CHEMICAL LOGISTICS CORP, S-1/A, 1998-10-13

CHEMICAL LOGISTICS CORP
S-1/A, 1998-10-13
CHEMICALS & ALLIED PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1998.

REGISTRATION NO. 333-59743

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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

CHEMICAL LOGISTICS CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5169 76-0547326
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

808 TRAVIS, SUITE 1135
HOUSTON, TEXAS 77002
(713) 228-1555
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------

FRANCIS S. KALMAN
CHIEF FINANCIAL OFFICER
808 TRAVIS, SUITE 1135
HOUSTON, TEXAS 77002
(713) 228-1555
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------

copy to:

<TABLE>
<S> <C>
MELISSA M. BALDWIN GENE J. OSHMAN
ANDREWS & KURTH L.L.P. BAKER & BOTTS, L.L.P.
600 TRAVIS, SUITE 4200 910 LOUISIANA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 220-4200 (713) 229-1234
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
---------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION

, 1998

3,200,000 SHARES
(Logo)

CHEMICAL LOGISTICS CORPORATION
COMMON STOCK
------------------

All of the 3,200,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), offered hereby are being offered by Chemical Logistics
Corporation (the "Company"). The Company was founded in July 1997 to acquire
nine companies engaged in the chemical distribution business (the "Founding
Companies") and has conducted no operations to date. Prior to this offering,
there has been no public market for the Common Stock. It is currently estimated
that the initial public offering price will be between $ and $ per
share. For information relating to factors to be considered in determining the
initial public offering price, see "Underwriting." The Company intends to make
application to list the Common Stock on The New York Stock Exchange under the
symbol "CLO." Of the net proceeds to the Company from the sale of the Common
Stock offered hereby, approximately $31.1 million will be paid to the
stockholders of the Founding Companies in connection with the acquisition of the
Founding Companies. See "Use of Proceeds."

---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
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<S> <C> <C> <C>
Per Share.............................. $ $ $
- ----------------------------------------------------------------------------------------------------------------
Total(2)............................... $ $ $
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</TABLE>

(1) Before deducting expenses of the offering payable by the Company estimated
at $5,400,000.

(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 480,000 shares of Common Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of such shares of Common Stock will be made at the offices of BT Alex.
Brown Incorporated, Baltimore, Maryland, on or about , 1998.

BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE

SANDERS MORRIS MUNDY
The date of this Prospectus is , 1998.
<PAGE> 3

[GRAPHICS]

---------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4

PROSPECTUS SUMMARY

Concurrently with and as a condition to the consummation of the offering
made hereby (the "Offering"), Chemical Logistics Corporation plans to acquire,
in separate transactions (collectively, the "Acquisitions"), for consideration
including cash and shares of its Common Stock (the "Acquisitions
Consideration"), the following nine entities engaged in the chemical
distribution business: G. S. Robins & Company ("Robins"), Industrial Chemicals,
Inc. ("Industrial"), Southwest Solvents & Chemicals and certain of its
affiliated entities ("Southwest Solvents"), Chemical Solvents, Inc. and one
affiliated entity ("Chemical Solvents"), Tilley Chemical Company, Inc. and one
affiliated entity ("Tilley"), Cron Chemical Corporation and certain of its
affiliated entities ("Cron"), Brown Chemical Company, Inc. and one affiliated
entity ("Brown"), Tarr, Inc. and certain of its affiliated entities ("Tarr") and
American Chemicals Co., Inc. ("American") (the foregoing companies referred to
herein as the "Founding Companies"). Unless otherwise indicated, references
herein to "CLC" mean Chemical Logistics Corporation, and references to the
"Company" mean CLC and the Founding Companies collectively.

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information and share and per share data in this
Prospectus (i) have been adjusted for (a) the Acquisitions, (b) the effects of
certain pro forma adjustments to the historical financial statements, (c) the
consummation of the Offering and (d) a 16.59366-for-1 stock split of the Common
Stock effected in July 1998, and (ii) assume that the Underwriters'
over-allotment option is not exercised.

THE COMPANY

CLC was founded in July 1997 to create a premier national chemical
distribution company with a wide range of value-added services, broad line of
product offerings and extensive geographic coverage, and to participate in the
consolidation of the chemical distribution industry. The Company operates an
extensive sales and distribution network focused primarily in the United States,
with 41 facilities serving 47 states, and distributes a broad line of chemicals
to over 10,000 customers in a number of industries including paint and coatings,
water treatment, pharmaceuticals, oil and gas, chemical processing, textiles,
food and beverage, fragrances, cosmetics, soaps and detergents, semiconductor,
mining and metal treatment, pulp and paper, ink, rubber and plastics. The
customers range in size from small manufacturing facilities to national and
multinational corporations such as McCormick & Company, Incorporated, The
Procter & Gamble Company and Archer-Daniels-Midland Company. In addition to
providing basic customer services such as the warehousing, transporting,
blending, packaging and labeling of chemicals, the Company also provides value-
added services requiring specialized facilities and expertise such as quality
assurance and laboratory analysis, contract drumming, specialized packaging and
bagging, bar coding, integrated supply (including inventory management, remote
tank monitoring and just-in-time delivery) and export containerization.

Concurrently with the closing of the Offering, CLC will acquire the nine
Founding Companies with pro forma combined 1997 revenues of $366 million, making
the Company one of the largest chemical distribution companies in North America.
The Founding Companies have been in existence for 49 years on average, and the
continuing senior executive officers of the Founding Companies have an average
of 25 years experience in the industry. One of these executives currently serves
as president of the industry's trade association, the National Association of
Chemical Distributors ("NACD"), and principals of four of the Founding Companies
currently serve on the 13-member Board of Directors of the NACD. Additionally,
one principal has served as president of the Chemical Education Foundation and
three principals currently serve as trustees of this foundation.

Based on industry data, the Company believes that sales by chemical
distribution companies in the United States were approximately $18 billion in
1997. The chemical distribution industry is becoming an increasingly important
component of the U.S. chemical supply chain as chemical manufacturers and end
users demand greater product and service capability from chemical distribution
companies and aggressively reduce their overall number of distributor
relationships in order to control costs. At the same time, and in common
1
<PAGE> 5

with certain other U.S. distribution industries, chemical distribution companies
are facing increasing costs for technology, infrastructure and regulatory
compliance. In this evolving, competitive environment, the Company believes that
its size, wide range of value-added services, broad line of product offerings
and extensive geographic coverage will allow it to be an industry leader.

The chemical distribution industry is highly fragmented. The Company
believes, based on industry data, that there are more than 1,000 chemical
distribution businesses in the United States consisting of a small number of
regional or national companies and a much larger number of relatively small,
owner-operated businesses that have limited access to capital and that offer a
limited range of services. At this time, many of these companies are not in
direct competition with the Company due to differences in services and products
offered. The Company believes that the fragmented nature of the industry
presents substantial consolidation and growth opportunities for relatively large
companies with a disciplined acquisition program, a decentralized operating
strategy and access to financial resources.

STRATEGY

The Company plans to achieve its goal of becoming a premier, broad line
national chemical distribution company by accelerating internal growth, by
implementing its operating strategy and by expanding through acquisitions. The
key elements of the Company's strategy are as follows:

Internal Growth Strategy. The Company intends to pursue internal growth by
promoting national account sales, cross selling its expanded product lines and
services and implementing best practices across the Founding Companies. The
Company believes that significant demand exists from large multi-location
companies to utilize the services of a limited number of chemical distribution
companies capable of providing comprehensive chemical product sourcing and
services on a regional or national basis. The Company intends to leverage its
sales and distribution network across the United States to obtain additional
business from existing customers that operate on a regional and national basis,
as well as new business from multi-location companies that previously could not
be serviced by the Founding Companies individually. Also, the Company believes
it will be able to expand sales to existing customers and to obtain new
customers by offering a broader line of products than has been offered by the
Founding Companies individually, complemented by a broader array of specialized
services. In addition, the Company intends to implement a company-wide marketing
program and to foster a culture of cooperation and teamwork that emphasizes the
dissemination of best practices among its local management teams.

Operating Strategy. The key elements of the Company's operating strategy
are to centralize certain corporate functions in order to obtain operating
efficiencies and to maintain a decentralized operating management in order to
continue to provide superior customer service; to provide value-added services
and become more integrated into the customers' internal use and handling of
chemical products; and to implement a company-wide management information
system. At the corporate level, the Company will consolidate functions such as
risk management and insurance, finance and accounting and employee benefits to
eliminate duplicative administrative and other costs that otherwise would be
incurred at each of its operating locations. At the operating subsidiary level,
the Company will adopt a regional approach to the U.S. chemical distribution
market by creating four U.S. geographic regions that in most cases will be
managed by selected Founding Company principals. The Company will employ a
decentralized management structure that focuses management of each operating
subsidiary on day-to-day operating matters, maintaining existing and building
new customer and supplier relationships, as well as assisting in the
identification of potential acquisition candidates. Also, the Company will
continue to develop and provide value-added services designed to meet each
customer's needs, thereby expanding product sales. Following the Offering, the
Company expects to use the Chempax(TM) management information system, which is
currently used by a majority of the Founding Companies, as the Company's primary
management information system. The Company's objective over time is to implement
a centralized, real time management information system linking all stocking
locations, chemical terminal locations, warehouses and sales offices with
Company management.

2
<PAGE> 6

Acquisition Strategy. The Company believes that the U.S. chemical
distribution industry presents significant consolidation opportunities, with
over 350 companies it views currently as potential acquisition candidates. The
Company intends to pursue an aggressive but disciplined acquisition program to
acquire chemical distribution companies in order to increase sales to industries
and markets currently served by the Company; to enter new industries and
markets; to develop new relationships with domestic and international chemical
suppliers; and to expand its range of products and services. The Company
believes that the senior management of the Founding Companies will be
instrumental in identifying and completing future acquisitions, as several of
the principals of the Founding Companies have held leadership roles in various
industry organizations and have developed extensive relationships with NACD
members.

The Company believes that the prominence and operating strength of the
Founding Companies and the experience of its senior management will provide the
Company with significant competitive advantages as it pursues its strategy.

THE OFFERING

Common Stock offered
hereby..................... 3,200,000 shares

Common Stock to be
outstanding after the
Offering(1).............. 12,194,531 shares

Use of proceeds............ To pay the cash portion of the purchase price for
the Founding Companies, to pay certain indebtedness
of the Founding Companies, to pay expenses incurred
in connection with the organization of CLC and the
Offering and for general corporate purposes. See
"Use of Proceeds."

Proposed NYSE trading
symbol..................... CLO

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(1) Includes (i) 6,543,329 shares to be issued to the owners of the Founding
Companies, (ii) 3,200,000 shares to be sold in the Offering, (iii) 656,697
shares issued to the management and directors of CLC, (iv) 1,570,441 shares
issued to the principals of Bellmeade Capital Partners, L.L.C. ("BCP") and
(v) 224,064 shares issued to or held by consultants to and employees of BCP.
Excludes options to purchase approximately 1,070,000 shares which are
expected to be granted upon consummation of the Offering. See "Management,"
"Certain Transactions" and "Description of Capital Stock."

RISK FACTORS

Prospective investors should carefully consider all information set forth
in this Prospectus and, in particular, should evaluate the specific factors set
forth under "Risk Factors" for risks involved with an investment in the Common
Stock.

3
<PAGE> 7

SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

CLC will acquire the Founding Companies simultaneously with, and as a
condition to, the consummation of the Offering. For financial statement
presentation purposes, CLC has been identified as the "accounting acquiror." The
following summary pro forma combined financial data present certain data for the
Company, as adjusted for (i) the effects of the Acquisitions, (ii) the effects
of certain other pro forma adjustments to the historical financial statements
and (iii) the consummation of the Offering and the application of the net
proceeds therefrom. The unaudited pro forma combined statement of operations
data assume that the Acquisitions, Offering and related transactions were closed
on January 1, 1997 and are not necessarily indicative of the results that the
Company would have obtained had these events actually then occurred or of the
Company's future results. During the periods presented below, the Founding
Companies were not under common control or management and, therefore, the data
presented may not be comparable to or indicative of post-combination results to
be achieved by the Company. The summary pro forma combined financial data are
based on preliminary estimates, available information and certain assumptions
that Company management deems appropriate and should be read in conjunction with
the other financial information included elsewhere in this Prospectus. See
"Selected Financial Data," the Unaudited Pro Forma Combined Financial Statements
and notes thereto, and the historical financial statements for the Founding
Companies and the notes thereto, all included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA COMBINED
-----------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $ 365,910 $ 180,357
Cost of sales............................................. 293,017 143,759
----------- -----------
Gross profit.............................................. 72,893 36,598
----------- -----------
Operating and delivery expenses........................... 22,861 11,963
Selling, general and administrative expenses(1)........... 30,092 15,259
Goodwill amortization(2).................................. 1,917 934
Depreciation.............................................. 4,639 2,431
----------- -----------
Income from operations.................................... 13,384 6,011
Interest and other income (expense), net(3)............... (1,222) (612)
----------- -----------
Income before income taxes................................ 12,162 5,399
Income tax expense(4)..................................... 5,698 2,550
----------- -----------
Net income................................................ $ 6,464 $ 2,849
=========== ===========
Net income per share...................................... $ 0.53 $ 0.23
=========== ===========
Shares used in computing pro forma net income per
share(5)............................................... 12,194,531 12,194,531
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998(6)(7)
--------------------------------
PRO FORMA
COMBINED AS ADJUSTED(8)
--------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital/(deficit)................................. $(14,912)(9) $ 29,305
Total assets.............................................. 194,326 190,785
Long-term debt, net of current maturities................. 13,386 23,251
Total stockholders' equity................................ 73,542 112,782
</TABLE>

4
<PAGE> 8

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(1) The pro forma combined statement of operations data reflect an aggregate of
approximately $3.4 million and $0.9 million for the year ended December 31,
1997 and the six months ended June 30, 1998, respectively, in pro forma
reductions in salary, bonus and benefits to the owners of the Founding
Companies to which they have agreed prospectively. Additionally, the data
reflect the reversal of the nonrecurring portion of the noncash compensation
charge of $6.4 million recognized by CLC for the six months ended June 30,
1998 related to the issuance of Common Stock to management. See "Certain
Transactions."

(2) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 40-year period and computed on the basis described in
the notes to the Unaudited Pro Forma Combined Financial Statements.

(3) Includes the elimination of interest expense of $0.1 million and $0.1
million for the year ended December 31, 1997 and the six months ended June
30, 1998, respectively, due to the planned repayment of certain of the
Founding Companies' existing debt, net of additional interest expense
related to new debt incurred by CLC.

(4) Assumes all pretax income before nondeductible goodwill is subject to a 41%
overall tax rate.

(5) Includes (i) 6,543,329 shares to be issued to the owners of the Founding
Companies, (ii) 3,200,000 shares to be sold in the Offering, (iii) 656,697
shares issued to the management and directors of CLC, (iv) 1,570,441 shares
issued to the principals of BCP and (v) 224,064 shares issued to or held by
consultants to and employees of BCP. Excludes options to purchase
approximately 1,070,000 shares, which are expected to be granted upon
consummation of the Offering.

(6) Reflects the Acquisitions and related transactions as if they had occurred
on June 30, 1998 as described in the notes to the Unaudited Pro Forma
Combined Financial Statements. The unaudited pro forma combined balance
sheet data is based upon preliminary estimates, available information and
certain assumptions that management deems appropriate and should be read in
conjunction with the other financial information and historical financial
statements, and notes thereto, included elsewhere in this Prospectus.

(7) A number of the Founding Companies have historically elected S Corporation
status for tax purposes. Prior to the Acquisitions, these Founding Companies
will make distributions to their stockholders totaling approximately $8.7
million. As of June 30, 1998, approximately $3.3 million of the $8.7 million
in distributions have been paid.

(8) Reflects the closing of the Offering and the Company's application of the
net proceeds therefrom and the additional borrowings to repay and refinance
certain indebtedness of the Founding Companies. See "Use of Proceeds" and
"Certain Transactions."

(9) Includes $31.1 million payable to owners of the Founding Companies,
representing the cash portion of the Acquisitions Consideration.

5
<PAGE> 9

SUMMARY INDIVIDUAL FOUNDING COMPANY HISTORICAL FINANCIAL DATA

The following table presents certain summary historical statement of
operations data of the Founding Companies for each of their three most recent
fiscal years and for the six months ended June 30, 1997 and 1998. The historical
statement of operations data below has not been adjusted for the pro forma
adjustments related to contractually agreed reductions in salaries and benefits,
or any other pro forma adjustments, reflected in the Unaudited Pro Forma
Combined Financial Statements included elsewhere in this Prospectus. The
statement of operations data presented below has been audited for certain of the
Founding Companies and certain of the periods as reflected in the historical
financial statements of such Founding Companies, included elsewhere in this
Prospectus. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEARS(1) JUNE 30,
--------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ROBINS
Net sales................................................. $58,236 $59,387 $61,445 $30,165 $29,380
Gross profit.............................................. 11,126 11,087 12,270 5,936 5,681
Income from operations.................................... 1,903 1,283 2,258 822 376
INDUSTRIAL
Net sales................................................. $42,880 $44,726 $51,599 $23,830 $25,531
Gross profit.............................................. 9,406 9,726 12,051 5,318 5,672
Income from operations.................................... 647 421 1,119 124 280
SOUTHWEST SOLVENTS
Net sales................................................. $50,621 $46,642 $47,219 $23,372 $23,437
Gross profit.............................................. 8,537 8,504 8,429 4,245 4,349
Income from operations.................................... 415 684 883 855 773
CHEMICAL SOLVENTS
Net sales................................................. $45,406 $40,874 $41,164 $20,596 $19,779
Gross profit.............................................. 11,981 10,576 10,831 5,389 5,804
Income from operations.................................... 2,807 1,636 1,788 770 1,224
TILLEY
Net sales................................................. $36,707 $38,281 $40,715 $20,642 $20,292
Gross profit.............................................. 5,966 5,989 6,693 3,369 3,448
Income from operations.................................... 1,356 1,189 1,818 1,011 878
CRON
Net sales................................................. $38,432 $41,760 $38,755 $19,429 $21,933
Gross profit.............................................. 5,996 6,893 6,197 2,991 3,352
Income from operations.................................... 1,195 1,514 846 456 724
BROWN
Net sales................................................. $30,996 $33,767 $34,311 $17,455 $18,176
Gross profit.............................................. 5,287 5,592 5,950 3,181 3,401
Income from operations.................................... 689 943 1,061 687 900
TARR
Net sales................................................. $30,097 $32,216 $31,662 $15,945 $12,888
Gross profit.............................................. 5,485 6,516 6,707 3,090 3,290
Income from operations.................................... 354 586 579 102 452
AMERICAN
Net sales................................................. $19,241 $19,370 $18,438 $ 9,985 $ 8,941
Gross profit.............................................. 2,992 3,160 3,243 1,881 1,601
Income from operations.................................... 22 59 545 312 293
</TABLE>

- ---------------

(1) The fiscal years presented are the years ended December 31, 1995, 1996 and
1997, except for Industrial for which the fiscal years presented are the
years ended February 29, 1996, February 28, 1997 and 1998; Tilley for which
the fiscal years presented are the years ended October 31, 1995, 1996 and
1997; Cron for which the fiscal years presented are the years ended
September 30, 1995, 1996 and 1997; and American for which the fiscal years
presented are the years ended June 30, 1996, 1997, and 1998.

6
<PAGE> 10

RISK FACTORS

Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the shares of Common Stock offered hereby. Information contained in
this Prospectus is based on beliefs of, and information currently available to,
the Company's management as well as estimates and assumptions made by the
Company's management, and may contain "forward-looking statements". When used in
this Prospectus, words such as "may," "will," "expect," "intend," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology, as they relate to the Company or the Company's
management, identify forward-looking statements. The following matters and
certain other factors noted throughout this Prospectus constitute cautionary
statements identifying important factors with respect to any such
forward-looking statements, including certain risks and uncertainties that could
cause actual results to differ materially from those in such forward-looking
statements.

ABSENCE OF COMBINED OPERATING HISTORY

CLC was organized in July 1997 but has conducted no operations, other than
in connection with the Offering and the Acquisitions, and generated no revenue
to date. CLC has entered into agreements to acquire the Founding Companies
simultaneously with, and as a condition to, the closing of the Offering. The
Founding Companies have been operating as separate entities and there can be no
assurance that the Company will be able to integrate the operations of these
businesses successfully or to institute the necessary systems and procedures,
including accounting and financial reporting systems, to manage the combined
enterprise on a profitable basis. In addition, there can be no assurance that
the recently assembled management group will be able to oversee the combined
enterprise and effectively implement the Company's operating or growth
strategies. The pro forma combined financial results of the Founding Companies
cover periods during which the Founding Companies and CLC were not under common
control or management and, therefore, may not be indicative of the Company's
future financial or operating results. The success of the Company will depend on
management's ability to integrate the Founding Companies and other future
acquisitions into one organization in a profitable manner. The inability of the
Company to successfully integrate the Founding Companies and to coordinate and
integrate certain operational, administrative, banking, insurance and accounting
functions and computer systems would have a material adverse effect on the
Company's financial condition and results of operations.

RISKS RELATED TO ACQUISITION STRATEGY

The Company's strategy for growth significantly relies on the acquisition
of additional chemical distribution companies. The Company expects to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities and may lead to higher acquisition prices. There can
be no assurance that the Company will be able to identify, acquire or profitably
manage additional businesses or to integrate successfully any acquired
businesses into the Company without substantial costs, delays or other
operational or financial difficulties. Further, acquisitions (including the
acquisitions of the Founding Companies) involve a number of special risks,
including failure of the acquired businesses to achieve expected results,
diversion of management's attention, failure to retain key personnel, customers
and suppliers of the acquired businesses and contingent and latent risks
(including environmental risks) associated with the past operations of, and
other unanticipated problems, events or liabilities arising from the acquired
businesses, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
recourse against the owners of the Founding Companies or of other acquired
businesses may be limited. In addition, there can be no assurance that the
Founding Companies or other businesses acquired in the future will achieve
anticipated net sales and earnings or that the Company will achieve any or all
of the other goals of its acquisition strategy. Acquisitions accounted for as
purchases may result in substantial annual noncash amortization charges for
goodwill and other intangible assets in the Company's statements of operations.
See "Business -- Strategy."

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RISKS RELATED TO INTERNAL GROWTH AND OPERATING STRATEGIES

Although the Company intends to seek to improve the profitability of the
Founding Companies and any subsequently acquired businesses by various means,
including realizing efficiencies and centralizing certain administrative
functions, there can be no assurance that the Company will be able to do so. The
Company does not currently sell all products or provide all services at each of
its locations and there can be no assurance regarding when, if ever, it will do
so. The Company's ability to maintain or increase the profitability of the
Founding Companies and any subsequently acquired businesses will be affected by
various factors, including demand for the Company's products and services, the
Company's ability to expand the range of products and services offered by each
Founding Company and by any subsequently acquired businesses and the Company's
ability to enter new markets successfully. Many of these factors are beyond the
control of the Company, and there can be no assurance that the Company's
strategies will be successful or that it will be able to generate cash flow
adequate to support its operations and internal growth. A key component of the
Company's strategy is to operate the Founding Companies and subsequently
acquired businesses on a decentralized basis, with local management retaining
responsibility for day-to-day operations, maintaining existing and building new
customer and supplier relationships, profitability and the growth of the
business. If proper business controls are not implemented or if management of
the Founding Companies and subsequently acquired businesses are not successful
in adopting an integrated operating approach, this decentralized operating
strategy could result in inconsistent operating, administrative and financial
practices at the Founding Companies and subsequently acquired businesses and the
Company's overall profitability could be adversely affected. The chemical
distribution industry is subject to technological change, product innovation and
substitution, and enhancement and changes in supplier and customer requirements.
The operations of the Company may be affected by these changes. The Company's
failure to anticipate or respond to these developments may have a material
adverse effect on the Company's financial condition and results of operations.
See "Business -- Strategy."

MANAGEMENT OF GROWTH

The Company expects to grow both internally and through acquisitions.
Management expects to expend significant time and effort in evaluating,
completing and integrating acquisitions and opening new facilities. The Company
may not be able to bid on certain national sales account opportunities if it
does not continue to add new geographic locations. There can be no assurance
that the Company's systems, procedures and controls will be adequate to support
the Company's operations as they expand. Any future growth also will impose
significant additional responsibilities on members of senior management,
including the need to identify, recruit and integrate new senior level managers
and executives. There can be no assurance that such additional managers and
executives will be identified and retained by the Company. To the extent that
the Company is unable to manage its growth efficiently and effectively, or is
unable to attract and retain additional qualified managers and executives, the
Company's financial condition and results of operations could be materially
adversely affected. See "Business -- Strategy."

INTEGRATION OF AND RELIANCE ON COMPUTER SYSTEMS

The Company's success will be dependent in part on its ability to
coordinate and integrate the management and information systems ("MIS") of the
Founding Companies that are used for ordering products, recording and analyzing
financial results, controlling inventory and performing other important
functions. There can be no assurance that the Company will be able to coordinate
and integrate the MIS economically or that the Company will not experience
delays, disruptions and unanticipated expenses in doing so. Any such event could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company will not be able to fully achieve certain
contemplated operating efficiencies and competitive advantages until it has
fully coordinated and integrated the MIS. Until the Company establishes
coordinated and integrated MIS, which may not occur for several years, it will
rely primarily on the separate systems of the Founding Companies. After the MIS
are integrated, the Company will rely heavily on them in its daily operations.
Consequently, any interruption in the operation of the MIS may have a material
adverse effect on the Company's business, financial condition and results of
operations. Also, the total future cost to the Company associated with
evaluating and modifying its computer systems to

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<PAGE> 12

address potential year 2000 compliance issues has not been determined. There can
be no assurance as to the ultimate effect of year 2000 compliance issues on the
Company or that such issues will not have a material adverse effect on the
Company's financial condition and results of operations.

COMPETITION

The Company is engaged in a highly fragmented and competitive industry.
Competition is based primarily on service, product pricing, quality and
geographic coverage. The Company competes with a large number of chemical
distribution companies on a national, regional and local basis, as well as
chemical traders and brokers and chemical manufacturers, some of which may have
greater financial resources and greater geographic coverage than the Company and
some of which are public companies or divisions of public companies. The Company
may also face competition for acquisition candidates from these companies, some
of which have been active in the acquisition market for chemical distribution
businesses. Other smaller chemical distribution companies may also seek
acquisitions from time to time. See "Business -- Competition." There can be no
assurance that such competition will not have a material adverse effect on the
Company's financial condition and results of operations.

ACQUISITION FINANCING

The Company's acquisition strategy will require substantial capital. The
Company intends to use its Common Stock for a portion of the consideration for
some or all future acquisitions. If the Common Stock does not maintain a
sufficient valuation or potential acquisition candidates are unwilling to accept
Common Stock as part of the consideration for the sale of their businesses, the
Company may be required to utilize more of its cash resources, if available, in
order to pursue its acquisition program. If the Company does not have sufficient
cash resources, its growth could be limited unless it is able to obtain
additional capital through future debt or equity financings. Using cash or debt
to complete acquisitions and finance internal growth could substantially limit
the Company's financial flexibility, and using equity may result in dilution of
the ownership interests of the then-existing stockholders of the Company. There
can be no assurance that the Company will be able to obtain financing if and
when it is needed or that, if available, it will be available on terms the
Company deems acceptable. As a result, the Company might be unable to pursue its
acquisition strategy successfully. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Combined Liquidity and Capital
Resources" and "Business -- Strategy."

RELIANCE ON INDUSTRIES SUBJECT TO FLUCTUATING DEMAND

Certain of the Company's products are sold to customers in industries and
markets that experience cyclicality or significant fluctuations in demand based
on economic conditions, energy prices, consumer demand, changing supplier and
customer practices, environmental regulations, weather conditions and other
factors beyond the control of the Company. No assurance can be given that the
Company will be able to increase or maintain its level of sales particularly in
periods of economic stagnation or downturn.

POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE

The Company is subject to federal, state, local and foreign environmental
laws, rules, regulations, and ordinances, including those concerning emissions
and discharges, and the generation, handling, storage, transportation,
treatment, disposal and import and export of hazardous materials ("Environmental
Laws"). The operation of the Company's facilities and the distribution of
chemical products entail risks under Environmental Laws, many of which provide
for substantial remediation costs in the event of discharges of contaminants and
fines and sanctions for violations. Violations of Environmental Laws could
result in the imposition of substantial criminal fines and penalties against the
Company's operating subsidiaries and their officers and employees, as well as
the Company, in certain circumstances. The costs associated with responding to
civil or criminal matters can be substantial. Also, significant civil or
criminal violations could adversely impact the Company's marketing ability in
the region served by the Company. Compliance with existing and future
Environmental Laws may require significant capital expenditures by the Company.
There can be no assurance that past or future operations will not result in the
Company incurring material

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<PAGE> 13

environmental liabilities and costs or that compliance with Environmental Laws
will not require material capital expenditures by the Company, each of which
could have a material adverse effect on the Company's results of operations and
financial condition. At some of the Company's sites, surface or subsurface
contamination has been established, the full extent of which is unknown. No
assurance can be given that material liabilities will not be incurred in the
future as a result of the existing contamination. In addition, although the
Company intends to conduct appropriate due diligence with respect to
environmental matters in connection with future acquisitions, there can be no
assurance that the Company will be able to identify or be indemnified for all
potential environmental liabilities relating to any acquired business. Although
the Company has obtained insurance and indemnities for certain contamination
conditions, such insurance and indemnities are limited. See
"Business -- Environmental and Health Regulation" and "Business -- Risk
Management and Insurance."

FLUCTUATIONS IN OPERATING RESULTS

The Company's results of operations may fluctuate significantly from
quarter to quarter or year to year because of a number of factors, including the
timing of future acquisitions, fluctuations in the demand for its distribution
services and competitive factors. Additionally, the Company's distribution
activities involve chemical products the prices of which fluctuate over time.
Future price fluctuations may have a negative impact on the Company and its
results of operations. Accordingly, quarterly comparisons of the Company's
revenues and operating results for a period should not be relied on as an
indication of future performance, and the results of any period may not be
indicative of results to be expected for future periods. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS

Following the completion of the Acquisitions and the Offering, the
Company's executive officers and directors, former stockholders of the Founding
Companies and persons affiliated with some or all of the above will beneficially
own approximately 74% of the total outstanding shares of Common Stock
(approximately 71% if the Underwriters' over-allotment option is exercised in
full). These persons, if acting in concert, will be able to continue to exercise
control over the Company's affairs, to elect the Board of Directors and to
control the disposition of any matter submitted to a vote of stockholders. See
"Principal Stockholders."

PROCEEDS OF OFFERING PAYABLE TO AFFILIATES

Of the net proceeds of the Offering, $31.1 million will be paid as the cash
portion of the purchase price for the Founding Companies. Some of the recipients
of these funds will become directors of the Company or holders of more than 5%
of the Common Stock. See "Principal Stockholders." Prior to the Acquisitions,
the Founding Companies will borrow an aggregate of approximately $8.7 million to
fund substantially all of the S Corporation Distributions. The Company intends
to assume or refinance through its revolving credit facility substantially all
of the indebtedness of the Founding Companies. Additionally, BCP has agreed to
advance to CLC, until the consummation of the Acquisitions and the Offering,
such funds as are necessary to pay the transaction costs associated with the
Acquisitions and the Offering. BCP will be reimbursed from the proceeds of the
Offering in respect of such expenses. As of September 30, 1998, BCP had advanced
the Company approximately $3.0 million for such expenses. See "Use of Proceeds"
and "Certain Transactions."

OPERATING HAZARDS

The Company's operations are subject to the numerous hazards associated
with the handling, transportation, blending, storage, sale, ownership and other
activities relating to chemicals. These hazards include, but are not limited to,
storage tank or pipeline leaks and ruptures, explosions, fires, chemical spills,
discharges or releases of toxic substances or gases, mechanical failures,
transportation accidents, any of which could materially and adversely affect the
Company. These hazards can cause personal injury and loss of life, severe damage
to or destruction of property and equipment, environmental damage and may result
in suspension of operations. The Company will maintain insurance coverage in the
amounts and against the risks it believes are in accordance with industry
practice, but this insurance will not cover all types or amounts of liabilities.
No
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<PAGE> 14

assurance can be given either that (i) this insurance will be adequate to cover
all losses or liabilities the Company may incur in its operations or (ii) the
Company will be able to maintain insurance of the types or at levels that are
adequate or at reasonable rates.

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK

Prior to the Offering, no public market for the Common Stock has existed,
and the initial public offering price, which will be determined by negotiation
between the Company and representatives of the Underwriters, may not be
indicative of the price at which the Common Stock will trade after the Offering.
See "Underwriting" for the factors to be considered in determining the initial
public offering price. The Company intends to make application to list the
Common Stock on the NYSE, but no assurance can be given that an active trading
market for the Common Stock will develop or, if developed, continue after the
Offering. The market price of the Common Stock after the Offering may be subject
to significant fluctuations from time to time in response to numerous factors,
including variations in the reported financial results of the Company from both
prior results and anticipated results and changing conditions in the economy in
general or in the industrial sector in particular. In addition, the stock
markets experience significant price and volume volatility from time to time
which may affect the market price of the Common Stock for reasons unrelated to
the Company's performance.

DEPENDENCE ON KEY PERSONNEL

The Company's operations are dependent on the continued efforts of its
executive officers and senior management and other key personnel of the Founding
Companies. Furthermore, the Company will be dependent on the senior management
of companies that may be acquired in the future. Although the Company will enter
into an employment agreement with each of the Company's executive officers,
there can be no assurance that any individual will continue in such capacity for
any particular period of time. The loss of key personnel, or the inability to
hire and retain qualified employees, could have an adverse effect on the
Company's business, financial condition and results of operations. See
"Management."

RISKS ASSOCIATED WITH DISTRIBUTION SUPPLY CONTRACTS

The products distributed by the Company are obtained through supply
relationships with chemical producers. Typically, the Company's supply contracts
have one-year terms with evergreen provisions that automatically renew the
contracts for additional one-year terms unless notice of termination is provided
(which notice may be, under certain agreements, as short as 30 days). In
addition, many of the Company's supply contracts are subject to termination as a
result of a change in control, including the Acquisitions. The Company has
long-established relationships with many of its suppliers. There can be no
assurance, however, that the Company's relationships or agreements with such
suppliers will not be terminated and, if terminated, that they can be replaced.
There also can be no assurance that manufacturers will be willing to extend
their current relationship with a Founding Company to other Founding Companies
or the Company as a whole.

SHARES ELIGIBLE FOR FUTURE SALE

As of September 30, 1998, 2,451,202 shares of Common Stock were issued and
outstanding. Simultaneously with the closing of the Offering, the stockholders
of the Founding Companies will receive, in the aggregate, 6,543,329 shares of
Common Stock as a portion of the consideration for their businesses. None of
these 8,994,531 shares of Common Stock was or will be issued in a transaction
registered under the Securities Act, and, accordingly, such shares may not be
sold except in transactions registered under the Securities Act or pursuant to
an exemption from registration, including the exemptions contained in Rules 144
and 701 under the Securities Act. In addition, the owners of the Founding
Companies, management, the principals of BCP and certain consultants have agreed
with the Company not to sell, contract to sell or otherwise dispose of any
shares of Common Stock received as consideration in the Acquisitions for a
period of two years following receipt thereof. When these shares become
saleable, the market price of the Common Stock could be materially adversely
affected by the sale of substantial amounts of the shares in the public market.
The current

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<PAGE> 15

stockholders of the Company (including the stockholders of the Founding
Companies) have certain piggy-back registration rights with respect to their
shares.

Upon the closing of the Offering, the Company will have outstanding options
to purchase up to a total of approximately 1,070,000 shares of Common Stock
issued pursuant to the Company's 1998 Stock Plan (the "Plan"). A total of 15% of
the Company's outstanding shares will be issuable pursuant to the Plan. The
Company intends to file a registration statement covering all the shares subject
to these options under the Securities Act. See "Management -- 1998 Stock Plan."

The Company currently intends to file a registration statement covering up
to an additional 5,000,000 shares of Common Stock under the Securities Act for
its use in connection with future acquisitions. These shares generally will be
freely tradeable after their issuance by persons not affiliated with the Company
unless the Company contractually restricts their resale.

The Company has agreed not to offer, sell or otherwise dispose of any
shares of Common Stock or other securities convertible into or exchangeable or
exercisable for shares of Common Stock for a period of 180 days after the date
of this Prospectus, except as consideration for acquisitions of businesses or on
exercise of options granted under the Plan, without the prior written consent of
BT Alex. Brown Incorporated. All directors, officers and current stockholders of
the Company and persons acquiring shares of Common Stock in connection with the
Acquisitions have agreed not to (i) offer, pledge, sell or otherwise dispose of
any shares of Common Stock, (ii) enter into any swap or other arrangement that
transfers all or a portion of the economic consequences associated with the
shares of Common Stock owned by such person or (iii) request the registration
for the offer or sale of Common Stock for a period of 180 days without the prior
written consent of BT Alex. Brown Incorporated.

There can be no assurance that the resale or the availability for sale of
the shares of Common Stock eligible for future sale will not have an adverse
effect on the prevailing market price of the Common Stock.

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Amended and Restated Certificate of Incorporation, Bylaws,
employment agreements and employee benefit plans contain provisions which may
have the effect of delaying, deferring or preventing a change in control of the
Company. For example, the Company's Amended and Restated Certificate of
Incorporation and Bylaws provide for, among other things, a classified Board of
Directors, the prohibition of stockholder action by written consent and the
affirmative vote of at least 66 2/3% of all outstanding shares of Common Stock
to approve the removal of directors from office. The Company's Board of
Directors has the authority to issue shares of preferred stock in one or more
series and to fix the rights and preferences of the shares of any such series
without stockholder approval. Any series of preferred stock is likely to be
senior to the Common Stock with respect to dividends, liquidation rights and,
possibly, voting. In addition, the Board of Directors may issue certain rights
pursuant to the rights plan authorized by the Amended and Restated Certificate
of Incorporation. The ability to issue preferred stock or rights could have the
effect of discouraging unsolicited acquisition proposals. The Company's employee
stock option plans contain provisions that allow for, among others, the
acceleration of vesting or payment of awards granted under such plans in the
event of a "change of control," as defined in such plans. In addition, the
Company has entered into employment agreements with certain executive officers
and key employees allowing for cash payments under certain circumstances
following a change in control, as defined, of the Company.

IMMEDIATE AND SUBSTANTIAL DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
immediate dilution in the net tangible book value of their shares of $11.91 per
share (assuming an initial public offering price of $15.00 per share). See
"Dilution." In the event the Company issues additional shares of Common Stock in
the future, including shares which may be issued in connection with acquisitions
or other public or private financings, purchasers of Common Stock in the
Offering may experience further dilution in the net tangible book value per
share of the Common Stock. See "Dilution."

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SIGNIFICANT MATERIALITY OF GOODWILL

The Company's balance sheet immediately following the Offering and
consummation of the Acquisitions will include an amount designated as "goodwill"
that represents 39% of total assets and 66% of stockholders' equity. Goodwill
arises when an acquiror pays more for a business than the fair value of the
tangible and separately measurable intangible net assets. Generally accepted
accounting principles require that this and all other intangible assets be
amortized over the period benefited. Management has determined that the period
benefited by the goodwill will be no less than 40 years. If management were not
to separately recognize a material intangible asset having a benefit period less
than 40 years, or were not to give effect to shorter benefit periods of factors
giving rise to a material portion of the goodwill, earnings reported in periods
immediately following the acquisition would be overstated. In later years, the
Company would be burdened by a continuing charge against earnings without the
associated benefit to income valued by management in arriving at the
consideration paid for the businesses. Earnings in later years also could be
significantly affected if management determined then that the remaining balance
of goodwill was impaired. Management has reviewed with its independent
accountants all of the factors and related future cash flows which it considered
in arriving at the amount incurred to acquire each of the Founding Companies.
Management concluded that the anticipated future cash flows associated with
intangible assets recognized in the acquisitions will continue indefinitely, and
there is no persuasive evidence that any material portion will dissipate over a
period shorter than 40 years.

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<PAGE> 17

THE COMPANY

ROBINS. Robins, a distributor of a broad line of organic and inorganic
chemicals, was founded in 1923 and is headquartered in St. Louis, Missouri.
Robins operates through nine distribution and storage facilities located in
Illinois, Missouri and Kansas. Robins has approximately 120 employees, including
22 sales personnel and 17 customer representatives, and operates a fleet of 15
tractors and 45 trailers. A tenth facility, which is located in Cedar Rapids,
Iowa, is under construction and will be leased by Robins beginning in the third
quarter of 1998. Robins had revenues of approximately $61.4 million for the year
ended December 31, 1997. Robins services over 1,200 customers, distributing
approximately 1,500 products to a customer base including the food processing,
water treatment, paint and coatings, pharmaceuticals, compounding, ice melt and
chemical processing industries. Recently, Robins has increased its mixing,
blending and formulating capabilities to meet market demand. G. Stephen Robins,
president of Robins, will sign a three-year employment agreement to continue in
his position as president of Robins following the consummation of the Offering.
In addition, Mr. Robins will become a director of the Company following the
consummation of the Offering.

INDUSTRIAL. Industrial, a distributor of mainly inorganic chemicals, was
founded in 1970 and is headquartered in Birmingham, Alabama. Industrial operates
through seven distribution and storage facilities located in Alabama and
Georgia. It also operates a liquid and dry blending and packaging facility in
Birmingham, and a custom dry packaging facility in Mobile, Alabama. Industrial
has approximately 111 employees, including 19 sales personnel and seven customer
service representatives and operates a fleet of eight tractors, 30 trailers and
21 other trucks. Industrial had revenues of approximately $51.6 million for the
fiscal year ended February 28, 1998. Industrial services over 2,500 customers,
distributing over 500 products to a customer base including the pulp and paper,
textile, water treatment, chemical manufacturing and food processing industries.
Value-added services provided include just-in-time inventory services and a
variety of custom specifications, including blending and packaging, sampling,
labeling, segregated storage and special delivery requirements. William L.
Welch, President of Industrial, will sign a three-year employment agreement to
continue in his position as president of Industrial following the consummation
of the Offering. In addition, Mr. Welch will become a director of the Company
following the consummation of the Offering.

SOUTHWEST SOLVENTS. Southwest Solvents, a distributor of a broad line of
organic and inorganic chemicals, began business in 1970 and is headquartered in
Houston, Texas. Southwest Solvents operates through seven distribution and
storage facilities in Texas and California. Southwest Solvents has approximately
95 employees, including 19 sales personnel and four customer service
representatives and operates a fleet of 21 tractors, 29 trailers, five other
trucks, and ten railcars. Southwest Solvents had revenues of approximately $47.2
million for the year ended December 31, 1997. Southwest Solvents services over
1,600 customers, distributing approximately 2,500 products to a customer base
including the paint, coatings and adhesives, oilfield service, printing, general
manufacturing, compounding, electronics and cosmetics industries. Value-added
services provided include export containerization and contract drumming for
chemical manufacturers and exporters. James M. Clepper, CEO of Southwest
Solvents, will sign a three-year employment agreement to serve as President and
Chief Operating Officer of the Company following the consummation of the
Offering. In addition, Mr. Clepper will become a director of the Company
following the consummation of the Offering.

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<PAGE> 18

CHEMICAL SOLVENTS. Chemical Solvents, a distributor of liquid organic
chemicals, was incorporated in 1970 and is headquartered in Cleveland, Ohio.
Chemical Solvents operates through its distribution and storage facilities
located in Cleveland. Chemical Solvents has approximately 113 employees,
including nine sales personnel and four customer service representatives and
operates a fleet of 11 tractors, 13 trailers, five other trucks, and one
railcar. Chemical Solvents had revenues of approximately $41.2 million for the
year ended December 31, 1997. Chemical Solvents services over 750 customers,
distributing approximately 450 products to a customer base including the metal
finishing, paint and coatings, adhesives and sealants, aerosol packaging,
automotive, chemical processing and plastics and rubber industries. Value-added
services provided include storage and repackaging, recycling and chemical waste
disposal, equipment cleaning supply, wastewater treatment and disposal and
coating stripping services. Bill Garrett, currently executive vice president of
Chemical Solvents, will sign a three-year employment agreement to serve as
president of Chemical Solvents following the consummation of the Offering. Ed
Pavlish, currently president of Chemical Solvents, will sign a consulting
agreement with Chemical Solvents following the consummation of the Offering.

TILLEY. Tilley, a distributor of a broad line of organic and inorganic
chemicals, began business in 1952 and is headquartered in Baltimore, Maryland.
Tilley operates through its distribution and storage facilities located in
Baltimore. Tilley has approximately 47 employees, including seven sales
personnel and three customer service representatives and operates a fleet of
nine tractors, 15 trailers, and six other trucks. Tilley had revenues of
approximately $40.7 million for the fiscal year ended October 31, 1997. Tilley
services over 600 customers, distributing approximately 1,200 products to a
customer base including the food and beverage, pharmaceutical, photographic and
chemical process industries as well as other diverse industrial markets.
Value-added services provided include export packaging, contract packaging,
remote tank monitoring and supply chain management. John Tilley, president of
Tilley, will sign a three-year employment agreement to continue in his position
as president of Tilley following the consummation of the Offering. In addition,
Mr. Tilley will become a director of the Company following the consummation of
the Offering.

CRON. Cron, a distributor of a broad line of organic and inorganic
chemicals, whose predecessor began business in 1936, maintains headquarters in
Houston, Texas and New Orleans, Louisiana. Cron operates through four
distribution and storage facilities located in Houston and Dallas, Texas, and
New Orleans and Lafayette, Louisiana. Cron has approximately 59 employees,
including 15 sales personnel and seven customer service representatives and
operates a fleet of nine tractors and 16 trailers. Cron had revenues of
approximately $38.8 million for the fiscal year ended September 30, 1997. Cron
services over 1,500 customers, distributing over 700 products to a customer base
including the paint and coatings, plastics, inks, construction, food, adhesive,
oil field services, chemical compounding, chemical process, metals and oil field
production industries. Value-added services provided include custom blending and
packing of chemical raw material and 24-hour oil field product availability
services provided by Cron. Jim Sette, president of Cron Chemical Corporation,
will sign a three-year employment agreement to continue in his position
following the consummation of the Offering.

BROWN. Brown, a distributor of various dry and liquid inorganic and organic
chemicals, was founded in 1936 and is headquartered in Oakland, New Jersey.
Brown operates through two distribution and storage facilities located in New
Jersey. Brown has approximately 28 employees, including five sales personnel and
four customer service representatives and operates a fleet of six tractors, 13
trailers, and two other trucks. Brown had revenues of approximately $34.3
million for the year ended December 31, 1997. Brown services approximately 1,000
customers, distributing over 1,500 products to a customer base including the
pharmaceutical, food, flavors, fragrances, personal care, cosmetics and
photographic industries. Value-added services provided include contract
warehousing, custom packaging, limited blending, remote tank monitoring systems
and vendor managed inventory programs. Doug Brown, president of Brown, will sign
a three-year employment agreement to serve as Chief Information Officer of the
Company and president of Brown following the consummation of the Offering. In
addition, Doug Brown will become a director of the Company following the
consummation of the Offering.

TARR. Tarr, a distributor of liquid organic chemicals and petroleum
products, whose predecessor began business in 1945, is headquartered in
Portland, Oregon. Tarr operates through nine distribution and storage facilities
located in Oregon, Washington and Arizona. Tarr has approximately 72 employees,
including
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<PAGE> 19

13 sales personnel and five customer service representatives and operates a
fleet of 16 other trucks, five tractors and 12 trailers. Tarr had revenues of
approximately $31.7 million for the year ended December 31, 1997. Tarr services
over 6,500 customers, distributing over 3,900 products to a customer base
including the paint and coatings, print, metals, transportation, compounding and
semiconductor industries. Value-added services provided include blending, custom
packaging and commercial fueling facilities and services. Skip Tarr, president
of Tarr, will sign a three-year employment agreement to continue in his position
as president of Tarr following the consummation of the Offering.

AMERICAN. American, a distributor of liquid organic chemicals, was founded
in 1940 and is headquartered in South Kearny, New Jersey. American operates
through distribution and storage facilities located in South Kearny. American
has approximately 20 employees, including six sales personnel and two customer
service representatives and operates a fleet of four tractors, 14 trailers, and
two other trucks. American had revenues of approximately $18.4 million for the
fiscal year ended June 30, 1998. American services over 200 customers,
distributing over 350 products to a customer base including the paint and
coatings, inks, flavor and fragrance, pharmaceutical and chemical process
industries. Value-added services provided include blending, custom packaging and
customer maintained inventories. Stephen B. Fiverson, president of American,
will sign a three-year employment agreement to continue in his position as
president of American following the consummation of the Offering. In addition,
Mr. Fiverson will become a director of the Company following the consummation of
the Offering.

Chemical Logistics Corporation was incorporated in Delaware in July 1997.
Its executive offices are located at 808 Travis, Suite 1135, Houston, Texas
77002, and its telephone number is (713) 228-1555.

16
<PAGE> 20

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby (assuming an initial public offering price of $15.00 per share
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company, a portion of which have been
or will be funded by advances from BCP and reimbursed from the proceeds of the
Offering) are estimated to be approximately $39.2 million (approximately $45.9
million if the Underwriters' over-allotment option is exercised in full).

Of the $39.2 million net proceeds, the Company estimates that approximately
$31.1 million will be used to pay the cash portion of the Acquisitions
Consideration, all of which will be paid to former stockholders and other equity
owners of the Founding Companies. The remaining net proceeds will be used to
repay various outstanding indebtedness of the Founding Companies at the closing
of the Offering that bear interest at rates ranging from 8.0% to 10.0% and
mature at various dates through October 2004. Such indebtedness may include
notes payable to fund a portion of the S Corporation Distributions. After
consummation of the Offering and the Acquisitions and after giving effect to the
application of the proceeds described above and to an anticipated draw down on
the Company's currently proposed bank line of credit (described below) to
refinance certain of the Founding Companies' indebtedness, the Company expects
to have a total of $23.3 million in debt outstanding.

CLC has reached an agreement in principle to obtain a bank line of credit
for $100 million to finance future acquisitions, to refinance existing
indebtedness of the individual Founding Companies and of companies acquired in
the future and for general corporate purposes. The line of credit will be
subject to customary drawing conditions and the completion of negotiations with
the lenders, the execution of appropriate loan documentation and the
consummation of the Offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Combined Liquidity and Capital
Resources."

DIVIDEND POLICY

The Company currently intends to retain its future earnings, if any, to
finance the growth, development and expansion of its business and, accordingly,
does not currently intend to declare or pay any dividends on the Common Stock
for the foreseeable future. The declaration, payment and amount of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including, among others, the
Company's financial condition, results of operations, cash flows from
operations, current and anticipated capital requirements and expansion plans,
the income tax laws then in effect and the requirements of Delaware law. In
addition, the Company's currently proposed credit facility will prohibit the
payment of dividends by the Company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Combined Liquidity and
Capital Resources."

Prior to the Acquisitions, certain of the Founding Companies will make the
S Corporation Distributions to their stockholders in the amount of approximately
$8.7 million.

17
<PAGE> 21

CAPITALIZATION

The following table sets forth the cash and cash equivalents, current
maturities of long-term obligations and the capitalization of (i) the Company on
a pro forma combined basis after giving effect to the Acquisitions, the S
Corporation Distributions and related transactions and (ii) the Company on a pro
forma basis, as adjusted to give effect to the Offering and the application of
the estimated net proceeds therefrom and the repayment and refinancing of
certain indebtedness of the Founding Companies. See "Use of Proceeds." This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Combined Liquidity and
Capital Resources" and the Unaudited Pro Forma Combined Financial Statements of
the Company and the notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------
PRO FORMA
COMBINED AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 3,900 $ 2,000
Current maturities of long-term debt(1)..................... 13,358 --
Long-term debt, net of current maturities(2)................ 18,008 23,251
Payable to Founding Companies' stockholders................. 31,126 --
-------- --------
Stockholders' equity:
Preferred Stock: $0.01 par value, 10,000,000 shares,
authorized; no shares issued and outstanding........... -- --
Common Stock: $0.01 par value, 50,000,000 shares
authorized; 8,994,531 issued and outstanding, pro forma
combined; and 12,194,531 shares issued and outstanding,
as adjusted(3)......................................... 90 122
Additional paid-in capital................................ 80,348 119,556
Retained deficit(4)....................................... (6,896) (6,896)
-------- --------
Total stockholders' equity........................ 73,542 112,782
-------- --------
Total capitalization.............................. $122,676 $136,033
======== ========
</TABLE>

- ---------------

(1) Includes the Company's line of credit and current payables to related
parties. See detail of related party amounts in the individual Founding
Company financial statements and accompanying notes thereto.

(2) Includes long-term obligations and long-term payables to related parties.
See detail of related party amounts in the individual Founding Company
financial statements and accompanying notes thereto.

(3) Excludes shares related to approximately 1,070,000 stock options which are
expected to be granted upon consummation of the Offering.

(4) Results from the noncash compensation charge related to the issuance of
Common Stock to management.

18
<PAGE> 22

DILUTION

At June 30, 1998, after giving effect to the Acquisitions as if they had
occurred at such date, the deficit in pro forma combined net tangible book value
of the Company was approximately $(1.5) million, or approximately $(0.17) per
share. The deficit in pro forma combined net tangible book value is equal to the
aggregate net tangible book value (tangible assets less total liabilities) of
the Company after giving effect to the Acquisitions. The number of shares used
for the per share calculation includes the 8,994,531 shares outstanding after
the Acquisitions, but prior to the Offering. After giving effect to the
Acquisitions and the sale by the Company of the 3,200,000 shares of Common Stock
offered hereby (assuming an initial public offering price of $15.00 per share
and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company), the pro forma combined net tangible
book value of the Company would have been $37.7 million, or $3.09 per share.
This represents an immediate increase in pro forma net tangible book value of
$3.26 per share to existing stockholders and an immediate dilution in net
tangible book value of $11.91 per share to new investors purchasing the shares
of Common Stock in the Offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Pro forma combined net tangible book value per share prior
to the Offering........................................ $(0.17)
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 3.26
------
Pro forma combined net tangible book value per share after
the Offering.............................................. 3.09
------
Dilution in net tangible book value per share to new
investors................................................. $11.91
======
</TABLE>

The following table sets forth on a pro forma basis, after giving effect to
the Acquisitions as of June 30, 1998, the number of shares of Common Stock
purchased from the Company, the total consideration to the Company and the
average price per share paid to the Company by (i) existing stockholders and
(ii) the new investors purchasing Common Stock from the Company in the Offering
at the assumed initial offering price of $15.00 per share (before deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL
-------------------- CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT(1) PERCENT PER SHARE
---------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders and
owners of Founding
Companies.................... 8,994,531 73.7% $(1,512,000) (3.2)% $(0.17)
New investors.................. 3,200,000 26.3 48,000,000 103.2 15.00
---------- ----- -----------
Total................ 12,194,531 100.0% $46,488,000 100.0%
========== ===== =========== =====
</TABLE>

- ---------------

(1) The total consideration paid represents the combined stockholders' equity of
the Founding Companies before the Offering, reduced to reflect: (i) the cash
portion of the Acquisitions Consideration and (ii) S Corporation
Distributions of $5.4 million that had not been paid as of June 30, 1998.

19
<PAGE> 23

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

CLC will acquire the Founding Companies simultaneously with and as a
condition to the consummation of the Offering. The following selected historical
financial data for CLC as of December 31, 1997 have been derived from audited
financial statements of CLC included elsewhere in this Prospectus. The selected
historical financial data as of June 30, 1998 and for the six months ended June
30, 1998 have been derived from the unaudited financial statements of CLC which
have been prepared on the same basis as the audited financial statements and, in
the opinion of Company management, reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of such data. The
results of operations for the six months ended June 30, 1998 should not be
regarded as indicative of the results that may be expected for the full year.

The summary unaudited pro forma combined financial data below present
certain data for the Company, adjusted for (i) the Acquisitions, (ii) the
effects of certain other pro forma adjustments to the historical financial
statements and (iii) the consummation of the Offering and the application of the
net proceeds therefrom. The summary pro forma combined statement of operations
data assume that the Acquisitions, Offering and related transactions were closed
on January 1, 1997, and are not necessarily indicative of the results that the
Company would have obtained had these events actually occurred at that date or
indicative of the Company's future results. During the periods presented below,
the Founding Companies were not under common control or management and,
therefore, the data presented may not be comparable to or indicative of
post-combination results to be achieved by the Company. The summary pro forma
combined financial data are based on preliminary estimates, available
information and certain assumptions that management deems appropriate and should
be read in conjunction with the other financial information included elsewhere
in this Prospectus. See the Unaudited Pro Forma Combined Financial Statements
and the notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JULY 15, 1997)
THROUGH SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (CLC):
Net sales................................................. $ -- $ --
Selling, general and administrative expenses.............. 17 6,877
---- -------
Depreciation.............................................. -- 2
---- -------
Loss from operations...................................... (17) (6,879)
---- -------
Net loss.................................................. $(17) $(6,879)
==== =======
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA COMBINED
---------------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
------------------ -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (THE COMPANY):
Net sales................................................. $ 365,910 $ 180,357
Cost of sales............................................. 293,017 143,759
---------- ----------
Gross profit.............................................. 72,893 36,598
---------- ----------
Operating and delivery expenses........................... 22,861 11,963
Selling, general and administrative expenses(1)........... 30,092 15,259
Goodwill amortization(2).................................. 1,917 934
Depreciation.............................................. 4,639 2,431
---------- ----------
Income from operations.................................... 13,384 6,011
Interest and other income (expense), net(3)............... (1,222) (612)
---------- ----------
Income before income taxes................................ 12,162 5,399
Income tax expense........................................ 5,698 2,550
---------- ----------
Net income................................................ 6,464 2,849
---------- ----------
Net income per share...................................... $ 0.53 $ 0.23
========== ==========
Shares used in computing pro forma net income per
share(5)............................................... 12,194,531 12,194,531
</TABLE>

20
<PAGE> 24

<TABLE>
<CAPTION>
JUNE 30, 1998(6)(7)
-----------------------------
PRO FORMA
COMBINED AS ADJUSTED(8)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (THE COMPANY):
Working capital/(deficit)................................. $(14,912)(9) $ 29,305
Total assets.............................................. 194,326 190,785
Long-term debt, net of current maturities................. 13,386 23,251
Total stockholders' equity........................ 73,542 112,782
</TABLE>

- ---------------

(1) The pro forma combined statement of operations data reflect an aggregate of
approximately $3.4 and $0.9 million for the year ended December 31, 1997 and
the six months ended June 30, 1998, respectively, in pro forma reductions in
salary, bonus and benefits of the owners of the Founding Companies to which
they have agreed prospectively. Additionally reflects the reversal of the
nonrecurring portion of the noncash compensation charge of $6.4 million
recognized by CLC for the quarter ended June 30, 1998 related to the
issuance of Common Stock to management. See "Certain Transactions."

(4) Assumes all pretax income before nondeductible goodwill is subject to a 41%
overall tax rate.

(9) Includes $31.1 million payable to owners of the Founding Companies,
representing the cash portion of the Acquisitions Consideration.

21
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Financial Data" and the Founding Companies' Financial Statements and related
Notes thereto appearing elsewhere in this Prospectus.

INTRODUCTION

The Company's revenues are derived primarily from the sale of dry and
liquid chemicals to industrial and commercial customers. Net sales are
recognized on shipment of the product to the customer. Net sales are comprised
of the gross sales price of chemical products and fees for services less sales
discounts and returns. The Company's customers represent a number of industries
including paint and coatings, water treatment, pharmaceuticals, oil and gas,
chemical processing, textiles, food and beverage, fragrances, cosmetics, soaps
and detergents, semiconductor, mining and metal treatment, pulp and paper, ink,
rubber and plastics. In addition, the Company not only provides basic customer
services such as the warehousing, transporting, blending, packaging and labeling
of chemicals, but also provides value-added services requiring specialized
facilities and expertise such as quality assurance and laboratory analysis,
contract drumming, specialized packaging and bagging, bar coding, integrated
supply (including inventory management, remote tank monitoring and just-in-time
delivery) and export containerization.

In the course of selling chemicals, the Company provides certain
value-added services such as drumming, blending and packaging. The value of
these services is bundled into the price of the chemicals that the Company bills
its customers. Certain of the Founding Companies provide services that are
separately billed to customers; however, the revenues associated with these
services are immaterial to the Company on a consolidated basis. See "Business"
for a more complete description of the Company's products and services.

Cost of sales consists primarily of materials, products purchased for
resale, freight and obsolescence. Operating and delivery costs consist primarily
of processing, storing and delivering of products. Selling, general and
administrative expenses consist primarily of cost for compensation and related
benefits, advertising, facility rent and utilities, communications and
professional fees. Senior executive management of the Founding Companies have
agreed to reductions in their compensation and related benefits totaling $3.4
and $0.9 million, on a pro forma basis for the 12 months ended December 31,
1997, and the six months ended June 30, 1998, respectively, in connection with
the Acquisitions. These reductions are in accordance with the terms of
employment agreements. Such reductions in salaries, bonuses and benefits have
been reflected as a pro forma adjustment in the Pro Forma Combined Statement of
Operations.

The Founding Companies have operated throughout the periods presented as
independent, privately owned entities, and their results of operations reflect
varying tax structures (S Corporations or C Corporations) which have influenced
the historical level of owners' compensation. Gross profit margins and selling,
general and administrative expenses as a percentage of revenues may not be
comparable among the individual Founding Companies.

The Company believes that it will realize savings from consolidation of
insurance programs and other general and administrative expenses. Offsetting
these savings will be costs related to the Company's new corporate management,
being a public company and integrating the Acquisitions. None of these savings
or incremental costs are reflected in the Pro Forma or Historical Combined
Statement of Operations.

Prior to the consummation of the Offering, the Company will have sold an
aggregate of 656,697 shares of Common Stock to management and has recorded
nonrecurring, noncash compensation charges of $6.8 million through June 30, 1998
and will record additional nonrecurring, noncash compensation charges of
approximately $0.6 million subsequent to June 30, 1998 related to such sales.
These nonrecurring compensation charges are not included in the Unaudited Pro
Forma Combined Financial Statements.

In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 (SAB 97) relating to business combinations
immediately prior to an initial public offering. SAB 97 requires that these
combinations be accounted for using the purchase method of acquisition
accounting. Under the purchase method, CLC has been designated as the accounting
acquiror. For the remaining companies,
22
<PAGE> 26

$74.7 million, representing the excess of the fair value of the Acquisitions
Consideration received over the fair value of the net assets to be acquired,
will be recorded as "goodwill" on the Company's balance sheet. Goodwill will be
amortized as a noncash charge to the statement of operations over a 40-year
period. The pro forma impact of this amortization expense, which is
nondeductible for tax purposes, is $1.9 million per year. The amount of goodwill
to be recorded and the related amortization expense will depend in part on the
actual Offering price. See "Certain Transactions -- Organization of the Company"
and "Risk Factors -- Significant Materiality of Goodwill."

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company has experienced modest seasonal declines in sales during first
and fourth quarters due to weather and a variance in number of delivery days.
The Company's volume of business may be adversely affected by a decline in the
purchases of chemicals as a result of regional or national downturns in economic
conditions. Quarterly results may also be materially affected by the timing of
acquisitions and the timing and magnitude of acquisition assimilation costs.
Accordingly, the operating results for any three-month period are not
necessarily indicative of the results that may be achieved for any subsequent
fiscal quarter or for a full fiscal year.

SUPPLEMENTAL UNAUDITED COMBINED FINANCIAL INFORMATION

The following supplemental unaudited combined financial information for the
periods presented does not purport to present the results of the combined
Founding Companies in accordance with generally accepted accounting principles,
but represents merely a summation of the revenues, cost of sales and gross
profit of the individual Founding Companies on a historical basis and excludes
the effects of the pro forma adjustments that are included in the Pro Forma
Combined Financial Statements appearing elsewhere in this Prospectus. The data
will not be comparable to, and may not be indicative of, the Company's
post-combination results of operations because (i) the Founding Companies were
not under common control or management and, (ii) the Company will use the
purchase method to establish a new basis of accounting to record the
Acquisitions.

The following table sets forth certain supplemental unaudited combined
financial information for the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------ ---------------------------------------
1995(1) 1996(1) 1997(1) 1997 1998
------------------ ------------------ ------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $352,616 100.0% $357,023 100.0% $365,309 100.0% $181,419 100.0% $180,357 100.0%
Cost of sales............ 285,841 81.1 288,979 81.0 292,938 80.2 146,019 80.5 143,760 79.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit............. $ 66,775 18.9% $ 68,044 19.0% $ 72,371 19.8% $ 35,400 19.5% $ 36,597 20.3%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>

- ---------------

(1) The fiscal years presented are the years ended December 31, 1995, 1996 and
1997, except for Industrial for which the fiscal years presented are the
years ended February 29, 1996, and February 28, 1997 and 1998; Tilley for
which the fiscal years presented are the years ended October 31, 1995, 1996
and 1997; Cron for which the fiscal years presented are the fiscal years
ended September 30, 1995, 1996 and 1997; and American for which the fiscal
years presented are the years ended June 30, 1996, 1997 and 1998.

Combined results for the six months ended June 30, 1998, compared to the six
months ended June 30, 1997

Net Sales. Net sales decreased $1.1 million, or 0.5%, from $181.4 million
for the six months ended June 30, 1997 to $180.3 million for the six months
ended June 30, 1998.

Cost of Sales. Cost of sales decreased $2.3 million, or 1.5%, from $146.0
million for the six months ended June 30, 1997, to $143.8 million for the six
months ended June 30, 1998. As a percentage of net sales, cost of sales
decreased from 80.5% for the six months ended June 30, 1997, to 79.7% for the
six months ended June 30, 1998.

23
<PAGE> 27

Combined results for the year ended December 31, 1997, compared to the year
ended December 31, 1996

Net Sales. Net sales increased $8.3 million, or 2.3%, from $357.0 million
in 1996 to $365.3 million in 1997 due to a general increase in sales volumes.

Cost of Sales. Cost of sales increased $4.0 million, or 1.4%, from $289.0
million in 1996 to $293.0 million in 1997. The increase in cost of sales was
primarily due to an increase in sales, partially offset by a decline in the
average cost of purchased product. As a percentage of net sales, cost of sales
decreased from 81.0% in 1996 to 80.2% in 1997.

Combined results for the year ended December 31, 1996, compared to the year
ended December 31, 1995

Net Sales. Net sales increased $4.4 million, or 1.2%, from $352.6 million
for the year ended December 31, 1995, to $357.0 million for the year ended
December 31, 1996. This increase was due to a general increase in sales volumes.

Cost of Sales. Cost of sales increased $3.1 million, or 1.1%, from $285.8
million for the year ended December 31, 1995, to $289.0 million for the year
ended December 31, 1996. As a percentage of net sales, cost of sales decreased
from 81.1% for the year ended December 31, 1995, to 81.0% for the year ended
December 31, 1996, principally due to a change in product mix.

COMBINED LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $25.4 million
and $24.0 million, respectively. The Company's principal capital requirements
are to fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations and borrowings under bank credit facilities.

Net cash provided by operating activities for 1997 and the six months ended
June 30, 1998, was $12.1 million and $3.8 million, respectively. These changes
were principally due to increased earnings, partially offset by funding working
capital requirements for accounts receivable, inventories and accounts payable.
Net cash used in investing activities for 1997 and the six months ended June 30,
1998, was $5.9 million and $1.0 million, respectively. The investing activities
were primarily related to capital expenditures of $6.1 million and $1.5 million
for 1997 and for the six months ended June 30, 1998, respectively. Net cash used
in financing activities for 1997 and the six months ended June 30, 1998, was
$3.9 million and $3.3 million, respectively. The net cash used in financing
activities resulted primarily from bank borrowings, offset by dividends paid to
shareholders of the Founding Companies.

CLC has entered into a preliminary agreement with a commercial bank under
which it expects to enter into a credit facility effective concurrently with the
closing of the Offering. According to the proposed terms of the agreement, the
credit facility will be a three-year revolving credit facility of up to $100
million to be used to finance acquisitions, to refinance existing indebtedness
of the individual Founding Companies and of companies acquired in the future and
for general corporate purposes. The amounts borrowed under the proposed credit
facility will bear interest at an annual rate equal to either (a) the London
Interbank Offered Rate ("LIBOR") plus 1.0% to 1.625%, as determined by the ratio
of the Company's total funded debt to EBITDA (as defined in the credit facility)
or (b) the higher of (i) the bank's prime rate and (ii) the Federal Funds rate
plus 0.5%, plus up to an additional 0.625% as determined by the ratio of the
Company's total funded debt to EBITDA. Commitment fees of 0.25% to 0.375% (based
on the same ratio of the Company's total funded debt to EBITDA) are due on any
unused borrowing capacity under the proposed credit facility. CLC's existing and
future subsidiaries will guarantee the repayment of all amounts due under the
facility, and the facility will be secured by the capital stock of these
subsidiaries and the accounts receivable and inventory of CLC and these
subsidiaries. The credit facility will require the consent of the lenders for
acquisitions exceeding a certain level of consideration, prohibit the payment of
cash dividends by the Company, restrict the ability of the Company to incur
other indebtedness and require the Company to comply with certain financial
covenants. Availability of the credit facility will be subject to customary
drawing conditions, completion of negotiations with the lenders and execution of
definitive loan documentation. Following the consummation of the Offering,
approximately $23.3 million of borrowings and $5.4 million in dividends payable
of the Founding Companies are expected to be repaid with borrowings under the
proposed credit facility.

24
<PAGE> 28

The Company anticipates that its cash flows from operations will provide
sufficient cash to enable the Company to meet its working capital needs, debt
service requirements and planned capital expenditures. Since CLC is a holding
company conducting no operations, it will be reliant upon its subsidiaries for
the resources necessary to fund its cash needs. Capital expenditures for 1997
and the six months ended June 30, 1998 were $6.1 million and $1.5 million,
respectively.

The Company intends to centralize the risk management and insurance
function at the corporate level and consolidate the purchase of insurance.
Management believes this will result in a savings from the total amount
previously paid by the Founding Companies for insurance. The Company has
retained a national insurance broker to develop a comprehensive insurance
program for the Company that will replace the insurance policies in effect at
each of the Founding Companies and provide additional coverage that the Company
believes is appropriate for a public company. In addition, the Company will
obtain environmental insurance for certain legal liabilities and environmental
pollution. See "Business -- Risk Management and Insurance" for a description of
the Company's environmental insurance coverage.

The Company has budgeted to spend approximately $13 million on expenditures
in 1999 for maintenance of existing facilities, environmental compliance,
facility upgrades and revenue producing capital projects. The Company has
incurred and anticipates that in the future it will incur certain costs
necessary to comply with environmental regulations. See
"Business -- Environmental and Health Regulation." Additionally, the Company
expects that its environmental insurance and the Environmental Indemnity will
mitigate the Company's need to incur significant cash outlays for environmental
related costs. See "Business -- Risk Management and Insurance" and "Certain
Transactions." The Company believes that it has recorded adequate accruals to
cover known environmental liabilities. There can be no assurance that the future
costs to resolve environmental related exposures will not have a material
adverse effect on the Company's financial position or results of operations.

The Company intends to pursue attractive acquisition opportunities. The
timing, size or success of any acquisition effort and the associated potential
capital commitments cannot be predicted. The Company expects to fund future
acquisitions primarily from working capital, cash flow from operations and
borrowings, including any unborrowed portion of the proposed credit facility, as
well as issuances of additional equity.

Due to the relatively low levels of inflation experienced in 1995, 1996 and
1997, inflation did not have a significant effect on the results of the combined
Founding Companies in those fiscal years.

YEAR 2000

The Founding Companies have begun the process of identifying, evaluating
and modifying computer systems in order to address potential year 2000
compliance issues. Five of the Founding Companies are currently using the
Chempax(TM) operating system. Two of these five companies are using the most
current version of Chempax(TM), which the Company believes is year 2000
compliant ("Y2K Version"). The other three Founding Companies that use the
Chempax(TM) software are planning to upgrade to the Y2K Version prior to the
year 2000. The remaining four Founding Companies, which do not use the
Chempax(TM) operating system, are also planning to convert their respective
operating systems to the Y2K Version prior to the year 2000. A large portion of
the Company's vendors and customers are major publicly-traded companies that the
Company believes are aware of and addressing the year 2000 issue; there can be
no assurance, however, that such vendors and customers will be able to address
year 2000 issues in a timely and effective manner. The Company believes it has a
viable plan to address the year 2000 issue, in part, through the implementation
of the Y2K Version and further believes that the implementation of the Y2K
Version and the year 2000 issue will not have a material adverse effect on the
Company's financial position or results of operation.

ROBINS RESULTS OF OPERATIONS

Robins commenced business in 1923 and has several offices located
throughout the Midwest United States, including its headquarters in St. Louis,
Missouri. Robins operates through nine distribution and storage facilities
located in Illinois, Missouri and Kansas and is principally engaged in the
wholesale distribution of a broad line of organic and inorganic chemicals to
customers in those states. A tenth facility, which is located in
25
<PAGE> 29

Cedar Rapids, Iowa, is under construction and will be leased by Robins beginning
in the third quarter of 1998. Robins has approximately 120 employees.

The following table sets forth selected historical results of operations
for Robins (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $58,236 100.0% $59,387 100.0% $61,445 100.0% $30,165 100.0% $29,380 100.0%
Costs and expenses --
Cost of sales............... 47,110 80.9 48,300 81.3 49,176 80.0 24,230 80.3 23,699 80.7
Operating and delivery
expenses.................. 3,741 6.4 3,540 6.0 4,126 6.7 2,132 7.1 1,958 6.7
Selling, general and
administrative expenses... 5,033 8.6 5,774 9.7 5,321 8.7 2,656 8.8 2,934 10.0
Depreciation................ 449 0.8 490 0.8 564 0.9 326 1.1 413 1.4
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations........ $ 1,903 3.3% $ 1,283 2.2% $ 2,258 3.7% $ 821 2.7% $ 376 1.2%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the six months ended June 30, 1998, compared to the six months
ended June 30, 1997

Net Sales. Net sales decreased $0.8 million, or 2.6%, from $30.2 million
for the six months ended June 30, 1997, to $29.4 million for the six months
ended June 30, 1998. This decrease was due to lower sales of calcium chloride
(ice melt) because of a mild winter.

Cost of Sales. Cost of sales decreased $0.5 million, or 2.2%, from $24.2
million for the six months ended June 30, 1997, to $23.7 million for the six
months ended June 30, 1998. The decline in cost of sales is a result of the
lower calcium chloride sales. As a percentage of net sales, cost of sales
increased from 80.3% for the six months ended June 30, 1997, to 80.7% for the
six months ended June 30, 1998.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.1 million, or 8.2%, from $2.1 million for the six months ended June 30, 1997,
to $2.0 million for the six months ended June 30, 1998. As a percentage of net
sales, operating and delivery expenses decreased from 7.1% for the six months
ended June 30, 1997, to 6.7% for the six months ended June 30, 1998. This
percentage decrease was primarily due to operational efficiencies and the
reduction of some direct sales volumes which had higher delivery costs,
partially offset by the additional expenses associated with the opening of a
distribution facility in Cedar Rapids, Iowa.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million, or 10.5%, from $2.7 million for
the six months ended June 30, 1997, to $2.9 million for the six months ended
June 30, 1998. As a percentage of net sales, selling, general and administrative
expenses increased from 8.8% for the six months ended June 30, 1997, to 10.0%
for the six months ended June 30, 1998. The increase was due to hiring
additional sales persons to service the new Cedar Rapids territory and to
provide greater market penetration in existing territories.

Results for the year ended December 31, 1997, compared to the year ended
December 31, 1996

Net Sales. Net sales increased $2.1 million, or 3.5%, from $59.4 million in
1996 to $61.5 million in 1997. The increase in net sales was primarily due to a
$1.5 million contract for a blended product that was obtained in March 1997.

Cost of Sales. Cost of sales increased $0.9 million, or 1.8%, from $48.3
million in 1996 to $49.2 million in 1997. The increase in cost of sales was
primarily due to the related increase in sales. As a percentage of net sales,
cost of sales decreased from 81.3% in 1996 to 80.0% in 1997, primarily due to
the blended product business, which generally had a higher margin.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.6 million, or 16.6%, from $3.5 million in 1996 to $4.1 million in 1997. As a
percentage of net sales, operating and delivery expenses

26
<PAGE> 30

increased from 6.0% in 1996 to 6.7% in 1997, primarily resulting from a
customer-requested billing change which required the delivery charges to be paid
by Robins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.5 million, or 7.8%, from $5.8 million in
1996 to $5.3 million in 1997. This decrease was primarily due to the 1996 buyout
of an officer, shareholder and director and the reorganization of the sales
department. As a percentage of net sales, selling, general and administrative
expenses decreased from 9.7% in 1996 to 8.7% in 1997.

Results for the year ended December 31, 1996, compared to the year ended
December 31, 1995

Net Sales. Net sales increased $1.2 million, or 2.0%, from $58.2 million in
1995 to $59.4 million in 1996. The increase in net sales was primarily due to an
additional sales location opened in Kansas City, Missouri, and a sales
distribution warehouse added in St. Louis, Missouri.

Cost of Sales. Cost of sales increased $1.2 million, or 2.5%, from $47.1
million in 1995 to $48.3 million in 1996, primarily as a result of the increase
in sales. As a percentage of net sales, cost of sales increased from 80.9% in
1995 to 81.3% in 1996.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.2 million, or 5.4%, from $3.7 million in 1995 to $3.5 million in 1996. The
decrease in operating and delivery expenses was primarily due to increased
savings from the usage of common carriers instead of in-house transportation in
situations where costs could be saved. As a percentage of net sales, operating
and delivery decreased from 6.4% in 1995 to 6.0% in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.7 million, or 14.7%, from $5.0 million in
1995 to $5.8 million in 1996. This increase was primarily attributable to
severance payments made in connection with the buyout of an officer, shareholder
and director. As a percentage of net sales, selling, general and administrative
expenses increased from 8.6% in 1995 to 9.7% in 1996.

ROBINS LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $9.3 million
and $8.8 million, respectively. Robins' principal capital requirements are to
fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations.

Net cash provided by operating activities for 1997 and the six months ended
June 30, 1998, was $3.8 million and $1.6 million, respectively. These changes
were principally due to changes in earnings and working capital requirements for
accounts receivable, inventories and accounts payable. Net cash used in
investing activities for 1997 and the six months ended June 30, 1998, was $1.2
million and $0.1 million, respectively. These investing activities primarily
related to capital expenditures, property and equipment sales and investments in
and dispositions of certificates of deposit. Net cash used in financing
activities for 1997 and the six months ended June 30, 1998, was $1.8 million and
$0.9 million, respectively. Robins paid dividends in 1997 and the six months
ended June 30, 1998 of $1.4 million and $0.9 million, respectively.

Robins has a revolving unsecured bank credit facility that provides for
borrowings of up to $2.5 million and is payable on demand. At June 30, 1998,
$2.5 million was available for borrowings from the credit facility. Robins
anticipates that its cash flows from operations will be sufficient to meet its
working capital and debt service requirements. Capital expenditure requirements
are expected to be funded from cash provided by operations and supplemented as
necessary with borrowings from banks or other lenders.

INDUSTRIAL RESULTS OF OPERATIONS

Industrial commenced business in 1970 and has several offices located in
the southeastern United States, including its headquarters in Birmingham,
Alabama. Industrial operates through seven distribution and

27
<PAGE> 31

storage facilities located in Alabama and Georgia and is a distributor of mainly
inorganic chemicals. The majority of its customers are in the southeastern
United States. Industrial has approximately 111 employees.

The following table sets forth selected historical results of operations
for Industrial (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED FOUR MONTHS ENDED JUNE 30,
--------------------------------------------------------- -------------------------------------
FEBRUARY 29, 1996 FEBRUARY 28, 1997 FEBRUARY 28, 1998 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $42,880 100.0% $44,726 100.0% $51,599 100.0% $15,958 100.0% $16,547 100.0%
Costs and expenses --
Cost of sales............... 33,474 78.1 35,000 78.3 39,547 76.6 12,275 76.9 12,820 77.5
Operating and delivery
expenses.................. 2,863 6.7 2,952 6.6 3,739 7.2 1,488 9.3 1,425 8.6
Selling, general and
administrative expenses... 5,095 11.9 5,451 12.2 6,366 12.3 1,833 11.5 1,981 12.0
Depreciation................ 801 1.9 902 2.0 828 1.6 243 1.5 195 1.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations........ $ 647 1.4% $ 421 .9% $ 1,119 2.3% $ 119 .8% $ 126 0.7%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the four months ended June 30, 1998, compared to the four months
ended June 30, 1997

Net Sales. Net sales increased $0.6 million, or 3.7%, from $16.0 million
for the four months ended June 30, 1997, to $16.6 million for the four months
ended June 30, 1998. The increase in net sales was primarily due to the
introduction of a new line of water treatment products.

Cost of Sales. Cost of sales increased $0.5 million, or 4.4%, from $12.3
million for the four months ended June 30, 1997, to $12.8 million for the four
months ended June 30, 1998. As a percentage of net sales, cost of sales
increased from 76.9% for the four months ended June 30, 1997, to 77.5% for the
four months ended June 30, 1998.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.1 million, or 4.2%, from $1.5 million for the four months ended June 30,
1997, to $1.4 million for the four months ended June 30, 1998. As a percentage
of sales, operating and delivery expenses decreased from 9.3% for the four
months ended June 30, 1997, to 8.6% for the four months ended June 30, 1998.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million, or 8.1%, from $1.8 million for
the four months ended June 30, 1997, to $2.0 million for the four months ended
June 30, 1998. As a percentage of net sales, selling, general and administrative
expenses increased from 11.5% for the four months ended June 30, 1997, to 12.0%
for the four months ended June 30, 1998. The increase was primarily due to an
increase in bad debt expenses and professional fees.

Results for the year ended February 28, 1998, compared to the year ended
February 28, 1997

Net Sales. Net sales increased $6.9 million, or 15.4%, from $44.7 million
in 1997 to $51.6 million in 1998. The increase was primarily due to increased
sales of the new line of water treatment products.

Cost of Sales. Cost of sales increased $4.5 million, or 13.0%, from $35.0
million in 1997 to $39.5 million in 1998. The increase in cost of sales was
primarily due to the related increase in sales. As a percentage of net sales,
cost of sales decreased from 78.3% in 1997 to 76.6% in 1998, primarily due to a
change in product mix.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.8 million, or 26.7%, from $3.0 million in 1997 to $3.7 million in 1998. As a
percentage of net sales, operating and delivery expenses increased from 6.6% in
1997 to 7.2% in 1998, primarily due to increases in salaries for warehouse
personnel and drivers.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.9 million, or 16.8%, from $5.5 million in
1997 to $6.4 million in 1998. This increase was primarily due to an overall
increase in salaries. As a percentage of net sales, selling, general and
administrative expenses increased from 12.2% in 1997 to 12.3% in 1998.

28
<PAGE> 32

Results for the year ended February 28, 1997, compared to the year ended
February 29, 1996

Net Sales. Net sales increased $1.8 million, or 4.3%, from $42.9 million in
1996 to $44.7 million in 1997. This increase was primarily due to additional
sales to new customers.

Cost of Sales. Cost of sales increased $1.5 million, or 4.6%, from $33.5
million in 1996 to $35.0 million in 1997, primarily due to the increase in net
sales. As a percentage of net sales, cost of sales increased from 78.1% in 1996
to 78.3% in 1997.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.1 million, or 3.1%, from $2.9 million in 1996 to $3.0 million in 1997. As a
percentage of net sales, operating and delivery expenses decreased from 6.7% in
1996 to 6.6% in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.4 million, or 7.0%, from $5.1 million in
1996 to $5.5 million in 1997. This increase was primarily due to an overall
increase in salaries. As a percentage of net sales, selling, general and
administrative expenses increased from 11.9% in 1996 to 12.2% in 1997.

INDUSTRIAL LIQUIDITY AND CAPITAL RESOURCES

Working capital at February 28, 1998, and June 30, 1998, was $0.6 million
and $0.8 million, respectively. Industrial's principal capital requirements are
to fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations and borrowings under bank credit facilities and
from affiliated parties.

Net cash provided by operating activities for 1998 and the four months
ended June 30, 1998, was $0.8 million and $0.4 million, respectively. These
changes were principally due to changes in earnings and working capital
requirements for accounts receivable, inventories and accounts payable. Net cash
used in investing activities for 1998 and the four months ended June 30, 1998,
was $0.7 million and $0.1 million, respectively. The investing activities
primarily related to capital expenditures and sales of property, plant and
equipment. Net cash used in financing activities for 1998 and the four months
ended June 30, 1998, was $0.1 million and $0.3 million, respectively. Industrial
paid dividends in 1998 and the four months ended June 30, 1998, of $1.0 million
and $0.1 million, respectively. In July 1998, Industrial made distributions to
shareholders of $921,600.

Industrial has a revolving unsecured bank credit facility that provides for
borrowings of up to $1.75 million and expires in December 1998. Borrowings
outstanding under the credit facility were approximately $1.7 million at June
30, 1998. Industrial anticipates that its cash flows from operations will be
sufficient to meet its working capital and debt service requirements. Capital
expenditure requirements are expected to be funded from cash provided by
operations and supplemented as necessary with borrowings from banks or other
lenders.

Industrial recently received and resolved a notice of violation of RCRA
hazardous waste requirements related to its Birmingham, Alabama facility through
an agreement to pay a $200,000 civil penalty and the execution of a consent
order that requires a limited investigation of the affected disposal areas. The
Company does not believe that the costs of this investigation will be material.
However, there is a possibility that a continuing governmental inquiry into past
waste disposal practices at this facility could lead to additional enforcement
action. As of June 30, 1998, Industrial had accrued $330,000 which management
believes is adequate to cover the civil penalty and the cost of the
investigation.

SOUTHWEST SOLVENTS RESULTS OF OPERATIONS

Southwest Solvents commenced business in 1970. Southwest Solvents is
headquartered in Houston, Texas, and has approximately 95 employees. Southwest
Solvents operates through seven distribution and storage facilities located in
Texas and California and is a distributor of a broad line of organic and
inorganic chemicals. Southwest Solvents' primary operations supply Texas,
Louisiana and California.

29
<PAGE> 33

The following table sets forth selected historical results of operations
for Southwest Solvents (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $50,621 100.0% $46,642 100.0% $47,219 100.0% $23,372 100.0% $23,437 100.0%
Costs and expenses --
Cost of sales.............. 42,084 83.1 38,138 81.8 38,791 82.1 19,127 81.8 19,088 81.4
Operating and delivery
expenses................. 2,437 4.8 2,677 5.7 2,433 5.2 1,324 5.7 1,437 6.1
Selling, general and
administrative
expenses................. 4,861 9.6 4,292 9.2 4,341 9.2 1,646 7.0 1,748 7.5
Depreciation............... 823 1.6 852 1.8 772 1.6 420 1.8 391 1.7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations....... $ 416 0.9% $ 683 1.5% $ 882 1.9% $ 855 3.7% $ 773 3.3%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the six months ended June 30, 1998, compared to the six months
ended June 30, 1997

Net Sales. Net sales increased $65,000, or 0.28%, from $23,372,000 for the
six months ended June 30, 1997, to $23,437,000 for the six months ended June 30,
1998, due to sales to new customers and the relative strength of the coating,
pigments and paints market.

Cost of Sales. Cost of sales decreased $39,000, or 0.2%, from $19,127,000
for the six months ended June 30, 1997, to $19,088,000 for the six months ended
June 30, 1998. As a percentage of net sales, cost of sales decreased from 81.8%
for the six months ended June 30, 1997, to 81.4% for the six months ended June
30, 1998.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.1 million, or 8.5%, from $1.3 million for the six months ended June 30, 1997,
to $1.4 million for the six months ended June 30, 1998. As a percentage of net
sales, operating and delivery expenses increased from 5.7% for the six months
ended June 30, 1997, to 6.1% for the six months ended June 30, 1998. This
increase was primarily due to changes in the sales mix necessitating greater use
of common carriers at a higher cost than the in-house fleet.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.1 million, or 6.2%, from $1.6 million for
the six months ended June 30, 1997, to $1.7 million for the six months ended
June 30, 1998. As a percentage of net sales, selling, general and administrative
expenses increased from 7.0% for the six months ended June 30, 1997, to 7.5% for
the six months ended June 30, 1998.

Results for the year ended December 31, 1997, compared to the year ended
December 31, 1996

Net Sales. Net sales increased $0.6 million, or 1.2%, from $46.6 million in
1996 to $47.2 million in 1997, due to an increase in the number of active
customer accounts and the addition of new products.

Cost of Sales. Cost of sales increased $0.7 million, or 1.7%, from $38.1
million in 1996 to $38.8 million in 1997. As a percentage of net sales, cost of
sales increased from 81.8% in 1996 to 82.1% in 1997. The increase in cost of
sales was primarily due to a change in product mix.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.2 million, or 9.1%, from $2.7 million in 1996 to $2.4 million in 1997. As a
percentage of net sales, operating and delivery expenses decreased from 5.7% in
1996 to 5.2% in 1997. This decrease was primarily due to a reduction in contract
drumming services which allowed for the elimination of a plant shift.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $49,000, or 1.1%, from $4,292,000 in 1996 to
$4,341,000 in 1997. As a percentage of net sales, selling, general and
administrative expenses remained constant at 9.2% in 1996 and 1997.

30
<PAGE> 34

Results for the year ended December 31, 1996, compared to the year ended
December 31, 1995

Net Sales. Net sales decreased $4.0 million, or 7.9%, from $50.6 million in
1995 to $46.6 million in 1996, primarily due to the loss of a major customer
seeking a chemical distributor with national coverage.

Cost of Sales. Cost of sales decreased $4.0 million, or 9.4%, from $42.1
million in 1995 to $38.1 million in 1996. The decrease in cost of sales was
primarily the result of the loss of a major customer. As a percentage of net
sales, cost of sales decreased from 83.1% in 1995 to 81.8% in 1996, primarily
due to the margins associated with the customer discussed above.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.2 million, or 9.8%, from $2.4 million in 1995 to $2.7 million in 1996. The
increase in operating and delivery expenses was primarily due to adding a plant
shift to accommodate contract drumming services. As a percentage of net sales,
operating and delivery expenses increased from 4.8% in 1995 to 5.7% in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.6 million, or 11.7%, from $4.9 million in
1995 to $4.3 million in 1996. This decrease was primarily attributable to
insurance premium reductions and a smaller executive bonus. As a percentage of
net sales, selling, general and administrative expenses decreased from 9.6% in
1995 to 9.2% in 1996.

SOUTHWEST SOLVENTS LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $1.5 million
and $2.1 million, respectively. Southwest Solvents, principal capital
requirements are to fund its working capital and the purchase and improvement of
facilities, machinery and equipment. Historically, these requirements have been
met by cash flows generated from operations and borrowings under bank credit
facilities.

Net cash provided by (used in) operating activities for 1997 and the six
months ended June 30, 1998, was $0.4 million and $(1.6) million, respectively.
These changes were principally due to changes in earnings and working capital
requirements for accounts receivable, inventories and accounts payable. Net cash
used in investing activities for 1997 and the six months ended June 30, 1998,
was $0.1 million and $0.1 million, respectively. The investing activities
primarily related to capital expenditures for the construction of a new chemical
lab and the refurbishment of existing plant facilities and sales of property,
plant and equipment. Net cash provided by (used in) financing activities for
1997 and the six months ended June 30, 1998, was $(0.5) million and $1.6
million, respectively. Southwest Solvents paid dividends in 1997 and the six
months ended June 30, 1998 of $0.3 million and $0.1 million, respectively.
Borrowings during 1997 and the six months ended June 30, 1998 were primarily
made to fund working capital requirements for accounts receivable, inventories,
accounts payable and accrued liabilities.

Southwest Solvents has two revolving credit lines and a term loan
outstanding subject to a common credit facility secured by accounts receivable
and inventory. One revolving credit line provides for borrowings of up to $3.0
million and expires in July 1999. The second revolving credit line provides for
individual borrowings for purchases of equipment of up to $0.5 million which
expire in January 2001 and December 2002. The term loan provided borrowings of
$3.1 million related to a plant acquisition and refurbishment and expires in
July 1999. At June 30, 1998, approximately $1.0 million was available for
borrowing under the two credit lines. Southwest Solvents anticipates that its
cash flows from operations will be sufficient to meet its working capital and
debt service requirements. Capital expenditure requirements are expected to be
funded from cash provided by operations and supplemented as necessary with
borrowings from banks.

CHEMICAL SOLVENTS RESULTS OF OPERATIONS

Chemical Solvents commenced business in 1970. Chemical Solvents is
headquartered in Cleveland, Ohio, and has approximately 113 employees. Chemical
Solvents operates through one main distribution facility in Ohio and is a
distributor of liquid organic chemicals as well as a processor of wastewater and
wash solvents. Chemical Solvents' primary operations supply Ohio, Michigan and
Pennsylvania.

31
<PAGE> 35

The following table sets forth selected historical results of operations
for Chemical Solvents (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $45,406 100.0% $40,874 100.0% $41,164 100.0% $20,596 100.0% $19,779 100.0%
Costs and expenses --
Cost of sales............. 33,425 73.6 30,298 74.1 30,334 73.7 15,207 73.8 13,975 70.7
Operating and delivery
expenses................ 4,667 10.3 4,109 10.1 4,352 10.6 2,229 10.8 2,294 11.6
Selling, general and
administrative
expenses................ 3,917 8.6 3,992 9.8 3,819 9.3 1,925 9.3 1,811 9.2
Depreciation.............. 590 1.3 839 2.0 871 2.1 465 2.3 475 2.4
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations...... $2,807 6.2% $1,636 4.0% $1,788 4.3% $ 770 3.8% $1,224 6.1%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the six months ended June 30, 1998, compared to the six months
ended June 30, 1997

Net Sales. Net sales decreased $0.8 million, or 4.0%, from $20.6 million
for the six months ended June 30, 1997, to $19.8 million for the six months
ended June 30, 1998.

Cost of Sales. Cost of sales decreased $1.2 million, or 8.1%, from $15.2
million for the six months ended June 30, 1997, to $14.0 million for the six
months ended June 30, 1998. As a percentage of net sales, cost of sales
decreased from 73.8% for the six months ended June 30, 1997, to 70.7% for the
six months ended June 30, 1998. The decrease is due to a larger percentage of
sales being derived from service activity during the first six months of 1998.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.1 million, or 2.9%, from $2.2 million for the six months ended June 30, 1997,
to $2.3 million for the six months ended June 30, 1998. As a percentage of net
sales, operating and delivery expenses increased from 10.8% for the six months
ended June 30, 1997, to 11.6% for the six months ended June 30, 1998.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $114,000, or 5.9%, from $1,925,000 for the six
months ended June 30, 1997, to $1,811,000 for the six months ended June 30,
1998. This decrease was primarily due to a refund from an insurance company
offset by an overall increase in salaries. As a percentage of net sales,
selling, general and administrative expenses decreased from 9.3% for the six
months ended June 30, 1997, to 9.2% for the six months ended June 30, 1998.

Results for the year ended December 31, 1997, compared to the year ended
December 31, 1996

Net Sales. Net sales increased $0.3 million, or 0.7%, from $40.9 million in
1996 to $41.2 million in 1997. The increase in net sales was primarily due to an
increase in sales from liquid organic chemicals.

Cost of Sales. Cost of sales increased approximately $36,000, or 0.1%, from
$30,298,000 in 1996 to $30,334,000 in 1997. As a percentage of net sales, cost
of sales decreased from 74.1% in 1996 to 73.7% in 1997, primarily due to an
increase in sales generated by services.

Operating and Delivery Expenses. Operating and delivery expenses increased
$0.2 million, or 5.9%, from $4.1 million in 1996 to $4.4 million in 1997. This
increase is consistent with the increase in net sales. As a percentage of net
sales, operating and delivery expenses increased from 10.1% in 1996 to 10.6% in
1997. The increase is due to wages related to the new water treatment facility.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.2 million, or 4.3%, from $4.0 million in
1996 to $3.8 million in 1997. As a percentage of net sales, selling, general and
administrative expenses decreased from 9.8% in 1996 to 9.3% in 1997.

32
<PAGE> 36

Results for the year ended December 31, 1996, compared to the year ended
December 31, 1995

Net Sales. Net sales decreased $4.5 million, or 10.0%, from $45.4 million
in 1995 to $40.9 million in 1996. This decrease is primarily due to the loss of
freon product business due to new regulations which prohibit the manufacturing
of freon.

Cost of Sales. Cost of sales decreased $3.1 million, or 9.4%, from $33.4
million in 1995 to $30.3 million in 1996, primarily as a result of the loss of
freon product business. As a percentage of net sales, cost of sales increased
from 73.6% in 1995 to 74.1% in 1996.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.6 million, or 12.0%, from $4.7 million in 1995 to $4.1 million in 1996. The
decrease in operating and delivery expenses was due to the loss of the freon
product business. As a percentage of net sales, operating and delivery expenses
decreased from 10.3% in 1995 to 10.1% in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.1 million, or 1.9%, from $3.9 million in
1995 to $4.0 million in 1996. This increase was primarily attributable to salary
increases. As a percentage of net sales, selling, general and administrative
expenses increased from 8.6% in 1995 to 9.8% in 1996.

CHEMICAL SOLVENTS LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $2.4 million
and $2.0 million, respectively. Chemical Solvents' principal capital
requirements are to fund its working capital and the purchase and improvement of
facilities, machinery and equipment. Historically, these requirements have been
met by cash flows generated from operations and borrowings under bank credit
facilities. Chemical Solvents has incurred and anticipates that in the future it
will incur certain costs necessary to comply with environmental regulations. See
"Business -- Environmental and Health Regulation."

Net cash provided by operating activities for 1997 and the six months ended
June 30, 1998, was $2.3 million and $1.8 million, respectively. These changes
were principally due to changes in earnings and depreciation. Net cash used in
investing activities for 1997 and the six months ended June 30, 1998, was $1.4
million and $0.1 million, respectively. The investing activities were primarily
related to capital expenditures for a drum storage warehouse which was started
in 1997 and the repayment of certain notes receivable. Net cash used in
financing activities for 1997 and the six months ended June 30, 1998, was $0.9
million and $1.7 million, respectively. Chemical Solvents paid dividends in 1997
and the six months ended June 30, 1998 of $0.7 million and $4.1 million,
respectively. Borrowings during the six months ended June 30, 1998, were made to
fund distributions, working capital requirements for inventories, accounts
payable and accrued liabilities.

Chemical Solvents has an unsecured bank credit facility that provides for
borrowings of up to $6.0 million and expires in April 1999. At June 30, 1998,
approximately $3.4 million was available for borrowings from the credit
facility. Chemical Solvents anticipates that its cash flows from operations will
be sufficient to meet its working capital and debt service requirements. Capital
expenditure requirements are expected to be funded from cash provided by
operations and supplemented as necessary with borrowings from banks or other
lenders.

TILLEY RESULTS OF OPERATIONS

Tilley commenced business in 1952. Tilley is headquartered in Baltimore,
Maryland, and has approximately 47 employees. Tilley operates through
distribution and storage facilities located in Baltimore and is a distributor of
a broad line of organic and inorganic chemicals. Tilley's primary operations
supply the Mid-Atlantic region of the United States.

33
<PAGE> 37

The following table sets forth selected historical results of operations
for Tilley (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, EIGHT MONTHS ENDED JUNE 30,
--------------------------------------------------------- -------------------------------------
1995 1996 1997 1997 1998
----------------- ----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $36,707 100.0% $38,281 100.0% $40,715 100.0% $26,706 100.0% $26,267 100.0%
Costs and expenses --
Cost of sales............... 30,742 83.8 32,292 84.4 34,022 83.6 22,318 83.6 21,792 83.0
Operating and delivery
expenses.................. 1,055 2.9 1,024 2.7 1,050 2.6 690 2.6 795 3.0
Selling, general and
administrative expenses... 3,134 8.5 3,339 8.7 3,381 8.3 2,149 8.0 2,224 8.5
Depreciation and
amortization.............. 421 1.1 437 1.1 444 1.1 287 1.1 306 1.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income from operations........ $ 1,355 3.7% $ 1,189 3.1% $ 1,818 4.4% $ 1,262 4.7% $ 1,150 4.3%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the eight months ended June 30, 1998, compared to the eight months
ended June 30, 1997

Net Sales. Net sales decreased $0.4 million, or 1.6%, from $26.7 million
for the eight months ended June 30, 1997, to $26.3 million for the eight months
ended June 30, 1998, primarily due to price decreases in some product lines.

Cost of Sales. Cost of sales decreased $0.5 million, or 2.4%, from $22.3
million for the eight months ended June 30, 1997, to $21.8 million for the eight
months ended June 30, 1998. As a percentage of net sales, cost of sales
decreased from 83.6% for the eight months ended June 30, 1997, to 83.0% for the
eight months ended June 30, 1998, principally due to more favorable supplier
pricing in the oil and lubricant segment combined with increased sales of higher
profit products in the chemical segment.

Operating and Delivery Expenses. Operating and delivery expenses increased
$105,000, or 15.2%, from $690,000 for the eight months ended June 30, 1997, to
$795,000 for the eight months ended June 30, 1998. As a percentage of net sales,
operating and delivery expenses increased from 2.6% for the eight months ended
June 30, 1997, to 3.0% for the eight months ended June 30, 1998. This percentage
increase was primarily due to wage increases and increased costs related to
facility maintenance and repairs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $75,000, or 3.5%, from $2,149,000 for the
eight months ended June 30, 1997, to $2,224,000 for the eight months ended June
30, 1998. As a percentage of net sales, selling, general and administrative
expenses increased from 8.0% for the eight months ended June 30, 1997, to 8.5%
for the eight months ended June 30, 1998. This increase was primarily due to the
largely fixed nature of these expenses.

Results for the year ended October 31, 1997, compared to the year ended October
31, 1996

Net Sales. Net sales increased $2.4 million, or 6.4%, from $38.3 million in
1996 to $40.7 million in 1997, primarily due to an increase in volume of sales
in the oil and lubricant segment.

Cost of Sales. Cost of sales increased $1.7 million, or 5.4%, from $32.3
million in 1996 to $34.0 million in 1997. As a percentage of net sales, cost of
sales decreased from 84.4% in 1996 to 83.6% in 1997.

Operating and Delivery Expenses. Operating and delivery expenses increased
$26,000, or 2.5%, from $1,024,000 in 1996 to $1,050,000 in 1997. This increase
is consistent with the increase in net sales. As a percentage of net sales,
operating and delivery expenses decreased from 2.7% in 1996 to 2.6% in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $42,000, or 1.3%, from $3,339,000 in 1996 to
$3,381,000 in 1997. As a percentage of net sales, selling, general and
administrative expenses decreased from 8.7% in 1996 to 8.3% in 1997.

34
<PAGE> 38

Results for the year ended October 31, 1996, compared to the year ended
October 31, 1995

Net Sales. Net sales increased $1.6 million, or 4.3%, from $36.7 million in
1995 to $38.3 million in 1996, primarily due to an increase in the volume of
sales to existing customers and the addition of new customers.

Cost of Sales. Cost of sales increased $1.6 million, or 5.0%, from $30.7
million in 1995 to $32.3 million in 1996, primarily due to the increase in sales
as discussed above. As a percentage of net sales, cost of sales increased from
83.8% in 1995 to 84.4% in 1996, primarily as a result of changes in product mix.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$31,000, or 2.9%, from $1,055,000 in 1995 to $1,024,000 in 1996. The decrease in
operating and delivery expenses was primarily due to reductions in outside
freight costs. As a percentage of net sales, operating and delivery expenses
decreased from 2.9% in 1995 to 2.7% in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million, or 6.5%, from $3.1 million in
1995 to $3.3 million in 1996. This increase was primarily attributable to salary
increases and overall inflation adjustments. As a percentage of net sales,
selling, general and administrative expenses increased from 8.5% in 1995 to 8.7%
in 1996.

TILLEY LIQUIDITY AND CAPITAL RESOURCES

Working capital at October 31, 1997, and June 30, 1998, was $3.5 million
and $3.8 million, respectively. Tilley's principal capital requirements are to
fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations and borrowings under bank credit facilities.

Net cash provided by operating activities for 1997 and the eight months
ended June 30, 1998, was $1.0 million and $0.6 million, respectively. These
changes were principally due to changes in earnings and depreciation. Net cash
used in investing activities for 1997 and the eight months ended June 30, 1998,
was $0.7 million and $0.3 million, respectively. These investing activities
primarily relate to the replacement of delivery and handling equipment and plant
renovations and repairs. Net cash used in financing activities for 1997 and the
eight months ended June 30, 1998, was $0.3 million and $0.4 million,
respectively. Tilley paid dividends of $0.2 million both in 1997 and for the
eight months ended June 30, 1998. Borrowings during the eight months ended June
30, 1998, were made to fund working capital requirements and capital
expenditures.

Tilley has two secured bank credit facilities. One facility provides for
total borrowings of up to $3.2 million and expires in March 1999. The other
facility provides for borrowings of up to $0.5 million and does not have an
expiration date, but will continue until all of Tilley's indebtedness thereunder
has been paid in full and the parties terminate this agreement in writing. At
June 30, 1998, approximately $2.2 million was available from the credit
facilities. Tilley anticipates that its cash flows from operations will be
sufficient to meet its working capital and debt service requirements. Capital
expenditure requirements are expected to be funded from cash provided by
operations and supplemented as necessary with borrowings from banks or other
lenders.

CRON RESULTS OF OPERATIONS

The predecessor entity of Cron began business in 1936. Cron maintains
headquarters in Houston, Texas, and New Orleans, Louisiana. Cron has
approximately 59 employees. Cron operates through two distribution facilities in
Texas and two distribution facilities in Louisiana and is a distributor of a
broad line of organic and inorganic chemicals. Cron's primary operations supply
Texas, Oklahoma and Louisiana.

35
<PAGE> 39

The following table sets forth selected historical results of operations
for Cron (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
------------------------------------- -------------------------------------
1996 1997 1997 1998
----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ $41,760 100.0% $38,755 100.0% $28,244 100.0% $31,439 100.0%
Costs and expenses --
Cost of sales...................... 34,866 83.5 32,557 84.0 23,779 84.2 26,616 84.7
Operating and delivery expenses.... 1,754 4.2 1,680 4.4 1,265 4.5 1,225 3.9
Selling, general and administrative
expenses......................... 3,276 7.9 3,268 8.4 2,393 8.5 2,338 7.4
Depreciation....................... 349 .8 404 1.0 300 1.1 304 1.0
------- ----- ------- ----- ------- ----- ------- -----
Income from operations............... $ 1,515 3.6% $ 846 2.2% $ 507 1.7% $ 956 3.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>

Results for the nine months ended June 30, 1998, compared to the nine months
ended June 30, 1997

Net Sales. Net sales increased $3.2 million, or 11.3%, from $28.2 million
for the nine months ended June 30, 1997, to $31.4 million for the nine months
ended June 30, 1998. The increase was primarily due to improved market
conditions in Cron's service areas, particularly in the oilfield service sector
in southern Louisiana and in the paint and coatings sector in Dallas.

Cost of Sales. Cost of sales increased $2.8 million, or 11.9%, from $23.8
million for the nine months ended June 30, 1997, to $26.6 million for the nine
months ended June 30, 1998. As a percentage of net sales, cost of sales
increased from 84.2% for the nine months ended June 30, 1997, to 84.7% for the
nine months ended June 30, 1998.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$40,000, or 3.2%, from $1,265,000 for the nine months ended June 30, 1997, to
$1,225,000 for the nine months ended June 30, 1998. As a percentage of net
sales, operating and delivery expenses decreased from 4.5% for the nine months
ended June 30, 1997, to 3.9% for the nine months ended June 30, 1998. This
percentage decrease was primarily due to reduced rental charges for
large-capacity containers resulting from improved management of Cron's tank
inventory.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $55,000, or 2.3%, from $2,393,000 for the nine
months ended June 30, 1997, to $2,338,000 for the nine months ended June 30,
1998. This decrease was primarily due to reduced staffing, resulting in a
decrease in salaries and related costs. As a percentage of net sales, selling,
general and administrative expenses decreased from 8.5% for the nine months
ended June 30, 1997, to 7.4% for the nine months ended June 30, 1998.

Results for the year ended September 30, 1997, compared to the year ended
September 30, 1996

Net Sales. Net sales decreased $3.0 million, or 7.2%, from $41.8 million in
1996 to $38.8 million in 1997. The decrease in net sales was primarily due to
decreased market demand in Cron's service area, supplier decisions not to meet
competitive market prices and supply problems with key vendors.

Cost of Sales. Cost of sales decreased $2.3 million, or 6.6%, from $34.9
million in 1996 to $32.6 million in 1997. The decrease in cost of sales was
primarily due to the decrease in net sales. As a percentage of net sales, cost
of sales increased from 83.5% in 1996 to 84.0% in 1997 primarily due to the mix
of products sold.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.1 million, or 4.2%, from $1.8 million in 1996 to $1.7 million in 1997. As a
percentage of net sales, operating and delivery expenses increased from 4.2% in
1996 to 4.4% in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $8,000, or 0.2%, from $3,276,000 in 1996 to
$3,268,000 in 1997. As a percentage of net sales, selling, general and
administrative expenses increased from 7.9% in 1996 to 8.4% in 1997.

36
<PAGE> 40

CRON LIQUIDITY AND CAPITAL RESOURCES

Working capital at September 30, 1997, and June 30, 1998, was $2.9 million
and $2.6 million, respectively. Cron's principal working capital requirements
are to fund its working capital and the purchase and improvement of facilities.
Historically, these requirements have been met by cash flows generated from
operations and borrowings from the parent company of Cron.

Net cash provided by operating activities for 1997 and the nine months
ended June 30, 1998, was $1.4 million and $1.1 million, respectively. These
changes were principally due to changes in earnings and working capital
requirements for accounts receivable, inventories and accounts payable. Net cash
used in investing activities for 1997 and the nine months ended June 30, 1998,
was $0.4 million and $0.1 million, respectively. These investing activities
primarily related to capital expenditures and sales of property, plant and
equipment. Net cash used in financing activities for 1997 and the nine months
ended June 30, 1998, was $0.8 million and $1.3 million, respectively. Cron paid
dividends in 1997 and the nine months ended June 30, 1998 of $0.8 million and
$1.3 million, respectively.

Cron anticipates that its cash flows from operations will be sufficient to
meet its working capital and debt service requirements. Capital expenditure
requirements are expected to be funded from cash provided by operations and
supplemented as necessary with borrowings from banks or other lenders.

BROWN RESULTS OF OPERATIONS

Brown commenced business in 1936. Brown is headquartered in Oakland, New
Jersey, and has approximately 28 employees. Brown operates through two
distribution and storage facilities located in New Jersey and is a distributor
of various dry and liquid inorganic and organic chemicals. Brown's primary
operations supply the northeastern United States.

The following table sets forth selected historical results of operations
for Brown (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------- -------------------------------------
1996 1997 1997 1998
----------------- ----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $33,767 100.0% $34,311 100.0% $17,455 100.0% $18,176 100.0%
Costs and expenses --
Cost of sales......................... 28,176 83.4 28,361 82.7 14,274 81.8 14,775 81.3
Operating and delivery expenses....... 1,532 4.5 1,514 4.4 951 5.4 884 4.9
Selling, general and administrative
expenses............................ 2,856 8.5 3,097 9.0 1,391 8.0 1,463 8.0
Depreciation.......................... 261 .8 278 .8 152 .9 154 .8
------- ----- ------- ----- ------- ------ ------- -----
Income from operations.................. $ 942 2.8% $ 1,061 3.1% $ 687 3.9% $ 900 5.0%
======= ===== ======= ===== ======= ====== ======= =====
</TABLE>

Results for the six months ended June 30, 1998, compared to the six months
ended June 30, 1997

Net Sales. Net sales increased $0.7 million, or 4.1%, from $17.5 million
for the six months ended June 30, 1997, to $18.2 million for the six months
ended June 30, 1998, due to a general increase in sales volumes.

Cost of Sales. Cost of sales increased $0.5 million, or 3.5%, from $14.3
million for the six months ended June 30, 1997, to $14.8 million for the six
months ended June 30, 1998. As a percentage of net sales, cost of sales
decreased from 81.8% for the six months ended June 30, 1997, to 81.3% for the
six months ended June 30, 1998.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$67,000, or 7.0%, from $951,000 for the six months ended June 30, 1997, to
$884,000 for the six months ended June 30, 1998. As a percentage of net sales,
operating and delivery expenses decreased from 5.4% for the six months ended
June 30, 1997, to 4.9% for the six months ended June 30, 1998.

37
<PAGE> 41

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $72,000, or 5.2%, from $1,391,000 for the six
months ended June 30, 1997, to $1,463,000 for the six months ended June 30,
1998. As a percentage of net sales, selling, general and administrative expenses
remained constant at 8.0% for the six months ended June 30, 1997 and 1998.

Results for the year ended December 31, 1997, compared to the year ended
December 31, 1996

Net Sales. Net sales increased $0.5 million, or 1.6%, from $33.8 million in
1996 to $34.3 million in 1997 due to a general increase in sales volumes.

Cost of Sales. Cost of sales increased $0.2 million, or 0.7%, from $28.2
million in 1996 to $28.4 million in 1997. The increase in cost of sales was
primarily due to the increase in sales volumes, partially offset by a decline in
the average cost of purchased product. As a percentage of net sales, cost of
sales decreased from 83.4% in 1996 to 82.7% in 1997 due to a decline in the
average cost of purchased product.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$18,000, or 1.2%, from $1,532,000 in 1996 to $1,514,000 in 1997. As a percentage
of net sales, operating and delivery expenses decreased from 4.5% in 1996 to
4.4% in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million, or 8.4%, from $2.9 million in
1996 to $3.1 million in 1997. This increase was primarily due to an increase in
officer bonuses. As a percentage of net sales, selling, general and
administrative expenses increased from 8.5% in 1996 to 9.0% in 1997.

BROWN LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $2.3 million
and $2.7 million, respectively. Brown's principal capital requirements are to
fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations and borrowings under bank credit facilities.

Net cash provided by (used in) operating activities for 1997 and the six
months ended June 30, 1998, was $2.2 million and $(0.9) million, respectively.
These changes were principally due to changes in earnings and working capital
requirements for accounts receivable, inventories and accounts payable. Net cash
used in investing activities for 1997 and the six months ended June 30, 1998,
was $0.4 million and $0.2 million, respectively. These investing activities
primarily related to capital expenditures. Net cash provided by (used in)
financing activities for 1997 and the six months ended June 30, 1998, was ($0.3)
million and $0.1 million, respectively. During 1997, Brown repaid a portion of
the borrowings outstanding under its revolving bank credit facility.

Brown has a revolving bank credit facility and a mortgage facility with a
bank. The revolving bank credit facility provides for borrowings of up to $1.0
million and expires in April 1999. The mortgage facility provided borrowings of
$1.4 million related to real estate acquisitions and improvements and originally
expired in July 1998 and was extended through December 1998. At December 31,
1997, Brown was not in compliance with certain covenants relating to such
mortgage facility. At June 30, 1998, approximately $1.0 million was available
for borrowings from the credit facility. Brown anticipates that its cash flows
from operations will be sufficient to meet its working capital and debt service
requirements. Capital expenditure requirements are expected to be funded from
cash provided by operations and supplemented as necessary with borrowings from
banks and other lenders.

TARR RESULTS OF OPERATIONS

The predecessor business of Tarr was founded in 1945. Tarr is headquartered
in Portland, Oregon, and has approximately 72 employees. Tarr operates through
nine distribution and storage facilities located in Oregon, Washington and
Arizona and is a distributor of liquid organic chemicals and petroleum products.
Tarr's primary operations supply the Northwest region of the United States and
Arizona.

38
<PAGE> 42

The following table sets forth selected historical results of operations
for Tarr (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------- --------------------------------------
1997 1997 1998
----------------- ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... $31,662 100.0% $15,945 100.0% $12,888 100.0%
Costs and expenses --
Cost of sales................ 24,956 78.8 12,855 80.6 9,598 74.5
Operating and delivery
expenses.................. 2,910 9.2 1,481 9.3 1,290 10.0
Selling, general and
administrative expenses... 2,798 8.8 1,309 8.2 1,313 10.2
Depreciation................. 420 1.3 198 1.2 235 1.8
------- ----- ------- ----- ------- -----
Income from operations......... $ 578 1.9% $ 102 .7% $ 452 3.5%
======= ===== ======= ===== ======= =====
</TABLE>

Results for the six months ended June 30, 1998, compared to the six months
ended June 30, 1997

Net Sales. Net sales decreased $3.0 million, or 19.2%, from $15.9 million
for the six months ended June 30, 1997, to $12.9 million for the six months
ended June 30, 1998. This decrease was due to the loss of a supplier and a major
customer in 1997 and reductions in the sales prices of products.

Cost of Sales. Cost of sales decreased $3.3 million, or 25.3%, from $12.9
million for the six months ended June 30, 1997, to $9.6 million for the six
months ended June 30, 1998. The decrease in the cost of sales was principally
due to lower sales attributable to the loss of a supplier and a major customer
as mentioned above and decreases in prices of fuel and solvents. As a percentage
of net sales, cost of sales decreased from 80.6% for the six months ended June
30, 1997, to 74.5% for the six months ended June 30, 1998, primarily due to a
loss of a major customer the sales to which were at lower-than-average gross
margins.

Operating and Delivery Expenses. Operating and delivery expenses decreased
$0.2 million, or 12.9%, from $1.5 million for the six months ended June 30,
1997, to $1.3 million for the six months ended June 30, 1998. As a percentage of
net sales, operating and delivery expenses increased from 9.3% for the six
months ended June 30, 1997, to 10.0% for the six months ended June 30, 1998.
This percentage increase was primarily due to the fixed nature of certain of
these costs.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4,000, or 0.3%, from $1,309,000 for the six
months ended June 30, 1997, to $1,313,000 for the six months ended June 30,
1998. As a percentage of net sales, selling, general and administrative expenses
increased from 8.2% for the six months ended June 30, 1997, to 10.2% for the six
months ended June 30, 1998. This increase was primarily due to an increase in
insurance expenses.

TARR LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 1997, and June 30, 1998, was $(0.6) million
and $(0.5) million, respectively. Tarr's principal capital requirements are to
fund its working capital and the purchase and improvement of facilities,
machinery and equipment. Historically, these requirements have been met by cash
flows generated from operations and borrowings under bank credit facilities.

Net cash provided by operating activities for 1997 and the six months ended
June 30, 1998, was $0.1 million and $1.1 million, respectively. These changes
were principally due to changes in earnings and working capital requirements for
accounts receivable, inventories and accounts payable. Net cash used in
investing activities for 1997 and the six months ended June 30, 1998, was $1.0
million and $0.2 million, respectively. The investing activities related
principally to capital expenditures to purchase property and equipment and
construct various facilities. Net cash provided by (used in) financing
activities for the year ended December 31, 1997, and the six months ended June
30, 1998, was $0.9 million and $(0.8) million,

39
<PAGE> 43

respectively. Tarr paid dividends in 1997 of $0.6 million. Long-term borrowings
in 1997 were to purchase property and equipment and construct various
facilities.

Tarr has a line of credit with a bank that provides for approximately $2.8
million of available credit, payable upon demand, expiring in February 1999. The
line of credit bears interest at 0.5% plus prime and is secured by accounts
receivable, inventories and the personal guarantee of a Tarr stockholder.
Borrowings outstanding under the line of credit were approximately $2.1 million
at June 30, 1998. Tarr anticipates that its cash flows from operations will be
sufficient to meet its working capital and debt service requirements. Capital
expenditure requirements are expected to be funded from cash provided by
operations and supplemented as necessary with borrowings from banks or other
lenders.

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<PAGE> 44

BUSINESS

GENERAL

CLC was founded in July 1997 to create a premier national chemical
distribution company with a wide range of value-added services, broad line of
product offerings and extensive geographic coverage, and to participate in the
consolidation of the chemical distribution industry. The Company operates an
extensive sales and distribution network focused primarily in the United States,
with 41 facilities serving 47 states, and distributes a broad line of chemicals
to over 10,000 customers in a number of industries including paint and coatings,
water treatment, pharmaceuticals, oil and gas, chemical processing, textiles,
food and beverage, fragrances, cosmetics, soaps and detergents, semiconductor,
mining and metal treatment, pulp and paper, ink, rubber and plastics. In
addition to providing basic customer services such as the warehousing,
transportation, blending, packaging and labeling of chemicals, the Company also
provides value-added services requiring specialized facilities and expertise
such as quality assurance and laboratory analysis, contract drumming,
specialized packaging and bagging, bar coding, integrated supply (including
inventory management, remote tank monitoring and just-in-time delivery) and
export containerization.

The chemical distribution industry is becoming an increasingly important
component of the U.S. chemical supply chain as chemical manufacturers and end
users demand greater product and service capability from chemical distribution
companies and aggressively reduce their overall number of distributor
relationships in order to control costs. At the same time, and in common with
certain other U.S. distribution industries, chemical distribution companies are
facing increasing costs for technology, infrastructure and regulatory
compliance. In this evolving, competitive environment, the Company believes that
its size, wide range of value-added services, broad line of product offerings
and extensive geographic coverage will allow it to be an industry leader.

INDUSTRY OVERVIEW

Based on industry data, the Company believes that sales by chemical
distribution companies in the United States were approximately $18 billion in
1997. Purchasing Magazine, which conducts an annual survey of the chemical
distribution industry, estimates the top 100 chemical distribution companies
generated approximately $11.5 billion in sales for 1997. Based on this survey,
the Company's 1997 pro forma combined revenues of $366 million would have made
it the seventh largest chemical distribution company in the United States in
1997.

The U.S. chemical distribution industry has grown more quickly than the
overall U.S. economy in past years. According to an industry consultant to the
NACD, average annual revenue growth was approximately 6.8% for the 86 NACD
members participating in an industry survey covering the 10-year period ending
December 31, 1996. The industry survey conducted by Purchasing Magazine reflects
higher revenue growth by larger chemical distribution companies. According to
survey data, the top 12 chemical distribution companies in the U.S. grew by
10.3% in revenue terms in 1997.

The chemical distribution industry has been affected by the following
important trends: (i) the increased outsourcing by manufacturers of chemical
distribution functions; (ii) the substantial reduction by end users in the
number of chemical distributors from which they purchase chemicals; (iii) the
increased importance to chemical distribution companies of size and significant
geographic coverage; and (iv) the trend toward integrated supply relationships
between chemical distributors and end users. The Company believes these trends
will continue.

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<PAGE> 45

Increased Outsourcing by Manufacturers. As chemical manufacturers have
emphasized their core competencies of manufacturing and marketing, they have
outsourced to chemical distribution companies an increasing amount of the
overall chemical distribution function, which includes buying, storing,
blending, packaging and transporting chemicals to customers. In addition,
chemical manufacturers have increasingly sought to use chemical distribution
companies, as opposed to their own sales force and other employees, to market
and distribute their chemical products where to do so would potentially increase
revenues and/or reduce costs.

Reduction of Distributor Relationships by End Users. Chemical users have
aggressively sought to reduce the number of distributors from which they buy in
order to achieve operating efficiencies and to reduce costs, while demanding
increased value-added services such as inventory management and logistical
support. In addition, multi-location customers prefer to purchase from chemical
distributors on a national basis and have excluded smaller, regional
distributors from bidding on these larger supply contract opportunities.

Increased Importance of Size and Geographic Coverage. The costs to chemical
distributors of obtaining and maintaining the necessary technology to do
business, and to comply with tightening industry and regulatory environmental,
safety and health standards, are increasing. In this environment of increased
costs, coupled with the trends described above favoring larger chemical
distributors able to provide extensive value-added services, those chemical
distribution companies that lack the necessary size and financial resources are
at a competitive disadvantage. In addition, both chemical manufacturers and
multi-location end users are increasingly seeking to deal with larger chemical
distribution companies with extensive geographic coverage in order to ensure
product quality and reduce costs. This ultimately reduces the number of
distributor relationships.

Demand for Integrated Supply. Chemical users increasingly prefer to deal
with chemical distribution companies that can offer an integrated approach to
providing chemical products and services. Such an approach would include, for
example, providing inventory management; chemical product stewardship; product
labeling, bar coding, quality assurance testing and other services to chemical
users as part of the overall chemical distribution function.

The chemical distribution industry is highly fragmented. The Company
believes, based on industry data, that there are more than 1,000 chemical
distribution businesses in the United States consisting of a small number of
regional or national companies and a much larger number of relatively small,
owner-operated businesses that have limited access to capital and that offer a
limited range of services. At this time, many of these companies are not in
direct competition with the Company due to differences in products distributed
or in the nature of their businesses. The Company believes that the fragmented
nature of the industry presents substantial consolidation and growth
opportunities for relatively large companies with a disciplined acquisition
program, a decentralized operating strategy and access to financial resources.
The Company also believes that the prominence and operating strength of the
Founding Companies and the experience of its executive management will provide
the Company with significant competitive advantages to capitalize on these
opportunities.

STRATEGY

As a result of the Acquisitions and the Offering, the Company believes it
has the size, scale of operations and resources necessary to compete effectively
on a national basis in the consolidating chemical distribution industry. The
Company plans to achieve its goal of becoming a premier national chemical
distribution company by accelerating internal growth, implementing its operating
strategy and expanding through acquisitions.

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<PAGE> 46

INTERNAL GROWTH STRATEGY

The Company intends to pursue internal growth by (i) promoting national
account sales, (ii) cross selling its expanded product lines and services and
(iii) implementing best practices across the Founding Companies.

Promoting National Account Sales. The Company believes that significant
demand exists from large multi-location national companies to utilize the
services of a limited number of chemical distribution companies capable of
providing comprehensive chemical product sourcing and services on a regional or
national basis. The Company intends to leverage its sales and distribution
network across the United States to obtain additional business from existing
customers that operate on a regional and national basis, as well as new business
from multi-location companies that previously could not be serviced by the
Founding Companies individually.

Cross Selling the Expanded Product Lines and Services of the Combined
Entity. The Company believes it will be able to expand sales to existing
customers and to obtain new customers by offering a broader line of products and
a broader array of specialized services than has been offered by the Founding
Companies individually.

Aggressive Implementation of Best Practices. The Company intends to
implement a company-wide marketing program and to foster a culture of
cooperation and teamwork that emphasizes the dissemination of best practices
among its local management teams. The Company will identify and share best
practices among the Founding Companies to leverage the technical strengths of
the individual Founding Companies.

OPERATING STRATEGY

The key elements of the Company's operating strategy are (i) to centralize
certain corporate functions in order to obtain operating efficiencies and to
maintain a decentralized operating management in order to continue to provide
superior customer service; (ii) to provide value-added services and become more
integrated into the customers' internal use and handling of chemical products;
and (iii) to implement a company-wide management information system.

Centralize Corporate Functions and Decentralize Operating Management. At
the corporate level, the Company will consolidate functions such as risk
management and insurance, finance and accounting, management information systems
and employee benefits to eliminate duplicative administrative and other costs
that otherwise would be incurred at each of its operating locations. The
anticipated operating efficiencies should provide the Company an advantage over
smaller regional and local competitors. At the operating subsidiary level, the
Company will adopt a regional approach to the U.S. chemical distribution market
by creating four U.S. geographic regions that in most cases will be managed by
selected Founding Company principals. The Company will employ a decentralized
management structure that focuses management of each operating subsidiary on
day-to-day operating matters, maintaining existing and building new customer and
supplier relationships, as well as assisting in the identification of potential
acquisition candidates. The Company believes that its decentralized management
philosophy will continue to provide superior customer service by allowing local
management the flexibility to implement policies and make decisions based on
first-hand assessments of the needs and desires of individual customers.

Provide Value-Added Services. The Company currently seeks, and following
the consummation of the Offering will continue to seek to develop and provide
value-added services designed to meet each customer's needs and to offer an
integrated supply approach to providing chemical products and services, thereby
expanding product sales. Examples of such services currently provided by the
Company to its customers are quality assurance and laboratory analysis, contract
drumming, specialized packaging and bagging, bar coding, integrated supply
(including inventory management, remote tank monitoring and just-in-time
delivery) and export containerization.

Implement Company-Wide Management Information System. Following the
Offering, the Company expects to use the Chempax(TM) management information
system, which is currently used by a majority of the Founding Companies as the
Company's primary management information system. The Company's objective over
time is to implement a centralized, real time management information system
linking all stocking
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<PAGE> 47

locations, chemical terminal locations, warehouses and sales offices with
Company management. Such a management information system will assist the Company
in achieving desired productivity levels and operating efficiency goals, as well
as allow centralized management of key functions including inventory control,
accounts receivable and accounts payable management, purchasing, pricing and
product transport. The Company's management information system will be designed
to allow the preparation of financial and operating reports on a daily,
company-wide basis.

ACQUISITION STRATEGY

The Company believes that the U.S. chemical distribution industry presents
significant consolidation opportunities, with over 350 U.S. companies it views
currently as potential acquisition candidates. The Company intends to pursue an
aggressive but disciplined acquisition program to acquire chemical distribution
companies in order to increase sales to industries and markets currently served
by the Company; to enter new industries and markets; to develop new
relationships with domestic and international chemical suppliers; and to expand
its range of products and services. In the past several months, the Company has
contacted the owners of numerous U.S. chemical distribution companies. A
significant percentage of these owners have expressed interest in discussing the
sale of their businesses to the Company. Currently, however, the Company is not
engaged in any material negotiations with such owners, and the Company does not
have any agreements, understandings, arrangements or commitments to effect any
acquisitions other than the acquisitions of the Founding Companies.

The Company believes that the senior management of the Founding Companies
will be instrumental in identifying and completing future acquisitions. Several
of the principals of the Founding Companies have held leadership roles in the
NACD. One of these principals, G. Stephen Robins, currently serves as president
of the NACD, and principals of four of the Founding Companies currently serve on
the 13-member Board of Directors of the NACD. Additionally, one principal has
served as president of the Chemical Educational Foundation and three principals
currently serve as trustees of this foundation. These leadership positions have
enabled these individuals to develop relationships with most of the principals
of the approximately 350 NACD member companies, which are among the potential
acquisition candidates of the Company. The Company expects that the visibility
of these individuals and the Company within the industry will increase the
industry profile of the Company and its acquisition program.

Expand within Existing Markets. The Company intends to explore acquisition
opportunities in the geographic and industry markets it already serves as well
as the geographic and industry markets served by businesses the Company acquires
in the future. Once the Company has entered a specific market, it will seek to
acquire other well-established companies in that particular market to deepen its
market penetration and expand the range of products and services offered to
customers. The Company will also pursue "tuck-in" acquisitions of smaller
companies whose operations can be integrated into and leveraged with an existing
operation.

Enter New Markets. The Company intends to expand into geographic markets
and industries not currently served by the Founding Companies by selectively
acquiring well-established chemical distribution companies that meet the
Company's acquisition criteria, as outlined below, and can serve as platforms
for future growth in that market or industry.

The Company has developed a set of financial, geographic and management
criteria designed to assist management in the evaluation of acquisition
candidates. These criteria comprise a variety of factors, including, but not
limited to, (i) historical and projected financial performance, (ii) internal
rate of return and return on assets, (iii) experience and reputation of the
candidate's management and operations, (iv) composition and size of the
candidate's customer base and supplier base, (v) whether the geographic location
of the candidate will enhance or expand the Company's market area or ability to
attract other acquisition candidates, (vi) whether the acquisition will augment
or increase the Company's market share and/or increase the Company's ability to
serve its existing customer base, (vii) potential synergies gained by combining
the acquisition candidate with the Company's existing operations and (viii)
liabilities, contingent or otherwise, of the candidate.

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<PAGE> 48

The Company believes that it is an attractive acquiror in part because of
(i) the Company's strategy for creating a leading national chemical distribution
company, (ii) the Company's potential to acquire businesses for cash and
publicly traded stock, (iii) the Company's increased industry and corporate
profile and access to financial resources as a public company, (iv) the
potential for increased future profitability of acquirees due to economies of
scale, centralized administrative functions, enhanced systems capabilities and
access to increased corporate resources and (v) the ability of the acquirees'
management to remain in the business due to the Company's decentralized
operating structure.

As consideration for future acquisitions, the Company expects to utilize a
combination of cash, Common Stock and debt. The purchase price for each future
acquisition will vary. Following the Offering, the Company intends to register
5,000,000 additional shares of Common Stock under the Securities Act, which will
be offered in connection with future acquisitions.

PRODUCTS AND SERVICES

The Company distributes thousands of different chemicals for use in a wide
variety of industries. The Company distributes liquid, dry, organic, inorganic,
commodity and specialty chemicals. In connection with the distribution of
chemicals, the Company also provides a broad range of value-added services to
its customers. The customers' demand for these services is driven by the
reduction in costs achievable through the use of such services. These
value-added services also benefit the Company by further integrating the Company
into its customers' processes. Following is a description of certain of these
services:

Warehousing and Repackaging of Bulk Chemicals. The Company's role as a
distribution company is to acquire large amounts of chemicals from suppliers and
store them at their facilities in a manner so that they can be shipped quickly
to customers in smaller quantities. By providing this service, the Company
enables its customers to reduce inventory costs.

Blending. In some instances, the Company performs blending services for
customers. In these instances, the customer provides the Company with the
specifications of the blended product and the Company mixes two or more
chemicals for the customer. The end product is then shipped to the customer. By
outsourcing blending, customers are able to reduce inventory costs by buying
only the exact amount of chemicals needed to fill the blended product order.
Examples of blends prepared by the Company for customers are paint and lacquer
thinners used in the coatings industry and blanket and roller wash solutions
used in the printing industry.

Quality Assurance and Laboratory Analysis. Generally, the Company tests
incoming liquid chemicals from suppliers to ensure that what is received is
consistent with the product specifications. Additionally, upon the request from
a customer, the Company can test chemicals and certify their quality prior to
their shipment to the customer. This service helps to prevent the loss of time
and money that would otherwise occur when customers reject chemicals upon their
delivery at their facility, as well as assist the customer with its quality
control requirements.

Bar Coding and Labeling. Certain customers use bar coding or special labels
to track or identify their chemicals within their own facilities. The Company,
when provided with the necessary information, can apply these items to the drums
or bags of chemicals before they are shipped to the customer. By having the
Company provide this service, the customer eliminates the time and expense of
performing this task and is able to identify and track their chemicals as soon
as they arrive at their facility.

Export Containerization. In certain areas, the Company provides export
services for its suppliers. This involves packaging bulk chemicals, putting the
packaged chemicals into containers for export, preparing the containers for
shipping and then delivering the containers to the terminal from where they will
be shipped.

Contract Bagging and Drumming. Certain chemical manufacturers have
outsourced some of the actual bagging and drumming of their products. The
Company receives a fee for these services and does not take title to the
chemicals. The chemicals are shipped in bulk to the Company's facilities, where
they are placed into the bags or drums provided by the manufacturer and then
returned to the supplier or shipped to the manufacturer's customers.
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<PAGE> 49

Inventory Management. The Company is able to aid customers in reducing
their inventory costs by providing a variety of inventory management services.
The Company offers just-in-time deliveries to certain customers through the use
of techniques such as remote tank monitoring and order placement through
Internet electronic mail.

Employee Training. Pursuant to Department of Transportation and OSHA
regulations the Company is required to conduct training courses for certain of
its employees throughout the year. Often, the Company will invite customers to
send employees to this training at little or no cost.

On a more limited basis, the Company provides other services including
hazardous waste management and commercial fueling services.

CUSTOMERS

The Company has over 10,000 customers, representing a broad range of
industries including paint and coatings; water treatment; pharmaceuticals; oil
and gas; chemical processing; textiles; food and beverage; fragrances;
cosmetics, soaps and detergents; semiconductor; mining and metal treatment; pulp
and paper; ink; rubber and plastics. The customers range in size from small
manufacturing facilities to national and multinational corporations such as
McCormick & Company, Incorporated, The Procter & Gamble Company and
Archer-Daniels-Midland Company. For the 12 months ended December 31, 1997, the
Company sold products to over 450 customers who purchased at least $75,000 of
products with no single customer accounting for more than 3% of the Company's
pro forma combined net sales. As is typical in the chemical distribution
industry, the Company has few supply contracts with its customers, but relies on
established customer relationships to generate sales. The Company will seek to
serve a larger number and wider variety of customers and pursue national account
sales as part of its internal growth strategy.

SALES AND MARKETING

Due to the varied service capabilities and geographical locations of the
Founding Companies, there have been several marketing strategies used to serve
customers. The Company plans to integrate the various strategies into a
corporate sales strategy that is implemented on a regional basis. Each of the
four regions will have a regional sales manager reporting to the regional
president. The Company believes that this regional strategy will allow it to
maintain a high level of service to its existing customers, as well as readily
identify new customers and sales opportunities.

The Company has approximately 24 sales managers, 76 outside sales
representatives, 15 product specialists and 53 customer service representatives.
Within the sales force, there are two groups of personnel -- outside sales
representatives and product specialists. The outside sales representatives call
on customers for commodity and basic chemical sales. In situations that require
technical assistance or the sale of certain speciality products, the outside
sales representative is assisted by a product specialist. Furthermore, where
cross selling opportunities of speciality products exist, the product
specialists will share the techniques and product knowledge among the Founding
Companies. Both groups of salespeople present the array of value-added services
available from the Company. Customer service representatives interact with the
customer at the time of order placement or, in the absence of the sales
representatives, when the customer has questions relating to product, delivery
and/or services. The customer service representatives office in each Founding
Company and generally are the customer contact at the time of order placement.
The Company anticipates that in the future, most customer service functions will
be performed on a regional basis.

The Company will focus on its various local and regional markets, but also
intends to pursue national account sales that are inclined to work with a fewer
number of distributors to achieve significant cost savings. The Company also
believes that, due to its size, it can help these multi-location customers
improve the quality and reliability of their supply and improve the efficiency
and effectiveness of their manufacturing processes.

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DELIVERY

The Company utilizes rail and trucks to deliver products to its customers
with the method of transport depending upon urgency, delivery frequency,
destination, customer preference and cost. The majority of the Company's
products are shipped to customers via trucks that are operated by Company
employees. The Company operates a fleet consisting of 48 owned and 40 leased
tractors, 157 owned and 30 leased trailers and 34 owned and 23 leased other
trucks. The Company also currently leases 11 railcars. The Company primarily
uses its own fleet rather than common carriers to deliver products to customers;
however, the Company does utilize common carriers to transport chemicals from
manufacturers to the Company's distribution facilities.

SUPPLIERS

The chemicals sold by the Company are manufactured by over 350 suppliers,
both domestic and international. The Company primarily purchases these chemicals
directly from manufacturers. The Company's decision to purchase from a specific
supplier is based on existing relationships, cost, depth of product offerings,
product specifications, quality and reliability of delivery. For certain
specialty chemicals, certain Founding Companies have exclusive rights to
distribute a product within a specified region. Although the Company has a wide
variety of contracts, many of which can be terminated by the supplier on
relatively short notice, the Company believes that the historic relationship
with each supplier is more important than these contracts to continued supply.

By increasing its supplier base, the Company believes that it will be able
to offer more products to its existing customers. The Company believes that it
is not materially dependent on any single supplier and that it currently
maintains good relationships with its suppliers.

PROPERTIES

The Company's primary warehouses, sales facilities and administrative
offices are listed below, subject to consolidation of certain facilities to
achieve operating efficiencies and subject to the execution of leases with
certain owners of the Founding Companies in connection with the Acquisitions and
the consummation of the Offering:

<TABLE>
<CAPTION>
APPROXIMATE GALLONS OF OWNED
LOCATION TYPE SQUARE FOOTAGE STORAGE OR LEASED
-------- ---- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Birmingham, AL....... Office 7,500 -- Owned
Birmingham, AL....... Warehouse/Office 76,853 -- Owned
Bulk Storage (wet) -- 116,000
Bulk Storage (dry) -- 72,000
Dothan, AL........... Warehouse/Office 9,862 -- Owned
Mobile, AL........... Warehouse/Office 19,738 -- Owned
Montgomery, AL....... Warehouse/Office 20,324 -- Owned
Phoenix, AZ.......... Warehouse/Office/Bulk Storage 20,700 122,000 Leased
Dalton, GA........... Warehouse/Office 13,914 -- Leased
East Point, GA....... Warehouse/Office 21,182 -- Owned
Decatur, IL.......... Warehouse/Office 23,600 -- Owned
E. St. Louis, IL..... Warehouse/Office/Bulk Storage (wet) 21,000 454,000 Owned
E. St. Louis, IL..... Warehouse/Office/Bulk Storage (dry) 59,500 8,000 Owned
Mt. Vernon, IL....... Warehouse/Office 14,000 -- Owned
Quincy, IL........... Warehouse/Office 20,000 -- Owned
Kansas City, KS...... Warehouse/Office 15,000 -- Owned
Lafayette, LA........ Warehouse/Office/Bulk Storage 13,000 85,000 Leased
New Orleans, LA...... Warehouse/Office/Bulk Storage 23,669 275,000 Owned
Baltimore, MD........ Warehouse/Office/Bulk Storage 80,500 134,000 Owned
Springfield, MO...... Warehouse/Office 15,000 -- Leased
</TABLE>

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<PAGE> 51

<TABLE>
<CAPTION>
APPROXIMATE GALLONS OF OWNED
LOCATION TYPE SQUARE FOOTAGE STORAGE OR LEASED
-------- ---- -------------- ---------- ---------
<S> <C> <C> <C> <C>
St. Louis, MO........ Warehouse/Office/Bulk Storage 80,000 128,000 Owned
St. Louis, MO........ Warehouse/Office 40,000 -- Leased
Oakland, NJ.......... Warehouse/Office 49,200 -- Leased
Paterson, NJ......... Warehouse/Office/Bulk Storage 21,400 97,000 Leased
S. Kearny, NJ........ Warehouse/Office/Bulk Storage 41,300 687,500 Leased
Cleveland, OH........ Warehouse/Office/Bulk Storage 47,600 741,000 Owned
Cornelius, OR........ Bulk Storage -- 66,000 Owned
Portland, OR......... Warehouse/Office/Bulk Storage 21,600 215,000 Owned
Tualatin, OR......... Bulk Storage -- 16,000 Leased
Wilsonville, OR...... Bulk Storage -- 20,000 Owned
Buda, TX............. Warehouse/Office/Bulk Storage 11,600 20,000 Owned
Corpus Christi, TX... Warehouse 10,000 -- Owned
Dallas, TX........... Bulk Storage 50,000 55,000 Owned
Dallas, TX........... Warehouse/Office/Bulk Storage 29,050 611,000 Owned
Dallas, TX........... Warehouse/Office/Bulk Storage 11,414 547,000 Owned
Houston, TX.......... Warehouse/Office 45,000 -- Owned
Houston, TX.......... Warehouse/Office/Bulk Storage 47,400 1,281,000 Owned
Vidor, TX............ Warehouse 7,000 -- Owned
Auburn, WA........... Warehouse/Office 12,900 -- Leased
Vancouver, WA........ Warehouse/Office/Bulk Storage 2,500 15,000 Owned
Vancouver, WA........ Bulk Storage -- 13,000 Leased
Washougal, WA........ Bulk Storage -- 16,000 Leased
</TABLE>

SAFETY AND TRAINING

The Company's business requires the handling of chemicals and exposure to
conditions that can be dangerous. Eight of the Founding Companies are currently
members (and one is in the process of applying for membership) of the NACD,
which has established the Responsible Distribution Process ("RDP"). RDP
establishes proper operating practices, documents policies and has become the
standard within the industry, setting the level at which a company measures its
commitment to chemical product stewardship. Adopting RDP is a condition of
membership in the NACD, and member compliance is verified by Underwriters
Laboratories. Although the Company is committed to chemical product stewardship
and the proper handling, use, transportation and disposal of chemical products,
it has been and is subject to claims by employees, customers and third parties
for property damage and personal injuries resulting from use of, and exposure
to, the Company's products. Following completion of the Offering, management
intends to expand throughout the Company existing training and educational
programs, as well as comprehensive safety policies and regulations, by sharing
best practices throughout its operations to complement RDP.

MANAGEMENT INFORMATION SYSTEMS

Each of the Founding Companies operates a management information system
that is used to purchase, monitor and distribute inventory throughout facilities
and enables the Founding Companies to manage inventory costs effectively and
achieve appropriate inventory turnover rates. The management information system
includes computerized order entry, sales analysis, inventory status, delivery
scheduling, customer invoicing, vendor payments and financial statement
preparation. The management information system is designed to improve
productivity for both the Company and its customers. Currently, five of the nine
Founding Companies use Chempax(TM) as their management information system. In
connection with developing its internal company-wide management information
system following the Offering, the Company intends to convert the other four
Founding Companies' management information systems to Chempax(TM). Once the
conversion is made, the Company's consolidated management information system
will operate over a wide area network providing real-time information to
operating locations and management for monitoring of sales

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<PAGE> 52

activities, credit approval, inventory levels, stock balancing, vendor returns,
order fulfillment and other key measures of both operating and financial
performance.

COMPETITION

The Company is engaged in a highly fragmented and competitive industry,
with approximately 1,000 chemical distribution companies currently operating in
the United States. At this time, the Company does not compete directly with all
of these companies due to differences in products distributed or in the nature
of their businesses. Competition is based primarily on service, product pricing,
quality and geographic coverage. The Company competes with a large number of
chemical distribution companies on a regional and local basis and a smaller
number of national distribution companies, some of which may have greater
financial resources than the Company and some of which are divisions of public
companies. The Company also competes with manufacturers who sell to end users
and to a limited extent with chemical brokers. The Company may also face
competition for acquisition candidates from these companies, some of which have
acquired chemical distribution companies during the past decade. Other smaller
chemical distribution companies may also seek acquisitions from time to time.

The Company believes that it will be able to compete effectively because of
its significant number of locations, geographic coverage, knowledgeable and
trained sales force, integrated computer systems, modern equipment, broad line
of products and value-added services, long-term customer relationships,
long-term supplier relationships, combined purchasing volume, experienced
operations employees and operational economies of scale. The Company intends to
seek to differentiate itself from the competition in terms of service and
quality by investing in systems and equipment and by offering a broad range of
products and services, as well as through its entrepreneurial culture and
decentralized structure.

EMPLOYEES

As of March 31, 1998, the Company had approximately 665 employees, 641 of
whom were full-time and 24 of whom were part-time. The Company is a party to
three collective bargaining agreements covering approximately 79 employees. The
Company believes that its relationship with its employees is good.

ENVIRONMENTAL AND HEALTH REGULATION

The Company's operations are subject to extensive federal, state and local
laws and regulations, many of which are designed to control operational
practices in an effort to protect employee safety, public health, and the
environment. Different regulatory agencies have jurisdiction over the Company.
Regulatory agencies or governmental entities that may have jurisdiction over the
Company include, at the federal level, the Bureau of Alcohol, Tobacco, and
Firearms; the Department of Transportation; the Environmental Protection Agency;
the Food and Drug Administration; and the Occupational Safety and Health
Administration. Numerous other laws and regulations may be applicable to and
numerous state and local agencies also have jurisdiction over the Company. The
applicability of the various laws and regulations and the jurisdiction of the
various governmental entities are dependent upon the services performed and the
substances handled by the Company. Regulations relating to the Company are
subject to change and the Company cannot predict the effect of future
regulations.

Existing environmental conditions at some of the Company's sites, including
subsurface contamination, may result in material claims, regulatory actions or
liabilities. At some of the Company's sites, surface or subsurface contamination
has been established, the full extent of which is unknown. No assurance can be
given that material liabilities will not be incurred in the future as a result
of such contamination. Previous operations at the Company's facilities may have
caused other environmental conditions, the extent or existence of which the
Company is unaware.

Various federal, state and local laws and regulations regulating the
protection of human health and the environment affect the Company's operations
and costs. The Company will maintain an environmental compliance program and
intends to address environmental and health issues identified as a result of its
compliance program. The Company intends to standardize programs to detect and
respond to any leaks or
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spills of regulated hazardous substances and to correct any identified
regulatory deficiencies. While the Company does not believe that any
noncompliance with applicable environmental laws and regulations on the part of
its operations and facilities is materially adverse to its financial position
taken as a whole, there can be no assurance that material costs and liabilities
will not be incurred in the future. It is also possible that future
developments, such as increasingly strict environmental laws, regulations and
enforcement policies, could result in material costs and liabilities in the
future. Compliance with additional and more stringent environmental laws and
regulations could also require the Company to incur material capital costs. Non-
compliance with existing or future environmental regulations could result in
material fines, injunctions, or cease and desist orders against the Company and
liabilities to third parties. Permits held by the Company may be subject to
modification, renewal, or revocation by governmental entities. The loss of or
detrimental modification of these permits could have a material adverse effect
on the Company's operations.

A risk typically associated with the chemical industry in general and the
Company's operations in particular is the possibility of chemical exposure
claims or pollution claims from employees or nearby landowners or residents. For
example, environmental conditions at nearby businesses could affect the
Company's facilities, resulting in a need to address the presence of
environmental conditions at or beneath the Company's affected facilities. It is
also possible that environmental conditions at or beneath the Company's
facilities could impact nearby properties or residents. As the Company addresses
environmental conditions, it may attempt to utilize risk reduction response
measures that may be allowed by law. In some circumstances, these risk reduction
measures may allow residual contamination to remain in place at the Company's
facilities. Such residual contamination may later need to be addressed should a
legal or regulatory requirement be imposed. In other cases, changes in site
conditions, such as the direction of groundwater flow, could change the risk
analysis and cause the need for environmental response measures.

Solid and Hazardous Waste. Some of the Company's operations generate
hazardous and non-hazardous wastes that are subject to the federal Resource,
Conservation and Recovery Act ("RCRA") and comparable state statutes. These
statutes regulate the treatment, storage, disposal, recycling and transportation
of hazardous waste as well as some non-hazardous wastes. The Chemical Solvents
facilities on Jennings Road and on Dennison Road in Cleveland, Ohio are subject
to RCRA permitting and regulatory requirements which entail significant
compliance costs. In addition, the Jennings Road facility is subject to a RCRA
Facility Investigation ("RFI") to identify whether any contamination exists.
Certain general areas of concern have been identified, and Chemical Solvents is
negotiating with EPA on the proposed scope of work. The Company is unable to
reasonably estimate what corrective action measures may be required as a result
of the RFI. However, the Company estimates that performance of the RFI alone may
cost up to $250,000. This liability is subject to the Environmental Indemnity
described in "Certain Transactions." The hazardous waste recycling and disposal
business includes significant environmental and regulatory risks.

Industrial recently resolved a notice of violation of RCRA hazardous waste
requirements related to its Birmingham, Alabama facility through an agreement to
pay a $200,000 civil penalty and the execution of a consent order that requires
a limited investigation of the affected disposal areas. The Company does not
believe that the costs of this investigation will be material. However, there is
a possibility that a continuing governmental inquiry into past waste disposal
practices at this facility could lead to additional enforcement action.

CERCLA. The Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability
without regard to fault or the legality of the original conduct, on certain
classes of persons that contributed to a site that released or threatens to
release a hazardous substance to the environment. These persons include the
owner or operator of a site and companies that disposed or arranged for the
disposal of the hazardous substance found at a site. CERCLA also authorizes EPA
and, in some cases, third parties to take actions in response to threats to the
public health or the environment and to seek to recover from responsible classes
of persons the costs they incur. In the course of its operations, the Company
has generated and will generate wastes that fall within CERCLA's definition of
"hazardous substances." Certain state laws impose similar liabilities to CERCLA.
Under CERCLA and similar state laws, a liable party may be held responsible for
the costs of investigating and remediating a contaminated site and for any
associated natural resource damages. Such liability is strict in
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<PAGE> 54

nature and typically joint and several. There can be no assurance that the
Company would be insulated from the Founding Companies' CERCLA liabilities.

Industrial has received a Potentially Responsible Party ("PRP") notice from
EPA with respect to the THAN Superfund site near Montgomery, Alabama. EPA
presently is enforcing the cleanup against the two primarily liable PRPs.
Industrial previously leased a part of this site from one of the primarily
liable PRPS, who has indemnified Industrial from this liability. This PRP,
however, has advised Industrial that it intends to pursue Industrial for any
contribution Industrial may have made to the contamination at the site. Based
upon its investigation of the site and the fact that EPA is not enforcing
cleanup obligations against Industrial, the Company believes that its
contribution, if any, to the site will not be material.

Chemical Solvents has received a PRP notice for the Granville Solvents
Superfund site in Granville, Ohio. Chemical Solvents anticipates, based upon the
existing adjusted allocation formula for the site, that it will owe
approximately $322,000, although there can be no assurance as to the ultimate
costs incurred at the site or as to the amount of costs for which the Company
will be responsible.

Chemical Solvents also has received a PRP notice for the New Lyme Superfund
site near Cleveland, Ohio. EPA completed remediation at the New Lyme site at a
cost of approximately $26 million. The PRP group made a settlement offer to EPA
of $12 million together with anticipated future costs, $33,000 of which was from
Chemical Solvents. EPA has not responded to the offer. While there can be no
assurance as to the ultimate outcome, the Company believes that Chemical
Solvents is a de minimis contributor to the site.

Robins received a CERCLA 104(e) request for information regarding the Great
Lakes Container Corp. Superfund site in St. Louis, Missouri. Robins believes
that it only purchased drums from this site and therefore denies any liability.
EPA's present removal action budget is less than $2 million at the site,
although there can be no assurance as to the total expenditures ultimately made
at the site.

Each of these Superfund sites is subject to the Environmental Indemnity.
See "Certain Transactions."

Air Quality. Certain operations of the Company are subject to local, state
and federal regulations for the control of emissions from sources of air
pollution. Legal and regulatory requirements in this area are increasing,
particularly under the 1990 Clean Air Act Amendments. EPA is developing a new
Maximum Achievable Control Technology requirement ("MACT") for liquid organic
blenders and manufacturers. While the Company believes that its facilities will
be exempt from this MACT requirement, there can be no assurance of the eventual
outcome of the EPA's rulemaking process.

Water. The Federal Water Pollution Control Act regulates the discharge of
pollutants into streams, groundwater, wetlands, or other surface waters from
industrial sources. In certain situations, the act requires the Company to
secure discharge permits, conduct sampling and monitoring, and to reduce the
quantity of pollutant loading in the discharges and imposes certain liabilities
for failing to obtain and violating permits.

Emergency Planning and Community Right to Know Act. EPCRA requires the
Company to file chemical handling information with local and state emergency
planning authorities. EPCRA also establishes an enforceable reporting scheme
that applies in the event of a hazardous chemical release to the environment.

OSHA and Local Codes. The Company's operations are subject to the
requirements of the federal Occupational Safety and Health Act ("OSHA") and
comparable state statutes. The OSHA hazard communication standard requires that
certain information be organized and maintained about hazardous materials used
or produced in operations. Certain of this information must be provided to
employees, state and local government authorities and citizens. OSHA also
regulates workplace safety and exposure to toxic chemicals in the workplace.

The Company's facilities in Paterson and Oakland, New Jersey are subject to
the requirements of the New Jersey Industrial Site Recovery Act ("ISRA"), which
requires state review and approval of environmental investigation and
remediation plans prior to the transfer of certain types of industrial and
commercial properties. The Company does not believe that compliance with ISRA
will entail material costs, although there can be no assurances as to the actual
amount of any such costs.

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Local fire codes regulate site conditions, such as the placement of storage
tanks at Company facilities. At Chemical Solvents' Jennings Road facility, the
local fire department has directed that a tank placement issue be addressed. The
Company believes that the costs associated with this issue will be approximately
$200,000.

RISK MANAGEMENT AND INSURANCE

The primary risks in the Company's operations include bodily injury,
property damage and injured workers' compensation. The Company maintains
automobile and general liability insurance for third party bodily injury and
property damage and workers' compensation coverage which it considers
appropriate to insure against these risks, subject to self-insured amounts.
After the consummation of the Offering, the Company intends to consolidate the
purchase of insurance, which management believes will result in savings from the
amounts paid by the Founding Companies prior to the Acquisitions.

In addition, the Company faces the risk of environmental contamination to
the properties it owns and leases. Effective upon the consummation of the
Acquisitions, CLC, each Founding Company and the stockholders of each Founding
Company will obtain environmental insurance for certain legal liabilities and
environmental pollution (the "Environmental Insurance"). Coverage will be
included for (i) cleanup of both on-site and off-site unknown pre-existing and
new pollution conditions that exceed regulatory action levels; (ii) third-party
liability, both on-site and off-site, for unknown pre-existing and/or new
pollution conditions emanating on, from or under each Founding Company's sites
(such as groundwater contamination); (iii) pre-existing unknown conditions of
the Founding Companies; and (iv) non-owned disposal sites that are identified to
the insurance carrier. Coverage will not be provided for pollution conditions or
liabilities which have been identified by CLC's environmental consultant in the
Phase I environmental reports prepared in connection with the Acquisitions.

The Environmental Insurance will be for a term of five years from the
consummation of the Acquisitions, will provide coverage of $25 million per
incident with an aggregate limit of $70 million and will cover each Founding
Company and their properties and facilities. A $25,000 deductible per incident
will apply. The Environmental Insurance will not cover all potential
environmental risks. No assurance can be given that (i) the insurance will be
adequate to reimburse for all covered all losses or liabilities the Company may
incur; (ii) the Company will be able to maintain Environmental Insurance of
adequate type, at adequate levels or at reasonable rates; (iii) the insurance
carrier will honor all claims made under the policy; or (iv) no circumstances or
conditions will be excluded under the insurance policy, resulting in the denial
of coverage for one or more claims. See "Certain Transactions" for a description
of certain environmental indemnity arrangements made pursuant to the
Acquisitions.

LEGAL PROCEEDINGS

The Company is, from time to time, a party to litigation or administrative
proceedings that arise in the normal course of its business. The Company does
not have pending any litigation that, separately or in the aggregate, if
adversely determined, would have a material adverse effect on the Company's
results of operations or financial condition.

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<PAGE> 56

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the Company's
directors and executive officers and those persons who will become directors and
executive officers following the consummation of the Offering:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bruce W. Wilkinson.................... 54 Chairman of the Board of Directors and
Chief Executive Officer
James M. Clepper*..................... 52 President, Chief Operating Officer and
Director
Francis S. Kalman..................... 51 Executive Vice President, Chief
Financial Officer and Secretary
Douglas A. Brown*..................... 43 Chief Information Officer and Director
Charles M. Vetters.................... 34 Senior Vice President -- Corporate
Development
Scott R. Creasman..................... 33 Vice President -- Controller
Lorne D. Bain......................... 57 Director
Stephen B. Fiverson*.................. 55 Director
Rodney R. Proto*...................... 50 Director
G. Stephen Robins*.................... 53 Director
John M. Tilley*....................... 46 Director
William L. Welch*..................... 58 Director
</TABLE>

- ---------------

* Election as a director or officer of the Company effective upon the
consummation of the Offering.

Bruce W. Wilkinson has served as Chairman of the Board and Chief Executive
Officer of the Company since April 1998. From March 1997 through October 1997,
Mr. Wilkinson served as President and Chief Executive Officer of Tyler
Corporation, a publicly traded diversified manufacturing and service company.
From June 1996 through December 1996, Mr. Wilkinson served as a director and
Interim President/Chief Executive Officer of Proler International, Inc., a
formerly publicly traded ferrous scrap recycler. From 1989 through 1995, Mr.
Wilkinson served as Chairman and Chief Executive Officer of CRSS, Inc., a
publicly traded, independent power and industrial energy company. Mr. Wilkinson
began employment with CRSS, Inc. in 1978 and served as President and Chief
Executive Officer from 1982 through 1989.

James M. Clepper will become President, Chief Operating Officer and a
director of the Company effective upon the consummation of the Offering. Mr.
Clepper has been the Chief Executive Officer of Southwest Solvents since July
1986 and has been an owner of Southwest Solvents since 1970. Mr. Clepper has
been active in the NACD since 1978. Mr. Clepper has served the NACD as a
regional president, chairman of the insurance and supplier relations committees
and is currently serving on the board of directors of the NACD. Mr. Clepper is
past president and currently a director of the Chemical Educational Foundation.
Mr. Clepper has served on the Board of Directors of Sterling Bancshares, Inc., a
publicly traded bank holding company, since 1996.

Francis S. Kalman has served as Executive Vice President, Chief Financial
Officer and Secretary of the Company since March 1998. From June 1996 through
September 1997, Mr. Kalman served as Senior Vice President and Chief Financial
Officer of Keystone International, Inc., a publicly traded manufacturing
company. From May 1992 to May 1996, Mr. Kalman served as Vice President and
Chief Financial Officer of American Ref-Fuel Company. From July 1982 through
October 1991, Mr. Kalman worked for United Gas Pipe Line Company, having
attained the position of Senior Vice President and Chief Financial Officer.

Douglas A. Brown will become Chief Information Officer and a director of
the Company effective upon the consummation of the Offering. Mr. Brown has
served the NACD as co-chairman of the RDP committee and a member of the
distributor operations committee. Mr. Brown is currently serving on the board of

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<PAGE> 57

directors of the NACD and as chairman of the government affairs committee. Mr.
Brown is also on the board of directors of the Chemical Industry Council of New
Jersey.

Charles M. Vetters has served as Senior Vice President -- Corporate
Development of the Company since August 1998. From March 1995 until August 1998,
Mr. Vetters served as Vice President -- Business Development of Tractebel Power,
Inc. (formerly CRSS, Inc.). From April 1992 to February 1995, Mr. Vetters served
as Treasurer of CRSS Capital, Inc. Mr. Vetters received a bachelor of science in
chemical engineering from Texas A&M University and a masters of business
administration from the University of Texas.

Scott R. Creasman has served as Vice President -- Controller since June
1998. From November 1997 through June 1998, Mr. Creasman served as Vice
President and Corporate Controller of U.S. Legal Support, Inc. From August 1997
through November 1997, Mr. Creasman served as Vice President and Controller of
Tyler Corporation, a publicly traded diversified manufacturing and service
company. From October 1996 through July 1997, Mr. Creasman served as Controller
of Brink's Home Security, Inc. From 1990 through 1996, Mr. Creasman was with
Texas Eastern Products Pipeline Company, the operator of a publicly held
petroleum products pipeline company, most recently as Controller. Mr. Creasman
is a C.P.A.

Lorne D. Bain has been President of the Company since its inception and a
director of the Company since April 1998. Mr. Bain will cease serving as
President upon consummation of the Offering. Mr. Bain has been a member and a
Managing Director of BCP since February 1997. From 1991 to 1996, Mr. Bain was
Chairman of the Board of Directors and Chief Executive Officer of Sanifill,
Inc., a publicly traded environmental services company, and served as a
consultant to Sanifill, Inc. until August 1997. Mr. Bain has served as a
director of Belden, Inc., a publicly traded electrical wire and cable
manufacturing company, since 1993.

Stephen B. Fiverson will become a director of the Company effective upon
the consummation of the Offering. Mr. Fiverson has served as president of
American since 1972. Mr. Fiverson has served as a regional president of the
NACD.

Rodney R. Proto has been President, Chief Operating Officer and a director
of Waste Management, Inc., the largest solid waste services company in North
America, since July 1998. From August 1996 to July 1998, he was President, Chief
Operating Officer, and a Director of USA Waste Services, Inc., the third largest
solid waste services company in North America, which acquired and changed its
name to Waste Management, Inc. in July 1998. Prior thereto, he was President,
Chief Operating Officer and a director of Sanifill, Inc., which was acquired by
USA Waste in August 1996. Mr. Proto joined Sanifill, Inc. in February 1992.
Before joining Sanifill, Inc., he was employed by Browning-Ferris Industries,
Inc. for 12 years where he served, among other positions, as Chairman of BFI
Overseas from 1985 to 1987 and President of Browning-Ferris Industries Europe,
Inc. from 1987 through 1991. Mr. Proto has been a director of Quanta Services,
Inc., a publicly traded specialty electrical contracting company, since March
1998. Mr. Proto will become a director of the Company effective upon the
consummation of the Offering.

G. Stephen Robins will become a director of the Company effective upon the
consummation of the Offering. Mr. Robins has served as president of Robins since
1980. Mr. Robins has been active in the NACD since 1977 and is currently
president of the organization. Mr. Robins has also served as the president of
the Affiliated Chemical Group. Mr. Robins received a bachelor of science in
chemical engineering from Princeton University and a masters of business
administration from Stanford University.

John M. Tilley will become a director of the Company effective upon the
consummation of the Offering. Mr. Tilley has served as president of Tilley since
1990. Mr. Tilley served as vice president of Tilley from 1985 to 1990. Mr.
Tilley has been active in the NACD since 1975 and is currently on the board of
directors of the organization. Mr. Tilley has also served as the president of
the Affiliated Chemical Group.

William L. Welch will become a director of the Company effective upon the
consummation of the Offering. Mr. Welch formed Industrial in 1970 and has served
as its president since that time.

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BOARD OF DIRECTORS

The Board of Directors will establish an Audit Committee and Compensation
Committee to be effective following the consummation of the Offering. The Audit
Committee will recommend the appointment of auditors and oversee the accounting
and audit functions of the Company. The Compensation Committee will determine
the salaries and bonuses of executive officers and administer the Plan.

The Board of Directors, following the consummation of the Offering, will be
divided into three classes of directors, with directors serving staggered
three-year terms, expiring at the annual meeting of stockholders in 1999, 2000
and 2001, respectively. At each annual meeting of stockholders, one class of
directors will be elected for a full term of three years to succeed that class
of directors whose terms are expiring. All officers serve at the discretion of
the Board of Directors, subject to terms of their employment agreement terms.
See "-- Employment Agreements."

DIRECTOR COMPENSATION

Directors who are employees of the Company or a subsidiary do not receive
additional compensation for serving as directors. Each director who is not an
employee of the Company or a subsidiary will receive an annual fee of $12,000
and $1,000 for each committee meeting (unless held on the same day as a Board of
Directors meeting). Directors of the Company will be reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or committees thereof, and for other expenses reasonably incurred in their
capacity as directors of the Company. At the consummation of the Offering, each
non-employee director serving on such date will receive stock options to
purchase 10,000 shares of Common Stock, (and individuals who are first elected
or appointed as non-employee directors after such date shall similarly receive
stock options to purchase 10,000 shares of Common Stock on the date of their
initial election or appointment) and thereafter a grant of 5,000 options
following each annual meeting of stockholders of the Company that is more than
90 days after the date of the director's initial 10,000 share grant, provided
the non-employee director continues to serve as such following the annual
meeting. See "-- 1998 Stock Plan." In addition, Mr. Proto purchased 19,962
shares of Common Stock from the Company for nominal consideration.

EXECUTIVE COMPENSATION

The Company was incorporated in July 1997 and, prior to the Offering, has
not conducted any operations other than activities related to the Acquisitions
and the Offering. The Company anticipates that during 1998 annualized base
salaries of its five most highly compensated executive officers will be: Mr.
Wilkinson -- $200,000, Mr. Clepper -- $200,000, Mr. Kalman -- $175,000, Mr.
Brown -- $135,000 and Mr. Vetters -- $130,000.

EMPLOYMENT AGREEMENTS

The Company will enter into employment agreements with Messrs. Wilkinson,
Clepper, Kalman and Brown which prohibits them from disclosing the Company's
confidential information and trade secrets and generally restricts these
individuals from competing with the Company for a period of time equal to the
greater of (i) two years after the date of the termination of employment with
the Company and (ii) five years following the consummation of the Offering. Each
of the agreements has an initial term of three years and provides for an
automatic annual extension at the end of its initial term and is terminable by
the Company for "cause" upon ten days' written notice and without "cause" by
either party upon thirty days' written notice. All employment agreements provide
that if the officer's employment is terminated by the Company without "cause,"
the officer will be entitled to receive his base salary (at the rate then in
effect) for the greater of (i) the time period remaining under the initial term
of the agreement or (ii) one year. In addition, the time period during which
such officer is restricted from competing with the Company will be shortened to
one year from the date of termination.

The employment agreements contain certain provisions concerning a
change-in-control of the Company, including the following: (i) in the event (a)
the officer's employment is terminated within one year following the change in
control by the Company, other than for "cause," (b) the officer's salary, duties
or authority are
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<PAGE> 59

reduced and the officer elects not to accept such reduction; or (c) the
successor does not give written notice to the Company and the officer of its
acceptance of the Company's obligations under the employment agreement at least
five days prior to the anticipated closing date, the officer will be entitled to
receive a lump sum severance amount equal to the greater of three times (x) the
amount of base salary remaining under the initial term of the employment
agreement and (y) one year's base salary, (ii) in any change-of-control
situation, the officer may elect to terminate his employment by giving three
business days' written notice prior to the anticipated closing of the
transaction giving rise to the change-in-control or written notice ten business
days after receipt of notice of such transaction, whichever is later, which will
be deemed a termination of employment by the Company without "cause," and the
provisions of the employment agreement governing the same will apply, except
that the severance amount otherwise payable shall be doubled, and (iii) if any
payment to the officer is subject to the 20% excise tax on excess parachute
payments, the officer shall be made "whole" on a net after-tax basis.

The Company will enter into an employment agreement with Mr. Creasman which
prohibits him from disclosing the Company's confidential information and trade
secrets and generally restricts him from competing with the Company for two
years after the date of the termination of employment with the Company. The
agreement has an initial term of one year and provides for an automatic annual
extension at the end of its initial term and is terminable by the Company for
"cause" upon ten days' written notice and without "cause" by either party upon
thirty days' written notice. The agreement provides that if the officer's
employment is terminated by the Company without "cause," the officer will be
entitled to receive his base salary (at the rate then in effect) for the greater
of (i) the time period remaining under the initial term of the agreement or (ii)
one year. In addition, the time period during which such officer is restricted
from competing with the Company will be shortened to one year from the date of
termination.

1998 STOCK PLAN

The Plan was adopted by the Board of Directors and stockholders in July
1998. The purpose of the Plan is to provide officers, employees, directors and
consultants with additional incentives by increasing their ownership interests
in the Company. Individual awards under the Plan may take the form of one or
more of: (i) either incentive stock options or non-qualified stock options
("NQSOs"); (ii) stock appreciation rights ("SARs"); (iii) restricted stock; (iv)
phantom stock; (v) performance awards; (vi) bonus stock awards; (vii) other
stock-based award, i.e., awards not otherwise provided for, the value of which
is based in whole or in part upon the value of the Common Stock; and (viii) cash
awards that may or may not be based on the achievement of performance goals
(collectively, "Awards"). The performance goals for Awards, until changed,
include target levels of net income, cash flows, return on equity, profit
margins, sales, stock price, market share improvement, achievement of national
accounts, reductions in cost of goods sold and earnings per share.

The Compensation Committee or the Company's Chief Executive Officer or
President, to the extent such duties are delegated to either of them by the
Compensation Committee, will administer the Plan and select the individuals who
will receive Awards and establish the terms and conditions of those Awards. The
Plan does not authorize a specific number of shares for Awards; however, the
maximum number of shares of Common Stock that may be subject to outstanding
Awards, determined immediately prior to grant of any Award, may not exceed 15%
of the aggregate number of shares of Common Stock then outstanding. Shares of
Common Stock which are attributable to Awards which have expired, terminated or
been canceled or forfeited are available for issuance or use in connection with
future Awards. The maximum number of shares of Common Stock with respect to
which any person may receive options and SARs in any calendar year is 500,000
shares. With respect to other forms of Awards, the maximum Award that may be
granted to any individual in any calendar year cannot exceed $4 million
(determined as of the date of the grant of the Award). Options and SARs may have
such exercise prices as the Compensation Committee, in its discretion,
determines.

The Plan will remain in effect for 10 years, unless earlier terminated by
the Board of Directors. The Plan may be amended by the Board of Directors or the
Compensation Committee without the consent of the stockholders of the Company,
except that any amendment will be subject to stockholder approval if required
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<PAGE> 60

by any federal or state law or regulation or by the rules of any stock exchange
or automated quotation system on which the Common Stock may then be listed or
quoted.

At the consummation of the Offering, NQSOs to purchase approximately
1,070,000 shares will be granted to directors and officers of CLC and employees
of the Founding Companies. Each of the foregoing options will have an exercise
price equal to the initial public offering price per share. These options will
vest at the rate of 20% per year, commencing on the first anniversary of grant,
and will expire at the earliest of (i) ten years from the date of grant, (ii)
three months following termination of employment, other than due to death or
disability, or (iii) one year following a termination of employment due to death
or disability.

The Plan also provides for (i) the automatic grant to each non-employee
director serving at the consummation of the Offering of an option to purchase
10,000 shares, (ii) the automatic grant to each individual who is first elected
or appointed as a non-employee director after the Offering of an option to
purchase 10,000 shares on such election or appointment, and (iii) an automatic
annual grant to each non-employee director of an option to purchase 5,000 shares
following each annual meeting of the stockholders of the Company that is more
than 90 days after the date of the director's initial 10,000 share grant,
provided the non-employee director continues to serve as such following the
annual meeting. All such director options will have an exercise price per share
equal to the fair market value of the Common Stock on the date of grant, will
vest six months after grant and will expire ten years from the date of grant,
unless such director ceases to serve prior to that time.

STOCK PURCHASE PLAN

The Board of Directors and stockholders adopted an employee stock purchase
plan (the "Stock Purchase Plan") for employees of the Company in July 1997.
Pursuant to the Stock Purchase Plan, the Company will pay any brokerage
commissions, transfer taxes and other fees associated with a participant's
purchase of Common Stock at the end of each six-month option period under the
plan. Additionally, purchases made pursuant to the Stock Purchase Plan will be
made at a 15% discount from (i) the then current market price of the Common
Stock or (ii) its market price at the beginning of the applicable option periods
whichever is lower. This discount will be funded by the Company. The Stock
Purchase Plan is intended to serve as a means of encouraging employees to invest
in the Company's Common Stock.

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

The Company was organized in July 1997 by BCP. Mr. Bain, John D. Rogers and
J. Chris Brewster (collectively, the "BCP Principals") were issued a total of
1,659,366 shares of Common Stock which were issued for a total of $1,000 in
connection with the formation of CLC. Mr. Bain is currently President and a
director of the Company. BCP has agreed to advance the Company whatever funds
are necessary to pay the transaction costs associated with the Acquisitions and
the Offering. As of September 30, 1998, BCP had outstanding advances to the
Company in the aggregate amount of approximately $3.0 million, which bear no
interest. All of BCP's advances will be reimbursed from the net proceeds of the
Offering.

Prior to the consummation of the Offering, the Company will have issued a
total of 791,836 shares of Common Stock at $.01 per share to various members of
management, directors and consultants, including: Mr. Wilkinson -- 201,381
shares, Mr. Clepper -- 178,996 shares, Mr. Kalman -- 120,835 shares, Mr.
Vetters -- 50,000 shares, Mr. Creasman -- 36,290 shares, Mr. Proto -- 19,962
shares and various consultants -- 184,372 shares. The Company will also grant
options to purchase 10,000 shares of Common Stock under the Plan, effective upon
the consummation of this Offering, to Mr. Proto, who will become a director of
the Company upon the closing of the Offering.

Simultaneously with the closing of the Offering, the Company will acquire
by stock purchase all of the issued and outstanding capital stock and other
equity interests of the Founding Companies, at which time each Founding Company
will become a wholly owned subsidiary of the Company. The Acquisitions
Consideration

57
<PAGE> 61

consists of (i) approximately $31.1 million in cash and (ii) 6,543,329 shares of
Common Stock. Prior to the Acquisitions, certain of the Founding Companies will
make S Corporation Distributions to their stockholders in an aggregate amount of
$8.7 million. Prior to the Acquisitions, certain of the Founding Companies will
incur approximately $8.7 million in indebtedness to their stockholders relating
to the payment of S Corporation Distributions.

The consummation of each Acquisition is subject to customary conditions.
These conditions include, among others, the accuracy on the closing date of the
Acquisitions of the representations and warranties by the Founding Companies,
their stockholders and by CLC; the performance by each of the parties of their
respective covenants; and the nonexistence of a material adverse change in the
results of operations, financial condition or business of each Founding Company.
There can be no assurance that the conditions to closing of the Acquisitions
will be satisfied or waived or that the acquisition agreements will not be
terminated prior to consummation.

Certain costs associated with environmental liabilities of each Founding
Company have been or will be addressed through the obtaining of the
Environmental Insurance and an environmental indemnity contained in each stock
purchase agreement (the "Environmental Indemnity"). See "Business -- Risk
Management and Insurance."

Scheduled environmental liabilities are covered under the Environmental
Indemnity, subject to a limit of the lesser of $5.0 million or 40% of the
consideration paid for the specific Founding Company (the "Indemnity Limit").
With respect to Chemical Solvents, the Indemnity Limit is $6.0 million. There is
no time limit on claims for indemnification for scheduled environmental
liabilities. Scheduled environmental liabilities are those liabilities agreed
upon by CLC, the Founding Companies and the stockholders to be scheduled, and
can include (i) conditions as of the consummation of the Acquisitions on the
Founding Company's properties or facilities that require or would require action
to remove, remediate, or reduce the levels of hazardous substances to below
regulatory action levels, or otherwise to perform any response, corrective or
preventive measure or to pay for any environmental response costs
("Environmental Response Measures") if all the facts were made known to a
governmental agency without regard to any historical contamination defense; (ii)
violations of environmental laws occurring prior to the consummation of the
Acquisitions; and (iii) other environmental liabilities or conditions existing
prior to the consummation of the Acquisitions that would require Environmental
Response Measures if all the facts were made known to a governmental agency
without regard to any historical contamination defense. Not all known or
potential environmental liabilities are scheduled liabilities. Liabilities that
are not scheduled will be partially indemnified as unscheduled liabilities to
the extent that they arose from or were incurred in connection with the business
operations of the Founding Companies prior to the Consummation Date.

Unscheduled environmental liabilities arising from or incurred in
connection with the operations of a Founding Company before the consummation of
the Acquisitions are also covered by the Environmental Indemnity. Each Founding
Company's stockholders' obligation to indemnify is not triggered until CLC and
such Founding Company have expended $100,000 (the "Basket Amount"). Once CLC and
the Founding Company have expended the Basket Amount, then the stockholders of
the Founding Companies must indemnify CLC and the Founding Company for 50% of
the next $400,000 expended, and for 100% of expenditures over $500,000 until the
Indemnity Limit is met. The stockholders of the Founding Companies are liable
only for those unscheduled environmental liabilities for which a notice of claim
is given by CLC to such stockholders within five years of the consummation of
the Acquisitions.

There can be no assurance that (i) the Environmental Indemnity will be
adequate to cover all losses or liabilities the Company may incur, (ii) each
Founding Company's stockholders will have adequate financial ability to pay any
claims submitted under the indemnity or (iii) that the Environmental Indemnity
will apply to all types of environmental losses or liabilities which the Company
may incur. The Company is generally required to indemnify a stockholder of a
Founding Company from environmental liabilities arising from or incurred in
connection with the operations of that Founding Company except to the extent
that such stockholder is obligated to indemnify the Company under the
Environmental Indemnity.

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<PAGE> 62

In determining the amount of consideration paid in the Acquisitions, the
Company valued each Founding Company on a consistent basis using the same
multiple of earnings, as adjusted for owner's compensation and other
nonrecurring items. The Company also took into account the S Corporation
Distributions made by certain of the Founding Companies.

The following table sets forth for each Founding Company the approximate
portion of the Acquisitions Consideration to be paid to the stockholders of each
of the Founding Companies in cash and in shares of Common Stock, with the cash
portion being subject to adjustment through the date of the consummation of the
Acquisitions:

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Robins...................................................... $ 7,189 1,118,227
Industrial.................................................. 6,962 1,176,233
Southwest Solvents.......................................... 1,718 786,613
Chemical Solvents........................................... -- 602,624
Tilley...................................................... 5,145 806,898
Cron........................................................ 2,308 359,006
Brown....................................................... 4,606 716,613
Tarr........................................................ 2,427 514,718
American.................................................... 771 462,397
------- ---------
Total............................................. $31,126 6,543,329
======= =========
</TABLE>

Prior to consummation of the Acquisitions, certain of the Founding
Companies will make the S Corporation Distributions estimated to be
approximately $8.7 million. Additionally, the amount of cash set forth above
payable to the stockholder of Chemical Solvents does not include an additional
$1.0 million (the "Contingent Consideration") that is being retained by the
Company. The Contingent Consideration will be available to cover certain costs
related to the RFI that is currently in process at Chemical Solvents' facility
on Jennings Road in Cleveland, Ohio. In the event the RFI is completed and funds
remain from the Contingent Consideration, the stockholder of Chemical Solvents
will be entitled to receive such remaining funds.

The agreements relating to the Acquisitions may be terminated under certain
limited circumstances prior to the consummation of the Offering. There can be no
assurance that the conditions to the closing of the Acquisitions will be
satisfied or waived or that the agreements relating to the Acquisitions will not
be terminated prior to the closing.

Pursuant to the agreements relating to the Acquisitions, all stockholders
of each of the Founding Companies have agreed not to compete with the Company
for five years after the consummation of the Offering. Those senior executives
of the Founding Companies who are entering into three-year employment agreements
with the Company have agreed not to compete with the Company for a period of
time equal to the later of (i) two years after the termination of their
affiliation with the Company and (ii) five years after the consummation of the
Offering. Those senior executives of the Founding Companies who are entering
into one-year employment agreements with the Company have agreed not to compete
with the Company for a period of two years after the termination of their
affiliation with the Company.

Individuals who are or will become executive officers or directors of the
Company will receive the following portions of the Acquisitions Consideration
for their interests in the Founding Companies, subject to adjustments as
described above.

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<PAGE> 63

<TABLE>
<CAPTION>
SHARES OF
COMPANY CASH(1) COMMON STOCK
------- ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Industrial
William L. Welch.......................................... $ 3,484 588,626
Robins
G. Stephen Robins......................................... 4,871 757,726
Southwest Solvents
James M. Clepper.......................................... 1,718 786,613
Tilley
John M. Tilley(2)......................................... 4,259 664,759
Brown
Douglas A. Brown.......................................... 580 190,651
American
Stephen B. Fiverson(3).................................... 771 462,397
------- ---------
Total............................................. $15,683 3,450,772
======= =========
</TABLE>

- ---------------

(1) Excludes S Corporation Distributions to Messrs. Welch, Clepper and Tilley of
approximately $300,000, $3.3 million and $14,000, respectively.

(2) Includes cash of $3,426,896 and 533,073 shares of Common Stock to be
received by the Tilley Family, LLC, of which Mr. Tilley is a member.

(3) This consideration is to be received by Colt Corporation, of which Mr.
Fiverson is an officer, director and shareholder.

TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS

During fiscal 1995, 1996 and 1997, Southwest Solvents made payments
totaling $95,425, $93,428 and $88,060, respectively, to a company wholly owned
by Mr. Clepper for the chartering of an aircraft. Mr. Clepper will become
President, Chief Operating Officer and a director of the Company following
consummation of the Offering.

Prior to April 1998, several of Industrial's warehouse facilities and
office buildings, and certain vehicles and equipment were owned and leased to
Industrial by Welch Enterprises, a general partnership consisting of William L.
Welch and L. B. Welch. Payments by Industrial during fiscal 1996, 1997 and 1998
under these leases aggregated $581,920, $573,155 and $564,700, respectively. All
the properties and assets will be transferred to Industrial prior to the closing
of the Acquisitions, in exchange for 460 shares of Industrial's common stock.
One of the properties, a 1.7 acre parcel upon which Industrial's Montgomery,
Alabama warehouse is located, was acquired by Welch Enterprises in March 1997
for approximately $125,000. Another one of the properties, a .7 acre parcel
adjacent to Industrial's Birmingham, Alabama warehouse facilities, was acquired
by Welch Enterprises in July 1997 for approximately $40,000. All the other
properties were acquired more than two years prior to the conveyance to
Industrial. The properties and other assets were valued for the purpose of the
exchange at an aggregate $1.5 million, based upon fair market value. In
addition, Industrial formerly leased an office building and warehouse facility
from Astro Packaging, Inc. ("Astro"), a corporation owned in part by Messrs.
Welch, for lease payments aggregating $120,000 in each of fiscal 1996, 1997 and
1998. Prior to the closing of the Acquisitions, Astro will convey this realty to
Industrial in exchange for two parcels of realty then owned by Industrial but
not used in its business operations. The property conveyed to Industrial was
valued for the purpose of the exchange at $450,000, and the two properties
conveyed to Astro were valued at an aggregate $450,000, based upon Industrial
management's belief that those amounts represented at least the fair market
value of the properties. While none of the foregoing valuations were determined
by unaffiliated third parties and none of the transactions were a result of
arms' length negotiations, management of Industrial believes them to have been
on terms at least as favorable as could have been obtained from unaffiliated
third parties.

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<PAGE> 64

Industrial was indebted to its stockholders, including Mr. Welch and
certain of his immediate family members, and their affiliates pursuant to
unsecured notes in the aggregate principal amount of $2,770,827 and $2,230,690
as of February 28, 1998 and February 28, 1997, respectively, bearing interest at
8.5% and 10%, respectively. L. B. Welch is indebted to Industrial under a note
dated December 30, 1996, having an outstanding principal balance of $105,167.50
as of February 28, 1998, bearing interest at 8.5%. Interest payments due under
the note were current at February 28, 1998. The note matures on December 30,
1998. Pursuant to the terms of the stock purchase agreement, those amounts will
be repaid within 30 days of the consummation of the offering.

William L. Welch holds a 33.3% equity interest in Pasco Products, Inc.
("Pasco"), a trucking firm from which Industrial purchases some shipping
services. In the fiscal year ended February 28, 1998, Industrial made payments
to Pasco in the aggregate amount of $89,690, which is estimated to equal
approximately 6.5% of Pasco's gross revenues for its most recent fiscal year.
William L. Welch will become a director of the Company effective upon
consummation of the Offering. L. B. Welch is William L. Welch's brother.

Immediately prior to consummation of the Offering, American was a
subsidiary of Colt Corporation ("Colt"). Stephen B. Fiverson is an executive
officer of Colt and members of his family are stockholders of Colt. American has
been included in consolidated federal income tax returns filed by Colt on behalf
of Colt and its subsidiaries. In addition, American paid management fees to Colt
and reimbursed it for administrative charges in the amounts of $24,762 and
$133,679 in the fiscal year ended March 31, 1998 (nine months), $67,006 and
$25,108 in the fiscal year ended June 30, 1997, and $63,608 and $25,060 in the
fiscal year ended June 30, 1996. Columbia Terminals, Inc. ("Columbia"), a
subsidiary of Colt, provides storage and related services to American for which
it was paid $504,964, $798,842 and $947,842 in the fiscal years ended March 31,
1998, June 30, 1997 and June 30, 1996, respectively. Columbia reimbursed
American for certain wages and benefit costs incurred by American on behalf of
Columbia in the amounts of $41,912, $35,943 and $60,911 in the fiscal years
ended March 31, 1998, June 30, 1997 and June 30, 1996, respectively.

The Company and Mr. Fiverson have entered into a letter agreement which
states that, simultaneously with the consummation of the Offering, American will
enter into an agreement (the "Operating Agreement") with Columbia pursuant to
which Columbia will allow American to use certain facilities and storage tanks
owned by Columbia. American will reimburse Columbia for operating costs of the
facilities, which include utilities, normal and customary repairs, maintenance,
operating costs and ad valorem taxes, and labor costs related to Columbia
employees utilized by American. During the initial one-year term (the "Initial
Term") of the Operating Agreement, American will not be assessed an operating or
rental charge for the use of the facilities or storage tanks. Following the
Initial Term, American can elect to continue using the facilities and storage
tanks, subject to the payment of rental fees. Mr. Fiverson is an executive
officer of Colt and will become a director of the Company upon the consummation
of the Offering. Certain members of Mr. Fiverson's immediate family are
stockholders of Colt.

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<PAGE> 65

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock, after giving effect to the issuance of
shares of Common Stock in connection with the Acquisitions and after giving
effect to the Offering, by (i) all persons known to the Company to be the
beneficial owner of 5% or more thereof, (ii) each director and nominee for
director, (iii) each executive officer and (iv) all officers and directors as a
group. Unless otherwise indicated, the address of each such person is c/o
Chemical Logistics Corporation, 808 Travis Street, Suite 1135, Houston, Texas
77002. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
AFTER OFFERING
--------------------
SHARES PERCENT
--------- -------
<S> <C> <C>
Bruce W. Wilkinson.......................................... 201,381 1.7%
James M. Clepper............................................ 965,609 7.9
Francis S. Kalman........................................... 170,068 1.4
Douglas A. Brown............................................ 190,651 1.6
Charles M. Vetters.......................................... 50,000 *
Scott R. Creasman........................................... 36,290 *
Lorne D. Bain............................................... 536,711 4.4
Stephen B. Fiverson (1)..................................... 462,397 3.8
Rodney R. Proto............................................. 19,962 *
G. Stephen Robins........................................... 757,726 6.2
John M. Tilley (2).......................................... 664,759 5.5
William L. Welch............................................ 588,626 4.8
All officers and directors as a group (12 persons).......... 4,643,510 38.1
</TABLE>

- ---------------

* Less than one percent.

(1) These shares are held by Colt Corporation, of which Mr. Fiverson is an
officer, director and stockholder. Mr. Fiverson shares voting and investment
power with respect to those shares.

(2) Of these shares, 533,073 are held by Tilley Family, LLC, of which Mr. Tilley
is a member. Mr. Tilley shares voting and investment power with respect to
those shares.

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<PAGE> 66

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $0.01 per share, and 10,000,000 shares of preferred
stock, par value $0.01 per share. After giving effect to the Acquisitions, there
will be 8,994,531 shares of Common Stock outstanding, par value $0.01 per share,
and no shares of preferred stock outstanding. After the closing of the Offering,
12,194,531 shares of Common Stock will be issued and outstanding, assuming no
exercise of the Underwriters' over-allotment option. The following summary of
the terms and provisions of the Company's capital stock does not purport to be
complete and is qualified in its entirety by reference to the Company's Amended
and Restated Certificate of Incorporation and Bylaws, which have been filed as
exhibits to the Company's registration statement, of which this Prospectus is a
part, and applicable law.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors. Such
holders are not entitled to vote cumulatively for the election of directors.
Holders of a majority of the shares of Common Stock entitled to vote in any
election of directors may elect all of directors standing for election.

Subject to the rights of any then outstanding shares of preferred stock,
holders of Common Stock are entitled to participate pro rata in such dividends
as may be declared in the discretion of the Board of Directors out of funds
legally available therefor. Holders of Common Stock are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
preferred stock then outstanding. Holders of Common Stock have no preemptive
rights to purchase shares of stock of the Company. Shares of Common Stock are
not subject to any redemption provisions and are not convertible into any other
securities of the Company. All outstanding shares of Common Stock are, and the
shares of Common Stock to be issued pursuant to the Offering and the
Acquisitions will be, upon payment therefor, fully paid and non-assessable.

The Company intends to make application to list the Common Stock on the
NYSE under the symbol "CLO."

PREFERRED STOCK

The preferred stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Amended and Restated Certificate of Incorporation and
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue the shares, to fix the number of shares and to change
the number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of the preferred stock , in each case without any further
action or vote by the stockholders. The Company has no current plans to issue
any shares of preferred stock of any class or series.

One of the effects of undesignated preferred stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of preferred stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, preferred stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of preferred stock may discourage
bids for the Common Stock at a premium or may otherwise adversely affect the
market price of the Common Stock.
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<PAGE> 67

STATUTORY BUSINESS COMBINATION PROVISION

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from the
time that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans) or (iii) at or after the time the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 66% of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by the
interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is (i) the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) an affiliate or associate of the
corporation and who was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder.

A corporation may, at its option, exclude itself from the coverage of
Section 203 by including in its certificate of incorporation or bylaws by action
of its stockholders to exempt itself from coverage. The Company has not adopted
such an amendment to its Amended and Restated Certificate of Incorporation or
Bylaws.

LIMITATION ON DIRECTORS' LIABILITIES

Pursuant to the Company's Amended and Restated Certificate of Incorporation
and under Delaware law, directors of the Company are not liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty, except
for liability in connection with a breach of the duty of loyalty, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for dividend payments or stock repurchases illegal under
Delaware law or any transaction in which a director has derived an improper
personal benefit. The Company will enter into indemnification agreements with
its directors and executive officers which indemnify such person to the fullest
extent permitted by its Amended and Restated Certificate of Incorporation, its
Bylaws and the Delaware General Corporation Law. The Company also intends to
obtain directors' and officers' liability insurance.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

The Company's Amended and Restated Certificate of Incorporation and Bylaws
include provisions that may have the effect of discouraging, delaying or
preventing a change in control of the Company or an unsolicited acquisition
proposal that a stockholder might consider favorable, including a proposal that
might result in the payment of a premium over the market price for the shares
held by stockholders. These provisions are summarized in the following
paragraphs.

Classified Board of Directors. The Amended and Restated Certificate of
Incorporation provides for the Board of Directors to be divided into three
classes of directors serving staggered three-year terms. The classification of
the Board of Directors has the effect of requiring at least two annual
stockholder meetings, instead of one, to replace a majority of members of the
Board of Directors.

Supermajority Voting. The Amended and Restated Certificate of Incorporation
requires the approval of the holders of at least 75% of the then outstanding
shares of the Company's capital stock entitled to vote thereon and the approval
of the holders of at least 75% of the then outstanding shares of each class of
stock of the Company voting separately as a class on, among other things,
certain amendments to the Amended and Restated Certificate of Incorporation. The
Board of Directors may amend, alter, change or repeal any bylaws without the
assent or vote of the stockholders, but any such bylaws may be altered, amended
or repealed upon
64
<PAGE> 68

the affirmative vote of at least 66 2/3% of the stock entitled to vote thereon.
A director of the Corporation may be removed only for cause and only upon the
affirmative vote of the holders of 66 2/3% of the stock entitled to vote
thereon.

Authorized but Unissued or Undesignated Capital Stock. The Company's
authorized capital stock will consist of 50,000,000 shares of Common Stock and
10,000,000 shares of preferred stock . After the Offering, the Company will have
outstanding 12,194,531 shares of Common Stock (assuming the Underwriters' over-
allotment option is not exercised). The authorized but unissued (and in the case
of preferred stock, undesignated) stock may be issued by the Board of Directors
in one or more transactions. In this regard, the Company's Amended and Restated
Certificate of Incorporation grants the Board of Directors broad power to
establish the rights and preferences of authorized and unissued preferred stock.
The issuance of shares of preferred stock pursuant to the Board of Directors'
authority described above could decrease the amount of earnings and assets
available for distribution to holders of Common Stock and adversely affect the
rights and powers, including voting rights, of such holders and may also have
the effect of delaying, deferring or preventing a change in control of the
Company. The Board of Directors does not currently intend to seek stockholder
approval prior to any issuance of preferred stock, unless otherwise required by
law.

Special Meeting of Stockholders. The Bylaws provide that special meetings
of stockholders of the Company may only be called by the Chairman of the Board
of Directors upon the written request of the Board of Directors pursuant to a
resolution approved by a majority of the Board of Directors.

Stockholder Action by Written Consent. The Amended and Restated Certificate
of Incorporation and Bylaws generally provide that any action required or
permitted by the stockholders of the Company must be effected at a duly called
annual or special meeting of the stockholders and may not be effected by any
written consent of the stockholders.

Notice Procedures. The Bylaws establish advance notice procedures with
regard to stockholder proposals relating to the nomination of candidates for
election as director, the removal of directors and amendments to the Amended and
Restated Certificate of Incorporation or Bylaws to be brought before annual
meetings of stockholders of the Company. These procedures provide that notice of
such stockholder proposals must be timely given in writing to the Secretary of
the Company prior to the annual meeting. Generally, to be timely, notice must be
received at the principal executive offices of the Company not less than 80 days
prior to an annual meeting (or if fewer than 90 days' notice or prior public
disclosure of the date of the annual meeting is given or made by the Company,
not later than the tenth day following the date on which the notice of the date
of the annual meeting was mailed or such public disclosure was made). The notice
must contain certain information specified in the Bylaws, including a brief
description of the business desired to be brought before the annual meeting and
certain information concerning the stockholder submitting the proposal.

Charter Provisions Relating to Rights Plan. The Amended and Restated
Certificate of Incorporation authorizes the Board of Directors of the Company to
create and issue rights (the "Rights") entitling the holders thereof to purchase
from the Company shares of capital stock or other securities. The times at
which, and the terms upon which, the Rights are to be issued may be determined
by the Board of Directors and set forth in the contracts or instruments that
evidence the Rights. The authority of the Board of Directors with respect to the
Rights includes, but is not limited to, the determination of (i) the initial
purchase price per share of the capital stock or other securities of the Company
to be purchased upon exercise of the Rights, (ii) provisions relating to the
times at which and the circumstances under which the Rights may be exercised or
sold or otherwise transferred, either together with or separately from, any
other securities of the Company, (iii) antidilutive provisions which adjust the
number or exercise price of the Rights or amount or nature of the securities or
other property receivable upon exercise of the Rights, (iv) provisions which
deny the holder of a specified percentage of the outstanding securities of the
Company the right to exercise the Rights and/or cause the Rights held by such
holder to become void, (v) provisions which permit the Company to redeem the
Rights and (vi) the appointment of a rights agent with respect to the Rights. If
authorized by the Board of Directors, the Rights would be intended to protect
the Company's stockholders from certain non-negotiated takeover attempts which
present the risk of a change of control on terms which may be less favorable to
the Company's stockholders than would be available in a transaction negotiated
with and approved by the Board

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<PAGE> 69

of Directors. The Board of Directors believes that the interests of the
stockholders generally are best served if any acquisition of the Company or a
substantial percentage of the Company's Common Stock results from arm's-length
negotiations and reflects the Board of Directors' careful consideration of the
proposed terms of a transaction. In particular, the Rights if issued would be
intended to help (i) reduce the risk of coercive two-tiered, front-end loaded or
partial offers which may not offer fair value to all stockholders of the
Company, (ii) deter market accumulators who through open market or private
purchases may achieve a position of substantial influence or control without
paying to stockholders a fair control premium and (iii) deter market
accumulators who are simply interested in putting the Company "in play."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

SHARES ELIGIBLE FOR FUTURE SALE

The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the public market. All of the
3,200,000 shares sold in the Offering, except for any shares acquired by
affiliates of the Company, will be freely tradeable. Simultaneously with the
closing of the Offering, the stockholders of the Founding Companies will
receive, in the aggregate, 6,543,329 shares of Common Stock as a portion of the
consideration for their businesses. Certain other stockholders of the Company
will hold, in the aggregate, an additional 2,451,202 shares of Common Stock.
None of these 8,994,531 shares was issued in a transaction registered under the
Securities Act, and, accordingly, such shares may not be sold except in
transactions registered under the Securities Act or pursuant to an exemption
from registration, including the exemptions contained in Rules 144 and 701 under
the Securities Act.

In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned his or her shares for at
least one year but not more than two years, or a person who may be deemed an
"affiliate" of the Company who has beneficially owned shares for at least one
year, would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the then outstanding shares of the
Common Stock or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the date on which notice of the proposed sale is
sent to the Securities and Exchange Commission. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. A person who is
not deemed to have been an affiliate of the Company at any time for 90 days
preceding a sale and who has beneficially owned his shares for at least two
years would be entitled to sell such shares under Rule 144 without regard to the
volume limitations, manner of sale provisions, notice requirements or the
availability of current public information about the Company.

In general, under Rule 701 under the Securities Act, any employee, officer,
or director of or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701. Such provisions permit nonaffiliates to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitation, or notice provisions of Rule 144 and permit
affiliates to sell their Rule 701 shares without having to comply with the Rule
144 holding period restrictions, in each case commencing 90 days after the
commencement of the Offering.

The Company has authorized the issuance of up to 15% of the outstanding
shares of its Common Stock immediately before any grant in accordance with the
terms of the Plan. It is anticipated that options to purchase approximately
1,070,000 shares of Common Stock will be granted upon closing of the Offering to
certain officers and directors of CLC and employees of the Founding Companies.
The Company intends to file a registration statement on Form S-8 under the
Securities Act registering the issuance of shares upon exercise of options
granted under the Plan. As a result, such shares will be eligible for resale in
the public market.

The Company currently intends to file a registration statement covering
5,000,000 additional shares of Common Stock under the Securities Act for its use
in connection with future acquisitions. These shares

66
<PAGE> 70

generally will be freely tradeable after their issuance by persons not
affiliated with the Company unless the Company contractually restricts their
resale.

The Company has agreed not to (i) directly or indirectly, offer, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
dispose of or transfer any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock or file any registration
statement under the Securities Act with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, for a period of 180 days from the date
of this Prospectus without the prior written consent of BT Alex. Brown
Incorporated on behalf of the Underwriters, except (i) in connection with
acquisitions and (ii) for any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to the Company's benefit plans described
herein. In addition, the owners of the Founding Companies, management, the
principals of BCP and certain consultants have agreed with the Company not to
sell, contract to sell or otherwise dispose of any shares of Common Stock
received as consideration in the Acquisitions for a period of two years
following receipt thereof.

Prior to the Offering, there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement, or otherwise,
or the availability of shares of Common Stock for sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
depress the prevailing market price. Such sales may also make it more difficult
for the Company to issue or sell equity securities or equity-related securities
in the future at a time and price that it deems appropriate. See "Risk
Factors -- Shares Eligible for Future Sale."

Former stockholders of the Founding Companies, certain executive officers
and directors are entitled to certain rights with respect to the registration of
their shares of Common Stock under the Securities Act. In the aggregate, these
groups hold 8,994,531 shares of Common Stock. If the Company proposes to
register any of its securities under the Securities Act, such stockholders are
entitled to notice of such registration and are entitled to include, at the
Company's expense, all or a portion of their shares therein, subject to certain
conditions. These registration rights will not apply to the registration
statement the Company intends to file for use in future acquisitions or with
respect to employee benefit plans.

67
<PAGE> 71

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation
and Sanders Morris Mundy Inc., have severally agreed to purchase from the
Company the following respective number of shares of Common Stock at the initial
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Sanders Morris Mundy Inc....................................
---------
Total............................................. 3,200,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby if
any of such shares are purchased.

The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share to certain other dealers. After
commencement of the initial public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 480,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares offered by the
Company hereunder, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the Common
Stock offered hereby. If purchased, such additional shares will be offered by
the Underwriters on the same terms as those on which the 3,200,000 shares are
being offered.

To facilitate the offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with the offering, thereby creating a short position
in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the syndicate of Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

68
<PAGE> 72

The Company has agreed not to offer, sell, or otherwise dispose of any
shares of Common Stock or other securities convertible into or exchangeable or
exercisable for shares of Common Stock for a period of 180 days after the date
of this Prospectus, except as consideration for acquisitions of businesses or on
exercise of options granted under the Plan, without the prior written consent of
BT Alex. Brown Incorporated. All directors, officers and current stockholders of
the Company and persons acquiring shares of Common Stock in connection with the
Acquisitions have agreed not to (i) offer, pledge, sell or otherwise dispose of
any shares of Common Stock, (ii) enter into any swap or other arrangement that
transfers all or a portion of the economic consequences associated with the
shares of Common Stock owned by such person or (iii) request the registration
for the offer or sale of Common Stock for a period of 180 days without the prior
written consent of BT Alex. Brown Incorporated.

The Representatives of the Underwriters have advised the Company that they
do not intend to confirm sales to any account over which they exercise
discretionary authority.

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price will be
determined by negotiations between the Company and the Representatives of the
Underwriters. Among the factors to be considered in such negotiations are
prevailing market conditions, the results of operations of the Founding
Companies in recent periods, the market capitalizations and stages of
development of other companies that the Company and the Representatives believe
to be comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development and other factors deemed
relevant by the Company and the Representatives.

LEGAL MATTERS

Certain legal matters in connection with the Common Stock being offered
hereby will be passed upon for the Company by Andrews & Kurth L.L.P., Houston,
Texas and for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The financial statements of CLC and the Founding Companies included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

69
<PAGE> 73

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is included as part of the Registration Statement, does not
contain all the information contained in the Registration Statement, certain
portions of which have been omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits and schedules thereto. Statements made in the Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete; with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto may be inspected, without charge, at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices at Citicorp Center, 500 West Madison Street, Room 1400,
Chicago, IL 60661, and 7 World Trade Center, Suite 1300, New York, NY 10048 or
on the Internet at http:www.sec.gov. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

Prior to filing the Registration Statement of which this Prospectus is a
part, the Company was not subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Upon effectiveness of the Registration Statement, the Company will become
subject to the informational and periodic reporting requirements of the Exchange
Act, and in accordance therewith, will file periodic reports, proxy statements,
and other information with the Commission. Such periodic reports, proxy
statements, and other information will be available for inspection and copying
at the public reference facilities and other regional offices referred to above.
The Company intends to register the securities offered by the Registration
Statement under the Exchange Act simultaneously with the effectiveness of the
Registration Statement and to furnish its stockholders with annual reports
containing audited financial statements and such other reports as may be
required from time to time by law or the New York Stock Exchange.

70
<PAGE> 74

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial
Statements............................................. F-3
Unaudited Pro Forma Combined Balance Sheet................ F-4
Unaudited Pro Forma Combined Statements of Operations..... F-5
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-7
G. S. ROBINS & COMPANY AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-12
Consolidated Balance Sheets............................... F-13
Consolidated Statements of Income......................... F-14
Consolidated Statements of Stockholders' Equity........... F-15
Consolidated Statements of Cash Flows..................... F-16
Notes to Consolidated Financial Statements................ F-17
INDUSTRIAL CHEMICALS, INC.
Report of Independent Public Accountants.................. F-26
Balance Sheets............................................ F-27
Statements of Income...................................... F-28
Statements of Stockholders' Equity........................ F-29
Statements of Cash Flows.................................. F-30
Notes to Financial Statements............................. F-31
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED
COMPANIES dba SOUTHWEST SOLVENTS AND CHEMICALS
Report of Independent Public Accountants.................. F-37
Combined Balance Sheets................................... F-38
Combined Statements of Income............................. F-39
Combined Statements of Stockholder's Equity............... F-40
Combined Statements of Cash Flows......................... F-41
Notes to Combined Financial Statements.................... F-42
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY
Report of Independent Public Accountants.................. F-48
Combined Balance Sheets................................... F-49
Combined Statements of Income............................. F-50
Combined Statements of Stockholder's Equity............... F-51
Combined Statements of Cash Flows......................... F-52
Notes to Combined Financial Statements.................... F-53
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY
Report of Independent Public Accountants.................. F-60
Combined Balance Sheets................................... F-61
Combined Statements of Income............................. F-62
Combined Statements of Stockholders' Equity............... F-63
Combined Statements of Cash Flows......................... F-64
Notes to Combined Financial Statements.................... F-65
</TABLE>

F-1
<PAGE> 75

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CRON CHEMICAL CORPORATION AND RELATED COMPANIES
Report of Independent Public Accountants.................. F-73
Combined Balance Sheets................................... F-74
Combined Statements of Income............................. F-75
Combined Statements of Stockholder's Equity............... F-76
Combined Statements of Cash Flows......................... F-77
Notes to Combined Financial Statements.................... F-78
BROWN CHEMICAL CO., INC. AND SUBSIDIARY
Report of Independent Public Accountants.................. F-84
Consolidated Balance Sheets............................... F-85
Consolidated Statements of Income......................... F-86
Consolidated Statements of Stockholders' Equity........... F-87
Consolidated Statements of Cash Flows..................... F-88
Notes to Consolidated Financial Statements................ F-89
TARR, INC. AND RELATED ENTITIES
Report of Independent Public Accountants.................. F-97
Combined Balance Sheets................................... F-98
Combined Statements of Income............................. F-99
Combined Statements of Stockholders' Equity............... F-100
Combined Statements of Cash Flows......................... F-101
Notes to Combined Financial Statements.................... F-102
A.C.C. INC. T/A AMERICAN CHEMICALS CO., INC.
Report of Independent Public Accountants.................. F-110
Balance Sheet............................................. F-111
Statement of Income....................................... F-112
Statement of Stockholders' Equity......................... F-113
Statement of Cash Flows................................... F-114
Notes to Financial Statements............................. F-115
CHEMICAL LOGISTICS CORPORATION
Report of Independent Public Accountants.................. F-121
Balance Sheets............................................ F-122
Statements of Income...................................... F-123
Statements of Stockholders' Equity........................ F-124
Statements of Cash Flows.................................. F-125
Notes to Financial Statements............................. F-126
</TABLE>

F-2
<PAGE> 76

CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION

The following unaudited pro forma combined financial statements give effect
to (i) the acquisitions by CLC of the outstanding capital stock and other equity
interests of Robins, Industrial, Southwest Solvents, Chemical Solvents, Tilley,
Cron, Brown, Tarr and American (together, the Founding Companies) and related
transactions and (ii) CLC's initial public offering (the Offering). These
acquisitions (the Acquisitions) will occur simultaneously with the closing of
the Offering and will be accounted for using the purchase method of accounting.

The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and related transactions, and the Offering, as if they had occurred
on June 30, 1998. The unaudited pro forma combined statements of operations give
effect to these transactions as if they had occurred on January 1, 1997.

CLC has preliminarily analyzed the savings that it expects to be realized
from reductions in salaries, bonuses and certain benefits to the owners of the
Founding Companies. To the extent such owners have contractually agreed to
prospective changes in salaries, bonuses and benefits, these changes have been
reflected in the unaudited pro forma combined statement of operations. With
respect to other potential cost savings, CLC has not and cannot quantify these
savings until completion of the Acquisitions. It is anticipated that these
savings will be offset by costs related to CLC's new corporate management and by
the costs associated with being a public company. However, because these costs
cannot be accurately quantified at this time, they have not been included in the
pro forma financial statements of CLC.

The pro forma adjustments are based on estimates, available information and
certain assumptions that Company management deems appropriate and may be revised
as additional information becomes available. The pro forma financial statements
do not purport to represent what CLC's combined financial position or results of
operations would actually have been if such transactions had occurred on those
dates and are not necessarily representative of CLC's combined financial
position or results of operations for any future period. Since the Founding
Companies were not under common control or management, historical combined
results may not be comparable to, or indicative of, future performance. The
unaudited pro forma combined financial statements should be read in conjunction
with the historical financial statements and notes thereto included elsewhere in
this Prospectus. See "Risk Factors" included elsewhere herein.

F-3
<PAGE> 77

CHEMICAL LOGISTICS CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 1998

(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
SOUTHWEST CHEMICAL
ROBINS INDUSTRIAL SOLVENTS SOLVENTS TILLEY CRON BROWN TARR
------- ---------- --------- -------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.................. $ 2,402 $ 21 $ 282 $ 9 $ 13 $ 124 $ 916 $ 14
Accounts receivable........................ 6,071 5,536 6,691 5,679 6,157 6,191 4,305 2,929
Due from affiliate......................... -- 105 -- -- -- -- -- 86
Inventories................................ 5,539 2,643 3,842 1,260 3,905 3,149 2,282 1,689
Deferred income taxes...................... -- -- -- -- 116 56 541 25
Other current assets....................... 892 136 217 165 460 67 228 258
------- ------- ------- ------- ------- ------- ------- ------
Total current assets................ 14,904 8,441 11,032 7,113 10,651 9,587 8,272 5,001
Investments................................ -- -- -- -- -- -- 221 --
Property, plant and equipment, net......... 3,205 3,447 5,328 6,244 2,504 2,800 1,819 2,737
Due from stockholders...................... -- -- 56 473 -- -- -- --
Goodwill, net.............................. -- -- -- -- -- -- -- 650
Other assets, net.......................... 592 296 5 -- 311 49 3,817 96
------- ------- ------- ------- ------- ------- ------- ------
Total assets........................ $18,701 $12,184 $16,421 $13,830 $13,466 $12,436 $14,129 $8,484
======= ======= ======= ======= ======= ======= ======= ======

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses...... $ 5,147 $ 3,852 $ 5,350 $ 4,658 $ 4,610 $ 6,251 $ 4,136 $2,577
Current maturities of long-term debt....... 206 1,745 398 475 190 -- 941 387
Lines of credit............................ -- -- 2,522 -- 1,465 -- -- 2,133
Due to affiliate........................... -- 1,843 240 -- -- 522 -- --
Dividends payable.......................... -- -- -- -- -- -- -- --
Income taxes payable....................... 84 -- 71 -- 359 -- 374 20
Deferred income taxes...................... -- -- -- -- -- -- -- --
Container deposits refundable to
customers................................. 717 174 313 27 197 227 130 346
Payable to Founding Companies'
stockholders.............................. -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------
Total current liabilities........... 6,154 7,614 8,894 5,160 6,821 7,000 5,581 5,463
Container deposits refundable to
customers................................. 448 1,644 -- -- -- -- -- --
Long-term debt, net of current
maturities................................ 1,076 3 1,648 6,957 570 -- 2,199 933
Due to affiliate........................... -- 802 -- -- -- 3,650 -- 170
Deferred income taxes...................... -- -- -- -- 66 421 226 136
Other noncurrent liabilities............... 419 -- 105 467 -- -- 1,273 --
Minority interest.......................... -- -- -- -- -- -- 167 --
Commitments and contingencies
Stockholders' Equity
Common stock.............................. 204 5 22 1 321 39 5 --
Additional paid-in capital................ 385 1,246 146 587 3 979 1,500 1,126
Unrealized gain on investments............ -- -- -- -- -- -- 56 --
Retained earnings......................... 11,693 870 5,606 658 5,685 347 3,122 656
Treasury stock, at cost................... (1,678) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------
Total stockholders' equity.......... 10,604 2,121 5,774 1,246 6,009 1,365 4,683 1,782
------- ------- ------- ------- ------- ------- ------- ------
Total liabilities and stockholders'
equity............................. $18,701 $12,184 $16,421 $13,830 $13,466 $12,436 $14,129 $8,484
======= ======= ======= ======= ======= ======= ======= ======

<CAPTION>
PRO FORMA PRO FORMA POSTACQUISITION AS
AMERICAN CLC ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
-------- ------- ----------- --------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.................. $ 342 $ 1 $ (224) $ 3,900 $ (1,900) $ 2,000
Accounts receivable........................ 2,098 -- -- 45,657 -- 45,657
Due from affiliate......................... -- -- -- 191 -- 191
Inventories................................ 1,017 -- 1,354 26,680 -- 26,680
Deferred income taxes...................... 13 -- (144) 607 -- 607
Other current assets....................... 146 2,040 -- 4,609 (1,907) 2,702
------ ------- -------- -------- -------- --------
Total current assets................ 3,616 2,041 986 81,644 (3,807) 77,837
Investments................................ -- -- -- 221 -- 221
Property, plant and equipment, net......... 31 28 3,679 31,822 -- 31,822
Due from stockholders...................... -- -- -- 529 -- 529
Goodwill, net.............................. -- -- 74,092 74,742 -- 74,742
Other assets, net.......................... 4 -- 198 5,368 266 5,634
------ ------- -------- -------- -------- --------
Total assets........................ $3,651 $ 2,069 $ 78,955 $194,326 $ (3,541) $190,785
====== ======= ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses...... $1,352 $ 2,139 $ 2,450 $ 42,522 $ (3,540) $ 38,982
Current maturities of long-term debt....... -- -- -- 4,342 (4,342) --
Lines of credit............................ -- -- -- 6,120 (6,120) --
Due to affiliate........................... 291 -- -- 2,896 (2,896) --
Dividends payable.......................... -- -- 5,395 5,395 -- 5,395
Income taxes payable....................... 246 -- -- 1,154 -- 1,154
Deferred income taxes...................... -- -- 855 855 -- 855
Container deposits refundable to
customers................................. 15 -- -- 2,146 -- 2,146
Payable to Founding Companies'
stockholders.............................. -- -- 31,126 31,126 (31,126) --
------ ------- -------- -------- -------- --------
Total current liabilities........... 1,904 2,139 39,826 96,556 (48,024) 48,532
Container deposits refundable to
customers................................. -- -- -- 2,092 -- 2,092
Long-term debt, net of current
maturities................................ -- -- -- 13,386 9,865 23,251
Due to affiliate........................... -- -- -- 4,622 (4,622) --
Deferred income taxes...................... 28 -- 2,252 3,129 -- 3,129
Other noncurrent liabilities............... -- -- (1,265) 999 -- 999
Minority interest.......................... -- -- (167) -- -- --
Commitments and contingencies
Stockholders' Equity
Common stock.............................. 1,326 1 (1,834) 90 32 122
Additional paid-in capital................ -- 6,825 67,551 80,348 39,208 119,556
Unrealized gain on investments............ -- -- (56) -- -- --
Retained earnings......................... 393 (6,896) (29,030) (6,896) -- (6,896)
Treasury stock, at cost................... -- -- 1,678 -- -- --
------ ------- -------- -------- -------- --------
Total stockholders' equity.......... 1,719 (70) 38,309 73,542 39,240 112,782
------ ------- -------- -------- -------- --------
Total liabilities and stockholders'
equity............................. $3,651 $ 2,069 $ 78,955 $194,326 $ (3,541) $190,785
====== ======= ======== ======== ======== ========
</TABLE>

F-4
<PAGE> 78

CHEMICAL LOGISTICS CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1998

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SOUTHWEST CHEMICAL
ROBINS INDUSTRIAL SOLVENTS SOLVENTS TILLEY CRON BROWN TARR AMERICAN
------- ---------- --------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES, net......................... $29,380 $25,531 $23,437 $19,779 $20,292 $21,933 $18,176 $12,888 $8,941
------- ------- ------- ------- ------- ------- ------- ------- ------
COSTS AND EXPENSES:
Cost of sales.................... 23,699 19,859 19,088 13,975 16,844 18,581 14,775 9,598 7,340
Operating and delivery........... 1,958 2,038 1,437 2,294 668 879 884 1,290 515
Selling, general and
administrative................. 2,934 3,024 1,748 1,811 1,666 1,549 1,463 1,313 798
Goodwill amortization............ -- -- -- -- -- -- -- -- --
Depreciation..................... 413 330 391 475 236 200 154 235 (5)
------- ------- ------- ------- ------- ------- ------- ------- ------
Total costs and expenses... 29,004 25,251 22,664 18,555 19,414 21,209 17,276 12,436 8,648
------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME (LOSS) FROM OPERATIONS...... 376 280 773 1,224 878 724 900 452 293
OTHER INCOME (EXPENSE):
Interest expense................. (41) (208) (182) (223) (63) (38) (165) (261) --
Interest income.................. 121 16 3 4 5 3 -- -- --
Other, net....................... (9) 92 55 (59) 3 25 52 154 (3)
------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME (LOSS) BEFORE INCOME
TAXES............................ 447 180 649 946 823 714 787 345 290
INCOME TAX EXPENSE................. -- -- 25 -- 276 264 365 30 121
======= ======= ======= ======= ======= ======= ======= ======= ======
NET INCOME (LOSS).................. $ 447 $ 180 $ 624 $ 946 $ 547 $ 450 $ 422 $ 315 $ 169
======= ======= ======= ======= ======= ======= ======= ======= ======
NET INCOME PER SHARE...............
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1)..........

<CAPTION>
PRO FORMA PRO FORMA
CLC ADJUSTMENTS COMBINED
------- ----------- -----------
<S> <C> <C> <C>
SALES, net......................... $ -- $ -- $ 180,357
------- ------- -----------
COSTS AND EXPENSES:
Cost of sales.................... -- -- 143,759
Operating and delivery........... -- -- 11,963
Selling, general and
administrative................. 6,877 (7,924) 15,259
Goodwill amortization............ -- 934 934
Depreciation..................... 2 -- 2,431
------- ------- -----------
Total costs and expenses... 6,879 (6,990) 174,346
------- ------- -----------
INCOME (LOSS) FROM OPERATIONS...... (6,879) 6,990 6,011
OTHER INCOME (EXPENSE):
Interest expense................. -- 107 (1,074)
Interest income.................. -- -- 152
Other, net....................... -- -- 310
------- ------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES............................ (6,879) 7,097 5,399
INCOME TAX EXPENSE................. -- 1,469 2,550
======= ======= ===========
NET INCOME (LOSS).................. $(6,879) $ 5,628 $ 2,849
======= ======= ===========
NET INCOME PER SHARE............... $ 0.23
===========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1).......... 12,194,531
===========
</TABLE>

- ---------------

(1) Includes (i) 6,543,329 shares issued to owners of the Founding Companies,
(ii) 3,200,000 shares to be sold in the Offering and (iii) 656,697 shares
issued to the management of and directors of CLC, (iv) 1,570,441 shares
issued to the principals of Bellmeade Capital Partners, L.L.C., and (v)
224,064 shares issued to or held by employees and consultants to BCP. Basic
and diluted income per share are the same for the six months ended June 30,
1998.

F-5
<PAGE> 79

CHEMICAL LOGISTICS CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SOUTHWEST CHEMICAL
ROBINS INDUSTRIAL SOLVENTS SOLVENTS TILLEY CRON BROWN TARR AMERICAN
------- ---------- --------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES, net......................... $61,445 $51,599 $47,219 $41,164 $40,715 $38,755 $34,311 $31,662 $19,040
------- ------- ------- ------- ------- ------- ------- ------- -------
COSTS AND EXPENSES:
Cost of sales.................... 49,176 39,547 38,791 30,333 34,022 32,557 28,361 24,956 15,630
Operating and delivery........... 4,126 3,738 2,433 4,352 1,050 1,680 1,514 2,910 1,058
Selling, general and
administrative................. 5,322 6,366 4,340 3,819 3,381 3,268 3,097 2,798 1,743
Goodwill amortization............ -- -- -- -- -- -- -- -- --
Depreciation..................... 564 828 772 871 444 404 278 420 22
------- ------- ------- ------- ------- ------- ------- ------- -------
Total costs and expenses... 59,188 50,479 46,336 39,375 38,897 37,909 33,250 31,084 18,453
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS...... 2,257 1,120 883 1,789 1,818 846 1,061 578 587
OTHER INCOME (EXPENSE):
Interest expense................. (117) (317) (364) (417) (181) (62) (340) (339) --
Interest income.................. 155 34 16 36 12 3 -- 137 1
Other, net....................... 21 247 27 142 5 27 (17) (9) --
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME
TAXES............................ 2,316 1,084 562 1,550 1,654 814 704 367 588
INCOME TAX EXPENSE................. (333) -- 27 -- 568 315 343 33 189
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME (LOSS).................. $ 2,649 $ 1,084 $ 535 $ 1,550 $ 1,086 $ 499 $ 361 $ 334 $ 399
======= ======= ======= ======= ======= ======= ======= ======= =======
NET INCOME PER SHARE...............
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1)..........

<CAPTION>
PRO FORMA PRO FORMA
CLC ADJUSTMENTS COMBINED
---- ----------- -----------
<S> <C> <C> <C>
SALES, net......................... $-- $ -- $ 365,910
---- ------- -----------
COSTS AND EXPENSES:
Cost of sales.................... -- (356) 293,017
Operating and delivery........... -- -- 22,861
Selling, general and
administrative................. 17 (4,059) 30,092
Goodwill amortization............ -- 1,917 1,917
Depreciation..................... -- 36 4,639
---- ------- -----------
Total costs and expenses... 17 (2,462) 352,526
---- ------- -----------
INCOME (LOSS) FROM OPERATIONS...... (17) 2,462 13,384
OTHER INCOME (EXPENSE):
Interest expense................. -- 78 (2,059)
Interest income.................. -- -- 394
Other, net....................... -- -- 443
---- ------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES............................ (17) 2,540 12,162
INCOME TAX EXPENSE................. -- 4,556 5,698
---- ------- -----------
---- ------- -----------
NET INCOME (LOSS).................. $(17) $(2,016) $ 6,464
==== ======= ===========
NET INCOME PER SHARE............... $ 0.53
===========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1).......... 12,194,531
===========
</TABLE>

- ---------------

(1) Includes (i) 6,543,329 shares issued to owners of the Founding Companies,
(ii) 3,200,000 shares to be sold in the Offering, (iii) 656,697 shares
issued the management of and directors of CLC, (iv) 1,570,441 shares issued
to the principals of Bellmeade Capital Partners, L.L.C., and (v) 224,064
shares issued to or held by employees and consultants to BCP. Basic and
diluted income per share are the same for the year ended December 31, 1997.

F-6
<PAGE> 80

CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

1. GENERAL:

CLC was founded to create a premier national chemical distribution company.
CLC has conducted no operations to date and will acquire the Founding Companies
concurrently with and as a condition to the closing of the Offering.

The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements. The periods included in
these financial statements for the individual Founding Companies are as of and
for the six months ended June 30, 1998, and for the year ended December 31,
1997, except for Industrial, Tilley, American and Cron, for which the period is
as of and for the fiscal years ended February 28, 1998, October 31, 1997, March
31, 1998, and September 30, 1997, respectively. The audited historical financial
statements included elsewhere herein have been included in accordance with
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 80.

2. ACQUISITION OF FOUNDING COMPANIES:

Concurrently with and as a condition to the closing of the Offering, CLC
will acquire all of the outstanding capital stock and other equity interests of
the Founding Companies. The acquisitions will be accounted for using the
purchase method of accounting with CLC being reflected as the accounting
acquiror.

The following table sets forth the consideration to be paid (a) in cash and
(b) in shares of Common Stock to the equity holders of each of the Founding
Companies, other than the accounting acquiror (CLC). For purposes of computing
the estimated purchase price for accounting purposes, the value of the shares is
determined using an estimated fair value of $11.25 per share (or $73.6 million).
The total estimated purchase price of $104.7 million for the acquisitions is
based upon preliminary estimates and is subject to certain purchase price
adjustments at and following closing. The table does not reflect the
distributions totaling $8.7 million constituting an estimate of substantially
all of the Founding Companies' undistributed earnings previously taxed to their
stockholders (S Corporation Distributions).

<TABLE>
<CAPTION>
SHARES OF
COMMON
CASH STOCK
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Robins...................................................... $ 7,189 1,118,227
Industrial.................................................. 6,962 1,176,233
Southwest Solvents.......................................... 1,718 786,613
Chemical Solvents........................................... -- 602,624
Tilley...................................................... 5,145 806,898
Cron........................................................ 2,308 359,006
Brown....................................................... 4,606 716,613
Tarr........................................................ 2,427 514,718
American.................................................... 771 462,397
------- ----------
Total............................................. $31,126 6,543,329
======= ==========
</TABLE>

3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:

(a) Records the remaining S Corporation Distributions of $5.4 million, which
are expected to be funded using new borrowings.

F-7
<PAGE> 81
CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Records the purchase of the Founding Companies for a total purchase price
of $104.7 million. The entry includes the liability of $31.1 million for
the cash portion of the consideration paid to the stockholders of the
Founding Companies in connection with the Acquisitions and the issuance of
6,543,329 shares of Common Stock to the Founding Companies resulting in the
creation of $74.1 million of goodwill after allocating the purchase price
to the aggregate assets acquired and liabilities assumed as shown below.
Based on its initial assessment, management believes that the historical
carrying value of the remaining Founding Companies' assets and liabilities
will approximate fair value and that there are no other identifiable
intangible assets to which any material purchase price can be allocated.
The adjustment excludes $1.0 million in consideration to be paid to one of
the Founding Companies, contingent on certain conditions being met.

ASSETS

<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 3,899
Accounts receivable......................................... 45,657
Due from affiliate.......................................... 191
Inventories................................................. 26,680
Deferred income taxes....................................... 607
Other current assets........................................ 2,569
--------
Total current assets.............................. 79,603
Investments................................................. 221
Property, plant and equipment, net.......................... 31,794
Due from stockholders....................................... 529
Goodwill, net............................................... 650
Other assets, net........................................... 5,368
--------
Total assets...................................... $118,165
========
LIABILITIES
Accounts payable and accrued expenses....................... $ 40,383
Current maturities of long-term debt........................ 4,342
Lines of credit............................................. 6,120
Due to affiliate............................................ 2,896
Dividends payable........................................... 5,395
Income taxes payable........................................ 1,154
Deferred income taxes....................................... 855
Container deposit refundable to customers................... 2,146
--------
Total current liabilities......................... 63,291
Container deposit refundable to customers................... 2,092
Long-term debt, net of current maturities................... 13,386
Due to affiliate............................................ 4,622
Deferred income taxes....................................... 3,129
Other noncurrent liabilities................................ 999
--------
Total liabilities................................. $ 87,519
========
</TABLE>

(c) Records the net deferred income tax liability attributable to the balance
sheet adjustments and temporary differences between the financial reporting
and tax bases of assets and liabilities held in the S Corporations.

(d) Records the cash proceeds from the issuance of 3,200,000 shares of Common
Stock, net of estimated offering costs of $8.8 million (based on an assumed
initial public offering price of $15.00 per share).

F-8
<PAGE> 82
CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Offering costs primarily consist of underwriting discounts and commissions,
accounting fees, legal fees and printing expenses.

(e) Records the cash portion of the consideration to be paid to the
stockholders of the Founding Companies in connection with the Acquisitions
and the planned additional borrowings for working capital purposes and
related deferred financing costs, net of the planned repayment of existing
debt in connection with the Offering.

The following tables summarize the unaudited pro forma combined balance
sheet adjustments (in thousands):

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) ADJUSTMENTS
------- -------- ------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents........................... $ (42) $ (182) $ -- $ (224)
Inventories......................................... -- 1,354 $ -- 1,354
Deferred income taxes............................... -- 94 (238) (144)
------- -------- ------- --------
Total current assets...................... (42) 1,266 (238) 986
Property, plant and equipment, net.................. -- 3,679 -- 3,679
Goodwill, net....................................... -- 74,092 -- 74,092
Other assets, net................................... -- 198 -- 198
------- -------- ------- --------
Total assets.............................. $ (42) $ 79,235 $ (238) $ 78,955
======= ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses............... $ -- $ 2,450 $ -- $ 2,450
Dividends payable................................... 5,395 -- -- 5,395
Deferred income taxes............................... -- -- 855 855
Payable to Founding Companies' stockholders......... -- 31,126 -- 31,126
------- -------- ------- --------
Total current liabilities................. 5,395 33,576 855 39,826
Deferred income taxes............................... -- 1,984 268 2,252
Other noncurrent liabilities........................ -- (1,265) -- (1,265)
Minority interest................................... -- (167) -- (167)
------- -------- ------- --------
Total liabilities......................... 5,395 34,128 1,123 40,646
Stockholders' equity --
Common stock...................................... -- (1,834) -- (1,834)
Additional paid-in capital........................ -- 67,551 -- 67,551
Unrealized gain on investments.................... -- (56) -- (56)
Retained earnings................................. (5,437) (22,232) (1,361) (29,030)
Treasury stock, at cost........................... -- 1,678 -- 1,678
------- -------- ------- --------
Total stockholders' equity................ (5,437) 45,107 (1,361) 38,309
------- -------- ------- --------
Total liabilities and stockholders'
equity.................................. $ (42) $ 79,235 $ (238) $ 78,955
======= ======== ======= ========
</TABLE>

F-9
<PAGE> 83
CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ASSETS

<TABLE>
<CAPTION>
POSTACQUISITION
(D) (E) ADJUSTMENTS
------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $39,240 $(41,140) $ (1,900)
Other current assets....................................... (2,040) 133 (1,907)
------- -------- --------
Total current assets............................. 37,200 (41,007) (3,807)
Other assets, net.......................................... -- 266 266
------- -------- --------
Total assets..................................... $37,200 $(40,741) $ (3,541)
======= ======== ========

LIABILITIES

Accounts payable and accrued expenses...................... $(2,040) $ (1,500) $ (3,540)
Current maturities of long-term debt....................... -- (4,342) (4,342)
Lines of credit............................................ -- (6,120) (6,120)
Due to affiliate........................................... -- (2,896) (2,896)
Payable to Founding Companies' stockholders................ -- (31,126) (31,126)
------- -------- --------
Total current liabilities........................ (2,040) (45,984) (48,024)
Long-term debt, net of current maturities.................. -- 9,865 9,865
Due to affiliate........................................... -- (4,622) (4,622)
------- -------- --------
Total liabilities................................ (2,040) (40,741) (42,781)
------- -------- --------
Stockholders' equity --
Common stock............................................. 32 -- 32
Additional paid-in capital............................... 39,208 -- 39,208
------- -------- --------
Total stockholders' equity....................... 39,240 -- 39,240
------- -------- --------
Total liabilities and stockholders' equity....... $37,200 $(40,741) $ (3,541)
======= ======== ========
</TABLE>

4. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS:

Year Ended December 31, 1997

(a) Reflects the net reduction in operations for the acquisition of certain
property and equipment which were not acquired in the Acquisitions and the
reduction in cost of sales on a FIFO basis for certain Founding Companies
which have historically accounted for inventory on a LIFO basis.

(b) Reflects the $3.4 million reduction in salaries, bonuses and benefits to
the owners of the Founding Companies to which they agreed in connection
with the Acquisitions offset by a charge for the recurring portion of
salary expenses of management.

(d) Reflects elimination of interest expense of $0.1 million due to the planned
repayment of existing debt in connection with the Acquisitions.

(e) Reflects the incremental provision for federal and state income taxes
relating to the statement of operations adjustments and to reflect income
taxes on S Corporation income as if these entities had been taxable as C
Corporations during the periods presented.

F-10
<PAGE> 84
CHEMICAL LOGISTICS CORPORATION AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the unaudited pro forma combined statement
of operations adjustments (in thousands):

<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
----- ------- ------- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
COST OF SALES............................ $(356) $ -- $ -- $ -- $ -- $ (356)
SELLING, GENERAL AND ADMINISTRATIVE...... (663) (3,396) -- -- -- (4,059)
GOODWILL AMORTIZATION.................... -- -- 1,917 -- -- 1,917
DEPRECIATION............................. 36 -- -- -- -- 36
----- ------- ------- ---- ------- -------
Total costs and expenses....... (983) (3,396) 1,917 -- -- (2,462)
----- ------- ------- ---- ------- -------
INCOME FROM OPERATIONS................... 983 3,396 (1,917) -- -- 2,462
----- ------- ------- ---- ------- -------
INTEREST EXPENSE......................... -- -- -- 78 -- 78
----- ------- ------- ---- ------- -------
INCOME BEFORE INCOME TAXES............... 983 3,396 (1,917) 78 -- 2,540
PROVISION FOR INCOME TAXES............... -- -- -- -- 4,556 4,556
----- ------- ------- ---- ------- -------
NET INCOME............................... $ 983 $ 3,396 $(1,917) $ 78 $(4,556) $(2,016)
===== ======= ======= ==== ======= =======
</TABLE>

Six Months Ended June 30, 1998

(a) Reflects the net reduction in operations for the acquisition of certain
property and equipment which were not acquired in the Acquisitions.

(b) Reflects the $0.9 million reduction in salaries, bonuses and benefits to
the owners of the Founding Companies to which they agreed in connection
with the Acquisitions, $0.3 million in costs directly attributable to the
Acquisitions incurred by the Founding Companies and the reversal of the
$6.8 million noncash compensation charge related to the issuance of 606,697
shares of Common Stock to management and directors of the Company offset by
a charge for the recurring portion of salary expenses of management.

(d) Reflects elimination of interest expense of $0.1 million due to the planned
repayment of existing debt in connection with the Acquisitions.

The following table summarizes the unaudited pro forma combined statement
of operations adjustments (in thousands):

<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
----- ------- ----- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
COST OF SALES........................ $ -- $ -- $ -- $ -- $ -- $ --
SELLING, GENERAL AND
ADMINISTRATIVE..................... (277) (7,647) -- -- -- (7,924)
GOODWILL AMORTIZATION................ -- -- 934 -- -- 934
----- ------- ----- ---- ------- -------
Total costs and expenses... (277) (7,647) 934 -- -- (6,990)
----- ------- ----- ---- ------- -------
INCOME FROM OPERATIONS............... 277 7,647 (934) -- -- 6,990
----- ------- ----- ---- ------- -------
INTEREST EXPENSE..................... -- -- -- 107 -- 107
----- ------- ----- ---- ------- -------
INCOME BEFORE INCOME TAXES........... 277 7,647 (934) 107 -- 7,097
PROVISION FOR INCOME TAXES........... -- -- -- -- 1,469 1,469
----- ------- ----- ---- ------- -------
NET INCOME........................... $ 277 $ 7,647 $(934) $107 $(1,469) $ 5,628
===== ======= ===== ==== ======= =======
</TABLE>

F-11
<PAGE> 85

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To G. S. Robins & Company:

We have audited the accompanying consolidated balance sheets of G. S.
Robins & Company and Subsidiaries (the Company) as of December 31, 1996 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
G. S. Robins & Company and Subsidiaries as of December 31, 1996 and 1997, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 1, 1998

F-12
<PAGE> 86

G. S. ROBINS & COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $439,722.... $ 1,260,742 $ 1,934,697
Certificates of deposit............................. -- 879,798 467,456
Accounts receivable, less allowance for doubtful
accounts of $67,617, $67,862 and $78,362,
respectively..................................... 6,043,214 6,359,352 6,071,729
Inventories......................................... 5,930,778 5,458,859 5,538,755
Container deposits paid to suppliers................ 624,650 580,957 560,694
Other current assets................................ 333,592 229,561 331,508
----------- ----------- -----------
Total current assets........................ 13,371,956 14,769,269 14,904,839
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost................ 7,391,877 8,018,295 8,511,613
Less -- Accumulated depreciation.................... (4,283,806) (4,847,386) (5,306,660)
----------- ----------- -----------
3,108,071.. 3,170,909 3,204,953
----------- ----------- -----------
OTHER ASSETS, net..................................... 624,448 562,732 591,634
----------- ----------- -----------
Total assets................................ $17,104,475 $18,502,910 $18,701,426
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $ 3,101,070 $ 3,516,742 $ 4,378,277
Accrued liabilities................................. 556,272 705,846 577,049
Income taxes payable................................ 90,397 185,512 84,424
Container deposits refundable to customer........... 765,129 753,846 717,361
Current maturities of long-term debt................ -- 176,668 205,924
Deferred income taxes............................... 292,486 -- --
Other current liabilities........................... 175,101 150,336 191,339
----------- ----------- -----------
Total current liabilities................... 4,980,455 5,488,950 6,154,374
----------- ----------- -----------
CONTAINER DEPOSITS REFUNDABLE TO CUSTOMERS............ 479,751 469,700 446,969
LONG-TERM DEBT, net of current maturities............. -- 1,076,432 1,076,432
DEFERRED INCOME TAXES................................. 140,520 -- --
OTHER LONG-TERM LIABILITIES........................... 46,088 424,017 419,189
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, voting; $10 par value; 50,000 shares
authorized; 18,660 shares issued; 18,660, 13,308
and 13,308, shares outstanding, respectively..... 186,600 186,600 186,600
Common stock, nonvoting; $10 par value; 1,730 shares
authorized, issued and outstanding,
respectively..................................... 17,300 17,300 17,300
Additional paid-in capital.......................... 385,292 385,292 385,292
Retained earnings................................... 10,868,469 12,132,195 11,692,846
Treasury stock, 5,352 shares, at cost............... -- (1,677,576) (1,677,576)
----------- ----------- -----------
Total stockholders' equity.................. 11,457,661 11,043,811 10,604,462
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $17,104,475 $18,502,910 $18,701,426
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE> 87

G. S. ROBINS & COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES, net.................. $58,235,831 $59,387,306 $61,445,374 $30,165,326 $29,379,997
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales............. 47,109,851 48,299,937 49,175,809 24,229,813 23,699,045
Operating and delivery.... 3,741,214 3,539,995 4,125,902 2,131,554 1,957,950
Selling, general and
administrative......... 5,033,113 5,774,155 5,321,661 2,656,386 2,933,596
Depreciation.............. 448,324 489,816 563,714 325,847 413,445
----------- ----------- ----------- ----------- -----------
Total costs and
expenses........ 56,332,502 58,103,903 59,187,086 29,343,600 29,004,036
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS...... 1,903,329 1,283,403 2,258,288 821,726 375,961
OTHER INCOME (EXPENSE):
Interest expense.......... (2,776) (17,588) (117,076) (51,438) (40,747)
Interest income........... 129,877 191,610 155,189 56,478 120,751
Other, net................ 47,621 (62,770) 21,480 41,760 (9,417)
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST..... 2,078,051 1,394,655 2,317,881 868,526 446,548
INCOME TAXES................ 796,100 624,061 (333,426) (338,006) --
----------- ----------- ----------- ----------- -----------
INCOME BEFORE MINORITY
INTEREST.................. 1,281,951 770,594 2,651,307 1,206,532 446,548
MINORITY INTEREST........... 3,568 (4,838) -- -- --
----------- ----------- ----------- ----------- -----------
NET INCOME.................. $ 1,278,383 $ 775,432 $ 2,651,307 $ 1,206,532 $ 446,548
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-14
<PAGE> 88

G. S. ROBINS & COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
VOTING NONVOTING
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL
----------------- ----------------- ----------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------ -------- ------ -------- ------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994....... 9,490 $ 94,900 18,660 $186,600 -- $ -- $204,148 $ 9,653,877
Cash dividends on preferred
stock........................ -- -- -- -- -- -- -- (66,430)
Cash dividends on common
stock........................ -- -- -- -- -- -- -- (348,532)
Net income..................... -- -- -- -- -- -- -- 1,278,383
------ -------- ------ -------- ----- -------- -------- -----------
BALANCE, December 31, 1995....... 9,490 94,900 18,660 186,600 -- -- 204,148 10,517,298
Cash dividends on preferred
stock........................ -- -- -- -- -- -- -- (49,823)
Cash dividends on common
stock........................ -- -- -- -- -- -- -- (374,438)
Redemption of preferred
stock........................ (9,490) (94,900) -- -- -- -- -- --
Issuance of nonvoting common
stock........................ -- -- -- -- 1,730 17,300 76,640 --
Contribution of minority
interest..................... -- -- -- -- -- -- 104,504 --
Net income..................... -- -- -- -- -- -- -- 775,432
------ -------- ------ -------- ----- -------- -------- -----------
BALANCE, December 31, 1996....... -- -- 18,660 186,600 1,730 17,300 385,292 10,868,469
Cash dividends on common
stock........................ -- -- -- -- -- -- -- (329,080)
Distributions to
stockholders................. -- -- -- -- -- -- -- (1,058,501)
Purchase of treasury stock..... -- -- -- -- -- -- -- --
Net income..................... -- -- -- -- -- -- -- 2,651,307
------ -------- ------ -------- ----- -------- -------- -----------
BALANCE, December 31, 1997....... -- -- 18,660 186,600 1,730 17,300 385,292 12,132,195
Distributions to stockholders
(unaudited).................. -- -- -- -- -- -- -- (885,897)
Net income (unaudited)......... -- -- -- -- -- -- -- 446,548
------ -------- ------ -------- ----- -------- -------- -----------
BALANCE, June 30, 1998
(unaudited).................... -- $ -- 18,660 $186,600 1,730 $ 17,300 $385,292 $11,692,846
====== ======== ====== ======== ===== ======== ======== ===========

TREASURY STOCK TOTAL
-------------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY
------ ----------- -------------
<S> <C> <C> <C>
BALANCE, December 31, 1994....... -- $ -- $10,139,525
Cash dividends on preferred
stock........................ -- -- (66,430)
Cash dividends on common
stock........................ -- -- (348,532)
Net income..................... -- -- 1,278,383
----- ----------- -----------
BALANCE, December 31, 1995....... -- -- 11,002,946
Cash dividends on preferred
stock........................ -- -- (49,823)
Cash dividends on common
stock........................ -- -- (374,438)
Redemption of preferred
stock........................ -- -- (94,900)
Issuance of nonvoting common
stock........................ -- -- 93,940
Contribution of minority
interest..................... -- -- 104,504
Net income..................... -- -- 775,432
----- ----------- -----------
BALANCE, December 31, 1996....... -- -- 11,457,661
Cash dividends on common
stock........................ -- -- (329,080)
Distributions to
stockholders................. -- -- (1,058,501)
Purchase of treasury stock..... 5,352 (1,677,576) (1,677,576)
Net income..................... -- -- 2,651,307
----- ----------- -----------
BALANCE, December 31, 1997....... 5,352 (1,677,576) 11,043,811
Distributions to stockholders
(unaudited).................. -- -- (885,897)
Net income (unaudited)......... -- -- 446,548
----- ----------- -----------
BALANCE, June 30, 1998
(unaudited).................... 5,352 $(1,677,576) $10,604,462
===== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-15
<PAGE> 89

G. S. ROBINS & COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------- ------------------------
1995 1996 1997 1997 1998
---------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $1,278,383 $ 775,432 $ 2,651,307 $ 1,206,532 $ 446,548
---------- ----------- ----------- ----------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation.................................. 448,324 489,816 563,714 325,847 413,445
Amortization.................................. 37,522 37,745 109,514 24,799 33,950
Minority interest in subsidiaries............. 3,568 (4,838) -- -- --
Provision for doubtful accounts............... 1,800 36,210 17,820 21,000 21,000
Deferred taxes................................ (79,559) (269,528) (338,006) -- --
Loss (gain) on disposition of property, plant
and equipment............................... -- -- (10,932) (21,316) (5,189)
Changes in operating assets and liabilities --
Receivables................................. 727,375 (463,231) (316,383) (280,465) 266,623
Inventories................................. (136,147) (731,075) 471,919 (231,465) (79,896)
Prepaid expenses and other assets........... (95,262) 216,067 (165,747) 252,373 (110,586)
Container deposits.......................... (78,550) 5,750 43,693 (26,326) 138,678
Accounts payable, accrued liabilities and
other.................................... (564,434) 141,664 796,361 738,690 667,825
Container deposits refundable to
customers................................ (119,283) 13,288 21,334 78,636 (197,894)
---------- ----------- ----------- ----------- ----------
Total adjustments........................ 145,354 (528,132) 1,193,287 881,773 1,147,956
---------- ----------- ----------- ----------- ----------
Net cash provided by operating
activities............................. 1,423,737 247,300 3,844,594 2,088,305 1,594,504
---------- ----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment............. (698,186) (1,020,557) (611,339) (253,150) (487,850)
Proceeds from sale of property and equipment.... -- -- -- 21,316 11,600
Sales (purchases) of certificates of deposit.... 422,060 250,000 (879,798) (446,699) 412,342
Cash surrender value decrease (increase)........ (149,160) (80,864) 279,620 334,437 --
---------- ----------- ----------- ----------- ----------
Net cash provided by (used in) investing
activities............................. (425,286) (851,421) (1,211,517) (344,096) (63,908)
---------- ----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) of long-term debt....... -- -- (165,886) (13,488) 29,256
Stockholder distributions....................... -- -- (1,058,501) (753,470) (885,897)
Common stock dividends.......................... (348,532) (374,438) (329,080) -- --
Preferred stock dividends....................... (66,430) (49,823) -- -- --
Purchase of treasury stock...................... -- (960) (258,590) (258,590) --
---------- ----------- ----------- ----------- ----------
Net cash used in financing activities.... (414,962) (425,221) (1,812,057) (1,025,548) (856,641)
---------- ----------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 583,489 (1,029,342) 821,020 718,661 673,955
CASH AND CASH EQUIVALENTS, beginning of period.... 885,575 1,469,064 439,722 439,722 1,260,742
---------- ----------- ----------- ----------- ----------
CASH AND CASH EQUIVALENTS, end of period.......... $1,469,064 $ 439,722 $ 1,260,742 $ 1,158,383 $1,934,697
========== =========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest...................................... $ 15,588 $ 776 $ 7,252 $ 5,833 $ 22
Taxes......................................... 910,629 799,828 58,475 58,475 154,567
OTHER SUPPLEMENTAL INFORMATION:
Repurchase of common stock through issuance of
note payable.................................. -- -- 1,418,986 1,418,986 --
Issuance of nonvoting common stock in exchange
for preferred stock........................... -- 93,940 -- -- --
Contribution of minority interest to
Company....................................... -- 104,504 -- -- --
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-16
<PAGE> 90

G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

G. S. Robins & Company and Subsidiaries (the Company), Missouri
corporations, are principally engaged in wholesale distribution of a broad line
or organic and inorganic chemicals. The Company markets and sells its products
to customers in Missouri, Illinois and Kansas.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The accompanying financial statements present G. S. Robins & Company and
its subsidiaries, Ro-Corp, Inc., Robins Solvents Co. and Robins Transportation
Co., Inc. All significant intercompany activity has been eliminated in
consolidation.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of operations and cash flows for the
six months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than those at year-end.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon a
specified percentage of outstanding accounts receivable at period-end and the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are stated at lower of cost or market. Cost is determined using
the weighted average method which approximates the first-in, first-out method.
Substantially all of the inventories consist of finished goods.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, and depreciation is
computed using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are capitalized and amortized over the lesser of
the life of the lease or the estimated useful life of the asset. Property and
equipment are reviewed for impairment whenever events or circumstances provide
evidence that suggests that the carrying amounts of the property and equipment
may not be recoverable.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the consolidated statements of income.

F-17
<PAGE> 91
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Customer Deposits on Drums and Cylinders

Many products are sold in steel or polyethylene drums for which the Company
charges a deposit. These deposits are refundable to the customer upon return of
the drum and are therefore recorded as a liability. Periodically, the Company
assesses (based on aging and experience) the deposit liability account for
deposits not expected to be claimed. For those deposits not expected to be
claimed, the drums are considered sold and the deposit is recognized as income.

The Company routinely purchases new and used drums and cylinders for use in
the ordinary course of business. The costs of the drums are capitalized and are
included in inventory.

Other Assets

Other assets include a noncompete agreement with a former stockholder (see
Note 10). Intangible assets are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amount of the
intangible asset may not be recoverable. The Company assesses the recoverability
of the intangible asset by determining whether the carrying amount of the
intangible asset can be recovered through projected undiscounted future cash
flows over the remaining amortization period. Amortization expense amounted to
$37,522, $37,745 and $109,514 in fiscal years 1995, 1996 and 1997, respectively.

Premiums on cash surrender value life insurance are expensed during the
year. Increases in the cash surrender value of life insurance are recorded as a
decrease in life insurance expense. The cash surrender value of life insurance
is recorded at its fair value.

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The Company has elected S Corporation status effective January 1, 1997, as
defined by the Internal Revenue Service, whereby the Company itself is not
subject to taxation for federal purposes. Under S Corporation status, the
stockholders report their shares of the Company's taxable earnings or losses in
their personal tax returns. Consequently, the accompanying 1997 financial
statements of the Company do not include a provision for current or deferred
income taxes (see Note 8). For fiscal years 1995 and 1996, the Company followed
the asset and liability method of accounting for income taxes. Under this
method, deferred assets and liabilities are recorded for future tax consequences
of temporary differences between the financial reporting and tax bases of assets
and liabilities and are measured using enacted tax rates and laws.

Environmental Expenditures

Environmental expenditures are expensed or capitalized in accordance with
generally accepted accounting principles. Liabilities for these expenditures are
recorded when it is probable that obligations have been incurred and the amounts
can be reasonably estimated.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-18
<PAGE> 92
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which
requires the reporting of comprehensive income and its components to be
displayed with the same prominence as other financial statements. This statement
requires a company to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the statement of financial position. The
Company has adopted this statement, and the differences between traditional
income and comprehensive income were insignificant.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending December 31, 1998. Management is
presently evaluating what, if any, additional disclosures may be required when
this statement is implemented.

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED -------------------------
USEFUL LIVES 1996 1997
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Land........................................... -- $ 246,739 $ 246,739
Buildings and improvements..................... 5-39 1,980,215 2,134,236
Furniture and fixtures......................... 3-10 452,848 603,874
Machinery and equipment........................ 3-10 3,205,331 3,495,725
Automobiles and trucks......................... 3-7 1,204,247 1,165,984
Totes.......................................... 5 302,497 371,737
----------- -----------
7,391,877 8,018,295
Less -- Accumulated depreciation............... (4,283,806) (4,847,386)
----------- -----------
Total................................ $ 3,108,071 $ 3,170,909
=========== ===========
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts receivable
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Balance, beginning of year.................................. $ 69,000 $ 67,617
Provision for doubtful accounts............................. 36,210 17,820
Amounts written off......................................... (37,593) (17,575)
-------- --------
Balance, end of year........................................ $ 67,617 $ 67,862
======== ========
</TABLE>

F-19
<PAGE> 93
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Cash surrender value life insurance......................... $405,050 $125,430
Investment in Affiliated Chemical Insurance, Ltd............ 110,755 110,755
Noncompete agreement........................................ -- 250,851
Other assets................................................ 108,643 75,696
-------- --------
$624,448 $562,732
======== ========
</TABLE>

Other long-term liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- --------
<S> <C> <C>
Deferred compensation....................................... $33,197 $107,423
Noncompete agreement (see Note 10).......................... -- 221,594
Other....................................................... 12,891 95,000
------- --------
$46,088 $424,017
======= ========
</TABLE>

5. LINE OF CREDIT:

The Company maintains a line of credit of $2,500,000, available at the
prime rate with no specified maturity date. The line is unsecured and, at
December 31, 1996 and 1997, there were no outstanding borrowings under the line.

6. LONG-TERM DEBT:

The Company has a note payable to a former stockholder. The note bears
interest at 6.5 percent and is payable in annual installments of principal and
interest of $258,120 through December 2003. The note also contains covenants
restricting the amounts of distributions to stockholders and requiring
acceleration of scheduled note payments in the event of a change in control of
the Company's stock.

Interest expense for the year ended December 31, 1997, was $88,696.

The scheduled maturities of long-term debt as of December 31, 1997, are as
follows:

<TABLE>
<S> <C>
1998..................................................... $ 176,668
1999..................................................... 188,152
2000..................................................... 200,382
2001..................................................... 213,407
2002..................................................... 227,278
Thereafter............................................... 247,213
----------
$1,253,100
==========
</TABLE>

7. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash and Cash Equivalents, Certificates of Deposit, Accounts Receivable and
Accounts Payable

The carrying amount approximates market value due to the highly liquid
nature of these short-term investments.

F-20
<PAGE> 94
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-Term Debt

The estimated market value of the Company's long-term debt is based on
quoted market prices or, where such prices are not available, on estimated
year-end interest rates of debt with the same remaining average maturities and
credit quality. The carrying amount approximates market value at December 31,
1996 and 1997.

8. INCOME TAXES:

Effective January 1, 1997, the Company elected S Corporation status. The
Company will no longer be directly responsible for any deferred tax liability
which might exist. The removal of the deferred tax liability which existed as of
December 31, 1996, is recognized in the 1997 consolidated statement of income
(see Note 2).

Income tax expense (benefit) is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Current --
Federal.......................................... $738,574 $ 753,697 $ 4,580
State............................................ 137,085 139,892 --
Deferred --
Federal.......................................... (67,104) (227,333) (285,091)
State............................................ (12,455) (42,195) (52,915)
-------- --------- ---------
$796,100 $ 624,061 $(333,426)
======== ========= =========
</TABLE>

Actual income tax expense differs from income tax expense computed by
applying the United States federal statutory rate to income before provision for
income taxes as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Statutory federal income tax........................ $727,318 $488,129 $ --
State income tax, less federal benefit.............. 81,010 63,503 (52,915)
Reversal of deferred taxes upon S Corporation
election.......................................... -- -- (285,091)
Other............................................... (12,228) 72,429 4,580
-------- -------- ---------
$796,100 $624,061 $(333,426)
======== ======== =========
</TABLE>

Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized in the recognition of income and
expenses for financial reporting purposes and such

F-21
<PAGE> 95
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amounts recognized for tax purposes. The tax effects of the temporary
differences that give rise to the significant portions of the deferred tax
assets and liabilities are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Deferred income tax assets --
Allowance for bad debt.................................... $ 27,212
Basis difference in inventories........................... 47,848
Accrued liabilities and expenses.......................... 32,991
---------
Total deferred income tax assets.................. 108,051
---------
Deferred income tax liabilities --
Basis difference in property and equipment................ (446,057)
Other, net................................................ (95,000)
---------
Total deferred income tax liabilities............. (541,057)
---------
Net deferred income tax liabilities............... $(433,006)
=========
</TABLE>

9. EMPLOYEE BENEFIT PLANS:

The Company maintains two retirement plans covering substantially all of
its employees.

Under a defined contribution plan covering union employees, the Company is
required to contribute defined amounts estimated to be sufficient to provide for
benefits under this plan. Company contributions to this plan were $41,407,
$46,313 and $55,844 for the years ended December 31, 1995, 1996 and 1997,
respectively.

The Company maintains a retirement savings plan under Section 401(k) of the
Internal Revenue Code, whereby employee contributions are made based upon a
percentage of compensation and employer matching contributions may be made at
the discretion of the Board of Directors. For participants hired before
September 1, 1995, both employee and employer contributions are 100 percent
vested upon contribution. For participants hired on or after September 1, 1995,
benefits are vested over a six-year period for employer contributions. Employer
contributions to this plan were $204,789, $211,702 and $226,455 for the years
ended December 31, 1995, 1996 and 1997, respectively.

In December 1996, the Company implemented a book value bonus plan, commonly
referred to as a "phantom stock" plan, for certain employees and owners. The
Company accrued $33,310 and $73,659 in 1996 and 1997, respectively, under the
plan. The accrued amounts are included in other long-term liabilities.

Pursuant to the terms of the above plan, should there be a change in
ownership of the Company or if the Company is sold, all "phantom stock" will
immediately vest and the holder shall receive stock at the value the purchaser
pays for actual shares. There were 53.7 shares and 111.7 shares of "phantom
stock" outstanding during 1996 and 1997, respectively.

10. RELATED-PARTY TRANSACTIONS:

In December 1996, certain stockholders of the Company, who were also
minority stockholders in the Company's consolidated subsidiaries, contributed
their equity interests in the subsidiaries to the Company. This noncash
transaction eliminated all minority interests in the Company's subsidiaries and
was accounted for as a $104,504 reduction in minority interest and an equivalent
increase in additional paid-in capital.

In December 1996, the Company issued 1,730 shares of nonvoting common stock
in exchange for all 9,490 outstanding shares of the Company's preferred stock.

F-22
<PAGE> 96
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1996, the Company's stockholders entered into a new
stockholders agreement. The new stockholders agreement places certain
restrictions on all stockholders' ability to sell shares of the Company's stock.

In 1996, the Company reached an agreement with an officer and minority
stockholder wherein he would resign as an officer and sell his stock to the
Company. As a result, in January 1997, the Company repurchased 5,352 shares of
common stock owned by the former officer. The Company paid $258,590 and issued a
note payable of $1,418,986 in exchange for the common stock. The Company holds
this stock as treasury stock.

In connection with this transaction, the Company incurred expenses of
$415,645 in 1996, including a severance payment to the former officer. During
1997, costs incurred relative to this transaction was $202,477. These expenses
are included in general and administrative expenses for 1996 and 1997.

In January 1997, the Company entered into a noncompete agreement with the
former officer. The noncompete agreement restricts the former officer from
engaging in competitive activities in the market areas the Company currently
serves. The Company will pay the former officer or his estate $44,700 annually
over the remaining 4-year term of the noncompete agreement. The Company accrued
a noncompete asset and a noncompete liability of $278,271 and will amortize the
noncompete asset over the term of the agreement. Additionally, in January 1997,
the Company also entered into a consulting agreement with the former officer.
The Company will pay the former officer $45,600 annually for consulting services
for a period of five years under the terms of the consulting agreement. Pursuant
to the Collateral Pledge Agreement surrounding the noncompete and consulting
agreements, payments due to the former officer shall be accelerated in the event
of a change in control of the Company's stock.

11. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company has received a CERCLA 104(e) request from the Environmental
Protection Agency for information regarding a Superfund site in St. Louis,
Missouri. The Company believes that it only purchased drums from this site and
therefore denies any liability. The Company's current belief that its
contribution, if any, to the site is or will be viewed by the Environmental
Protection Agency as being de minimis.

Litigation

The Company has various claims and lawsuits from time to time in connection
with its operations. In the opinion of management, uninsured losses on claims
and lawsuits, if any, would not be material to the Company's financial position,
results of operations or cash flows.

Leases

Rents of $557,022, $580,460 and $461,686 were paid to nonrelated parties
for the lease of equipment and warehouse space for the years ended December 31,
1995, 1996 and 1997, respectively.

F-23
<PAGE> 97
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has operating leases for certain facilities, trucks and
automobiles which expire at various dates through 2004. Total noncancelable
lease commitments at December 31, 1997, are as follows:

<TABLE>
<S> <C>
1998...................................................... $289,674
1999...................................................... 140,277
2000...................................................... 58,918
2001...................................................... 17,100
2002...................................................... 17,100
Thereafter................................................ 22,800
--------
$545,869
========
</TABLE>

In addition to minimum lease payments, the Company is charged a variable
rental based on lease truck mileage. Total minimum rental and variable rental
expenses related to truck operating leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Minimum rental expenses.............................. $247,000 $241,020 $134,190
Variable rental expenses............................. 78,000 73,387 44,548
-------- -------- --------
$325,000 $314,407 $178,738
======== ======== ========
</TABLE>

Union Contracts

The Company has certain employees in St. Louis, Missouri, that have union
representation for the period from July 1, 1997, to July 1, 2002. The union
contract covers compensation and benefits.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales ranging from 10 percent to 15 percent of total sales
to one customer during the years ended December 31, 1995, 1996 and 1997,
respectively. The Company believes that the loss of any single customer would
not have a material adverse effect on the results of operations of the Company.

The Company had purchases greater than 10 percent of total purchases from
one vendor during the years ended December 31, 1995, 1996 and 1997.

The Company had cash and cash equivalents in financial institutions which
exceeded the federally insured limits by $339,722 and $1,160,742 at December 31,
1996 and 1997, respectively.

In addition, the Company grants credit, generally without collateral, to
its customers located primarily in Missouri, Illinois and Kansas. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within the midwestern United States. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

13. STOCKHOLDERS' EQUITY:

The Company has two classes of common stock: voting common stock and
nonvoting common stock. All voting power is vested with the voting common stock.
The voting common stock and the nonvoting common stock have equal standing with
respect to distributions and liquidation preference.

There are 50,000 shares of voting common stock, $10 par value, authorized,
18,660 shares issued and 13,308 shares outstanding. There are 1,730 shares of
nonvoting common stock, $10 par value, authorized, issued and outstanding.

F-24
<PAGE> 98
G. S. ROBINS & COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. SUBSEQUENT EVENTS (UNAUDITED):

In April 1998, the Company entered a five-year operating lease for a
storage facility in Sauget, Illinois. Rent charges will approximate $10,850 per
month.

In July 1998, the Company and its stockholders entered into a definitive
agreement with Chemical Logistics Corporation (Chemical) pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock, concurrent with the consummation of an initial
public offering (the Offering) of common stock of Chemical.

F-25
<PAGE> 99

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Industrial Chemicals, Inc.:

We have audited the accompanying balance sheets of Industrial Chemicals,
Inc. (the Company), as of February 28, 1997 and 1998, and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended February 28, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Industrial Chemicals, Inc.,
as of February 28, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended February 28, 1998, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 1, 1998

F-26
<PAGE> 100

INDUSTRIAL CHEMICALS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------- JUNE 30,
1997 1998 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 35,802 $ 14,267 $ 20,941
Accounts receivable, less allowance for doubtful
accounts of $75,836, $60,360 and $125,808,
respectively..................................... 5,285,923 6,400,405 5,535,573
Inventories......................................... 2,852,763 3,141,603 2,642,621
Notes receivable, affiliates........................ 445,151 105,501 105,168
Other current assets................................ 222,894 210,974 135,782
----------- ----------- -----------
Total current assets........................ 8,842,533 9,872,750 8,440,085
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost................ 5,229,069 6,037,889 7,145,323
Less -- Accumulated depreciation.................... (2,650,028) (3,561,255) (3,698,336)
----------- ----------- -----------
2,579,041 2,476,634 3,446,987
----------- ----------- -----------
OTHER ASSETS, net..................................... 112,130 232,820 296,004
----------- ----------- -----------
Total assets................................ $11,533,704 $12,582,204 $12,183,076
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................... $ 5,037,541 $ 5,008,743 $ 3,131,353
Accrued liabilities................................. 139,681 300,772 720,783
Container deposits refundable to customers.......... 149,143 154,596 173,541
Current maturities of notes payable, stockholders
and affiliates................................... 1,997,049 1,959,518 1,843,597
Current maturities of long-term debt................ 1,450,845 1,782,451 1,745,108
Other current liabilities........................... 22,931 33,074 --
----------- ----------- -----------
Total current liabilities................... 8,797,190 9,239,154 7,614,382
CONTAINER DEPOSITS REFUNDABLE TO CUSTOMERS............ 1,547,591 1,462,520 1,643,638
NOTES PAYABLE, stockholders and affiliates, net of
current maturities.................................. 233,641 811,309 802,008
LONG-TERM DEBT, net of current maturities............. -- 2,627 2,627
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par, 10,000 shares authorized,
4,148, 4,148 and 4,608 shares issued and
outstanding, respectively........................ 4,148 4,148 4,608
Additional paid-in capital.......................... 26,852 26,852 1,246,084
Retained earnings................................... 924,282 1,035,594 869,729
----------- ----------- -----------
Total stockholders' equity.................. 955,282 1,066,594 2,120,421
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $11,533,704 $12,582,204 $12,183,076
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-27
<PAGE> 101

INDUSTRIAL CHEMICALS, INC.

STATEMENTS OF INCOME

The accompanying notes are an integral part of these financial statements.

F-28
<PAGE> 102

INDUSTRIAL CHEMICALS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, February 28, 1995.................. 4,148 $4,148 $ 26,852 $ 581,963 $ 612,963
Distributions to stockholders............. -- -- -- (468,721) (468,721)
Net income................................ -- -- -- 720,003 720,003
----- ------ ---------- ---------- ----------
BALANCE, February 29, 1996.................. 4,148 4,148 26,852 833,245 864,245
Distributions to stockholders............. -- -- -- (414,800) (414,800)
Net income................................ -- -- -- 505,837 505,837
----- ------ ---------- ---------- ----------
BALANCE, February 28, 1997.................. 4,148 4,148 26,852 924,282 955,282
Distributions to stockholders............. -- -- -- (970,634) (970,634)
Net income................................ -- -- -- 1,081,946 1,081,946
----- ------ ---------- ---------- ----------
BALANCE, February 28, 1998.................. 4,148 4,148 26,852 1,035,594 1,066,594
Distributions to stockholders
(unaudited)............................ -- -- -- (208,940) (208,940)
Issuance of common stock (unaudited)...... 460 460 -- -- 460
Contributions from stockholders
(unaudited)............................ -- -- 1,219,232 -- 1,219,232
Net income (unaudited).................... -- -- -- 43,075 43,075
----- ------ ---------- ---------- ----------
BALANCE, June 30, 1998 (Unaudited).......... 4,608 $4,608 $1,246,084 $ 869,729 $2,120,421
===== ====== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-29
<PAGE> 103

INDUSTRIAL CHEMICALS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------- FOUR MONTHS
FEBRUARY 28, ENDED JUNE 30,
FEBRUARY 29, ------------------------- ----------------------
1996 1997 1998 1997 1998
------------ ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 720,003 $ 505,837 $ 1,081,946 $ 160,317 $ 43,075
----------- ----------- ----------- --------- ----------
Adjustments to reconcile net income to
net cash provided by operating
activities --
Depreciation........................ 801,026 902,418 828,240 242,800 194,731
Increase in LIFO reserve............ 189,391 291,407 328,975 -- --
Loss (gain) on disposition of
property, plant and equipment..... (16,110) (8,007) 27,162 -- --
Changes in operating assets and
liabilities --
Receivables....................... (115,850) (420,419) (774,832) (460,574) 913,304
Inventories....................... (489,501) (591,406) (617,815) 834,346 498,982
Prepaid expenses and other........ (1,448) 16,228 11,920 130,121 75,525
Other assets...................... (51,433) (13,360) (120,690) (120,690) (63,184)
Accounts payable, accrued
liabilities and other.......... 1,115,844 (626,327) 49,156 (256,278) (1,290,390)
----------- ----------- ----------- --------- ----------
Total adjustments.............. 1,431,919 (449,466) (267,884) 369,725 328,968
----------- ----------- ----------- --------- ----------
Net cash provided by operating
activities................... 2,151,922 56,371 814,062 530,042 372,043
----------- ----------- ----------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (1,464,840) (1,064,476) (829,309) (162,992) (100,264)
Proceeds from disposition of property,
plant and equipment................. 52,400 18,950 89,976 11,087 38,393
----------- ----------- ----------- --------- ----------
Net cash used in investing
activities................... (1,412,440) (1,045,526) (739,333) (151,905) (61,871)
----------- ----------- ----------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt.......... 3,012,535 2,923,367 2,146,234 131,906 98,614
Repayments of long-term debt.......... (3,236,016) (1,566,177) (1,271,864) (287,929) (261,179)
Distributions to stockholders......... (468,721) (414,800) (970,634) (248,880) (140,933)
----------- ----------- ----------- --------- ----------
Net cash provided by (used in)
financing activities......... (692,202) 942,390 (96,264) (404,903) (303,498)
----------- ----------- ----------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 47,280 (46,765) (21,535) (26,766) 6,674
CASH AND CASH EQUIVALENTS, beginning of
period................................ 35,287 82,567 35,802 35,802 14,267
----------- ----------- ----------- --------- ----------
CASH AND CASH EQUIVALENTS, end of
period................................ $ 82,567 $ 35,802 $ 14,267 $ 9,036 $ 20,941
=========== =========== =========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest................ $ 222,832 $ 259,723 $ 317,043 $ 75,660 $ 98,853
OTHER SUPPLEMENTAL INFORMATION:
Issuance of common stock in exchange
for property and equipment.......... $ -- $ -- $ -- $ -- $1,219,692
Distribution of property to
stockholders........................ $ -- $ -- $ -- $ -- $ 68,007
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-30
<PAGE> 104

INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Industrial Chemicals, Inc. (the Company), an Alabama corporation, is a
distributor of mainly inorganic chemicals. The majority of its customers are in
the southeastern United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of operations and cash flows for the
four months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than those at year-end.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid debt instruments with
an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost (last-in, first-out) or market.
Substantially all of the goods consist of finished products.

Property, Plant and Equipment

Plant and equipment are stated at cost, and depreciation is computed using
the straight-line method for financial reporting purposes and accelerated
methods for federal income tax purposes. Leasehold improvements are capitalized
and amortized over the lesser of the life of the lease or the estimated useful
life of the asset. Property, plant and equipment are reviewed for impairment
whenever events or circumstances provide evidence that suggests that the
carrying amounts of the property, plant and equipment may not be recoverable.

Customer Deposits on Drums and Cylinders

The Company routinely purchases new and used drums and cylinders for use in
the ordinary course of business. The costs of the drums and cylinders are
capitalized and are included in property and equipment.

F-31
<PAGE> 105
INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Other Assets

Other assets consist primarily of prepaid federal income taxes. These
assets represent deposits made for federal income taxes under Internal Revenue
Code Section 444 for S Corporations that retain a year-end different from that
of their stockholders.

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

On December 19, 1986, the Company, with the consent of its stockholders,
elected to have its income taxed under the provisions of Subchapter S of the
Internal Revenue Code, which provided that, in lieu of corporate income taxes,
the stockholders are taxed on the Company's taxable income. The Company
regularly declares dividends in amounts at least equal to the stockholders' tax
liabilities resulting from the S Corporation election. This election became
effective for the tax year beginning March 1, 1987.

Environmental Expenditures

Use of Estimates

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending February 28, 1999. Management is
presently evaluating what, if any, additional disclosures may be required when
this statement is implemented.

F-32
<PAGE> 106
INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORIES:

The following sets forth the balances of selected accounts assuming that
the first-in, first-out (FIFO) method had been used for costing all inventories
in fiscal years 1996, 1997 and 1998:

<TABLE>
<CAPTION>
FEBRUARY 28,
FEBRUARY 29, -----------------------
1996 1997 1998
------------ ---------- ----------
<S> <C> <C> <C>
Inventories...................................... $4,020,299 $4,028,891 $3,988,756
Working capital.................................. 1,856,407 1,370,614 1,635,335
Net income....................................... 416,612 94,092 1,155,309
Retained earnings................................ 361,854 230,537 706,619
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT:

Property and equipment consists of the following:

<TABLE>
<CAPTION>
FEBRUARY 28,
ESTIMATED -------------------------
USEFUL LIVES 1997 1998
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Buildings and improvements..................... 5-32 $ 2,259,032 $ 2,479,029
Furniture and fixtures......................... 5-10 667,669 705,728
Machinery and equipment........................ 3-10 907,240 1,066,382
Containers..................................... 5 725,093 1,017,697
Automobiles and trucks......................... 3-5 670,035 769,053
----------- -----------
5,229,069 6,037,889
Less -- Accumulated depreciation............... (2,650,028) (3,561,255)
----------- -----------
Total........................................ $ 2,579,041 $ 2,476,634
=========== ===========
</TABLE>

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts receivable
consists of the following:

<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Balance, beginning of year.................................. $ 95,706 $ 75,836
Provision for doubtful accounts............................. 7,178 14,962
Amounts written off......................................... (27,048) (30,438)
-------- --------
Balance, end of year........................................ $ 75,836 $ 60,360
======== ========
</TABLE>

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Accrued compensation and benefits........................... $113,313 $264,005
Other accrued expenses...................................... 26,368 36,767
-------- --------
$139,681 $300,772
======== ========
</TABLE>

6. LONG-TERM DEBT:

The Company has a revolving line of credit with a bank totaling $1,750,000
of available credit expiring in December 1998. The line of credit bears interest
at 8.25 percent. The line of credit is secured by the

F-33
<PAGE> 107
INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company's accounts receivable, inventory and equipment. The line-of-credit
agreement requires, among other things, that the Company maintain a minimum
current ratio, a specified working capital level, certain debt-to-equity ratios
and minimum amounts of net worth during the term of the agreement. At February
28, 1997 and 1998, borrowings outstanding under the line of credit were
$1,300,000 and $1,650,000, respectively.

Long-term debt includes the following:

<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Regions Bank, 8.5%, unsecured............................. $ 137,770 $ 122,002
South Trust Bank of Alabama, 8.25%, secured by certain of
the Company's accounts receivable, inventory and
equipment............................................... 1,300,000 1,650,000
Other, 7%-10%, unsecured.................................. 13,075 13,076
----------- -----------
1,450,845 1,785,078
Less -- Current maturities................................ (1,450,845) (1,782,451)
----------- -----------
Long-term debt............................................ $ -- $ 2,627
=========== ===========
Notes payable, stockholders and affiliates includes the
following -- Notes payable, 8%-10%, unsecured........... $ 2,230,690 $ 2,770,827
Less -- Current maturities........................... (1,997,049) (1,959,518)
----------- -----------
Long-term notes payable, stockholders and affiliates...... $ 233,641 $ 811,309
=========== ===========
</TABLE>

Long-term debt maturities as of February 28, 1998, are as follows:

7. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Trade Receivables and Accounts Payable

The carrying amount approximates market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt

8. EMPLOYEE BENEFIT PLANS:

The Company has a profit-sharing plan which covers all full-time employees
with more than one year of service with the Company. The amount of employer
contributions made is at the discretion of the Board of Directors and is
determined annually. The amounts contributed to the profit-sharing plan for the
years ended February 29, 1996, and February 28, 1997 and 1998, were $96,264, $--
and $117,030, respectively.

The Company has a discretionary bonus plan covering certain employees under
which $249,700, $598,843 and $1,192,932 were charged to expense in fiscal years
1995, 1996 and 1997, respectively.

F-34
<PAGE> 108
INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. RELATED-PARTY TRANSACTIONS:

The Company is leasing an office building and warehouse facility from an
affiliated S Corporation under an operating lease that is renewed on a
month-to-month basis. The consideration for this lease was $120,000 for each of
the years ended February 29, 1996, and February 28, 1997 and 1998, respectively.

The Company is leasing several warehouse facilities, office buildings,
equipment and its corporate headquarters building from an affiliated limited
partnership under operating leases that are renewed on a month-to-month basis.
The consideration for these leases was $581,920, $573,155 and $564,700, for the
years ended February 29, 1996, and February 28, 1997 and 1998, respectively.

The Company has unsecured outstanding notes payable to stockholders and
affiliates at February 28, 1997 and 1998, in the amounts of $2,230,690 and
$2,770,827, respectively. The notes bore interest at 10 percent and 8 percent at
February 28, 1997 and 1998, respectively.

10. COMMON STOCK:

In April 1998, certain stockholders of the Company contributed certain
fixed assets with historical value of $1.2 million to the Company in exchange
for 460 shares of the Company's common stock, par value $1.00 per share. The
fixed assets consist of real estate and other equipment that are leased to the
Company and used in its industrial chemicals distribution business.

11. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statutes. In
response to liabilities associated with these activities, accruals are
established when it is probable that obligations have been incurred and
reasonable estimates are possible. Such accruals primarily include estimated
costs associated with remediation. The Company does not use discounting in
determining its accrued liabilities for environmental remediation, and no claims
for possible recovery from third-party insurers or other parties related to
environmental costs have been recognized in the Company's financial statements.
The Company has received a potentially responsible party (PRP) notice from the
Environmental Protection Agency (EPA) with respect to the THAN superfund site
near Montgomery, Alabama. The EPA is presently enforcing the cleanup against the
two primarily liable PRPs. The Company previously leased a part of this site
from one of the primarily liable PRPs who has indemnified the Company from this
liability. This PRP, however, has advised the Company that it intends to pursue
the Company for any contribution the Company may have made to the contamination
at the site. Based upon its investigation of the site and the fact that the EPA
is not enforcing cleanup obligations against the Company, the Company believes
that its contribution, if any, to the site will not be material.

Litigation

The Company has various claims and lawsuits outstanding in connection with
its operations. In the opinion of management, uninsured losses on these claims
and lawsuits, if any, would not be material to the Company's financial position,
results of operations or cash flows.

Leases

The Company leases a warehouse facility under a noncancelable operating
lease expiring December 16, 1998. Rent expense during fiscal years 1996, 1997
and 1998 was $--, $13,760 and $41,496, respectively. Additionally, rents of
$91,500 and $45,705 were paid to nonrelated parties for the lease of equipment
for the years ended February 29, 1996, and February 28, 1997, respectively.
F-35
<PAGE> 109
INDUSTRIAL CHEMICALS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had no sales or purchases greater than 10 percent of total
sales or total purchases to or from any one customer or vendor, respectively,
during the years ended February 29, 1996, and February 28, 1997 and 1998.

In addition, the Company grants credit, generally without collateral, to
its customers located primarily in the southeastern United States. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within the southeastern United States. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

13. SUBSEQUENT EVENTS (UNAUDITED):

The Company recently received and resolved a notice of violation of RCRA
hazardous waste requirements related to its Birmingham, Alabama facility through
an agreement to pay a civil penalty of $200,000 and execution of a consent order
that requires a limited investigation of the affected disposal areas. However,
there is a possibility that a continuing governmental inquiry into past waste
disposal practices at this facility could lead to additional enforcement action.
As of June 30, 1998, the Company had accrued $330,000, which management of the
Company believes is adequate to cover the civil penalty and costs of the
investigation.

In July 1998, the Company made distributions to shareholders of $921,600.

F-36
<PAGE> 110

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Houston Solvents and Chemicals Co., Inc.:

We have audited the accompanying combined balance sheets of Houston
Solvents and Chemicals Co., Inc., dba Southwest Solvents and Chemicals, and
related companies (collectively, the Company) as of December 31, 1996 and 1997,
and the related combined statements of income, stockholder's equity and cash
flows for each of the three years in the period ended December 31, 1997. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Houston
Solvents and Chemicals Co., Inc., dba Southwest Solvents and Chemicals, as of
December 31, 1996 and 1997, and the combined results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 15, 1998, (except with respect
to the matter discussed in
the second paragraph of Note 5 as to
which the date is July 1, 1998.)

F-37
<PAGE> 111

HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

COMBINED BALANCE SHEETS

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $ 5,690,683 $ 6,272,496 $ 4,832,317
Accrued liabilities................................. 635,665 702,149 517,657
Income taxes payable................................ 40,637 71,138 71,138
Container deposits refundable to customers.......... 189,950 278,554 313,135
Notes payable -- stockholder........................ 622,270 830,606 240,330
Line of credit...................................... -- -- 2,522,000
Current maturities of long-term debt................ 348,000 397,992 397,992
Other current liabilities........................... 55,709 -- --
----------- ----------- -----------
Total current liabilities................... 7,582,914 8,552,935 8,894,569
LONG-TERM DEBT, net of current maturities............. 2,217,571 1,846,460 1,647,878
OTHER LONG-TERM LIABILITIES........................... 125,269 105,707 104,917
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock........................................ 22,000 22,000 22,000
Additional paid-in capital.......................... 145,633 145,633 145,633
Retained earnings................................... 4,875,359 5,080,643 5,605,730
----------- ----------- -----------
Total stockholder's equity.................. 5,042,992 5,248,276 5,773,363
----------- ----------- -----------
Total liabilities and stockholder's
equity.................................... $14,968,746 $15,753,378 $16,420,727
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-38
<PAGE> 112

HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES, net.................. $50,620,579 $46,642,321 $47,219,392 $23,372,105 $23,436,901
COSTS AND EXPENSES:
Cost of sales............. 42,083,971 38,137,878 38,790,545 19,126,914 19,088,221
Operating and delivery.... 2,437,111 2,677,241 2,433,127 1,324,052 1,436,733
Selling, general and
administrative......... 4,860,829 4,291,551 4,340,485 1,645,968 1,747,972
Depreciation.............. 823,318 852,032 772,494 419,897 390,547
----------- ----------- ----------- ----------- -----------
Total costs and
expenses........ 50,205,229 45,958,702 46,336,651 22,516,831 22,663,473
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS...... 415,350 683,619 882,741 855,274 773,428
OTHER INCOME (EXPENSE):
Interest expense.......... (344,249) (426,416) (363,870) (190,537) (182,207)
Interest income........... 44,964 4,438 15,663 3,266 2,697
Other, net................ 114,801 48,205 26,950 35,448 54,900
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES..................... 230,866 309,846 561,484 703,451 648,818
INCOME TAXES................ 12,343 15,659 26,694 30,105 24,731
----------- ----------- ----------- ----------- -----------
NET INCOME.................. $ 218,523 $ 294,187 $ 534,790 $ 673,346 $ 624,087
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-39
<PAGE> 113

HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994............... 2,200 $22,000 $145,633 $4,606,031 $4,773,664
Distributions to stockholder........... -- -- -- (12,596) (12,596)
Net income............................. -- -- -- 218,523 218,523
----- ------- -------- ---------- ----------
BALANCE, December 31, 1995............... 2,200 22,000 145,633 4,811,958 4,979,591
Distributions to stockholder........... -- -- -- (230,786) (230,786)
Net income............................. -- -- -- 294,187 294,187
----- ------- -------- ---------- ----------
BALANCE, December 31, 1996............... 2,200 22,000 145,633 4,875,359 5,042,992
Distributions to stockholder........... -- -- -- (329,506) (329,506)
Net income............................. -- -- -- 534,790 534,790
----- ------- -------- ---------- ----------
BALANCE, December 31, 1997............... 2,200 22,000 145,633 5,080,643 5,248,276
Distributions to stockholder
(unaudited)......................... -- -- -- (99,000) (99,000)
Net income (unaudited)................. -- -- -- 624,087 624,087
----- ------- -------- ---------- ----------
BALANCE, June 30, 1998 (unaudited)....... 2,200 $22,000 $145,633 $5,605,730 $5,773,363
===== ======= ======== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-40
<PAGE> 114

HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ -------------------------
1995 1996 1997 1997 1998
----------- ---------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 218,523 $ 294,187 $ 534,790 $ 673,346 $ 624,087
----------- ---------- --------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation......................................... 823,318 852,032 772,494 419,897 390,547
Gain on disposition of property, plant and
equipment.......................................... (3,008) (267) (36,066) (25,402) (29,225)
Changes in operating assets and liabilities --
Accounts receivable................................ 202,467 454,863 (932,915) (1,573,227) (560,850)
Inventories........................................ 142,381 371,076 (687,180) (1,256,179) (258,685)
Other current assets............................... (21,638) 15,480 44,208 (69,383) (98,411)
Other assets, net.................................. 11,242 (31,097) (21,564) (7,052) (51,166)
Accounts payable, accrued liabilities and other.... (240,383) (632,149) 767,402 501,008 (1,590,881)
----------- ---------- --------- ----------- -----------
Total adjustments................................ 914,379 1,029,938 (93,621) (2,010,338) (2,198,671)
----------- ---------- --------- ----------- -----------
Net cash provided by (used in) operating
activities..................................... 1,132,902 1,324,125 441,169 (1,336,992) (1,574,584)
----------- ---------- --------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (1,917,924) (700,632) (185,588) (93,332) (98,150)
Proceeds from disposition of property, plant and
equipment............................................ 31,450 17,900 47,700 28,000 59,500
----------- ---------- --------- ----------- -----------
Net cash used in investing activities............ (1,886,474) (682,732) (137,888) (65,332) (38,650)
----------- ---------- --------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) advances on long-term debt............ 950,436 (339,244) (168,492) 1,782,134 1,733,141
Distributions to stockholder........................... (12,596) (230,786) (329,506) -- (99,000)
----------- ---------- --------- ----------- -----------
Net cash provided by (used in) financing
activities..................................... 937,840 (570,030) (497,998) 1,782,134 1,634,141
----------- ---------- --------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 184,268 71,363 (194,717) 379,810 20,907
CASH AND CASH EQUIVALENTS, beginning of period........... 200,244 384,512 455,875 455,875 261,158
----------- ---------- --------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period................. $ 384,512 $ 455,875 $ 261,158 $ 835,685 $ 282,065
=========== ========== ========= =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest............................................. $ 306,746 $ 401,090 $ 366,390 $ 190,537 $ 182,207
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-41
<PAGE> 115

HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Houston Solvents and Chemicals Co., Inc., dba Southwest Solvents and
Chemicals (a Texas corporation), and its related companies (collectively, the
Company) is a distributor of a broad line of organic and inorganic chemicals.
The primary operations supply the Houston and Dallas marketplaces and are
supplemented with activities in Austin, Beaumont and Corpus Christi, Texas, and
Los Angeles, California.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Combination

The combined financial statements include the accounts of Houston Solvents
and Chemicals Co., Inc., dba Southwest Solvents and Chemicals, and SS&C
Properties, Inc., and Dallas Solvents & Chemicals Co., Inc., two affiliates
through common ownership. All significant intercompany balances and transactions
have been eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of their operations and cash flows for
the six months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than those at year-end.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash equivalents include all liquid debt instruments purchased with an
original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon a
percentage of sales and writes off accounts against the allowance based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined
using the weighted average method which approximates the first-in, first-out
method.

Property, Plant and Equipment

F-42
<PAGE> 116
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Customer Deposits on Drums

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The Company has elected S Corporation status for tax purposes. In
accordance with the S Corporation provisions of the Internal Revenue Code, the
Company's earnings are taxed directly to the stockholder. The provision for
income taxes is composed entirely of state income taxes.

Use of Estimates

Environmental Expenditures

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
which requires the reporting of comprehensive income and its components to be
displayed with the same prominence as other financial statements. This statement
requires a company to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. The Company has adopted this
statement, and the differences between traditional income and comprehensive
income were insignificant.

F-43
<PAGE> 117
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES -------------------------
(IN YEARS) 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Land........................................... -- $ 820,100 $ 820,100
Buildings and improvements..................... 15-20 6,105,326 6,368,390
Plant equipment................................ 5-12 5,122,025 5,255,505
Automobiles and trucks......................... 3-8 1,985,483 1,932,329
Furniture and fixtures......................... 5-7 521,126 537,095
Construction in progress....................... -- 378,488 --
----------- -----------
14,932,548 14,913,419
Less -- Accumulated depreciation............... (8,681,535) (9,262,713)
----------- -----------
Total................................ $ 6,251,013 $ 5,650,706
=========== ===========
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts receivable
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Balance, beginning of year.................................. $408,133 $462,239
Provision for doubtful accounts............................. 71,642 51,014
Amounts written off......................................... (17,536) (15,124)
-------- --------
Balance, end of year........................................ $462,239 $498,129
======== ========
</TABLE>

5. LONG-TERM DEBT:

The Company has a $3,000,000 revolving line of credit (the Revolver), a
$3,100,000 term loan (the Term Loan) and a $500,000 equipment line with a bank.
Under the agreements, substantially all accounts receivable and inventories are
pledged as collateral. Borrowings under the equipment line are evidenced by
individual notes payable. The Revolver bears interest at the bank's prime rate
less .5 percent or, at the option of the Company, at the current LIBOR 30-day or
60-day rates plus 200 basis points. The Revolver matures on May 31, 1998. There
were no borrowings outstanding under the Revolver at December 31, 1996 or 1997.
The Term Loan and the equipment line bear interest at the bank's prime rate,
less .5 percent. The Term Loan matures on October 1, 1998. Borrowings
outstanding under the Term Loan were $2,404,000 and $2,056,000 at December 31,
1996 and 1997, respectively. Notes outstanding under the equipment line mature
on January 12, 2001, and December 12, 2002. Borrowings under these notes totaled
$161,571 and $188,452 at December 31, 1996 and 1997, respectively.

On July 1, 1998, and effective May 31, 1998, the Company renewed and
extended both the Revolver and Term Loan through July 1, 1999. Both the Revolver
and Term Loan bear interest at the bank's prime rate less .75 percent or, at the
option of the Company, at the current LIBOR 30-day or 60-day rates plus 200
basis points.

F-44
<PAGE> 118
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Long-term debt maturities as of December 31, 1997, are as follows:

<TABLE>
<S> <C>
1998..................................................... $ 397,992
1999..................................................... 1,761,140
2000..................................................... 56,551
2001..................................................... 16,460
Thereafter............................................... 12,309
----------
$2,244,452
==========
</TABLE>

The Revolver and Term Loan agreements require, among other things, that the
Company maintain a minimum current ratio, a specified working capital level,
certain debt-to-equity ratios and minimum amounts of net worth during the life
of the agreements.

At December 31, 1996, the Company had a note payable to its stockholder of
$622,270 with interest at 9 percent. This note provided for quarterly
installments and matured on December 31, 1997. At December 31, 1997, the Company
had notes payable to its stockholder totaling $830,606 with interest at 9
percent. These notes provide for quarterly installments with a final maturity of
December 31, 1998.

6. COMMON STOCK:

Common stock consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Houston Solvents and Chemicals Co., Inc., $100 par value;
10,000 shares authorized, 200 shares issued and
outstanding............................................... $20,000 $20,000
SS&C Properties, Inc., $1 par value; 1,000,000 shares
authorized, 1,000 shares issued and outstanding........... 1,000 1,000
Dallas Solvents and Chemicals Co., Inc., $1 par value;
1,000,000 shares authorized, 1,000 shares issued and
outstanding............................................... 1,000 1,000
------- -------
Total common stock................................ $22,000 $22,000
======= =======
</TABLE>

7. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Accounts Payable

The carrying amounts approximate market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt

F-45
<PAGE> 119
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES:

State income tax expense consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
State --
Current............................................... $19,383 $21,254 $30,501
Deferred.............................................. (7,040) (5,595) (3,807)
------- ------- -------
$12,343 $15,659 $26,694
======= ======= =======
</TABLE>

Deferred state tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred income tax assets --
Basis difference in inventory............................. $ 1,493 $ 1,841
Allowance for doubtful accounts........................... 7,685 9,865
-------- --------
Total deferred income tax assets.................. 9,178 11,706
-------- --------
Deferred income tax liabilities --
Accrued expenses.......................................... (632) (661)
Basis difference in property and equipment................ (14,226) (12,918)
-------- --------
Total deferred income taxes liabilities........... (14,858) (13,579)
-------- --------
Net deferred income tax liabilities............... $ (5,680) $ (1,873)
======== ========
</TABLE>

9. PROFIT-SHARING PLAN:

The Company provides a contributory 401(k) savings plan (the Plan).
Employees become eligible to participate in the Plan upon completion of six
months of service. Participants may elect to allocate 1 percent to 15 percent of
their compensation to their accounts. Contributions made by the Company are
determined by the board of directors. The Company contributed $50,000, $25,000
and $25,000 to the Plan in 1995, 1996 and 1997, respectively.

10. RELATED-PARTY TRANSACTIONS:

The Company charters an aircraft from a company which is wholly owned by
the sole stockholder and chief executive officer of the Company. Total expense
incurred by the Company in chartering the aircraft was $95,425, $93,428 and
$88,060 for 1995, 1996 and 1997, respectively.

11. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and

F-46
<PAGE> 120
HOUSTON SOLVENTS AND CHEMICALS CO., INC. AND RELATED COMPANIES
dba SOUTHWEST SOLVENTS AND CHEMICALS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

similar state statutes. The Company is currently not named as a potentially
responsible party under CERCLA or similar state legislation with respect to its
operations.

Litigation

Leases

As of December 31, 1997, the Company's minimum rental commitments under
operating leases, which relate primarily to facility rental, total $34,995 and
$4,950 for 1998 and 1999 respectively. The Company expects to renew these leases
as they expire.

Total rental expense was $253,970, $277,297 and $246,801 for 1995, 1996 and
1997, respectively.

12. SELF-INSURANCE:

Prior to 1996, the Company had been partially self-insured for employee
healthcare costs. The Company maintained commercial insurance which limited the
Company's losses to $25,000 per individual with the Company accruing for
retained exposures under the plan. In January 1996, the Company changed the
healthcare plan from a partially self-insured plan to a third-party insurer
plan.

13. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company did not have sales greater than 10 percent of total sales to
any one customer during the years 1995, 1996 or 1997.

The Company did not purchase greater than 10 percent of total purchases
from any one vendor during the years 1995, 1996 and 1997.

In addition, the Company grants credit, generally without collateral, to
its customers located in the regions it serves. Consequently, the Company is
subject to potential credit risk related to changes in business and economic
factors affecting these customers. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

14. SUBSEQUENT EVENTS (UNAUDITED):

In July 1998, the Company and its sole stockholder entered into a
definitive agreement with Chemical Logistics Corporation (Chemical) pursuant to
which all outstanding shares of the Company's common stock will be exchanged for
cash and shares of Chemical common stock, concurrent with the consummation of an
initial public offering (the Offering) of common stock of Chemical.

F-47
<PAGE> 121

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Chemical Solvents, Inc.:

We have audited the accompanying combined balance sheets of Chemical
Solvents, Inc. and related company (collectively, the Company) as of December
31, 1996 and 1997, and the related combined statements of income, stockholder's
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Chemical Solvents,
Inc. and related company as of December 31, 1996 and 1997, and the combined
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 15, 1998

F-48
<PAGE> 122

CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 14,569 $ 3,702 $ 9,354
Accounts receivable, less allowance for doubtful
accounts of $25,000.............................. 5,982,906 5,978,443 5,678,344
Inventories......................................... 924,709 1,176,426 1,260,132
Notes receivable.................................... 19,407 -- --
Other current assets................................ 460,800 245,559 165,145
----------- ----------- -----------
Total current assets........................ 7,402,391 7,404,130 7,112,975
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost................ 12,221,330 14,004,826 14,206,789
Less -- Accumulated depreciation.................... (7,014,151) (7,487,638) (7,962,697)
----------- ----------- -----------
5,207,179 6,517,188 6,244,092
----------- ----------- -----------
NOTES RECEIVABLE, net of current portion.............. 766,777 -- --
NOTES RECEIVABLE -- stockholder....................... 106,217 114,636 --
OTHER ASSETS, net..................................... 375,755 440,241 473,241
----------- ----------- -----------
Total assets................................ $13,858,319 $14,476,195 $13,830,308
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.................................... $ 3,820,965 $ 3,750,610 $ 3,951,597
Accrued liabilities................................. 682,414 766,369 707,007
Container deposits refundable to customers.......... -- 27,000 27,000
Current maturities of long-term debt................ 375,000 419,808 475,000
----------- ----------- -----------
Total current liabilities................... 4,878,379 4,963,787 5,160,604
LONG-TERM DEBT, net of current maturities............. 4,754,000 4,534,216 6,957,456
OTHER LONG-TERM LIABILITIES........................... 586,450 529,959 466,599
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock........................................ 1,000 1,000 1,000
Additional paid-in capital.......................... 586,839 586,839 586,839
Retained earnings................................... 3,051,651 3,860,394 657,810
----------- ----------- -----------
Total stockholder's equity.................. 3,639,490 4,448,233 1,245,649
----------- ----------- -----------
Total liabilities and stockholder's
equity.................................... $13,858,319 $14,476,195 $13,830,308
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE> 123

CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES, net....................... $45,405,902 $40,873,552 $41,164,102 $20,595,892 $19,779,226
COSTS AND EXPENSES:
Cost of sales.................. 33,425,045 30,297,608 30,333,493 15,206,530 13,975,103
Operating and delivery......... 4,667,110 4,109,326 4,352,407 2,229,278 2,294,077
Selling, general and
administrative.............. 3,917,212 3,991,577 3,818,688 1,924,825 1,811,320
Depreciation................... 589,674 838,988 871,287 465,180 475,060
----------- ----------- ----------- ----------- -----------
Total costs and
expenses............. 42,599,041 39,237,499 39,375,875 19,825,813 18,555,560
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS........... 2,806,861 1,636,053 1,788,227 770,079 1,223,666
OTHER INCOME (EXPENSE):
Interest expense............... (389,520) (450,072) (417,125) (210,217) (222,578)
Interest income................ 97,480 76,281 35,606 31,022 4,334
Other, net..................... 113,445 (118,709) 142,203 (148) (58,677)
----------- ----------- ----------- ----------- -----------
NET INCOME....................... $ 2,628,266 $ 1,143,553 $ 1,548,911 $ 590,736 $ 946,745
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-50
<PAGE> 124

CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- PAID-IN COMPREHENSIVE RETAINED STOCKHOLDER'S COMPREHENSIVE
SHARES AMOUNT CAPITAL INCOME(1) EARNINGS EQUITY INCOME
------ ------ ---------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994....... 1,000 $1,000 $534,300 $ -- $ 3,159,864 $ 3,695,164
Net income..................... -- -- -- -- 2,628,266 2,628,266 $2,628,266
Other comprehensive income,
unrealized holding gains..... -- -- -- 42,180 -- 42,180 42,180
----------
Comprehensive income........... -- -- -- -- -- -- $2,670,446
==========
Distributions to stockholder... -- -- -- -- (2,632,494) (2,632,494)
----- ------ -------- -------- ----------- -----------
BALANCE, December 31, 1995....... 1,000 1,000 534,300 42,180 3,155,636 3,733,116
Net income..................... -- -- -- -- 1,143,553 1,143,553 $1,143,553
Other comprehensive income,
unrealized holding gains..... -- -- -- (42,180) -- (42,180) (42,180)
----------
Comprehensive income........... -- -- -- -- -- -- $1,101,373
==========
Distributions to stockholder... -- -- -- -- (1,247,538) (1,247,538)
Contribution from
stockholder.................. -- -- 52,539 -- -- 52,539
----- ------ -------- -------- ----------- -----------
BALANCE, December 31, 1996....... 1,000 1,000 586,839 -- 3,051,651 3,639,490
Net income..................... -- -- -- -- 1,548,911 1,548,911 $1,548,911
==========
Distributions to stockholder... -- -- -- -- (740,168) (740,168)
----- ------ -------- -------- ----------- -----------
BALANCE, December 31, 1997....... 1,000 1,000 586,839 -- 3,860,394 4,448,233
Net income (unaudited)......... -- -- -- -- 946,745 946,745 $ 946,745
==========
Distributions to stockholder
(unaudited).................. -- -- -- -- (4,149,329) (4,149,329)
----- ------ -------- -------- ----------- -----------
BALANCE, June 30, 1998
(unaudited).................... 1,000 $1,000 $586,839 $ -- $ 657,810 $ 1,245,649
===== ====== ======== ======== =========== ===========
</TABLE>

- ---------------

(1) Represents unrealized holding gains on available-for-sale securities.

The accompanying notes are an integral part of these financial statements.

F-51
<PAGE> 125

CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 2,628,266 $ 1,143,553 $ 1,548,911 $ 590,736 $ 946,745
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating
activities --
Depreciation........................... 589,674 838,988 871,287 465,180 475,060
(Decrease) increase in LIFO reserve.... (100,461) (252,517) 2,072 -- --
Loss (gain) on disposition of property,
plant and equipment.................. (28,078) 204,280 (93,554) (89,000) --
Loss (gain) on sale of marketable
securities........................... 44 (29,726) -- -- --
Changes in operating assets and
liabilities --
Accounts receivable.................. 1,747,926 1,586,325 4,463 (633,776) 300,099
Inventories.......................... 1,301,322 744,757 (253,789) (396,433) (83,706)
Other current assets................. 804,448 198,812 234,648 117,625 80,414
Other assets, net.................... 62,898 (4,494) (8,419) (58,686) (33,000)
Accounts payable, accrued liabilities
and other......................... (4,036,500) (907,064) (15,891) 808,644 78,265
----------- ----------- ----------- ----------- -----------
Total adjustments................. 341,273 2,379,361 740,817 213,554 817,132
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities...................... 2,969,539 3,522,914 2,289,728 804,290 1,763,877
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................... (2,308,759) (1,513,256) (2,237,864) (1,222,420) (201,964)
Proceeds from disposition of property,
plant and equipment.................... 29,050 8,000 150,122 -- --
Proceeds from sale of marketable
securities............................. 85,174 119,726 -- -- --
Repayment of notes receivable............ 114,011 112,098 766,777 300,092 114,636
Increase (decrease) in cash surrender
value of officer's life insurance...... (62,020) 24,265 (64,486) -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities...................... (2,142,544) (1,249,167) (1,385,451) (922,328) (87,328)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt............. (133,052) (1,969,895) (1,185,684) (3,652,750) (3,919,938)
Borrowings on long-term debt............. 1,875,161 833,333 1,010,708 4,233,000 6,398,370
Issuance of common stock................. -- -- -- -- --
Capital contribution from stockholder.... -- 52,539 -- -- --
Cash distributions to stockholder........ (2,619,027) (1,247,538) (740,168) (178,236) (4,149,329)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............ (876,918) (2,331,561) (915,144) 402,014 (1,670,897)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. (49,923) (57,814) (10,867) 283,976 5,652
CASH AND CASH EQUIVALENTS, beginning of
period................................... 122,306 72,383 14,569 14,569 3,702
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period... $ 72,383 $ 14,569 $ 3,702 $ 298,545 $ 9,354
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest................... $ 351,898 $ 454,693 $ 413,742 $ 243,218 $ 258,962
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-52
<PAGE> 126

CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Chemical Solvents, Inc. and related company (Ohio corporations)
(collectively, the Company) operates through one main distribution facility in
Cleveland, Ohio, and is a distributor of liquid organic chemicals as well as a
processor of wastewater and wash solvents. The plant processes industrially
contaminated water for disposal in an environmentally safe manner. The Company's
primary operations supply the Ohio, Pennsylvania, Michigan and Indiana
marketplaces.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Combination

The combined financial statements include the accounts of Chemical
Solvents, Inc. and Pavlish Real Estate, Inc., an affiliate through common
ownership. All significant intercompany balances and transactions have been
eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of its operations and cash flows for
the six months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year-end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost (last-in, first-out) or market.
Substantially all of the goods consist of finished products.

Property, Plant and Equipment

Plant and equipment are stated at cost and depreciation is computed using
the straight-line method for financial reporting and tax purposes. Improvements
are capitalized and amortized over the estimated useful life of the asset.
Property, plant and equipment are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amounts of the
property, plant and equipment may not be recoverable.

F-53
<PAGE> 127
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Customer Deposits on Drums and Cylinders

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The Company has elected S Corporation status for tax purposes. In
accordance with the S Corporation provision of the Internal Revenue Code, the
Company's earnings are taxed directly to the stockholder.

Use of Estimates

Environmental Expenditures

New Accounting Pronouncements

In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
requires the display of comprehensive income and its components in the financial
statements. Comprehensive income represents all changes in equity of an entity
during the reporting period, including net income and charges directly to equity
which are excluded from net income. The Company has chosen to disclose
comprehensive income, which includes unrealized gains on an available-for-sale
equity security, in the consolidated statements of stockholders' equity. Prior
years have been restated to conform to the SFAS No. 130 disclosure requirements.

F-54
<PAGE> 128
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORIES:

The following sets forth the balances of selected accounts assuming that
the first-in, first-out (FIFO) method had been used for costing all inventories
in fiscal years 1995, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Inventories...................................... $2,150,886 $1,406,129 $1,659,918
Working capital.................................. 5,201,481 3,105,432 3,023,835
Net income....................................... 2,527,805 891,036 1,550,983
Retained earnings................................ 4,439,573 4,083,071 4,893,886
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED -------------------------
USEFUL LIVES 1996 1997
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Land........................................... -- $ 85,084 $ 68,812
Buildings and improvements..................... 5-32 3,708,776 5,174,834
Machinery and equipment........................ 5-7 5,621,138 6,283,323
Automobiles and trucks......................... 3-5 1,776,687 1,579,666
Furniture and fixtures......................... 5-10 765,616 898,191
Construction in progress....................... 264,029 --
----------- -----------
12,221,330 14,004,826
Less -- Accumulated depreciation............... (7,014,151) (7,487,638)
----------- -----------
Total................................ $ 5,207,179 $ 6,517,188
=========== ===========
</TABLE>

5. NOTES RECEIVABLE:

During 1993, the Company sold certain nonproductive assets to an unrelated
party for $240,000. Under the terms of the agreement, the Company received
$40,000 in cash and a promissory note in the amount of $200,000, which bore
interest at 10 percent. The balance was $153,875 at December 31, 1996. The
promissory note required monthly payments of $2,643, including principal and
interest, for a period of 10 years. The note was repaid in full in February
1997.

On January 1, 1994, the Company received a promissory note in the amount of
$875,000 from an unrelated party. This note accrued interest on the unpaid
principal balance at the prime rate of interest and required an annual lump-sum
principal payment of $75,000. The balance was $630,000 at December 31, 1996. The
note was repaid in full in 1997.

F-55
<PAGE> 129
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT:

Long-term debt includes the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Long-term credit facility at prime (8.25% at 1996 and 8.50%
at 1997), payable at maturity, due April 30, 1999......... $3,879,000 $3,143,000
Mortgage note payable to a bank at 8.75%, payable in monthly
installments of $9,453, due 2002, secured by real
property, and personally guaranteed by the sole
stockholder of the Company................................ -- 960,000
Notes payable to a bank at 8.89%, payable in monthly
installments of $31,250 plus interest, due April 2000,
secured by certain vehicles and equipment................. 1,250,000 805,650
Note payable to a bank at 8%, payable in monthly
installments of principal and interest of $1,241, due June
2001. The note is secured by a vehicle.................... -- 45,374
---------- ----------
5,129,000 4,954,024
Less -- Current maturities.................................. (375,000) (419,808)
---------- ----------
Long-term debt.................................... $4,754,000 $4,534,216
========== ==========
</TABLE>

The long-term credit facility was entered into on March 29, 1996, and
provides for maximum borrowings of $6,000,000. The amount available for
borrowing is based on a percentage of eligible receivables. The Company pays a
commitment fee of .25 percent per year on the unused portion of the credit
facility. Borrowings under the credit facility require that the Company comply
with certain covenants, including limitations on additional borrowings and
capital expenditures and required minimum levels of tangible net worth and
working capital. The Company's inventory, equipment and intangible assets have
been assigned as collateral under the credit facility agreement and is secured
by the guarantee of the sole stockholder of the Company.

The note payable to bank in the amount of $805,650 at December 31, 1997 was
renegotiated in February 1998. The renegotiated debt totals $950,000, with
interest at 7.96 percent, payable in 48 monthly installments of principal and
interest of $23,210 through March 2002.

Long-term debt maturities as of December 31, 1997, are as follows:

F-56
<PAGE> 130
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMON STOCK:

Common stock consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Chemical Solvents, Inc., no par value, 500 shares
authorized, issued and outstanding....................... $ 500 $ 500 $ 500
Pavlish Real Estate Holding Company, no par value, 500
shares authorized, issued and outstanding................ 500 500 500
------ ------ ------
$1,000 $1,000 $1,000
====== ====== ======
</TABLE>

8. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Accounts Payable

The carrying amounts approximate market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt

9. EMPLOYEE BENEFIT PLANS:

The Chemical Solvents Profit Sharing & 401(k) Plan (the Plan) is a
voluntary contributory defined contribution plan for all eligible employees of
Chemical Solvents, Inc. The effective date of the Plan was March 28, 1977. The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA). The Plan provides for the Company to make discretionary
contributions not to exceed 3 percent of the participant's contribution. Total
discretionary contributions by the Company under the Plan were approximately
$55,200, $46,000 and $35,000 for 1995, 1996 and 1997, respectively.

During 1992, the Company established an Executive Deferred Compensation
Plan, allowing certain members of management to defer a portion of their
compensation. Under this agreement, the Company was required to deposit funds
into a Trust equivalent to the accumulated deferred compensation. Management had
deposited $186,100 and $244,100 into a restricted trust as of December 31, 1995
and 1996, respectively. For financial statement purposes, the assets held in the
trust were netted against the accrued liability of the plan, which were
generally the same amounts. In 1997, the Company terminated this plan and the
assets of the trust were distributed to the respective members of management.

10. RELATED-PARTY TRANSACTIONS:

The Company has advanced funds amounting to $106,217 and $114,636 to its
sole stockholder at December 31, 1996 and 1997, respectively. The notes
receivable balances include an advance to the stockholder of $100,000 plus
interest accrued in the amount of 8.5 percent. The amount was advanced in
October 1995 and is not evidenced by a formal note agreement. No payments have
been made on the advance since the date of advance, and there is no stated
maturity; thus, the balance is classified as noncurrent in the accompanying
balance sheets.

F-57
<PAGE> 131
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company has been named a responsible party (PRP) under Environmental
Protection Agency (EPA) regulations for a Superfund site near Greenville, Ohio.
During 1994, the Company reached a settlement with the EPA whereby the Company
would pay a total of $ 341,125 in five annual installments of $68,225. The full
amount of this obligation was accrued in 1995. The Company, after consultation
with counsel, believes that the settlement may be reassessed and an additional
amount will be required to be paid. The Company anticipates based upon the
existing adjusted allocation formula for the site, that it will owe
approximately $322,000, although there can be no assurance as to the ultimate
costs incurred at the site or as to the amount of costs for which the Company
will be responsible.

The Company also has received a PRP notice from the EPA for a Superfund
site near Cleveland, Ohio. The EPA completed remediation at the site at a cost
of approximately $26 million. The PRP group made a settlement offer to the EPA
of $12 million together with anticipated future costs, $33,000 of which was from
the Company. The EPA has not responded to the offer. While there can be no
assurance as to the ultimate outcome, the Company believes that it is a de
minimis contributor to the site.

The Company's facilities in Cleveland, Ohio, are subject to RCRA permitting
and regulatory requirements which are likely to entail significant compliance
costs. In addition, one of the facilities is subject to permitting obligations
under a RCRA Facility Investigation ("RFI") to identify whether any
contamination exists. Certain general areas of concern have been identified, and
the Company is negotiating with the EPA on the proposed scope of work. The
Company is unable to reasonably estimate what corrective action measures may be
required as a result of the RFI. However, the Company estimates that performance
of the RFI alone may cost up to $250,000.

Based on the Company's evaluation of these and other environmental matters,
the Company has provided environmental accruals of $724,450 and $654,792 at
December 31, 1996 and 1997, respectively, primarily related to remediation
matters.

The Company has received a hazardous waste management permit as a federally
approved Part B facility. This permit was superceded by an Ohio EPA permit,
which is effective to May 14, 1998. An application to renew the permit was
submitted in November 1997, and the permit is now pending upon the review and
approval of the agency.

The Ohio EPA has established certain rules which require that the Company
provide assurance that funds will be available when needed for closure and/or
postclosure care of its facilities. In order to comply with these rules, the
Company has established a trust fund for the benefit of the Ohio EPA and entered
into a trust agreement with Pittsburgh National Bank. No deposits have been made
to the trust; however, the Company has purchased a letter of credit in the
amount of $405,341 in favor of the Ohio EPA in connection with its obligation.
The Company evaluates the adequacy of the letter of credit coverage periodically
and increases the letter as needed.

F-58
<PAGE> 132
CHEMICAL SOLVENTS, INC. AND RELATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Litigation

Leases

The Company leases equipment and vehicles under noncancelable operating
leases. Expenses incurred under these leases during fiscal years 1995, 1996 and
1997 were $47,226, $57,552 and $98,437, respectively.

Future minimum payments under noncancelable operating leases are as
follows:

Union Contracts

Hourly plant employees voted in May 1997 to have a union represent them in
negotiations with the Company. The Company has reached a basic agreement with
the union for a four-year period. This agreement must now be presented to the
employees for ratification.

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had sales of approximately 17 percent, 10 percent and 12
percent of total sales to one customer during the years ended December 31, 1995,
1996 and 1997, respectively.

The Company purchased approximately 33 percent, 37 percent and 32 percent
of total purchases from one vendor during 1995, 1996 and 1997, respectively.

In addition, the Company generally grants credit to its customers without
collateral. Consequently, the Company is subject to potential credit risk
related to changes in business and economic factors within the industry.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.

13. SUBSEQUENT EVENTS (UNAUDITED):

In July 1998, the Company and its stockholder entered into a definitive
agreement with Chemical Logistics Corporation (Chemical) pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock, concurrent with the consummation of an initial
public offering (the Offering) of common stock of Chemical.

F-59
<PAGE> 133

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tilley Chemical Company, Inc.:

We have audited the accompanying combined balance sheets of Tilley Chemical
Company, Inc., and related entity (collectively, the Company) as of October 31,
1996 and 1997, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended October
31, 1997. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Tilley
Chemical Company, Inc., and related entity as of October 31, 1996 and 1997, and
the combined results of their operations and their cash flows for each of the
three years in the period ended October 31, 1997, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 18, 1998

F-60
<PAGE> 134

TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
OCTOBER 31,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 41,904 $ 90,948 $ 13,281
Accounts receivable, less allowance for doubtful
accounts of $42,000.............................. 4,991,545 5,289,070 6,156,698
Inventories......................................... 3,989,682 3,706,378 3,905,028
Other current assets................................ 125,533 105,115 460,061
Deferred income taxes............................... 215,945 179,782 116,245
----------- ----------- -----------
Total current assets........................ 9,364,609 9,371,293 10,651,313
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost................ 5,645,353 6,240,859 6,501,427
Less -- Accumulated depreciation.................... (3,308,079) (3,704,104) (3,997,912)
----------- ----------- -----------
2,337,274 2,536,755 2,503,515
----------- ----------- -----------
OTHER ASSETS, net..................................... 286,070 238,951 310,978
----------- ----------- -----------
Total assets................................ $11,987,953 $12,146,999 $13,465,806
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $ 3,946,391 $ 3,138,013 $ 4,026,505
Accrued liabilities................................. 553,846 579,448 583,634
Container deposits refundable to customers.......... 179,811 209,393 197,532
Income taxes payable................................ -- 82,038 358,647
Lines of credit..................................... 1,926,153 1,734,368 1,464,748
Current maturities of long-term debt................ 138,648 102,320 189,553
----------- ----------- -----------
Total current liabilities................... 6,744,849 5,845,580 6,820,619
----------- ----------- -----------
LONG-TERM DEBT, less current maturities............... 378,747 528,130 570,391
----------- ----------- -----------
DEFERRED INCOME TAXES................................. 184,733 230,143 65,853
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock........................................ 320,949 320,949 320,949
Additional paid-in capital.......................... 3,055 3,055 3,055
Retained earnings................................... 4,355,620 5,219,142 5,684,939
----------- ----------- -----------
Total stockholders' equity.................. 4,679,624 5,543,146 6,008,943
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $11,987,953 $12,146,999 $13,465,806
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-61
<PAGE> 135

TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEAR ENDED OCTOBER 31, JUNE 30,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES, net.................. $36,707,497 $38,280,846 $40,714,717 $26,705,814 $26,266,571
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales............. 30,741,936 32,292,010 34,021,976 22,317,643 21,792,007
Operating and delivery.... 1,054,807 1,024,024 1,049,852 689,751 795,260
Selling, general and
administrative......... 3,133,582 3,339,435 3,380,574 2,149,063 2,224,339
Depreciation.............. 421,046 436,706 444,117 286,992 305,538
----------- ----------- ----------- ----------- -----------
Total costs and
expenses........ 35,351,371 37,092,175 38,896,519 25,443,449 25,117,144
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS...... 1,356,126 1,188,671 1,818,198 1,262,365 1,149,427
OTHER INCOME (EXPENSE):
Interest expense.......... (223,779) (220,564) (180,889) (130,604) (86,990)
Interest income........... 887 5,443 12,257 3,228 5,224
Other income (expense).... (673) 4,808 4,956 2,318 2,928
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES..................... 1,132,561 978,358 1,654,522 1,137,307 1,070,589
INCOME TAXES................ 364,828 295,262 567,500 380,998 358,647
----------- ----------- ----------- ----------- -----------
NET INCOME.................. $ 767,733 $ 683,096 $ 1,087,022 $ 756,309 $ 711,942
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-62
<PAGE> 136

TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, October 31, 1994................. 320,949 $320,949 $3,055 $3,351,791 $3,675,795
Distributions to stockholders........... -- -- -- (223,500) (223,500)
Net income.............................. -- -- -- 767,733 767,733
------- -------- ------ ---------- ----------
BALANCE, October 31, 1995................. 320,949 320,949 3,055 3,896,024 4,220,028
Distributions to stockholders........... -- -- -- (223,500) (223,500)
Net income.............................. -- -- -- 683,096 683,096
------- -------- ------ ---------- ----------
BALANCE, October 31, 1996................. 320,949 320,949 3,055 4,355,620 4,679,624
Distributions to stockholders........... -- -- -- (223,500) (223,500)
Net income.............................. -- -- -- 1,087,022 1,087,022
------- -------- ------ ---------- ----------
BALANCE, October 31, 1997................. 320,949 320,949 3,055 5,219,142 5,543,146
Distributions to stockholders
(unaudited).......................... -- -- -- (246,145) (246,145)
Net income (unaudited).................. -- -- -- 711,942 711,942
------- -------- ------ ---------- ----------
BALANCE, June 30, 1998 (unaudited)........ 320,949 $320,949 $3,055 $5,684,939 $6,008,943
======= ======== ====== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-63
<PAGE> 137

TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEAR ENDED OCTOBER 31, JUNE 30,
----------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 767,733 $ 683,096 $1,087,022 $ 756,309 $ 711,942
--------- ---------- ---------- --------- ---------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation...................... 421,046 436,706 444,117 286,992 305,538
Provision for deferred income
taxes........................... 1,915 (59,071) 81,575 22,359 (100,753)
Loss (gain) on disposition of
property, plant and equipment... 672 4,808 4,956 -- (1,072)
Changes in operating assets and
liabilities --
Receivables..................... 262,817 (782,020) 297,525 (378,687) (867,628)
Inventories..................... (96,527) (229,121) (283,304) (91,921) (198,650)
Prepaid expenses................ 7,961 (19,981) 20,418 (211,193) (354,946)
Other assets.................... (68,215) (135,853) 47,119 81,136 (72,027)
Accounts payable, accrued
liabilities and other........ (763,272) 1,019,571 (753,193) (857,350) 892,677
Income taxes payable............ (95,712) (17,245) 82,038 380,998 276,609
--------- ---------- ---------- --------- ---------
Total adjustments............ (329,315) 217,794 (58,749) (767,666) (120,252)
--------- ---------- ---------- --------- ---------
Net cash provided by (used
in) operating activities... 438,418 900,890 1,028,273 (11,357) 591,690
--------- ---------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................. (493,613) (336,169) (683,799) (141,869) (301,829)
Proceeds from disposition of
property, plant and equipment..... 114 16,299 6,801 3,000 11,127
--------- ---------- ---------- --------- ---------
Net cash used in investing
activities................. (493,499) (319,870) (676,998) (138,869) (290,702)
--------- ---------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt......... 108,570 76,000 240,336 -- 170,000
Repayments of long-term debt......... (179,834) (170,776) (127,281) (85,917) (32,890)
Net increase (decrease) in
line-of-credit borrowings......... 350,962 (255,434) (191,786) 299,016 (269,620)
Cash distributions paid.............. (223,500) (223,500) (223,500) (62,873) (246,145)
--------- ---------- ---------- --------- ---------
Net cash provided by (used
in) financing activities... 56,198 (573,710) (302,231) 150,226 (378,655)
--------- ---------- ---------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... 1,117 7,310 49,044 -- (77,667)
CASH AND CASH EQUIVALENTS, beginning of
period............................... 33,477 34,594 41,904 41,904 90,948
--------- ---------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................... $ 34,594 $ 41,904 $ 90,948 $ 41,904 $ 13,281
========= ========== ========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest.......................... $ 177,551 $ 124,436 $ 152,468 $ 103,472 $ 91,163
Taxes............................. 352,289 363,755 341,673 168,833 416,820
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-64
<PAGE> 138

TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Tilley Chemical Company, Inc., a Maryland corporation, is a privately owned
and managed industrial distributor of a broad line of organic and inorganic
chemicals. D. J. J. Equity Corporation (D. J. J.) was incorporated in the state
of Maryland in 1989. D. J. J. is a real estate company wholly owned by the
stockholders of the Company. The Company leases its offices and a significant
portion of its warehouse space on a year-to-year basis from D. J. J.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Combination

The combined financial statements include the accounts of Tilley Chemical
Company, Inc., and D. J. J. (collectively, the Company), affiliates through
common ownership. All significant intercompany balances and transactions have
been eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of its operations and cash flows for
the eight months ended June 30, 1997 and 1998. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at year-end.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market. Substantially all of the goods consist of finished products.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, and depreciation is
computed using the straight-line method for financial reporting purposes and
accelerated methods for federal income tax purposes. Leasehold improvements are
capitalized and amortized over the lesser of the life of the lease or the
estimated useful life of the asset. Property, plant and equipment are reviewed
for impairment whenever events or circumstances provide evidence that suggests
that the carrying amounts of the property, plant and equipment may not be
recoverable.

F-65
<PAGE> 139
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Container Deposits Refundable to Customers

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

Tilley Chemical Company, Inc., follows the asset and liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109. Under this method, deferred assets and liabilities are
recorded for future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates and laws.

Upon incorporation, D. J. J., with the consent of its stockholders, elected
to have its income taxed under the provisions of Subchapter S of the Internal
Revenue Code, which provides that, in lieu of corporate income taxes, the
stockholders are taxed on the entity's taxable income. D. J. J. regularly
declares dividends in amounts at least equal to the stockholders' tax
liabilities resulting from the Subchapter S Corporation election.

Environmental Expenditures

Use of Estimates

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which requires the reporting of comprehensive
income and its components to be displayed with the same prominence as other
financial statements. This statement requires a company to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial position. The Company has adopted this statement, and the
differences between traditional income and comprehensive income were
insignificant.

F-66
<PAGE> 140
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1997. The Company intends to adopt this statement during its fiscal year ending
October 31, 1999. Management is presently evaluating what, if any, additional
disclosures may be required when this statement is implemented.

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
ESTIMATED -------------------------
USEFUL LIVES 1996 1997
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Land........................................... $ 170,726 $ 170,726
Warehouse...................................... 30 1,268,954 1,458,441
Leasehold improvements......................... 5-39 474,541 487,011
Machinery and equipment........................ 3-7 1,194,582 1,394,382
Tank farm facility............................. 5-15 475,130 484,021
Automobiles and trucks......................... 5-7 1,865,801 2,034,544
Oil and lube equipment......................... 7 195,619 211,734
----------- -----------
5,645,353 6,240,859
Less -- Accumulated depreciation............... (3,308,079) (3,704,104)
----------- -----------
Total................................ $ 2,337,274 $ 2,536,755
=========== ===========
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Accrued compensation and benefits........................... $239,364 $267,044
Accrued profit-sharing expense.............................. 150,000 165,000
Accrued insurance and legal expense......................... 125,000 125,000
Other accrued expenses...................................... 39,482 22,404
-------- --------
$553,846 $579,448
======== ========
</TABLE>

F-67
<PAGE> 141
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Note payable in monthly installments of $4,526 which
includes interest at 8.5%. Unsecured. Maturity date is
January 2012.............................................. $ -- $ 445,137
Note payable in monthly installments of $904 which includes
interest at 8.5%. Unsecured. Maturity date is January
2012...................................................... -- 89,006
Note payable in monthly installments of $1,267 plus interest
at prime plus 1/4%. Collateralized by a semi-tractor.
Maturity date is November 2000............................ 62,065 46,867
Note payable in monthly installments of $1,230 plus interest
at prime plus 1/4%. Collateralized by a semi-tractor.
Maturity date is February 2000............................ 49,200 34,440
Note payable in monthly installments of $600 plus interest
at prime plus 1/4%. Collateralized by a semi-truck.
Maturity date is November 1999............................ 22,200 15,000
Note payable in monthly installments of $1,383 plus interest
at prime plus 1/2%. Collateralized by a semi-tractor.
Maturity date is November 1996............................ 1,383 --
Note payable in monthly installments of $1,983 plus interest
at prime plus 1/2%. Collateralized by automobiles.
Maturity date is November 1996............................ 1,984 --
Note payable in monthly installments of $750 plus interest
at prime plus 1/2%. Collateralized by semi-trailers.
Maturity date is May 1997................................. 4,995 --
Note payable in monthly installments of $1,454 plus interest
at prime plus 1/2%. Collateralized by a semi-tractor.
Maturity date is June 1997................................ 11,633 --
Note payable in monthly installments of $1,382 plus interest
at prime plus 1/2%. Collateralized by a semi-tanker.
Maturity date is August 1997.............................. 13,815 --
Note payable in monthly installments of $5,640 which
includes interest at 8.75%. Collateralized by land and
buildings. Maturity date is December 2003................. 350,120 --
--------- ---------
517,395 630,450
Less -- Current maturities.................................. (138,648) (102,320)
--------- ---------
Long-term debt.................................... $ 378,747 $ 528,130
========= =========
</TABLE>

Long-term debt maturities as of October 31, 1997, are as follows:

<TABLE>
<S> <C>
1998..................................................... $102,320
1999..................................................... 102,320
2000..................................................... 87,114
2001..................................................... 66,427
Thereafter............................................... 272,269
--------
Total.......................................... $630,450
========
</TABLE>

F-68
<PAGE> 142
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. LINES OF CREDIT:

The Company has available lines of credit as follows.

Line of Credit, First Union Bank

The Company has a $3,200,000 line of credit with First Union Bank, which
expires in March 1999, collateralized by a lien on accounts receivable and
inventories. The interest rate is the LIBOR rate plus 2.5% which averaged 8.0
percent and 8.1 percent during 1996 and 1997, respectively. At October 31, 1996
and 1997, borrowings outstanding under this line of credit were $1,926,154 and
$1,234,368, respectively. The line-of-credit agreement contains the following
restrictive covenants: the ratio of current assets to current liabilities not
less than 1.1 to 1; tangible net worth not less than $4,400,000; and the ratio
of liabilities to tangible net worth no greater than 2.50 to 1.0.

The Company also has available unused letters of credit issued by First
Union Bank for $88,700 and $54,450 as of October 31, 1996 and 1997,
respectively.

Line of Credit, County National Bank

In August 1997, the Company established a $500,000 line of credit with
County National Bank, collateralized by a lien on accounts receivable and
inventories. The line of credit does not have an expiration date, but continues
until all indebtedness of borrower to lender has been repaid in full and the
parties terminate the agreement in writing. The interest rate is the bank's
prime rate which averaged 8.5 percent during 1997. The restrictive covenants for
this line of credit are the same as those for the First Union Bank line of
credit, except tangible net worth must be at least $3,400,000. At October 31,
1997, borrowings outstanding under this line of credit were $500,000.

7. COMMON STOCK:

Common stock consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Tilley Chemical Company, Inc., $1 par, 100,000 shares
authorized, 37,309 shares outstanding,
respectively....................................... $ 37,309 $ 37,309 $ 37,309
D. J. J. Equity Corporation, $1 par, 1,000,000 shares
authorized, 283,640 shares outstanding,
respectively....................................... 283,640 283,640 283,640
-------- -------- --------
Total...................................... $320,949 $320,949 $320,949
======== ======== ========
</TABLE>

8. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Accounts Payable

The carrying amount approximates market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt and Lines of Credit

The estimated market value of the Company's long-term debt and lines of
credit is based on quoted market prices or, where such prices are not available,
on estimated year-end interest rates of debt with the same remaining average
maturities and credit quality. The carrying amount approximates market value at
October 31, 1995, 1996 and 1997.

F-69
<PAGE> 143
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES:

Income tax expense consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current --
Federal............................................ $298,743 $291,620 $399,922
State.............................................. 64,170 62,713 86,005
-------- -------- --------
362,913 354,333 485,927
-------- -------- --------
Deferred --
Federal............................................ 1,514 (48,616) 67,134
State.............................................. 401 (10,455) 14,439
-------- -------- --------
1,915 (59,071) 81,573
-------- -------- --------
Total income tax expense................... $364,828 $295,262 $567,500
======== ======== ========
</TABLE>

Actual income tax expense differs from income tax computed by applying the
United States federal statutory rate to income before provision for income taxes
as follows:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax......................... $396,396 $342,425 $579,081
State income tax, less federal benefit............... 41,971 33,968 65,288
Effect of earnings taxed to stockholders............. (82,498) (84,466) (82,797)
Nondeductible expenses............................... 8,959 3,335 5,928
-------- -------- --------
$364,828 $295,262 $567,500
======== ======== ========
</TABLE>

Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. The tax effects of the temporary
differences that give rise to the significant portions of the deferred tax
assets and liabilities are presented below:

<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets --
Accrued expenses.......................................... $ 76,614 $ 45,589
Allowance for doubtful accounts........................... 17,640 17,640
Basis difference in inventory............................. 93,459 80,034
Container deposit......................................... 41,609 47,656
State taxes............................................... -- 1,571
--------- ---------
Total deferred income tax assets.................. 229,322 192,490
--------- ---------
Deferred income tax liabilities --
Basis difference in property and equipment................ (163,628) (211,851)
State taxes............................................... (3,482) --
Other..................................................... (31,000) (31,000)
--------- ---------
Total deferred income tax liabilities............. (198,110) (242,851)
--------- ---------
Net deferred income tax assets (liabilities)...... $ 31,212 $ (50,361)
========= =========
</TABLE>

F-70
<PAGE> 144
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFIT PLAN:

The Company has a defined 401(k) contribution profit-sharing plan. The plan
provides for the Company to match one-half of the percentage contributed by each
employee not to exceed 3 percent of the employee's compensation. Total matching
contributions by the Company under the plan were approximately $19,443, $17,788
and $21,444 for the years ended October 31, 1995, 1996 and 1997, respectively.
The Company may also make discretionary contributions. The Company declared
discretionary contributions of $190,000, $150,000 and $165,000 for the years
ended October 31, 1995, 1996 and 1997, respectively.

11. RELATED-PARTY TRANSACTIONS:

The Company has a sales agreement with a customer owned by one of the
Company's legal counsel. Sales to this customer were approximately $1,600,000
for the years ended October 31, 1995, 1996 and 1997, respectively. The terms of
such sales agreement are no more or less favorable than those terms on
nonrelated sales contracts.

The Company has a banking relationship and debt borrowings with a bank,
County National Bank, managed by a member of the Company's board of directors.
The debt terms of such borrowings are no more or less favorable than those terms
on nonrelated borrowings.

12. COMMITMENTS AND CONTINGENCIES:

Litigation

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statutes. The
Company is currently not named as a potentially responsible party under CERCLA
or similar state legislation with respect to its operations.

Net Profits Agreement

Effective September 1, 1995, the Company entered into a net profits
agreement with a company whereby the monthly net profits (as defined in the
agreement) earned on certain products procured by that company outside the
United States and later sold in the United States (as defined in the agreement)
are split 50/50 between the parties. The agreement specified a term of two years
expiring September 1, 1997, and automatically renews for another two-year term,
until September 1, 1999. As of October 31, 1997, the agreement is still in
effect. The agreement may be terminated at any time provided that the parties to
the agreement reach mutually agreeable terms and the terminating party provides
the other party with 90 days' written notice. The Company performs all the
administrative tasks associated with this agreement, including the accounting
function. The portion of net profits paid out under this agreement are accounted
for as a commission expense within selling, general and administrative expenses
in the accompanying combined statements of income and were $94,206, $59,577, and
$63,341 for the years ended October 31, 1995, 1996 and 1997, respectively. The
sales related to such agreement are $1,840,256, $822,027 and $1,070,376 for the
years ended October 31, 1995, 1996 and 1997, respectively. The costs of sales
related to such agreement are $1,523,512, $661,378 and $935,160 for the years
ended October 31, 1995, 1996 and 1997, respectively.

F-71
<PAGE> 145
TILLEY CHEMICAL COMPANY, INC., AND RELATED ENTITY

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

13. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company had no sales greater than 10 percent of total sales to any one
customer during the years ended October 31, 1995, 1996 and 1997.

The Company purchased 24 percent of total purchases from two vendors during
the years ended October 31, 1995, 1996 and 1997.

In addition, the Company grants credit, generally without collateral, to
its customers located primarily in the northeastern United States. Consequently,
the Company is subject to potential credit risk related to changes in business
and economic factors within the Mid-Atlantic region of the United States.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.

14. SUBSEQUENT EVENTS:

In July 1998, the Company and its stockholders entered into a definitive
agreement with Chemical Logistics Corporation (Chemical) pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock, concurrent with the consummation of the initial
public offering (the Offering) of additional common stock of Chemical.

F-72
<PAGE> 146

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cron Chemical Corporation:

We have audited the accompanying combined balance sheets of Cron Chemical
Corporation and related companies (collectively, the Company) as of September
30, 1996 and 1997, and the related combined statements of income, stockholder's
equity and cash flows for the years then ended. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Cron
Chemical Corporation and related companies as of September 30, 1996 and 1997,
and the combined results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 15, 1998

F-73
<PAGE> 147

CRON CHEMICAL CORPORATION AND RELATED COMPANIES

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $ 209,246 $ 415,359 $ 124,105
Accounts receivable, less allowance for doubtful
accounts of $31,000, $31,000 and $53,000,
respectively..................................... 5,389,228 5,289,757 6,190,641
Inventories......................................... 3,510,477 3,072,561 3,149,045
Deferred income taxes............................... 62,411 50,434 56,317
Other current assets................................ 209,273 243,132 67,056
----------- ----------- -----------
Total current assets........................ 9,380,635 9,071,243 9,587,164
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost................ 5,433,636 5,689,710 5,684,065
Less -- Accumulated depreciation.................... (2,476,224) (2,747,268) (2,884,519)
----------- ----------- -----------
2,957,412 2,942,442 2,799,546
----------- ----------- -----------
INTANGIBLE ASSETS, net................................ 70,833 58,333 48,958
----------- ----------- -----------
Total assets................................ $12,408,880 $12,072,018 $12,435,668
=========== =========== ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $ 4,613,113 $ 4,736,402 $ 5,571,153
Accrued liabilities................................. 535,877 517,588 679,885
Container deposits refundable to customers.......... 208,449 218,462 227,483
Dividends payable -- Parent......................... 814,254 403,635 207,194
Income taxes payable -- Parent...................... 474,787 292,901 314,829
----------- ----------- -----------
Total current liabilities................... 6,646,480 6,168,988 7,000,544
----------- ----------- -----------
NOTES PAYABLE -- PARENT............................... 600,000 650,000 3,650,000
----------- ----------- -----------
DEFERRED INCOME TAXES................................. 397,913 394,124 420,505
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock........................................ 38,750 38,750 38,750
Additional paid-in capital.......................... 4,394,469 4,394,469 979,469
Retained earnings................................... 331,268 425,687 346,400
----------- ----------- -----------
Total stockholder's equity.................. 4,764,487 4,858,906 1,364,619
----------- ----------- -----------
Total liabilities and stockholder's
equity.................................... $12,408,880 $12,072,018 $12,435,668
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-74
<PAGE> 148

CRON CHEMICAL CORPORATION AND RELATED COMPANIES

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES, net............................... $41,759,726 $38,754,559 $28,243,861 $31,439,342
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales.......................... 34,866,229 32,557,168 23,779,380 26,615,620
Operating and delivery................. 1,753,821 1,680,363 1,265,406 1,225,238
Selling, general and administrative.... 3,276,285 3,267,590 2,393,471 2,337,897
Depreciation and amortization.......... 349,491 403,874 300,345 303,832
----------- ----------- ----------- -----------
Total costs and expenses....... 40,245,826 37,908,995 27,738,602 30,482,587
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS................... 1,513,900 845,564 505,259 956,755
OTHER INCOME (EXPENSE):
Interest expense....................... (51,052) (62,285) (42,527) (49,736)
Interest income........................ 6,216 3,221 2,844 3,142
Other, net............................. 49,849 26,744 26,935 34,867
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES............... 1,518,913 813,244 492,511 945,028
INCOME TAXES............................. 569,744 315,190 184,646 349,312
----------- ----------- ----------- -----------
NET INCOME............................... $ 949,169 $ 498,054 $ 307,865 $ 595,716
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-75
<PAGE> 149

CRON CHEMICAL CORPORATION AND RELATED COMPANIES

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30, 1995........... 1,467.5 $38,750 $ 4,394,469 $ 196,353 $ 4,629,572
Distributions to Parent............. -- -- -- (814,254) (814,254)
Net income.......................... -- -- -- 949,169 949,169
------- ------- ----------- --------- -----------
BALANCE, September 30, 1996........... 1,467.5 38,750 4,394,469 331,268 4,764,487
Distributions to Parent............. -- -- -- (403,635) (403,635)
Net income.......................... -- -- -- 498,054 498,054
------- ------- ----------- --------- -----------
BALANCE, September 30, 1997........... 1,467.5 38,750 4,394,469 425,687 4,858,906
Distributions to Parent
(unaudited)...................... -- -- (3,415,000) (675,003) (4,090,003)
Net income for the nine months
(unaudited)...................... -- -- -- 595,716 595,716
------- ------- ----------- --------- -----------
BALANCE, June 30, 1998 (unaudited).... 1,467.5 $38,750 $ 979,469 $ 346,400 $ 1,364,619
======= ======= =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-76
<PAGE> 150

CRON CHEMICAL CORPORATION AND RELATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
---------------------- -----------------------
1996 1997 1997 1998
--------- ---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 949,169 $ 498,054 $ 307,865 $ 595,716
--------- ---------- --------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization........... 349,491 403,874 300,345 303,832
Loss (gain) on disposition of property,
plant and equipment................... (49,849) (26,744) (26,935) (34,867)
Provision for deferred income taxes..... 40,530 32,817 32,782 20,499
Changes in operating assets and
liabilities --
Accounts receivable................... 213,772 99,471 291,218 (900,884)
Inventories........................... (293,810) 437,916 394,710 (76,484)
Other current assets.................. (21,078) (21,881) 61,381 170,193
Accounts payable, accrued liabilities
and other.......................... (241,855) (70,663) (582,154) 1,033,879
--------- ---------- --------- -----------
Total adjustments.................. (2,799) 854,790 471,347 516,168
--------- ---------- --------- -----------
Net cash provided by operating
activities....................... 946,370 1,352,844 779,212 1,111,884
--------- ---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................... (717,824) (409,919) (281,099) (156,994)
Proceeds from disposition of property,
plant and equipment..................... 57,700 27,442 27,439 40,300
--------- ---------- --------- -----------
Net cash used in investing
activities....................... (660,124) (382,477) (253,660) (116,694)
--------- ---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under notes
payable -- Parent....................... 250,000 50,000 550,000 --
Distributions to Parent.................... (651,000) (814,254) (814,254) (1,286,444)
--------- ---------- --------- -----------
Net cash provided by (used in)
financing activities............. (401,000) (764,254) (264,254) (1,286,444)
--------- ---------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (114,754) 206,113 261,298 (291,254)
CASH AND CASH EQUIVALENTS, beginning of
period..................................... 324,000 209,246 209,246 415,359
--------- ---------- --------- -----------
CASH AND CASH EQUIVALENTS, end of period..... $ 209,246 $ 415,359 $ 470,544 $ 124,105
========= ========== ========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest................................ $ 51,052 $ 62,285 $ 25,336 $ 43,319
Other supplemental information:
Non-cash intercompany borrowing from and
distribution to Parent................ -- -- -- 3,000,000
-- -- -- (3,000,000)
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-77
<PAGE> 151

CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Cron Chemical Corporation (a Texas corporation) and its related companies
(Louisiana corporations) (collectively, the Company) are wholly owned
subsidiaries of Amalgamet, Inc. (the Parent), whose ultimate parent is Preussag
AG. The Company is a distributor of a broad line of organic and inorganic
chemicals to customers throughout the United States. The primary operations
supply Texas and Louisiana.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Combination

The combined financial statements include the accounts of Cron Chemical
Corporation, Magnolia Chemicals & Solvents, Inc., and Rayver, Inc., two
affiliates through common ownership. All significant intercompany balances and
transactions have been eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of their operations and cash flows for
the nine months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year-end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash equivalents include all liquid debt instruments purchased with an
original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon a
historical analysis of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined
using the weighted average method which approximates the first-in, first-out
method.

Property, Plant and Equipment

Plant and equipment are recorded at cost and are being depreciated using
the straight-line method for financial reporting purposes and accelerated
methods for federal income tax purposes. Leasehold improvements are capitalized
and amortized over the lesser of the life of the lease or the estimated useful
life of the asset. Property, plant and equipment are reviewed for impairment
whenever events or circumstances provide evidence that suggests that the
carrying amounts of the property, plant and equipment may not be recoverable.

F-78
<PAGE> 152
CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Intangible Assets

Intangible assets are amortized, using the straight-line method of
accounting, over their estimated useful life. Amortization amounted to $12,500
in fiscal years 1996 and 1997.

Customer Deposits on Drums and Cylinders

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The Company follows the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS) No.
109. Under this method, deferred assets and liabilities are recorded for future
tax consequences of temporary differences between the financial reporting and
tax bases of assets and liabilities and are measured using enacted tax rates and
laws.

The operations of the Company were included in the consolidated U.S.
federal income tax return of the Parent. For purposes of these financial
statements, current and deferred income taxes have been provided on an "as if"
separate-return basis. As a member of a consolidated group, the Company is
jointly and severally liable for federal income taxes of the group.

Use of Estimates

Environmental Expenditures

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which requires the reporting of comprehensive
income and its components to be displayed with the same prominence as other
financial statements. This statement requires a company to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The Company has adopted this statement, and the differences between
traditional income and comprehensive income were insignificant.

F-79
<PAGE> 153
CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending September 30, 1998. Management is
presently evaluating what, if any, additional disclosures may be required when
this statement is implemented.

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
ESTIMATED -------------------------
USEFUL LIVES 1996 1997
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Land........................................... $ 435,335 $ 435,335
Buildings and improvements..................... 5-50 2,655,540 2,743,727
Machinery and equipment........................ 3-6 1,555,719 1,689,564
Automobiles and trailers....................... 3-5 787,042 821,084
----------- -----------
5,433,636 5,689,710
Less -- Accumulated depreciation............... (2,476,224) (2,747,268)
----------- -----------
Total................................ $ 2,957,412 $ 2,942,442
=========== ===========
</TABLE>

4. NOTES PAYABLE -- PARENT:

The Company's notes payable -- parent are classified as long-term in the
accompanying balance sheets as the Parent has stated that it will not require
repayment of these notes within the next 12 months. The notes bear interest at
the London Interbank Offered Rate plus 1 percent, as of the beginning of each
quarter. Interest was payable at rates of 7.0 percent and 7.25 percent at
September 30, 1996 and 1997, respectively. Interest expense incurred for the
years ended September 30, 1996 and 1997, related to the notes payable was
$49,998 and $62,285, respectively.

5. COMMON STOCK:

Common stock consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1996 1997
------- -------
<S> <C> <C>
Cron stock, $1 par value; 1,000 shares authorized, 1,000
shares issued and outstanding............................. $ 1,000 $ 1,000
Magnolia stock, $100 par value; 750 shares authorized, 367.5
shares issued and outstanding............................. 36,750 36,750
Rayver stock, no par value; 100 shares authorized, 100
shares issued and outstanding............................. 1,000 1,000
------- -------
Total common stock................................ $38,750 $38,750
======= =======
</TABLE>

F-80
<PAGE> 154
CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Accounts Payable

The carrying amounts approximate market value due to the highly liquid
nature of these short-term investments.

Notes Payable

The estimated market value of the Company's notes payable is based on
quoted market prices or, where such prices are not available, on estimated
year-end interest rates of debt with the same remaining average maturities and
credit quality. The carrying amount approximates market value at September 30,
1996 and 1997.

7. INCOME TAXES

Income tax expense computed on an "as if" company basis consists of the
following:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Current --
Federal................................................... $514,368 $274,452
State..................................................... 14,846 7,921
Deferred --
Federal................................................... 39,394 31,895
State..................................................... 1,136 922
-------- --------
$569,744 $315,190
======== ========
</TABLE>

Actual income tax expense differs from income tax computed by applying the
United States federal statutory rate to income before provision for income taxes
as follows:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Statutory federal income tax................................ $531,620 $284,635
State income taxes, less federal benefit.................... 10,389 5,779
Nondeductible expenses...................................... 27,735 24,776
-------- --------
$569,744 $315,190
======== ========
</TABLE>

F-81
<PAGE> 155
CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

effects of the temporary differences that give rise to the significant portions
of the deferred tax assets and liabilities are presented below:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets --
Basis difference in inventory............................. $ 63,618 $ 58,581
State taxes............................................... 4,672 4,994
--------- ---------
Total deferred income tax assets.................. 68,290 63,575
Deferred income tax liabilities --
Accrued expenses.......................................... (40,188) (22,651)
Basis difference in property and equipment................ (359,105) (377,626)
Other..................................................... (4,499) (6,988)
--------- ---------
Total deferred income tax liabilities............. (403,792) (407,265)
--------- ---------
Net deferred income tax liabilities............... $(335,502) $(343,690)
========= =========
</TABLE>

8. RELATED-PARTY TRANSACTIONS:

The Company has the following related-party transactions:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Interest expense on note payable -- Parent.................. $ 49,998 $ 62,285
Income taxes payable to Parent.............................. 474,787 292,901
Purchases of inventory from affiliated companies............ 252,000 158,000
Sales of inventory to affiliated companies.................. 138,000 211,000
</TABLE>

9. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statutes. The
Company is not currently named as a potentially responsible party under CERCLA
or similar state legislation with respect to its operations.

Litigation

Leases

The Company leases various equipment under operating leases which expire in
2002. Rent expense during fiscal years 1996 and 1997 was approximately $192,000
and $183,000, respectively.

F-82
<PAGE> 156
CRON CHEMICAL CORPORATION AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum payments under operating leases are as follows:

10. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company did not have sales greater than 10 percent of total sales to
any one customer during 1996 and 1997.

The Company purchased approximately 11 percent of total purchases from one
vendor during 1996. The Company did not purchase greater than 10 percent of
total purchases from any vendor during 1997.

In addition, the Company grants credit, generally without collateral, to
its customers. Consequently, the Company is subject to potential credit risk
related to changes in business and economic factors. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.

11. SUBSEQUENT EVENTS (UNAUDITED):

On June 10, 1998, the Company entered into an unsecured promissory note
with the Parent for $1,000,000 which expires in July 1999. The promissory note
bears interest at 8 percent. Also on June 10, 1998, the Company entered into two
separate secured promissory notes with the Parent for $2,000,000 which expire in
July 1999. The promissory notes are secured by real estate owned by the Company
and bear interest at 8 percent.

In July 1998, the Company and its stockholders entered into a definitive
agreement with Chemical Logistics Corporation (Chemical) pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock concurrent with the consummation of an initial
public offering (the Offering) of common stock of Chemical.

F-83
<PAGE> 157

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Brown Chemical Co., Inc.:

We have audited the accompanying consolidated balance sheets of Brown
Chemical Co., Inc. and subsidiary (collectively, the Company) as of December 31,
1996 and 1997, and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brown Chemical
Co., Inc. and subsidiary as of December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 15, 1998

F-84
<PAGE> 158

BROWN CHEMICAL CO., INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $ 2,622,264 $ 3,670,562 $ 3,482,271
Accrued liabilities................................. 658,095 804,193 653,646
Container deposits refundable to customers.......... 189,318 218,650 129,692
Income taxes payable................................ 14,101 108,862 374,319
Notes payable....................................... 15,131 14,929 --
Current maturities of long-term debt................ 293,333 987,778 941,111
----------- ----------- -----------
Total current liabilities................... 3,792,242 5,804,974 5,581,039
----------- ----------- -----------
LONG-TERM DEBT, net of current maturities............. 2,992,597 2,133,296 2,199,441
DEFERRED INCOME TAXES................................. 108,151 142,777 226,416
OTHER LONG-TERM LIABILITIES........................... 1,380,454 1,280,985 1,272,757
MINORITY INTEREST..................................... 153,404 163,122 166,654
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 10,000 shares authorized,
5,000 shares issued and outstanding.............. 5,070 5,070 5,070
Additional paid-in capital.......................... 1,500,000 1,500,000 1,500,000
Retained earnings................................... 2,351,133 2,703,039 3,121,985
Unrealized gain on equity investments............... 25,747 67,215 55,982
----------- ----------- -----------
Total stockholders' equity.................. 3,881,950 4,275,324 4,683,037
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $12,308,798 $13,800,478 $14,129,344
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-85
<PAGE> 159

BROWN CHEMICAL CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES, net............................. $33,767,376 $34,311,113 $17,455,110 $18,176,142
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales........................ 28,175,745 28,361,095 14,274,283 14,775,387
Operating and delivery............... 1,531,583 1,514,302 951,078 884,424
Selling, general and
administrative.................... 2,856,583 3,097,369 1,390,728 1,462,662
Depreciation......................... 260,746 277,513 152,227 153,735
----------- ----------- ----------- -----------
Total costs and expenses..... 32,824,657 33,250,279 16,768,316 17,276,208
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS................. 942,719 1,060,834 686,794 899,934
OTHER INCOME (EXPENSE):
Interest expense..................... (350,734) (339,568) (120,907) (164,501)
Other, net........................... 5,730 (16,996) (112,376) 52,315
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST............................. 597,715 704,270 453,511 787,748
INCOME TAX EXPENSE..................... 279,686 342,646 216,763 365,270
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST........ 318,029 361,624 236,748 422,478
MINORITY INTEREST...................... 9,759 9,718 4,094 3,532
----------- ----------- ----------- -----------
NET INCOME............................. $ 308,270 $ 351,906 $ 232,654 $ 418,946
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-86
<PAGE> 160

BROWN CHEMICAL CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME(1) EQUITY INCOME
------ ------ ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996....... 5,000 $5,070 $1,500,000 $2,351,133 $25,747 $3,881,950
Net income..................... -- -- -- 351,906 -- 351,906 $351,906
Other comprehensive income,
unrealized holding gains..... -- -- -- -- 41,468 41,468 41,468
--------
Comprehensive income........... -- -- -- -- -- -- $393,374
----- ------ ---------- ---------- ------- ---------- ========
BALANCE, December 31, 1997....... 5,000 5,070 1,500,000 2,703,039 67,215 4,275,324
Net income (unaudited)......... -- -- -- 418,946 -- 418,946 418,946
Other comprehensive income,
unrealized holding gains
(unaudited).................. -- -- -- -- (11,233) (11,233) (11,233)
--------
Comprehensive income
(unaudited).................. -- -- -- -- -- -- $407,713
----- ------ ---------- ---------- ------- ---------- ========
BALANCE, June 30, 1998
(unaudited).................... 5,000 $5,070 $1,500,000 $3,121,985 $55,982 $4,683,037
===== ====== ========== ========== ======= ==========
</TABLE>

- ---------------

(1) Represents unrealized holding gains on available-for-sale equity securities.

The accompanying notes are an integral part of these financial statements.

F-87
<PAGE> 161

BROWN CHEMICAL CO., INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ ------------------------
1996 1997 1997 1998
---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 308,270 $ 351,906 $ 232,654 $ 418,946
--------- ---------- ---------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities--
Loss on real estate option................... -- 29,600 -- --
(Increase) decrease in cash value of life
insurance................................. 75,155 30,227 23,420 18,830
Depreciation................................. 260,737 277,214 152,227 153,735
Provision for deferred taxes................. 174,718 115,259 28,815 (45,568)
Minority interest............................ 9,759 9,718 4,094 3,532
Changes in operating assets and liabilities--
Accounts and loans receivable............. (319,930) 238,999 (310,563) (863,081)
Inventories............................... (76,633) (75,903) (19,475) (232,817)
Prepaid expenses.......................... 18,189 (1,240) (137,833) (143,210)
Accounts payable.......................... (135,702) 1,048,298 697,248 (292,867)
Due to customers.......................... 28,052 29,332 75,842 (157,208)
Due to profit sharing..................... -- -- (150,000) (100,000)
Accrued liabilities....................... 248,335 143,393 193,398 19,541
Deferred compensation plan................ (75,206) (80,642) (39,617) (1,475)
Income taxes payable...................... (8,564) 94,761 110,454 311,025
Other..................................... 7,740 (6,152) 3,848 632
--------- ---------- ---------- -----------
Total adjustments....................... 206,650 1,852,864 631,858 (1,328,931)
--------- ---------- ---------- -----------
Net cash provided by (used in) operating
activities............................ 514,920 2,204,770 864,512 (909,985)
--------- ---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Life insurance policy payments................. (258,277) (258,277) (129,139) (129,139)
Acquisition of fixed assets.................... (147,844) (78,644) (63,944) (24,378)
Other.......................................... (15,726) (13,942) (14,494) (16)
--------- ---------- ---------- -----------
Net cash used in investing activities... (421,847) (350,863) (207,577) (153,533)
--------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings....................... -- -- 135,965 156,863
Repayments of debt............................. (78,203) (293,535) (106,583) (113,883)
Capital lease payments......................... (16,050) (16,122) (10,126) (10,434)
--------- ---------- ---------- -----------
Net cash provided by (used in) financing
activities............................ (94,253) (309,657) 19,256 32,546
--------- ---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... (1,180) 1,544,250 676,191 (1,030,972)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD......................................... 404,648 403,468 403,468 1,947,718
--------- ---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $ 403,468 $1,947,718 $1,079,659 $ 916,746
========= ========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for--
Interest..................................... $ 93,988 $ 86,712 $ 52,699 $ 41,053
Taxes........................................ 93,186 131,712 75,625 88,852
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-88
<PAGE> 162

BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Brown Chemical Co., Inc. (Brown Chemical), a New Jersey corporation, and
subsidiary (collectively, the Company) are domestic distributors of various dry
and liquid inorganic and organic chemicals to industrial customers primarily in
New Jersey, New York and Pennsylvania.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements of the Company include the accounts
of Brown Realty, Inc. (Brown Realty), an 83 1/3 percent owned subsidiary. All
significant intercompany balances and transactions have been eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of its operations and cash flows for
the six months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year-end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are stated at lower of cost or market with cost being
determined using the first-in, first-out (FIFO) method. Substantially all of the
Company's inventory consists of finished goods.

Investments

Investments consist of equity securities. The Company classifies its equity
securities as available-for-sale. Available-for-sale securities are recorded at
fair value based upon market quotations. Unrealized holding gains and losses,
net of the related tax effect, on available-for-sale securities are excluded
from earnings and are reported as a separate component of stockholders' equity
until realized. A decline in the market value of any available-for-sale security
below cost that is deemed other than temporary is charged to earnings in the
period it occurs resulting in the establishment of a new cost basis for the
security. Dividend income is recognized when earned.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciation is
computed using the straight-line method for financial reporting purposes and
accelerated methods for federal income tax purposes. Plant and

F-89
<PAGE> 163
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

equipment are reviewed for impairment whenever events or circumstances provide
evidence that suggests that the carrying amounts of the plant and equipment may
not be recoverable.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and resulting gain or
loss is recognized in the statements of income.

Cash Surrender Value of Life Insurance

Customer Deposits on Drums and Cylinders

Containers used to ship products which cost in excess of $1,000 and have a
useful life greater than one year are capitalized and depreciated over their
useful life (generally five years). Containers used to ship products which cost
less than $1,000 are accounted for as inventory.

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The Company follows the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standards (SFAS) No.
109. Under this method, deferred assets and liabilities are recorded for future
tax consequences of temporary differences between the financial reporting and
tax bases of assets and liabilities, and are measured using enacted tax rates
and laws.

Environmental Expenditures

Use of Estimates

F-90
<PAGE> 164
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

New Accounting Pronouncements

In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires the display of comprehensive income and
its components in the financial statements. Comprehensive income represents all
changes in equity of an entity during the reporting period, including net income
and charges directly to equity which are excluded from net income. The Company
has chosen to disclose comprehensive income, which includes unrealized gains on
an available-for-sale equity security, in the consolidated statements of
stockholders' equity. Prior years have been restated to conform to the SFAS No.
130 disclosure requirements.

3. INVESTMENTS:

The cost, gross unrealized holding gains and fair value of the Company's
available-for-sale equity securities were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- --------
<S> <C> <C>
Cost........................................................ $26,588 $ 26,622
Gross unrealized holding gains.............................. 45,977 120,026
------- --------
Fair value........................................ $72,565 $146,648
======= ========
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED -------------------------
USEFUL LIVES 1996 1997
------------ ----------- -----------
(IN YEARS)
<S> <C> <C> <C>
Land........................................... -- $ 199,778 $ 199,778
Buildings and improvements..................... 5-31 2,568,478 2,568,478
Machinery and equipment........................ 5-7 1,104,238 1,170,335
Furniture and fixtures......................... 5-10 158,720 171,566
Automobiles and trucks......................... 5-7 283,524 283,524
----------- -----------
4,314,738 4,393,681
Less -- Accumulated depreciation............... (2,167,637) (2,445,150)
----------- -----------
Total................................ $ 2,147,101 $ 1,948,531
=========== ===========
</TABLE>

F-91
<PAGE> 165
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts receivable
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Balance, beginning of year.................................. $15,000 $22,185
Provision for doubtful accounts............................. 7,185 6,325
Amounts written off......................................... -- (7,185)
------- -------
Balance, end of year........................................ $22,185 $21,325
======= =======
</TABLE>

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred compensation agreements............................ $440,712 $584,105
Profit-sharing plan......................................... 150,000 150,000
Other accrued expenses...................................... 17,383 20,088
-------- --------
$608,095 $754,193
======== ========
</TABLE>

6. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Brown Realty --
Mortgage payable to a bank, dated June 1993, payable in
monthly installments of $7,778, bearing interest at
prime plus 1 percent and secured by property and
building at the Oakland, New Jersey, location and
guaranteed by Brown Chemical, maturing July 1, 1998.
(Prime was 8.50% as of December 31, 1997).............. $1,081,111 $ 987,778
Brown Chemical --
Line of credit with borrowings of up to $1.0 million,
bearing interest at prime plus 1/2% and secured by all
Brown Chemical's assets, scheduled maturity on October
15, 1997, and expiring September 9, 1998............... 200,000 --
Loans payable on cash surrender value of life insurance
policies............................................... 2,004,820 2,133,296
---------- ----------
3,285,931 3,121,074
Less -- Current maturities.................................. (293,333) (987,778)
---------- ----------
Long-term debt.................................... $2,992,598 $2,133,296
========== ==========
</TABLE>

The loans payable on the cash surrender value of life insurance policies
are due upon the death of the insured and have no scheduled repayments prior to
such event.

The mortgage payable requires Brown Chemical and Brown Realty to maintain
certain working capital, net worth and debt service ratios. At December 31,
1997, Brown Chemical was not in compliance with certain mortgage debt covenants.
The mortgage payable is classified as a current maturity of long-term debt as it
matures on July 1, 1998. As of May 15, 1998, the bank has not accelerated the
payment of the mortgage payable.

F-92
<PAGE> 166
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. MINORITY INTEREST:

At December 31, 1996 and 1997, the Company reported minority interest in
the balance sheet of $153,404 and $163,122, respectively. The minority interest
relates to the 16 2/3 percent outside ownership in Brown Realty. For financial
reporting purposes, the assets, liabilities and income (loss) attributable to
the minority interest are consolidated in the Company's financial statements and
the minority interest's share of net assets and income (loss) in Brown Realty,
has been recorded as "Minority Interest" in the balance sheets and statements of
income.

8. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Accounts Payable

The carrying amount approximates market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt and Notes Payable

The estimated market value of the Company's long-term debt and notes
payable is based on quoted market prices or, where such prices are not
available, on estimated year-end interest rates of debt with the same remaining
average maturities and credit quality. The carrying amount approximates market
value at December 31, 1996 and 1997.

9. INCOME TAXES:

Income tax expense consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Current --
Federal................................................... $ 72,235 $177,290
State..................................................... 32,732 50,097
-------- --------
104,967 227,387
-------- --------
Deferred --
Federal................................................... 145,831 89,865
State..................................................... 28,888 25,394
-------- --------
174,719 115,259
-------- --------
Total income tax expense.......................... $279,686 $342,646
======== ========
</TABLE>

Actual income tax expense differs from income tax computed by applying the
United States federal statutory rate to income before provision for income taxes
as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Statutory federal income tax................................ $209,200 $246,495
State income tax, less federal benefit...................... 40,053 49,069
Other....................................................... 30,433 47,082
-------- --------
$279,686 $342,646
======== ========
</TABLE>

F-93
<PAGE> 167
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Assets --
Basis difference in inventory............................. $ 64,166 $ 53,501
Accrued expense........................................... 577,453 472,121
Allowance for doubtful accounts........................... 12,523 15,306
-------- --------
Total deferred income tax assets.................. 654,142 540,928
-------- --------
Liabilities --
Basis differences in plant and equipment.................. 80,429 82,632
Unrealized investment gain................................ 20,230 52,811
Other..................................................... 7,492 7,334
-------- --------
Total deferred income tax liabilities............. 108,151 142,777
-------- --------
Net deferred income tax assets.................... $545,991 $398,151
======== ========
</TABLE>

Based on recent operating results and expected levels of future earnings,
the Company believes it will, more likely than not, generate sufficient taxable
income to realize the net deferred tax assets recorded.

10. EMPLOYEE BENEFIT PLANS:

401(k) Plan

The Company has a defined contribution 401(k) profit-sharing plan. The plan
provides for the Company to match up to 50% of the first three percent of
contributions made by each employee. Total contributions by the Company under
the plan were $23,752 and $25,806 in 1996 and 1997, respectively.

Profit-Sharing Plan

The Company has a discretionary profit-sharing plan that covers all
full-time employees over the age of 21 with six months of service. Contributions
to the plan are based on a formula and are contingent upon the attainment of
certain levels of earnings as defined in the agreement. In 1996 and 1997,
contributions were $150,000.

Deferred Compensation Agreements

In 1986, the Company entered into deferred compensation agreements with two
of the Company's former officers whereby the Company is obligated to pay $90,000
per year upon retirement to each of the two officers for 15 years. The Company
recorded compensation expense associated with the deferred compensation
agreements from the date of the agreements to the retirement dates of the two
officers. The amounts charged to interest expense relating to such agreements
were $109,685 in 1996 and $104,794 in 1997. The Company's remaining cash
obligations as of December 31, 1997, was approximately $2.2 million. The Company
has purchased life insurance policies which may be used to fund the cash
obligations of these agreements. The cash surrender value of such policies was
$3.6 million as of December 31, 1997.

F-94
<PAGE> 168
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statues. The
Company is currently not named as a potentially responsible party under CERCLA
or similar state legislation with respect to its operations.

In 1992, the Company entered into an agreement in principle with the New
Jersey Department of Environmental Protection and Energy whereby the Company
would be financially responsible for up to $300,000 annually for any corrective
action necessitated by hazardous discharges. Under this agreement, the Company
has not had to take any corrective action necessitated by hazardous discharges.

Litigation

The Company is not currently involved in any significant disputes or legal
actions; however, such actions could arise in the ordinary course of business.

Deferred Compensation Agreements

The Company has entered into deferred compensation agreements with two of
the Company's officers. See Note 10, "Employee Benefit Plans," for further
description of such agreements.

Leases

The Company leases certain facilities, warehouses, equipment and trucks
under noncancelable operating leases. Rent expense during fiscal years 1996 and
1997 was $170,000 each year. Future minimum payments under noncancelable
operating leases are as follows:

Certain equipment has been leased under terms that constitute a capital
lease. Accordingly, the costs of the assets (the lower of the cash purchase
price or the present value of future minimum lease payments) were recorded as an
addition to property and the related liabilities were recorded as lease
obligations. The assets are amortized using the straight-line method, and
interest expense is recorded on the basis of the outstanding lease obligation.

F-95
<PAGE> 169
BROWN CHEMICAL CO., INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net present value of future minimum lease payments under the capital
leases as of December 31, 1997, is as follows:

<TABLE>
<S> <C>
Year ending December 31 --
1998.................................................... $22,443
1999.................................................... 13,780
2000.................................................... 3,875
-------
Total lease payments............................ 40,098
Less -- Amounts representing interest..................... (3,244)
-------
Present value of minimum lease payments................... $36,854
=======
</TABLE>

12. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company did not have sales greater than 10 percent of total sales to
any one customer during the years ended December 31, 1996 or 1997.

The Company had purchases from one supplier which were greater than 10
percent of total purchases during the years ended December 31, 1996 and 1997.
The purchases from such supplier comprised 22 percent and 14 percent of the
Company's purchases during the years ended December 31, 1996 and 1997,
respectively.

In addition, the Company grants credit, generally without collateral, to
its customers. Consequently, the Company is subject to potential credit risk
related to changes in business and economic factors within the New York, New
Jersey and Connecticut regions. However, management believes that its contract
acceptance, billing and collection policies are adequate to minimize the
potential credit risk.

The Company had cash and cash equivalents in financial institutions which
exceed the federally insured limits by $296,357 and $1,844,350 at December 31,
1996 and 1997, respectively.

13. COMMON STOCK:

The Company has 10,000 shares of no par common stock authorized and 5,000
shares issued and outstanding as of December 31, 1997.

14. SUBSEQUENT EVENTS (UNAUDITED):

In July 1998, the Company and its stockholders entered into a definitive
agreement with Chemical Logistics Corporation (Chemical), pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock, concurrent with the consummation of an initial
public offering (the Offering) of common stock of Chemical.

F-96
<PAGE> 170

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tarr, Inc.:

We have audited the accompanying combined balance sheet of Tarr, Inc. and
related entities (collectively, the Company) as of December 31, 1997, and the
related combined statements of income, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Tarr, Inc. and
related entities as of December 31, 1997, and the combined results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 29, 1998

F-97
<PAGE> 171

TARR, INC. AND RELATED ENTITIES

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 33,133 $ 14,211
Accounts receivable, less allowance for doubtful accounts
of $172,927............................................ 2,751,016 3,015,314
Inventories............................................... 2,025,480 1,689,158
Other current assets...................................... 207,693 258,390
Deferred income taxes..................................... 23,483 25,023
----------- -----------
Total current assets.............................. 5,040,805 5,002,096
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost...................... 5,386,879 5,586,060
Less -- Accumulated depreciation.......................... (2,638,975) (2,849,063)
----------- -----------
2,747,904 2,736,997
----------- -----------
GOODWILL, net............................................... 693,960 649,741
OTHER ASSETS, net........................................... 238,519 96,132
----------- -----------
Total assets...................................... $ 8,721,188 $ 8,484,966
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,880,982 $ 1,775,899
Accrued liabilities....................................... 197,115 821,111
Container deposits refundable to customers................ 346,261 346,261
Current maturities of long-term debt...................... 392,041 386,572
Line of credit............................................ 2,850,000 2,132,586
----------- -----------
Total current liabilities......................... 5,666,399 5,462,429
----------- -----------
LONG-TERM DEBT, less current maturities..................... 1,110,937 933,402
----------- -----------
NOTE PAYABLE, stockholder................................... 99,444 170,000
----------- -----------
DEFERRED INCOME TAXES....................................... 147,473 136,407
----------- -----------
OTHER LIABILITIES........................................... 229,817 --
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY:
Common stock (Note 5)..................................... -- --
Additional paid-in capital................................ 1,126,362 1,126,362
Retained earnings......................................... 340,756 656,366
----------- -----------
Total stockholders' equity........................ 1,467,118 1,782,728
----------- -----------
Total liabilities and stockholders' equity........ $ 8,721,188 $ 8,484,966
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-98
<PAGE> 172

TARR, INC. AND RELATED ENTITIES

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------------
1997 1997 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
SALES, net............................................ $31,662,463 $15,945,330 $12,888,310
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales....................................... 24,955,806 12,855,172 9,597,573
Operating and delivery.............................. 2,910,426 1,481,279 1,290,313
Selling, general and administrative................. 2,797,694 1,309,014 1,312,835
Depreciation........................................ 419,546 198,156 235,220
----------- ----------- -----------
Total costs and expenses.................... 31,083,472 15,843,621 12,435,941
----------- ----------- -----------
INCOME FROM OPERATIONS................................ 578,991 101,709 452,369
OTHER INCOME (EXPENSE):
Interest expense.................................... (339,349) (143,116) (260,786)
Other income........................................ 137,218 208,818 154,481
Other expense....................................... (9,383) -- --
----------- ----------- -----------
INCOME BEFORE INCOME TAXES............................ 367,477 167,411 346,064
INCOME TAXES.......................................... 32,794 14,933 30,454
----------- ----------- -----------
NET INCOME............................................ $ 334,683 $ 152,478 $ 315,610
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-99
<PAGE> 173

TARR, INC. AND RELATED ENTITIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these financial statements.

F-100
<PAGE> 174

TARR, INC. AND RELATED ENTITIES

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------
1997 1997 1998
------------ --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 334,683 $ 152,478 $ 315,610
----------- --------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation....................................... 419,546 198,156 235,220
Amortization....................................... 74,034 -- --
Provision for deferred income taxes................ 24,192 6,047 4,077
Donation of automobiles............................ -- -- 23,150
Gain on disposition of property, plant and
equipment........................................ (14,372) (11,750) (2,505)
Changes in operating assets and liabilities --
Receivables...................................... 223,906 (319,545) (264,298)
Inventories...................................... (454,581) (242,038) 336,322
Prepaids and other current assets................ 15,897 49,916 (52,237)
Other assets..................................... -- (87,259) 186,606
Accounts payable, accrued liabilities and
other......................................... (471,433) 361,241 257,904
Income taxes payable............................. (5,994) 7,135 16,049
----------- --------- ----------
Total adjustments............................. (188,805) (38,097) 740,288
----------- --------- ----------
Net cash provided by (used in) operating
activities.................................. 145,878 114,381 1,055,898
----------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (1,052,109) (326,205) (247,463)
Proceeds from disposition of property, plant and
equipment.......................................... 14,372 11,750 2,505
----------- --------- ----------
Net cash used in investing activities......... (1,037,737) (314,455) (244,958)
----------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under notes payable.................... (354,188) (180,653) (249,075)
Borrowings (Repayments) on line of credit............. 600,000 416,000 (717,414)
Net borrowings of notes payable with shareholder...... 1,208,288 430,172 66,071
Net borrowings under notes payable with shareholder... -- -- 229,000
Net repayments under notes payable with shareholder... -- -- (158,444)
Distributions to stockholders......................... (588,776) (498,839) --
----------- --------- ----------
Net cash provided by (used in) financing
activities.................................. 865,324 166,680 (829,862)
----------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (26,535) (33,394) (18,922)
CASH AND CASH EQUIVALENTS, beginning of period.......... 59,668 59,668 33,133
----------- --------- ----------
CASH AND CASH EQUIVALENTS, end of period................ $ 33,133 $ 26,274 $ 14,211
=========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest........................................... $ 311,864 $ 61,677 $ 74,591
Taxes.............................................. $ 17,060 $ -- $ 960
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-101
<PAGE> 175

TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS:

Tarr, Inc. (Tarr), an Oregon corporation, and related entities including
Tarr, Inc. of Arizona (Arizona), an Arizona corporation, and Tarr Trucking, Inc.
(Trucking), an Oregon corporation (collectively referred to as the Company), is
primarily engaged in the distribution of liquid organic chemicals and petroleum
products. The Company's primary operations supply the Northwest portion of the
United States and Arizona.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Combination

The combined financial statements include the accounts of Tarr, Arizona and
Trucking, affiliates through common ownership. All significant intercompany
balances and transactions have been eliminated.

Interim Financial Information

The interim financial statements included herein are unaudited; however,
they include all adjustments of a normal recurring nature which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at June 30, 1998, and the results of its operations and cash flows for
the six months ended June 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year-end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market. Substantially all of the goods consist of finished products.

Property, Plant and Equipment

Plant and equipment are stated at cost and depreciation is computed using
the straight-line method for financial reporting purposes and accelerated
methods for federal income tax purposes. Leasehold improvements are capitalized
and amortized over the lesser of the life of the lease or the estimated useful
life of the asset. Property, plant and equipment are reviewed for impairment
whenever events or circumstances provide evidence that suggests that the
carrying amounts of the property, plant and equipment may not be recoverable.

F-102
<PAGE> 176
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

Goodwill and Other Assets

Goodwill is being amortized over a period of 40 years. Amortization
amounted to $30,000 for the year ended December 31, 1997, with accumulated
amortization of $473,737 at December 31, 1997.

Other assets consist primarily of a noncompete and consulting agreement
related to an agreement between the Company and another party whereby the
Company retained the other party's experience and abilities while restricting
the other party's ability to compete against the Company. In return, the Company
agreed to pay $5,000 per month over the term of the agreement to the other party
for the consulting services and covenant not to compete. The total future
payments were discounted over the term of the agreement and recorded as an asset
and liability in the accompanying balance sheet.

These intangible assets are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amount of the
intangible asset may not be recoverable. The Company assesses the recoverability
of the intangible asset by determining whether the carrying amount of the
intangible asset can be recovered through projected undiscounted future cash
flows over the remaining amortization period.

Container Deposits Refundable to Customers

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

On October 1, 1987, Tarr, with the consent of its stockholders, elected to
have its income taxed under the provisions of Subchapter S of the Internal
Revenue Code, which provided that, in lieu of corporate income taxes, the
stockholders are taxed on the Tarr's taxable income. Tarr regularly declares
dividends in amounts at least equal to the stockholders' tax liabilities
resulting from the S Corporation election.

Arizona and Trucking are C Corporations and thus follow the asset and
liability method of accounting for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. Under this method, deferred
assets and liabilities are recorded for future tax consequences of temporary
differences between the financial reporting and tax bases of assets and
liabilities and are measured using enacted tax rates and laws.

Environmental Expenditures

Use of Estimates

NOTES TO COMBINED FINANCIAL STATEMENTS

reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which requires the reporting of comprehensive
income and its components to be displayed with the same prominence as other
financial statements. This statement requires a company to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The Company has adopted this statement, and the differences between
traditional income and comprehensive income were insignificant.

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES 1997
------------ ------------
(IN YEARS)
<S> <C> <C>
Land........................................................ $ 424,794
Buildings and improvements.................................. 20 1,238,831
Tank farm................................................... 20 303,919
Machinery and equipment..................................... 5-10 1,619,197
Automobiles and trucks...................................... 5 1,610,686
Furniture and fixtures...................................... 7 189,452
-----------
5,386,879
Less -- Accumulated depreciation............................ (2,638,975)
-----------
Total............................................. $ 2,747,904
===========
</TABLE>

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts receivable
consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Balance at beginning of period.............................. $ 88,027
Provision for doubtful accounts............................. 84,900
Amounts written off......................................... --
--------
Balance at end of period.................................... $172,927
========
</TABLE>

F-104
<PAGE> 178
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Consulting and noncompete agreements........................ $ 440,343
Other....................................................... 24,480
---------
464,823
Less -- Accumulated amortization............................ (226,304)
---------
$ 238,519
=========
</TABLE>

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Payable for consulting and noncompete agreement............. $ 43,515
Interest payable............................................ 15,482
Payroll taxes payable....................................... 3,181
Sales and use taxes payable................................. 106,265
Property taxes payable...................................... 3,974
Other taxes payable......................................... 24,698
--------
$197,115
========
</TABLE>

5. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL:

Common stock consisted of Tarr, Inc., no par value, 10,000 shares
authorized, 1,423.7 shares issued and outstanding; Tarr, Inc. of Arizona, no par
value, 100 and 900 shares voting and nonvoting, respectively, 100 voting and 300
nonvoting shares issued and outstanding, respectively; and Tarr Trucking, Inc.,
no par value, 100 shares authorized, 50 shares issued and outstanding.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Cash, Accounts Receivable and Payables

The carrying amount approximates market value due to the highly liquid
nature of these short-term investments.

Long-Term Debt, Line of Credit and Note Payable, Stockholder

The estimated market value of the Company's long-term debt, line of credit
and note payable, stockholder is based on quoted market prices or, where such
prices are not available, on estimated year-end interest rates of debt with the
same remaining average maturities and credit quality. The carrying amount
approximates market value at December 31, 1997.

F-105
<PAGE> 179
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

7. LONG-TERM DEBT:

Long-term debt includes the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Note payable to the city of Wilsonville in installments of
$5,823, including interest at 5.72% with final payment due
in May 2008. Secured by land improvements at the
Wilsonville Cardlock site................................. $ 94,110
Notes payable to Ford Motor Credit in installments of $632,
including interest at 8.75% with final payment due in
January 2003, secured by two vehicles..................... 37,948
Note payable to bank in installments of $4,447, including
interest at prime plus .75% with final payment due in
February 2000. Secured by accounts receivable and
inventory................................................. 88,387
Note payable in monthly installments of approximately
$5,700, including interest at 9.1% with final payment due
October 2004. Secured by property in Wilsonville,
Oregon.................................................... 345,114
Note payable in monthly installments of approximately
$6,175, including interest at 8.75% with final payment due
December 2000. Secured by accounts receivable, certain
equipment and inventory................................... 200,519
Note payable in monthly installments of approximately
$6,200, including interest at 8.75%, with final payment
due October 2000. Secured by certain equipment............ 186,899
Note payable in monthly installments of approximately
$4,200, including interest at 9.5%, with final payment due
July 2002. Secured by certain equipment................... 186,855
Note payable in monthly installments of approximately
$2,600, including interest at 8.65%, with the final
payment due February 2002................................. 109,964
Note payable in monthly installments of approximately
$2,600, including interest at 8%, with the final payment
due November 1999. Secured by certain property in
Portland, Oregon.......................................... 56,035
Note payable in monthly installments of approximately
$1,300, including interest at 10%, with the final payment
due August 2002. Secured by certain property in Vancouver,
Washington................................................ 57,515
Note payable in monthly installments of approximately
$6,000, including interest at 9%, with the final payment
due October 1999.......................................... 115,000
Chevron note payable with interest rate of 10%.............. 24,632
----------
1,502,978
Less -- Current maturities.................................. (392,041)
----------
Long-term debt.................................... $1,110,937
==========
</TABLE>

Long-term debt maturities as of December 31, 1997, are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 392,041
1999........................................................ 374,408
2000........................................................ 271,270
2001........................................................ 143,537
2002........................................................ 107,805
Thereafter.................................................. 213,917
----------
$1,502,978
==========
</TABLE>

F-106
<PAGE> 180
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

8. LINE OF CREDIT:

At December 31, 1997, the Company has a line of credit with a bank totaling
$2,850,000 and expiring February 28, 1999. The line of credit is payable upon
demand or upon the lender's determination that there has been a material adverse
change in the financial condition or management of the Company. The line of
credit bears interest at 1/2 percent plus prime. The line of credit is secured
by accounts receivable and inventories. The secured interest cannot exceed 80
percent of the recorded value of the accounts receivable and 50 percent of the
recorded value of inventory with a maximum inventory advance of $550,000.
Borrowings outstanding under the line of credit were $2,850,000 at December 31,
1997.

The line-of-credit agreement provides, among other things, that the Company
will maintain certain minimum levels of tangible net worth, working capital,
total liabilities to tangible net worth and debt coverage ratios, as defined in
the agreement. At December 31, 1997, the Company was in technical violation of
the negative covenants relating to the working capital, total liabilities to
tangible net worth and debt coverage ratios. The Company received a waiver from
the lender agreeing to waive the covenant violations until December 31, 1998.
The majority stockholder has also issued a personal guarantee to the bank during
the waiver period.

9. INCOME TAXES:

Income tax expense consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Current --
Federal................................................... $ 6,707
State..................................................... 1,895
-------
8,602
-------
Deferred --
Federal................................................... 18,862
State..................................................... 5,330
-------
24,192
-------
Total income tax expense.......................... $32,794
=======
</TABLE>

Actual income tax expense differs from income tax computed by applying the
United States federal statutory rate to income before provision for income taxes
as follows:

<TABLE>
<S> <C>
Statutory federal income tax................................ $ 128,617
S Corporation income........................................ (104,705)
State income tax, less federal benefit...................... 4,696
Nondeductible expenses...................................... 4,186
---------
$ 32,794
=========
</TABLE>

F-107
<PAGE> 181
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

effects of the temporary differences that give rise to the significant portions
of the deferred tax assets and liabilities are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Deferred income tax assets --
Net operating loss........................................ $ 13,834
Basis difference in inventory............................. 20,956
Other..................................................... 44,389
---------
Total deferred income tax assets.................. 79,179
---------
Deferred income tax liabilities --
Basis difference in property and equipment................ (84,894)
Other..................................................... (118,275)
---------
Total deferred income tax liabilities............. (203,169)
---------
Net deferred income tax liabilities............... $(123,990)
=========
</TABLE>

10. EMPLOYEE BENEFIT PLAN:

The Company has a profit-sharing plan for all employees. Employees are
eligible to participate in the plan after completing 12 months of employment and
are vested after six years of employment. The amount contributed by the Company
is discretionary. Profit-sharing contributions amounted to $18,650 for the year
ended December 31, 1997.

11. RELATED-PARTY TRANSACTIONS:

The Company paid cash bonuses of $9,240 to its majority stockholder and
$37,000 to its minority stockholder in 1997.

In 1997, the Company borrowed $99,444 from its majority stockholder. The
note bears an interest rate of 8.5 percent but specifies no payback term. It is
classified as long-term, as the stockholder has no current intention of calling
the note. The Company recorded $2,084 of interest expense related to this note
in 1997.

12. COMMITMENTS AND CONTINGENCIES:

Litigation

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statutes. The
Company is currently not named as a potentially responsible party under CERCLA
or similar state legislation with respect to its operations.

Leases

The Company is leasing an office building under a noncancelable operating
lease expiring in 2008. The lease agreement provides for annual payments of
approximately $42,000.

F-108
<PAGE> 182
TARR, INC. AND RELATED ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS

The Company is leasing a warehouse facility under a noncancelable operating
lease which expires in 1999. The lease agreement provides for annual payments of
approximately $43,000.

Additionally, the Company leases certain facilities, warehouses, equipment
and trucks under noncancelable operating leases. Rent expense was $238,345 for
the year ended December 31, 1997.

Future minimum payments under noncancelable operating leases are as
follows:

<TABLE>
<S> <C>
1998..................................................... $192,561
1999..................................................... 136,309
2000..................................................... 94,181
2001..................................................... 92,736
2002..................................................... 78,324
Thereafter............................................... 230,500
--------
$824,611
========
</TABLE>

13. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company did not have sales greater than 10 percent of total sales to
any one customer during the year ended December 31, 1997. The Company had
purchases from three vendors that were individually greater than 10 percent of
total purchases for 1997. The total percentage purchased from these three
vendors accounts for 59 percent of total purchases for 1997.

In addition, the Company grants credit, generally without collateral, to
its customers located primarily in the Northwest region. Consequently, the
Company is subject to potential credit risk related to changes in business and
economic factors within the region. However, management believes that its
contract acceptance, billing and collection policies are adequate to minimize
the potential credit risk.

14. SUBSEQUENT EVENTS:

In July 1998, the Company and its stockholders entered into a definitive
agreement with Chemical Logistics Corporation (Chemical) pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Chemical common stock, concurrent with the consummation of the initial
public offering (the Offering) of additional common stock of Chemical.

F-109
<PAGE> 183

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To A.C.C., Inc.:

We have audited the accompanying balance sheet of A.C.C., Inc., t/a
American Chemicals Co., Inc. (the Company), as of June 30, 1998, and the related
statements of income, stockholder's equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A.C.C., Inc., t/a American
Chemicals Co., Inc., as of June 30, 1998, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas

August 21, 1998

F-110
<PAGE> 184

A.C.C., INC. T/A AMERICAN CHEMICALS CO., INC.

BALANCE SHEET

<TABLE>
<CAPTION>
JUNE 30,
1998
----------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 341,596
Accounts receivable....................................... 2,098,244
Inventories............................................... 1,016,987
Other current assets...................................... 146,041
Deferred income taxes..................................... 12,980
----------
Total current assets.............................. 3,615,848
----------
PLANT AND EQUIPMENT, at cost................................ 81,434
Less -- Accumulated depreciation.......................... (50,178)
----------
31,256
----------
Other assets, net......................................... 4,426
----------
Total assets...................................... $3,651,530
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $1,240,489
Accrued liabilities....................................... 111,486
Container deposit refundable to customers................. 15,585
Due to affiliates......................................... 288,464
Income taxes payable...................................... 245,960
Note payable, employee.................................... 2,951
----------
Total current liabilities......................... 1,904,935
----------
DEFERRED INCOME TAXES....................................... 27,512
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 2,500 shares authorized, 1 share
issued and outstanding................................. 1,326,343
Retained earnings......................................... 392,740
----------
Total stockholder's equity........................ 1,719,083
----------
Total liabilities and stockholder's equity........ $3,651,530
==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-111
<PAGE> 185

A.C.C., INC. T/A AMERICAN CHEMICALS CO., INC.

STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1998
-----------
<S> <C>
SALES, net.................................................. $18,438,063
-----------
COSTS AND EXPENSES:
Cost of sales............................................. 15,194,920
Operating and delivery.................................... 1,044,808
Selling, general and administrative....................... 1,643,890
Depreciation.............................................. 9,048
-----------
Total costs and expenses.......................... 17,892,666
-----------
INCOME FROM OPERATIONS...................................... 545,397
OTHER INCOME, net........................................... (2,478)
-----------
INCOME BEFORE INCOME TAXES.................................. 542,919
INCOME TAXES................................................ 243,161
-----------
NET INCOME.................................................. $ 299,758
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-112
<PAGE> 186

A.C.C., INC. T/A AMERICAN CHEMICALS CO., INC.

STATEMENT OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1997............................ 1 $1,326,343 $ 92,982 $1,419,325
Net income................................... -- -- 299,758 299,758
-- ---------- -------- ----------
BALANCE, June 30, 1998............................ 1 $1,326,343 $392,740 $1,719,083
== ========== ======== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-113
<PAGE> 187

A.C.C., INC. T/A AMERICAN CHEMICALS CO., INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1998
----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 299,758
---------
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation........................................... 9,048
Increase in LIFO reserve............................... (8,186)
Provision for deferred income taxes.................... (13,718)
Changes in operating assets and liabilities --
Decrease in receivables.............................. 104,374
Increase in inventories.............................. (18,180)
Decrease in prepaid expenses and other............... 15,576
Decrease in accounts payable, accrued liabilities and
other............................................... (361,012)
Increase in income taxes payable..................... 204,200
---------
Total adjustments................................. (67,898)
---------
Net cash provided by operating activities......... 231,860
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable, employee...................... (53,240)
---------
Net cash used in financing activities............. (53,240)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 178,620
CASH AND CASH EQUIVALENTS, beginning of period.............. 162,976
---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 341,596
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Taxes.................................................. $ 7,683
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-114
<PAGE> 188

A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

Description of Business

A.C.C., Inc., t/a American Chemicals Co., Inc. (the Company), a Florida
corporation, is a domestic distributor of a broad line of organic and inorganic
chemicals. The Company sells its products primarily to customers in the
northeastern United States.

Basis of Presentation

The accompanying financial statements represent the financial position,
results of operations and cash flows for the Company, a wholly owned subsidiary
of Colt Corporation (Colt).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

Cash and cash equivalents include all liquid debt instruments purchased
with an original maturity of three months or less.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts based upon the
specific identification of accounts receivable where collection is no longer
probable. As of June 30, 1998, the Company did not have an allowance for
doubtful accounts as historical credit losses have been insignificant.

Inventories

Inventories are stated at lower of cost or market, with costs being
determined using the last-in, first-out (LIFO) method. Substantially all of the
Company's inventories consist of finished goods.

Plant and Equipment

Plant and equipment are recorded at cost and are being depreciated using
the straight-line method for financial reporting purposes and accelerated
methods for federal income tax purposes. Plant and equipment are reviewed for
impairment whenever events or circumstances provide evidence that suggests that
the carrying amounts of the plant and equipment may not be recoverable.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of plant and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of income.

Customer Deposits on Drums and Cylinders

F-115
<PAGE> 189
A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Revenue Recognition

The Company recognizes income on the accrual method. Under this method,
credit sales and the cost of such sales are recognized in full upon delivery of
product to the customer.

Income Taxes

The operations of the Company were included in the consolidated U.S.
federal income tax return of Colt. For purposes of these financial statements,
current and deferred income taxes have been provided on an "as if"
separate-return basis. As a member of a consolidated group, the Company is
jointly and severally liable for federal income taxes of the group.

Environmental Expenditures

Use of Estimates

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending June 30, 1999. Management is presently
evaluating what, if any, additional disclosures may be required when this
statement is implemented.

F-116
<PAGE> 190
A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORIES:

The following sets forth the balances of selected accounts assuming that
the first-in, first-out (FIFO) method had been used for costing all inventories:

<TABLE>
<CAPTION>
JUNE 30,
1998
----------
<S> <C>
Inventories................................................. $1,094,121
Working capital............................................. 1,633,779
Net income.................................................. 304,265
Retained earnings........................................... 315,506
</TABLE>

4. PLANT AND EQUIPMENT:

Plant and equipment consists of the following:

<TABLE>
<CAPTION>
ESTIMATED JUNE 30,
USEFUL LIVES 1998
------------ ---------
(IN YEARS)
<S> <C> <C>
Machinery and equipment................................ 5-7 $62,018
Furniture and fixtures................................. 7 19,416
-------
81,434
Less -- Accumulated depreciation....................... 50,178
-------
Total........................................ $31,256
=======
</TABLE>

5. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and a note payable. The carrying values of
the Company's financial instruments approximate fair value due to the short-term
nature of these investments.

6. INCOME TAXES:

Income tax expense consists of the following:

<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30,
1998
-----------
<S> <C>
Current --
Federal................................................... $207,300
State..................................................... 49,579
--------
256,879
========
Deferred --
Federal................................................... (12,002)
State..................................................... (1,716)
--------
(13,718)
--------
Total income tax expense.......................... $243,161
========
</TABLE>

F-117
<PAGE> 191
A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Actual income tax expense differs from income tax computed by applying the
United States federal statutory rate to income before provision for income taxes
as follows:

<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30,
1998
-----------
<S> <C>
Statutory federal income tax................................ $190,022
State income tax, less federal benefit...................... 31,111
Other....................................................... 22,028
--------
$243,161
========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
1998
---------
<S> <C>
Deferred income tax assets --
Accrued expenses.......................................... $ 17,297
State tax liability....................................... 1,149
--------
Total deferred income tax assets.................. 18,446
--------
Deferred income tax liabilities --
Basis difference in plant and equipment................... (7,979)
Other..................................................... (25,000)
--------
Total deferred income tax liabilities............. (32,979)
--------
Net deferred income tax liabilities............... ($14,533)
========
</TABLE>

7. EMPLOYEE BENEFIT PLANS:

401(k) Plan

On January 1, 1998, Colt established a defined contribution 401(k)
profit-sharing plan which covers substantially all of the Company's employees.
The plan provides for Colt to match one-half of the first 6 percent contributed
by each of the Company's employees. Total contributions by Colt on behalf of
Company employees under the plan were $8,055 for the year ended June 30, 1998.

Profit-Sharing Plan

Colt has a discretionary profit-sharing plan which covers substantially all
of the Company's employees. Contributions are determined at the discretion of
Colt's board of directors. There were no contributions made on behalf of the
Company's employees in the year ended June 30, 1998.

Other

For the year ended June 30, 1998, the Company made retirement benefit
payments of $49,992 to a former employee.

F-118
<PAGE> 192
A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. RELATED-PARTY TRANSACTIONS:

Included in operating and selling, general and administrative expenses for
the year ended June 30, 1998, is $405,018 which represents the Company's net
allocated share of certain operating and selling, general and administrative
costs paid by an affiliated entity. Operating and selling, general and
administrative costs are allocated based on the estimated level of effort
devoted to Colt's various subsidiary operations and the relative size of the
subsidiary (based on revenues and payroll). The Company's management believes
the method of allocating operating and selling general and administrative
expenses is reasonable. Total operating and selling, general and administrative
expenses reflected in the accompanying statement of income are reasonable when
compared with the total operating and selling, general and administrative costs
the Company would have incurred on a stand-alone basis.

Historical interest expense on amounts due to affiliates has not been
reflected in the accompanying financial statements. As of June 30, 1998, the
Company had net amounts due to affiliates of $288,464. Amounts due to affiliates
have no specific repayment terms and are noninterest-bearing. The average
balance on the amounts due to affiliates for the year ended June 30, 1998, was
$253,128.

The Company rents certain land, equipment and storage facilities owned by
related parties on a month-to-month basis. Total expenses related to these items
for the year ended June 30, 1998, was $253,128.

In July 1997, the Company borrowed $56,191 from an officer of the Company.
As of June 30, 1998, the loan balance was $2,951. The loan was
noninterest-bearing and will be repaid in full July 1998.

9. COMMITMENTS AND CONTINGENCIES:

Environmental Matters

The Company is subject to certain laws and regulations, such as the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation and Recovery Act and similar state statutes. The
Company is currently not named as a potentially responsible party under CERCLA
or similar state legislation with respect to its operations.

Litigation

The Company is not currently involved in any significant disputes or legal
actions; however, such actions could arise in the ordinary course of business.

Leases

The Company leases certain trucks under noncancelable operating leases.
Rent expense for such leases during the year ended June 30, 1998, was $138,340.
Future minimum payments under noncancelable operating leases are as follows:

<TABLE>
<S> <C>
Year ending June 30 --
1999...................................................... $106,816
2000...................................................... 106,816
2001...................................................... 8,901
--------
$222,533
========
</TABLE>

Union Contracts

Certain employees have union representation under a ratified agreement
through May 2000. The agreement covers compensation and benefits.

F-119
<PAGE> 193
A.C.C., INC., T/A AMERICAN CHEMICALS CO., INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. MAJOR CUSTOMERS AND RISK CONCENTRATION:

The Company made sales to one customer which exceeded 10 percent of total
sales during the year ended June 30, 1998. The sales to this customer comprised
approximately 14 percent of the Company's sales during the year ended June 30,
1998.

The Company had purchases from three suppliers which were greater than 10
percent of total purchases during the year ended June 30, 1998. The purchases
from such suppliers comprised approximately 50 percent of the Company's
purchases during the year ended June 30, 1998.

In addition, the Company grants credit, generally without collateral, to
its customers located primarily in the northeastern region. Consequently, the
Company is subject to potential credit risk related to changes in business and
economic factors within the area. However, management believes that its contract
acceptance, billing and collection policies are adequate to minimize the
potential credit risk.

11. COMMON STOCK:

The Company has 2,500 shares of no par common stock authorized and one
share issued and outstanding. The Company's sole stockholder is Colt.

F-120
<PAGE> 194

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Chemical Logistics Corporation:

We have audited the accompanying balance sheet of Chemical Logistics
Corporation as of December 31, 1997, and the related statements of operations,
cash flows and stockholders' equity for the period from inception (July 15,
1997) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chemical Logistics
Corporation as of December 31, 1997, and the results of its operations and its
cash flows for the period from inception (July 15, 1997) through December 31,
1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
July 17, 1998

F-121
<PAGE> 195

CHEMICAL LOGISTICS CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH........................................................ $ 1,000 $ 1,283
PROPERTY, PLANT AND EQUIPMENT, at cost...................... -- 30,309
Less -- Accumulated depreciation.......................... -- (1,867)
-------- -----------
-- 28,442
-------- -----------
DEFERRED OFFERING COSTS..................................... -- 2,039,707
-------- -----------
Total assets...................................... $ 1,000 $ 2,069,432
======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED LIABILITIES......................................... $ 16,592 $ 2,139,482
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued................................ -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized, 1,659,366 and 2,401,202 shares issued and
outstanding, respectively.............................. 1,000 1,336
Additional paid-in capital................................ -- 6,824,779
Retained deficit.......................................... (16,592) (6,896,165)
-------- -----------
Total stockholders' equity........................ (15,592) (70,050)
-------- -----------
Total liabilities and stockholders' equity........ $ 1,000 $ 2,069,432
======== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-122
<PAGE> 196

CHEMICAL LOGISTICS CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JULY 15, 1997) SIX MONTHS
THROUGH ENDED
DECEMBER 31, JUNE 30,
1997 1998
--------------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES.................................................... $ -- $ --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 16,592 6,877,706
DEPRECIATION................................................ -- 1,867
-------- -----------
LOSS BEFORE INCOME TAXES.................................... (16,592) (6,879,573)
INCOME TAXES................................................ -- --
-------- -----------
NET LOSS.................................................... $(16,592) $(6,879,573)
======== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-123
<PAGE> 197

CHEMICAL LOGISTICS CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION BY
BELLMEADE, July 15, 1997...... 1,659,366 $1,000 $ -- $ -- $ 1,000
NET LOSS........................ -- -- -- (16,592) (16,592)
--------- ------ ---------- ----------- -----------
BALANCE, December 31, 1997...... 1,659,366 1,000 -- (16,592) (15,592)
ISSUANCE OF ADDITIONAL SHARES
(unaudited)................... 741,836 336 6,824,779 -- 6,825,115
NET LOSS (unaudited)............ -- -- -- (6,879,573) (6,879,573)
--------- ------ ---------- ----------- -----------
BALANCE, June 30, 1998
(unaudited)................... 2,401,202 $1,336 $6,824,779 $(6,896,165) $ (70,050)
========= ====== ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-124
<PAGE> 198

CHEMICAL LOGISTICS CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JULY 15, 1997) SIX MONTHS
THROUGH ENDED
DECEMBER 31, JUNE 30,
1997 1998
--------------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(16,592) $(6,879,573)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation........................................... -- 1,867
Compensation expense related to issuance of stock to
CLC management........................................ -- 6,824,779
Changes in assets and liabilities --
Increase in deferred offering costs.................. -- (2,039,707)
Increase in accrued liabilities...................... 16,592 2,122,890
-------- -----------
Net cash provided by (used in) operating
activities..................................... -- 30,256
-------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... -- (30,309)
-------- -----------
Net cash used in investing activities............. -- (30,309)
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization.................................... 1,000 --
Issuance of additional shares to management............... -- 336
-------- -----------
Net cash provided by financing activities......... 1,000 336
-------- -----------
NET INCREASE IN CASH........................................ 1,000 283
CASH, beginning of period................................... -- 1,000
-------- -----------
CASH, end of period......................................... $ 1,000 $ 1,283
======== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-125
<PAGE> 199

CHEMICAL LOGISTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Chemical Logistics Corporation (the Company) was founded in July 1997, to
create a premier national chemical distribution company. The Company intends to
acquire, in separate transactions, nine entities engaged in the chemical
distribution business (the Acquisitions), complete the consummation of its
initial public offering (the Offering) and, subsequent to the Offering, continue
to acquire through merger or purchase similar companies to expand its national
and regional operations.

The Company has not conducted any operations, and all activities to date
have related to the Offerings and the Acquisitions. All expenditures of the
Company to date have been funded by its founders and current stockholders, on
behalf of the Company. The Company's founders and stockholders have also
committed to fund future organization expenses and offering costs. As of March
31, 1998, costs of approximately $35,421 have been incurred in connection with
the Offering, and such costs will be a reduction of the proceeds from the
Offering. The Company has treated these costs as deferred offering costs in the
accompanying balance sheet. The Company is dependent upon the Offering to
execute the Acquisitions and to repay its current stockholders for funding
deferred offering costs. There is no assurance that the Acquisitions or Offering
will be completed. The ability of the Company to generate future operating
revenues is dependent upon among other things, the ability of the Company to
integrate operations and computer systems, identify and integrate satisfactory
acquisition candidates and manage the effect of business growth and the need for
other key personnel.

2. STOCKHOLDERS' EQUITY:

Common Stock

The Company effected a 16.59366-for-1 stock split in July 1998 for each
share of common stock of the Company (Common Stock) then outstanding. The
effects of the Common Stock split have been retroactively reflected in the
balance sheets and in these notes.

In connection with its initial capitalization the Company issued 1,659,366
shares to partners of Bellmeade Capital Partners, L.L.C., the founder of the
Company, in July 1997. As of June 30, 1998, the Company has issued an additional
741,836 shares to management, directors and consultants of the Company. As a
result of the issuance of shares to the Company's management and directors for
nominal consideration, the Company recorded, for financial statement
presentation purposes, a nonrecurring, noncash compensation charge of $6.8
million, calculated based on the difference between the amount paid for the
shares and the offering price of the shares of $15.00 less a discount of 25
percent. A member of management who joined the Company subsequent to June 30,
1998, will be issued an additional 50,000 shares at $.01 per share. As a result
of the issuance of the 50,000 shares, the Company will record an additional
nonrecurring, noncash compensation charge of approximately $0.6 million.

1998 Stock Plan

The Plan was adopted by the board of directors and stockholders in June
1998. The purpose of the Plan is to provide officers, employees, directors and
consultants with additional incentives by increasing their ownership interests
in the Company. Individual awards under the Plan may take the form of one or
more of (a) either incentive stock options or nonqualified stock options
(NQSOs), (b) stock appreciation rights (SARs), (c) restricted stock, (d) phantom
stock, (e) bonus stock awards, (f) awards not otherwise provided for, the value
of which is based in whole or in part upon the value of the Common Stock, and
(g) cash awards that may or may not be based on the achievement of performance
goals (Awards). The performance goals for Awards, until changed, include target
levels of net income, cash flows, return on equity, profit margins, sales, stock
price, market share improvement, achievement of national accounts, reductions in
cost of goods sold and earnings per share.

F-126
<PAGE> 200
CHEMICAL LOGISTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Compensation Committee or the Company's chief executive officer or
president, to the extent such duties are delegated to either of them by the
Compensation Committee, will administer the Plan and select the individuals who
will receive awards and establish the terms and conditions of those awards. The
maximum number of shares of Common Stock that may be subject to outstanding
awards, determined immediately prior to grant of any award, may not exceed 15
percent of the aggregate number of shares of Common Stock then outstanding.
Shares of Common Stock which are attributable to awards which have expired,
terminated or been canceled or forfeited are available for issuance or use in
connection with future awards. The maximum number of shares of Common Stock with
respect to which any person may receive options and SARs in any calendar year is
500,000 shares. With respect to other forms of Awards, the maximum Award that
may be granted to any individual in any calendar year cannot exceed $4 million
(determined as of the date of the grant of the Award). Options and SARs may have
such exercise prices as the Compensation Committee, at its discretion,
determines.

The Plan will remain in effect for 10 years, unless earlier terminated by
the board of directors. The Plan may be amended by the board of directors or the
Compensation Committee without the consent of the stockholders of the Company,
except that any amendment will be subject to stockholder approval if required by
any federal or state law or regulation or by the rules of any stock exchange or
automated quotation system on which the Common Stock may then be listed or
quoted.

Each of the foregoing options will have an exercise price equal to the
initial public offering price per share. These options will vest at the rate of
20 percent per year, commencing on the first anniversary of grant and will
expire at the earliest of (a) 10 years from the date of grant, (b) three months
following termination of employment, other than due to death or disability or
(c) one year following a termination of employment due to death or disability.

The Plan also provides for (a) the automatic grant to each nonemployee
director serving at the consummation of the Offering of an option to purchase
10,000 shares, (b) the automatic grant to each individual who is first elected
or appointed as a nonemployee after the Offering of an option to purchase 10,000
shares on such election or appointment and (c) an automatic annual grant to each
nonemployee director of an option to purchase 5,000 shares following each annual
meeting of the stockholders on which such director remains a nonemployee
director. All such director options will have an exercise price per share equal
to the fair market value of the Common Stock on the date of grant, will vest six
months after grant and will expire on the earliest of (a) 10 years from the date
of grant or (b) one year following termination from the board.

Stock Purchase Plan

Prior to the closing of the Offering, the Company will adopt an employee
stock purchase plan (the Stock Purchase Plan) for employees of the Company.
Pursuant to the Stock Purchase Plan, the Company will pay any brokerage
commissions, transfer taxes and other fees associated with a participant's
purchase of Common Stock at the end of each six-month option period under the
plan. Additionally, purchases made pursuant to the Stock Purchase Plan will be
made at a 15 percent discount from (a) the then current market price of the
Common Stock or (b) its market price at the beginning of the applicable option
periods, whichever is lower. This discount will be funded by the Company. The
Stock Purchase Plan is intended to serve as a means of encouraging participants
to invest in Common Stock.

3. STOCK-BASED COMPENSATION:

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a new fair value
method of accounting for employee stock options or similar equity instruments
and the current method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25 under which compensation expense is recorded to the extent
that the fair market value
F-127
<PAGE> 201
CHEMICAL LOGISTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

of the related stock is in excess of the options exercise price at date of
grant. Entities electing to remain with the accounting in APB Opinion No. 25
must make pro forma disclosures of net income and earnings per share as if the
fair value method of accounting prescribed in SFAS No. 123 had been applied. The
Company will measure compensation expense attributable to stock options based on
the method prescribed in APB Opinion No. 25 and will provide the required pro
forma disclosure of net income and earnings per share, as applicable.

4. NEW ACCOUNTING PRONOUNCEMENTS:

SFAS No. 130 requires the presentation of comprehensive income in an
entity's financial statements. Comprehensive income represents all changes in
equity of an entity during the reporting period, including net income and
charges directly to equity which are excluded from net income. This statement is
not anticipated to have a material impact on the Company or its financial
disclosures.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." This
statement requires the reporting of expanded information of a company's
operating segments. It also expands the definition of what constitutes an
entity's operating segments. This statement is required to be adopted for fiscal
years beginning after December 15, 1997. The Company intends to adopt this
statement during its fiscal year ending December 31, 1997. Management is
presently evaluating what, if any, additional disclosures may be required when
this statement is implemented.

5. FOUNDING COMPANY ACQUISITIONS:

In July 1998, the Company signed definitive agreements pursuant to which
all outstanding shares of common stock of the following entities (the Founding
Companies) will be exchanged for cash and shares of the Common Stock, concurrent
with the consummation of the Offering. The entities to be acquired are as
follows:

- Robins
- Industrial
- Southwest Solvents
- Chemical Solvents
- Tilley
- Cron
- Brown
- Tarr
- American

The aggregate consideration that will be paid by the Company to acquire the
Founding Companies will be approximately $31.1 million in cash and 6,543,329
shares of Common Stock.

The Company will enter into employment agreements with each executive
officer of the Company which prohibits such officer from disclosing the
Company's confidential information and trade secrets and generally restricts
these individuals from competing with the Company for a period of time equal to
the greater of (i) two years after the date of the termination of employment
with the Company and (ii) five years following the consummation of the Offering.
Each of the agreements has an initial term of three years and provides for an
automatic annual extension at the end of its initial term and is terminable by
the Company for "cause" upon ten days' written notice and without "cause" by
either party upon thirty days' written notice. All employment agreements provide
that if the officer's employment is terminated by the Company without "cause,"
the officer will be entitled to receive his base salary (at the rate then in
effect) for the greater of (i) the time period remaining under the initial term
of the agreement or (ii) one year. In addition, the time

F-128
<PAGE> 202
CHEMICAL LOGISTICS CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

period during which such officer is restricted from competing with the Company
will be shortened to one year from the date of termination.

6. EVENTS SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

The Company has recently initiated negotiations with a group of commercial
banks to provide the Company with a credit facility to be used for acquisitions,
working capital and other general corporate purposes and may result in financial
covenants that limit the Company's operations and financial flexibility. There
can be no assurance that the Company will be able to obtain such financing if
and when it is needed or that, if available, it will be available on terms the
Company deems acceptable.

F-129
<PAGE> 203

- ------------------------------------------------------
- ------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...........................
Risk Factors.................................
The Company..................................
Use of Proceeds..............................
Dividend Policy..............................
Capitalization...............................
Dilution.....................................
Selected Financial Data......................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................
Business.....................................
Management...................................
Certain Transactions.........................
Principal Stockholders.......................
Description of Capital Stock.................
Shares Eligible for Future Sale..............
Underwriting.................................
Legal Matters................................
Experts......................................
Additional Information.......................
Index to Financial Statements................
</TABLE>

------------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED
HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

3,200,000 SHARES
(LOGO)

CHEMICAL LOGISTICS
CORPORATION
COMMON STOCK
-------------------

PROSPECTUS
-------------------
BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE

SANDERS MORRIS MUNDY
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 204

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 17,370
NASD Filing Fee............................................. 6,388
Listing Fee................................................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing Expenses........................................... *
Transfer Agent's Fees....................................... *
Miscellaneous............................................... *
----------
Total............................................. $5,400,000
==========
</TABLE>

- ---------------

(1) The amounts set forth above, except for the SEC and NASD fees, are in each
case estimated.

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Subsection (a) of section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability

II-1
<PAGE> 205

asserted against him and incurred by him in any such capacity, or arising out of
his status as such whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.

Article Eighth of the Company's Amended and Restated Certificate of
Incorporation states that:

No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article Eighth shall not eliminate or limit the liability of a director to
the extent provided by applicable law (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article Eighth shall apply to,
or have any effect on, the liability or alleged liability of any director
of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal. If the DGCL is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted
by the DGCL, as so amended.

In addition, Article VI of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.

The Company intends to enter into indemnification agreements with each of
its executive officers and directors.

Under Section of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify, under certain
conditions, the Company, its officers and directors, and persons who control the
Company within the meaning of the Securities Act of 1933, as amended, against
certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is certain information concerning all sales of securities
by the Company during the past three years that were not registered under the
Securities Act of 1933. The description presented below gives effect to the
Company's recent 16.59366 for one stock split effected in June 1998.

(a) On July 15, 1997, the Company issued 1,659,366 shares of its
Common Stock at an aggregate price of $1,000 to Lorne D. Bain, John D.
Rogers, and J. Chris Brewster.

(b) On March 12, 1998, the Company issued 465,121 shares of its Common
Stock to certain executive officers, key employees and consultants at an
aggregate price of $280.29.

(c) On April 1, 1998, the Company issued 19,083 shares of its Common
Stock to certain executive officers at an aggregate price of $11.50.

(d) On April 10, 1998, the Company issued 188,571 shares of its Common
Stock to Bruce W. Wilkinson at a price of $113.64.

(e) On April 15, 1998, the Company issued 12,810 shares of its Common
Stock to Bruce W. Wilkinson at a price of $7.72.

II-2
<PAGE> 206

(f) On May 29, 1998, the Company issued 36,290 shares of its Common
Stock to Scott R. Creasman at a price of $21.87.

(g) On June 16, 1998, the Company issued 19,962 shares of its Common
Stock to Rodney R. Proto at a price of $12.03.

(h) On June 20, 1998, the Company issued 17 shares of its Common Stock
to H. Lawrence Gardner, Jr. at a price of $0.01.

(i) On July 19, 1998, the Company issued 50,000 shares of its Common
Stock to Charles Vetters at a price of $30.13.

(j) See "Certain Transactions" for a discussion of the issuance of
shares of Common Stock in connection with the Acquisitions.

These transactions were completed without registration under the Securities
Act of 1933 in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
+1.1 -- Form of Underwriting Agreement.
*2.1 -- Form of Stock Purchase Agreement dated as of July 20,
1998 by and among the parties listed in the Schedule to
Form of Stock Purchase Agreement attached hereto.
*3.1 -- Amended and Restated Certificate of Incorporation.
*3.2 -- Bylaws.
+4.1 -- Specimen Common Stock Certificate.
**5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
**10.1 -- Form of Employment and Non-Competition Agreement.
**10.2 -- Form of Officer and Director Indemnification Agreement.
**10.3 -- Chemical Logistics Corporation 1998 Stock Plan.
**10.4 -- Chemical Logistics Corporation Stock Purchase Plan.
**21.1 -- List of Subsidiaries.
**23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
**23.2 -- Consent of Arthur Andersen LLP.
*24.1 -- Powers of Attorney (included in signature page set forth
on page II-5).
*27 -- Financial Data Schedule.
*99.1 -- Consents of Directors to serve.
</TABLE>

- ---------------

+ To be filed by amendment.

* Previously filed.

** Filed herewith.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled

II-3
<PAGE> 207

by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned registrant hereby undertakes:

(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.

II-4
<PAGE> 208

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on October 13, 1998.

CHEMICAL LOGISTICS CORPORATION

By: /s/ FRANCIS S. KALMAN

----------------------------------

Francis S. Kalman,

Executive Vice President,

Chief Financial Officer and
Secretary

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES INDICATED ON OCTOBER 13, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

BRUCE W. WILKINSON* Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Bruce W. Wilkinson

LORNE D. BAIN* President and Director
- -----------------------------------------------------
Lorne D. Bain

/s/ FRANCIS S. KALMAN Executive Vice President, Chief Financial
- ----------------------------------------------------- Officer and Secretary (Principal Financial
Francis S. Kalman Officer)

SCOTT R. CREASMAN* Vice President -- Controller (Principal
- ----------------------------------------------------- Accounting Officer)
Scott R. Creasman

*By: /s/ FRANCIS S. KALMAN
------------------------------------------------
(Francis S. Kalman, pursuant to a power of attorney
filed with this Registration Statement No. 333-59743,
filed with the Securities and Exchange Commission on
July 24, 1998)
</TABLE>

II-5
<PAGE> 209

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+1.1 -- Form of Underwriting Agreement.
*2.1 -- Form of Stock Purchase Agreement dated as of July 20,
1998 by and among the parties listed in the Schedule to
Form of Stock Purchase Agreement attached hereto.
*3.1 -- Amended and Restated Certificate of Incorporation.
*3.2 -- Bylaws.
+4.1 -- Specimen Common Stock Certificate.
**5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
**10.1 -- Form of Employment and Non-Competition Agreement.
**10.2 -- Form of Officer and Director Indemnification Agreement.
**10.3 -- Chemical Logistics Corporation 1998 Stock Plan.
**10.4 -- Chemical Logistics Corporation Stock Purchase Plan.
**21.1 -- List of Subsidiaries.
**23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
**23.2 -- Consent of Arthur Andersen LLP.
*24.1 -- Powers of Attorney (included in signature page set forth
on page II-5).
*27 -- Financial Data Schedule.
*99.1 -- Consents of Directors to serve.
</TABLE>

- ---------------

+ To be filed by amendment.

* Previously filed.

** Filed herewith.

<PAGE> 1
EXHIBIT 5.1

[ANDREWS & KURTH L.L.P. LETTERHEAD]

October 13, 1998

Chemical Logistics Corporation
808 Travis, Suite 1135
Houston, Texas 77002

Gentlemen:

We have acted as counsel to Chemical Logistics Corporation, a
Delaware corporation (the "Company"), in connection with the preparation of its
Registration Statement on Form S-1 (Registration No. 333-59743) (the
"Registration Statement"), filed by the Company under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the offering and sale
by the Company of up to 3,200,000 shares of its common stock, par value $0.01
per share (the "Common Stock"). This opinion also relates to any registration
statement of the Company relating to the registration of additional shares of
Common Stock pursuant to Rule 462(b) under the Securities Act.

We have examined originals or copies of (i) the Second Amended
and Restated Certificate of Incorporation of the Company; (ii) the Bylaws of the
Company, as amended; (iii) certain resolutions of the Board of Directors and the
stockholders of the Company; and (iv) such other documents and records as we
have deemed necessary and relevant for purposes hereof. We have relied upon
certificates of public officials and officers of the Company as to certain
matters of fact relating to this opinion and have made such investigations of
law as we have deemed necessary and relevant as a basis hereof. We have not
independently verified any factual matter relating to this opinion.

We have assumed the genuineness of all signatures, the
authenticity of all documents, certificates and records submitted to us as
copies, and the conformity to original documents, certificates and records of
all documents, certificates and records submitted to us as copies.

Based upon the foregoing, and subject to the limitations and
assumptions set forth herein, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that:

<PAGE> 2

Chemical Logistics Corporation
October 13, 1998
Page 2

1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.

2. The issuance of the Common Stock has been duly authorized,
and when issued and delivered by the Company against payment therefor as
described in the Registration Statement, such shares will be validly issued,
fully paid and nonassessable.

The foregoing opinion is based on and is limited to the
General Corporation Law of the State of Delaware and the relevant laws of the
United States of America, and we render no opinion with respect to the laws of
any other jurisdiction.

We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as Exhibit 5.1 to the Registration Statement
and to the reference to this firm under the caption "Legal Matters" in the
prospectus contained in the Registration Statement. By giving such consent, we
do not admit that we are included within the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and regulations
issued thereunder. This opinion may be incorporated by reference in a
registration statement of the Company relating to the registration of additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act, in
which case the opinions expressed herein will apply to the additional shares
registered thereunder.

Very truly yours,

/s/ Andrews & Kurth L.L.P.

<PAGE> 1
EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") by and among Chemical
Logistics Corporation, a Delaware corporation ("CLC"), [Founding Company], a
corporation and a wholly owned subsidiary of CLC (the "Company") and
("Executive") is hereby entered into effective as of the date of the
consummation of the initial public offering ("Offering") of the common stock of
CLC (the "Effective Date"). References herein to "CLC" shall be deemed to
include all present and future operating subsidiaries of CLC.

RECITALS

The following statements are true and correct:

As of the Effective Date, the Company and CLC will be engaged primarily
in the providing of chemical distribution services and logistics.

In the course of his employment with the Company, Executive will become
familiar with and aware of information as to CLC's and the Company's customers
and specific manner of doing business, including the processes, techniques and
trade secrets utilized by the Company and CLC, and future plans with respect
thereto, all of which have been and will be established and maintained at great
expense to the Company and CLC. This information is a trade secret and
constitutes the valuable goodwill of the Company and CLC.

Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:

AGREEMENTS

1. EMPLOYMENT AND DUTIES

(a) The Company hereby employs Executive as . As such, Executive shall
have responsibilities, duties and authority reasonably accorded to, expected of
and consistent with Executive's position as __________________________________
of the Company and will report to the _____________________________ of CLC.
Executive hereby accepts this employment upon the terms and conditions herein
contained and, subject to paragraph l(c), agrees to provide full-time services
to promote and further the business and interests of the Company and its
affiliates.

(b) Executive shall faithfully adhere to, execute and fulfill all
lawful policies established by the Company.

<PAGE> 2

(c) Except as set forth on Schedule l(c) hereto, Executive shall not,
during the term of his employment hereunder, engage in any other business
activity pursued for gain, profit or other pecuniary advantage if such activity
interferes in any material respect with Executive's duties and responsibilities
hereunder. The foregoing limitations shall not be construed as prohibiting
Executive from making personal investments in such form or manner as will
neither require his services in the operation or affairs of the companies or
enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.

(d) Executive shall be entitled to vacation in accordance with the
policies of the Company.

2. COMPENSATION

For all services rendered by Executive, the Company shall compensate
Executive as follows:

(a) Base Salary. The base salary payable to Executive during the term
shall be $_______________ per year, payable in accordance with the Company's
payroll procedures for officers, but not less frequently than monthly. After the
first full year of employment hereunder, such base salary may be increased from
time to time, at the discretion of the Board of CLC, in light of the Executive's
responsibilities and performance.

(b) Incentive Bonus Plan. It is CLC's intent to develop a written
Incentive Bonus Plan setting forth the criteria under which executives of CLC
will be eligible to receive year-end bonus awards. In the event that the
Incentive Bonus Plan is established, Executive shall be entitled to participate
in such plan in the same manner as similarly situated executives of CLC. No
Incentive Bonus Plan payments will be made for the twelve (12) month operating
period following the Offering.

(c) Executive Perquisites, Benefits and Other Compensation. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:

(i) Reimbursement for all business travel and other
out-of-pocket expenses (including those costs to maintain any
professional certifications held or obtained by Executive) reasonably
incurred by Executive in the performance of his duties pursuant to this
Agreement and in accordance with the Company's policy for executives of
the Company. All such expenses shall be appropriately documented in
reasonable detail by Executive upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's
expense reporting policy.

(ii) Executive shall, subject to the satisfaction of any
general eligibility criteria, be eligible to participate in all
compensation and benefit plans and programs as are

<PAGE> 3

maintained from time to time for executives of CLC.

(iii) The Company shall provide Executive with such other
perquisites as may be deemed appropriate for Executive by the
Compensation Committee of the Board of CLC.

3. NON-COMPETITION AGREEMENT

(a) Executive recognizes that the Company's willingness to enter into
this Agreement is based in material part on Executive's agreement to the
provisions of this paragraph 3 and that Executive's breach of the provisions of
this paragraph 3 could materially damage CLC and the Company. Subject to the
further provisions of this Agreement, Executive shall not, during the term of
his employment with the Company, and for a period of two years immediately
following the termination of such for any reason whatsoever, and in any event
for a period of five years immediately following consummation of the Offering,
except as may be set forth herein, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company, partnership,
corporation or business of whatever nature:

(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with any products or services sold by CLC or the
Company during the three year period prior to the termination of
Executive's employment with the Company within 100 miles of where any
CLC entity conducts business, including any territory serviced by the
Company during the term of Executive's employment (the "Territory");

(ii) call upon any person who is, at that time, an executive
of CLC for the purpose or with the intent of enticing such executive
away from or out of the employ of CLC;

(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
CLC within the Territory for the purpose of soliciting or selling any
products or services in direct competition with any products or
services sold by CLC during the three year period prior to the
termination of Executive's employment with the Company within the
Territory;

(iv) call upon any prospective acquisition candidate, on
Executive's own behalf or on behalf of any competitor, which candidate
was, to Executive's knowledge after reasonable inquiry, either called
upon by CLC or for which CLC made an acquisition analysis, for the
purpose of acquiring such entity; or disclose customers, whether in
existence or proposed, of CLC to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to
the extent that CLC has in the past disclosed such information to the
public for valid business reasons.

<PAGE> 4

Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Executive from acquiring as an investment (i) not more than 2% of
the capital stock of a competing business, whose stock is traded on a national
securities exchange, the Nasdaq Stock Market or on an over-the-counter or
similar market or (ii) not more than 5% of the capital stock of a competing
business whose stock is not publicly traded.

(b) Because of the difficulty of measuring economic losses to CLC as a
result of a breach of the covenant set forth in paragraph 3(a), and because of
the immediate and irreparable damage that could be caused to CLC and for which
it would have no other adequate remedy, Executive agrees that foregoing covenant
may be enforced by CLC, in the event of breach by him, by injunctions and
restraining orders. Executive further agrees to waive any requirement for CLC's
securing or posting of any bond in connection with such remedies.

(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of CLC on the date of the execution of this Agreement
and the current plans of CLC but it is also the intent of CLC, the Company and
Executive that such covenants be construed and enforced in accordance with the
changing activities, business and locations of CLC throughout the term of this
covenant, whether before or after the date of termination of the employment of
Executive, unless the Executive was conducting such new business prior to CLC
conducting such new business. For example, if, during the term of this
Agreement, CLC engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Executive will be precluded
from soliciting the customers or executives of such new activities or business
or from such new location and from directly competing with such new business
within 100 miles of its then-established operating location(s) through the term
of this covenant, unless the Executive was conducting such new business prior to
CLC conducting such new business.

(d) It is further agreed by the parties hereto that, in the event that
Executive shall cease to be employed hereunder and shall enter into a business
or pursue other activities not in competition with the activities of CLC or
similar activities or business in locations the operation of which, under such
circumstances, does not violate clause (a)(i) of this paragraph 3, and in any
event such new business, activities or location are not in violation of this
paragraph 3 or of Executive's obligations under this paragraph 3, if any,
Executive shall not be chargeable with a violation of this paragraph 3 if CLC
shall thereafter enter the same, similar or a competitive (i) business, (ii)
course of activities or (iii) location, as applicable.

(e) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby

<PAGE> 5

be reformed.

(f) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against CLC, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by CLC of such covenants; provided, however, that the covenants
pursuant to this paragraph 3 shall be subject to the provisions of paragraph
4(f). It is specifically agreed that the periods of two years (subject to the
further provisions of this Agreement) following termination of employment, and
five years following the consummation of the Offering, stated at the beginning
of this paragraph 3, during which the agreements and covenants of Executive made
in this paragraph 3 shall be effective, shall be computed by excluding from such
computation any time during which Executive is determined to be in violation of
any provision of this paragraph 3.

(g) CLC and the Executive hereby agree that this covenant is a material
and substantial part of this transaction.

4. TERM; TERMINATION; RIGHTS ON TERMINATION

The term of this Agreement shall begin on the Effective Date and
continue for three (3) years (the "Term"), and, unless terminated sooner as
herein provided, shall continue thereafter on a year-to-year basis on the same
terms and conditions contained herein. This Agreement and Executive's employment
may be terminated in any one of the following ways:

(a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate. Any declared
but unpaid bonuses which the Executive is entitled to receive under CLC's
Incentive Bonus Plan shall be paid.

(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Executive shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Executive's employment
hereunder provided Executive is unable to resume his full-time duties at the
conclusion of such notice period. Also, Executive may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Executive shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Executive shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Executive or
Executive's doctor and such doctor shall have concurred in the conclusion of
Executive's doctor. In the event this Agreement is terminated as a result of
Executive's disability, Executive shall

<PAGE> 6

receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Initial Term of this Agreement or
for twelve (12) months, whichever amount is greater.

(c) Good Cause. The Company may terminate this Agreement ten (10) days
after written notice to Executive for good cause, which shall be: (1)
Executive's material and irreparable breach of this Agreement; (2) Executive's
gross negligence or willful misconduct in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of Executive's material duties and responsibilities
hereunder; (3) Executive's dishonesty, fraud or misconduct with respect to the
business or affairs of the Company which materially and adversely affects the
operations or reputation of the Company (monetarily or otherwise); (4)
Executive's conviction of a felony crime or involving moral turpitude; or (5)
chronic alcohol abuse or illegal drug abuse by Executive which is determined by
the Board following a reasonable investigation to materially impair the
Executive's ability to perform his duties and responsibilities. In the event of
a termination for good cause, as enumerated above, Executive shall have no right
to any severance compensation.

(d) Without Cause. At any time after the commencement of employment,
the Company or Executive may, without cause, terminate this Agreement and
Executive's employment, effective thirty (30) days after written notice is
provided to the other party. Should Executive be terminated by the Company
without cause, Executive shall receive from the Company, in the form of a lump
sum payment, the base salary at the rate then in effect for whatever time period
is remaining under the Initial Term of this Agreement or for twelve (12) months,
whichever amount is greater, plus any declared but unpaid bonuses which the
Executive is entitled to receive under CLC's Incentive Bonus Plan. If, at the
time of any termination without cause, Executive has served for at least nine
months since the previous year end on which annual compensation is based and has
satisfied the criteria and performance objectives set forth in CLC's Incentive
Bonus Plan for which a bonus for Executive for the then current year would be
based, then, if a bonus payable to other executives for the then current year is
subsequently declared, Executive shall be entitled to receive a bonus on a
prorated basis based on Executive's satisfaction of such criteria and
performance objectives. Further, any termination without cause by the Company
shall operate to shorten the periods set forth in paragraph 3(a) and during
which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Executive resigns or otherwise terminates his
employment without cause pursuant to this paragraph 4(d), Executive shall
receive no severance compensation.

(e) Change in Control of CLC. This Agreement may be considered
terminated upon a "change in control", as defined in paragraph 9 below and any
payments due shall be in the form of a lump sum payment.

(f) Effect of Termination. Upon termination of this Agreement for any
reason provided above, Executive shall be entitled to receive all compensation
earned and all benefits and reimbursements due through the effective date of
termination. Additional compensation subsequent

<PAGE> 7

to termination, if any, will be due and payable to Executive only to the extent
and in the manner expressly provided above or in paragraph 9. All other rights
and obligations of CLC, the Company and Executive under this Agreement shall
cease as of the effective date of termination, except that CLC's and the
Company's obligations under paragraphs 4 and 14 herein and Executive's
obligations under paragraphs 3, 5, 6, 7, 8, 10 and 13 herein shall survive such
termination in accordance with their terms.

If termination of Executive's employment arises out of the Company's
failure to pay Executive on or before the date due the amounts to which he is
entitled under this Agreement or as a result of any other breach of this
Agreement by CLC or the Company, as determined pursuant to the provisions of
paragraph 18 below, the Company shall pay all amounts and damages to which
Executive may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Executive
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply during such time as any amounts determined pursuant to the
provisions of paragraph 18 below to be payable by the Company under this
Agreement remain unpaid or CLC or the Company is determined pursuant to the
provisions of paragraph 18 below to be in breach of any other provision of this
Agreement, and shall terminate in the event this Agreement is terminated as a
result of a breach by CLC or the Company.

5. RETURN OF COMPANY PROPERTY

All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Executive by or on behalf of CLC or the Company or their representatives,
vendors or customers which pertain to the business of CLC or the Company shall
be and remain the property of CLC or the Company, as the case may be, and be
subject at all times to their discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of CLC or
the Company which is collected by Executive shall be delivered promptly to the
Company without request by either CLC or the Company upon termination of
Executive's employment.

6. INVENTIONS

Executive shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one year thereafter, if conceived during employment, and which are
directly related to the business or activities of CLC and which Executive
conceives as a result of his employment by the Company. Executive hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein. The
Company shall immediately reimburse Executive for all expenses

<PAGE> 8

incurred by Executive in complying with the provisions of this paragraph 6.

7. TRADE SECRETS

Executive agrees that he will not, during or after the term of this
Agreement, disclose the specific terms of CLC's relationships or agreements with
its respective significant vendors or customers or any other significant and
material trade secret of CLC, whether in existence or proposed, to any person,
firm, partnership, corporation or business for any reason or purpose whatsoever.

8. CONFIDENTIALITY

(a) Executive acknowledges and agrees that all Confidential Information
(as defined below) of CLC is confidential and a valuable, special and unique
asset of CLC that gives CLC an advantage over its actual and potential, current
and future competitors. Executive further acknowledges and agrees that Executive
owes CLC and the Company a duty of loyalty and care as to all Confidential
Information to prevent unauthorized disclosure or unauthorized use, that certain
Confidential Information constitutes "trade secrets" under applicable laws and,
that unauthorized disclosure or unauthorized use of CLC's Confidential
Information would irreparably injure CLC.

(b) Both during the term of Executive's employment and after the
termination of Executive's employment for any reason (including wrongful
termination), Executive shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Executive.
Except as necessary in the performance of Executive's duties under this
Agreement, Executive shall not, at any time (either during or after the term of
Executive's employment), disclose any Confidential Information to any person or
entity (except to other Executives of CLC who have a need to know the
information in connection with the performance of their employment duties), or
copy, reproduce, modify, decompile or reverse engineer any Confidential
Information, or remove any Confidential Information from the Company's premises,
without the prior written consent of the Board, or permit any other person to do
so. Executive shall take reasonable precautions, at the Company's expense, to
protect the physical security of all documents and other material containing
Confidential Information (regardless of the medium on which the Confidential
Information is stored). This Agreement applies to all Confidential Information,
whether now known or later to become known to Executive.

(c) Upon the termination of Executive's employment with the Company for
any reason, and upon request of the Company at any other time but without
materially interfering with Executive's ability to perform his duties under this
Agreement, Executive shall promptly surrender and deliver to the Company all
documents and other written material of any nature containing or pertaining to
any Confidential Information and shall not retain any such document or other
material. Within five days of any such request, Executive shall certify to the
Company in writing that all such

<PAGE> 9

materials have been returned.

(d) As used in this Agreement, the term "Confidential Information"
shall mean any information or material known to or used by or for CLC (whether
or not owned or developed by CLC and whether or not developed by Executive) that
is not generally known to persons in the chemical distribution services and
logistics business or such business as CLC shall have entered into. Confidential
information includes, but is not limited to, the following: all trade secrets of
CLC; all information that CLC has marked as confidential or has otherwise
described to Executive (either in writing or orally) as confidential; all
nonpublic information concerning CLC's products, services, prospective products
or services, research, product designs, prices, discounts, costs, marketing
plans, marketing techniques, market studies, test data, customers, customer
lists and records, suppliers and contracts; all CLC business records and plans;
all CLC personnel files; all financial information of or concerning CLC; all
information relating to operating system software, application software,
software and system methodology, hardware platforms, technical information,
inventions, computer programs and listings, source codes, object codes,
copyrights and other intellectual property; all technical specifications; any
proprietary information belonging to CLC; all computer hardware or software
manuals; all training or instruction manuals; and all data and all computer
system passwords and user codes.

9. CHANGE IN CONTROL

(a) Unless he elects to terminate this Agreement pursuant to this
paragraph 9, Executive understands and acknowledges that CLC may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of CLC and the Company
hereunder.

(b) In the event of a pending Change in Control wherein CLC and
Executive have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of CLC's business
and/or assets that such successor is willing as of the closing to assume and
agrees to perform CLC's and the Company's obligations under this Agreement in
the same manner and to the same extent that CLC and the Company are hereby
required to perform, then such Change in Control shall be deemed to be a
termination of this Agreement by CLC and the Company without cause and the
applicable portions of paragraph 4(d) will apply; however, under such
circumstances, the amount of the severance payment due to Executive shall be
triple the amount calculated under the terms of paragraph 4(d), except that for
purposes of this paragraph 9(b) only, the Incentive Bonus Plan payment amount
shall be the average of the bonus paid in the three prior years, but in any
event not less than seventy-five percent (75%) of Executive's then current base
salary and the non-competition provisions of paragraph 3 shall not apply
whatsoever . Health and all welfare benefits shall be extended for a three (3)
year term at the Company's expense.

<PAGE> 10

elect to terminate Executive's employment upon the effective date of such Change
in Control by providing written notice to the Company at least three (3)
business days prior to the closing of the transaction (or ten (10) business days
after receipt of notice of such transaction, whichever is later) giving rise to
the Change in Control. In such case, the applicable provisions of paragraph
4(d), except that for purposes of this paragraph 9(c) only, the Incentive Bonus
Plan payment amount shall be the average of the bonus paid in the three prior
years, but in any event not less than seventy-five percent (75%) of Executive's
then current base salary, will apply; however, the amount of the severance
payment due Executive pursuant to this paragraph 9(c) shall be double the amount
calculated under the terms of paragraph 4(d). Health and welfare benefits shall
be extended for a two (2) year term at the Company's expense.

(d) If, on or within one year following the effective date of a Change
in Control, the Company (a) terminates Executive's employment other than for
cause, or (b) reduces Executive's salary, duties or authority which Executive
elects not to accept, then Executive shall terminate and receive from the
Company the same amount and health and welfare benefits which Executive would
have received pursuant to a termination under paragraph 9(b) above. If the
Company requires Executive to relocate from ___________ and Executive elects not
to relocate, then Executive shall terminate and receive from the Company the
same amount and health and welfare benefits which Executive would have received
pursuant to a termination under paragraph 9(c) above.

(e) A "Change in Control" shall be deemed to have occurred if:

(i) any person, other than CLC or an executive benefit plan of
CLC, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of CLC (not including the voting
securities of any subsidiary of CLC) and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial
Owner of voting securities representing 50% or more of the total voting
power of all of the then-outstanding voting securities of CLC.

(ii) the individuals (A) who, as of the effective date of
CLC's registration statement with respect to its initial public
offering, constitute the Board of Directors of CLC (the "Original
Directors") or (B) who thereafter are elected to the Board of Directors
of CLC and whose election, or nomination for election, to the Board of
Directors of CLC was approved by a vote of at least two-thirds (2/3) of
the Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election)
or (C) who are elected to the Board of Directors of CLC and whose
election, or nomination for election, to the Board of Directors of CLC
was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
Directors"), cease for any reason to constitute a majority of the
members of the Board of Directors of CLC;

<PAGE> 11

(iii) the stockholders of CLC shall approve a merger,
consolidation, recapitalization, or reorganization of CLC a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of
the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of CLC immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or

(iv) the stockholders of CLC shall approve a plan of complete
liquidation of CLC or an agreement for the sale or disposition by CLC
of all or a substantial portion of CLC's assets (i.e., 50% or more of
the total assets of CLC).

(f) Executive must be notified in writing by CLC at any time that CLC
anticipates that a Change in Control may take place.

(g) If it shall be finally determined that any payment made or benefit
provided to Executive in connection with a Change in Control of CLC is subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, or any successor thereto, the Company shall pay Executive an amount
of cash (the "Additional Amount") such that the net amount received by Executive
after paying all applicable taxes (and any interest and penalties imposed with
respect thereto) on such Additional Amount shall be equal to the amount that
Executive would have received if Section 4999 were not applicable.

10. NO PRIOR AGREEMENTS

Executive hereby represents and warrants to CLC and the Company that
the execution of this Agreement by Executive and his employment by the Company
and the performance of his duties hereunder will not violate or be a breach of
any agreement with a former employer, client or any other person or entity.
Further, Executive agrees to indemnify CLC and/or the Company for any claim,
including, but not limited to, reasonable attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against CLC and/or the Company based upon or arising out
of the final nonappealable determination of a court of competent jurisdiction
that Executive has breached or violated the terms of any non-competition
agreement, invention or secrecy agreement between Executive and a third party
which was in existence as of the date of this Agreement.

<PAGE> 12

11. ASSIGNMENT: BINDING EFFECT

Executive understands that he has been selected for employment by the
Company on the basis of his personal qualifications, experience and skills.
Executive agrees, therefore, that he cannot assign all or any portion of his
performance under this Agreement. Subject to the preceding two sentences and the
express provisions of paragraph 12 below, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. This Agreement
may not be assigned by CLC or the Company except in a Change of Control pursuant
to paragraph 9.

12. NO MITIGATION OR OFFSET

Executive shall not be required to mitigate the amount of any Company
payment provided for in this Agreement by seeking other employment or otherwise.
The amount of any payment required to be paid to Executive by the Company
pursuant to this Agreement shall not be reduced by any amounts that are owed to
the Company or CLC by Executive, or by any setoff, counterclaim, recoupment,
defense or other claim, right or action.

13. RELEASE

Notwithstanding anything in this Agreement to the contrary, Executive
shall not be entitled to receive any payments pursuant to this Agreement (other
than payments pursuant to paragraph 2 above) unless Executive has executed (and
not revoked) a general release of all claims Executive may have against CLC, the
Company and their affiliates in a form of such release reasonably acceptable to
CLC.

14. INDEMNIFICATION

In the event Executive is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
environmental or investigative (other than an action by CLC or the Company
against Executive), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Executive against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Executive in connection
therewith. In the event that both Executive and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all attorneys'
fees and reasonable expenses of such separate counsel. Further, while Executive
is expected at all times to use his best efforts to faithfully discharge his
duties under this Agreement, Executive cannot be held liable to the Company for
errors or omissions made in good faith where Executive has not exhibited gross,
willful and wanton negligence and misconduct

<PAGE> 13

nor performed criminal and fraudulent acts which materially damage the business
of the Company. The parties acknowledge and agree that the provisions of this
paragraph 14 are in addition to any other rights of indemnification that
Executive is entitled to as a director, officer or employee of the Company
pursuant to the charter, bylaws or other arrangements between the Company and
its directors, officers and employees.

15. COMPLETE AGREEMENT

Executive has no oral representations, understandings or agreements
with CLC, the Company or any of their officers, directors or representatives
covering the same subject matter as this Agreement. This written Agreement is
the final, complete and exclusive statement and expression of the agreement
between CLC, the Company and Executive and of all the terms of this Agreement,
and it cannot be varied, contradicted or supplemented by evidence of any prior
or contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of CLC, the Company and Executive, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such term. Without
limiting the generality of the foregoing, any party's failure to insist on
strict compliance with this Agreement shall not be deemed a waiver thereof.

16. NOTICE

Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:

If to CLC or the Company:

Chemical Logistics Corporation
Attn: Chief Executive Officer
801 Travis, Suite 1135
Houston, Texas 77008

If to Executive:

Notice shall be deemed given and effective on the earlier of three days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 16.

<PAGE> 14

17. SEVERABILITY: HEADINGS

If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of this Agreement or of any part hereof.

18. DISPUTE RESOLUTIONS

Except with respect to injunctive relief as provided in paragraph 3(b),
neither party shall institute a proceeding in any court or administrative agency
to resolve a dispute between the parties before that party has sought to resolve
the dispute through direct negotiation with the other party. If the dispute is
not resolved within two weeks after a demand for direct negotiation, the parties
shall attempt to resolve the dispute through mediation. If the parties do not
promptly agree on a mediator, the parties shall request the Association of
Attorney Mediators in Houston, Texas to appoint a mediator certified by the
appropriate Court of Texas. If the mediator is unable to facilitate a settlement
of the dispute within a reasonable period of time, as determined by the
mediator, the mediator shall issue a written statement to the parties to that
effect and any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three arbitrators in Houston, Texas, in accordance with the
National Rules for the Resolution of Employment Disputes promulgated by the
American Arbitration Association then in effect. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Executive was terminated without disability or good
cause, as defined in paragraphs 4(b) and 4(c), respectively, or that the Company
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The costs and expenses,
including reasonable attorneys' fees, of the prevailing party in any dispute
arising under this Agreement will be promptly paid by the other party.

19. GOVERNING LAW

This Agreement shall in all respects be construed according to the laws
of the State of Texas without regard to its conflicts of law provisions.

20. COUNTERPARTS

This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

<PAGE> 15

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective for all purposes as of the Effective Date.

CHEMICAL LOGISTICS CORPORATION

By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

[FOUNDING COMPANY]

By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

EXECUTIVE

-------------------------------------

<PAGE> 1
EXHIBIT 10.2

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT is made as of , 1998, and is entered
into by and between Chemical Logistics Corporation, a Delaware corporation (the
"Company"), and ("Indemnitee").

R E C I T A L S:

WHEREAS, the certificate of incorporation and bylaws of the Company
provide for the indemnification of the Company's directors and executive
officers to the maximum extent permitted from time to time under applicable law
and, along with the Delaware General Corporation Law, contemplate that the
Company may enter into agreements with respect to such indemnification; and

WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected.

NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:

1. Definitions. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:

"Authorized Representative" means (i) a director, officer,
employee, agent or fiduciary of the Company or any Subsidiary and (ii)
a person serving at the request of the Company or any Subsidiary as a
director, officer, employee, fiduciary or other representative of
another Enterprise.

"Enterprise" means any corporation, partnership, limited
liability company, association, joint venture, trust, employee benefit
plan or other entity.

"Expenses" means all expenses, including (without limitation)
reasonable fees and expenses of counsel.

"Liabilities" means all liabilities, including (without
limitation) the amounts of any judgments, fines, penalties, excise
taxes and amounts paid in settlement.

<PAGE> 2

"Proceeding" means any threatened, pending or completed claim,
action (including any action by or in the right of the Company), suit
or proceeding (whether formal or informal, or civil, criminal,
administrative, legislative, arbitrative or investigative) in respect
of which Indemnitee is, was or at any time becomes, or is threatened to
be made, a party, witness, subject or target, by reason of the fact
that Indemnitee is or was an Authorized Representative or a prospective
Authorized Representative.

"Subsidiary" means, at any time, (i) any corporation of which
at least a majority of the outstanding voting stock is owned by the
Company at such time, directly or indirectly through subsidiaries, and
(ii) any other Enterprise in which the Company, directly or indirectly,
owns more than a 50% equity interest at such time.

2. Interpretation. (a) In this Agreement, unless a clear contrary
intention appears:

(i) the singular number includes the plural number and vice
versa;

(ii) reference to any gender includes each other gender;

(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision;

(iv) unless the context indicates otherwise, reference to any
Section means such Section hereof; and

(v) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term.

(b) The Section headings herein are for convenience only and
shall not affect the construction hereof.

(c) No provision of this Agreement shall be interpreted or
construed against any party solely because that party or its legal
representative drafted such provision.

(d) In the event of any ambiguity, vagueness or other similar
matter involving the interpretation or meaning of this Agreement, this Agreement
shall be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.

(e) If the indemnification to which Indemnitee is entitled as
respects any aspect of any claim varies between two or more provisions of this
Agreement, that provision providing the most comprehensive indemnification shall
apply.

-2-

<PAGE> 3

3. Limitation on Personal Liability. To the fullest extent permitted by
applicable law, Indemnitee shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director of
the Company, provided that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.

4. Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:

(i) for amounts actually paid to Indemnitee pursuant to one or
more policies of directors and officers liability insurance maintained
by the Company or pursuant to a trust fund, letter of credit or other
security or funding arrangement provided by the Company; provided,
however, that if it should subsequently be determined that Indemnitee
is not entitled to retain any such amount, this clause (i) shall no
longer apply to such amount;

(ii) in respect of remuneration paid to Indemnitee if it shall
be determined by a final judgment or other final adjudication that
payment of such remuneration was in violation of applicable law;

(iii) on account of Indemnitee's conduct which is finally
adjudged to constitute willful misconduct or to have been knowingly
fraudulent, deliberately dishonest or from which the Indemnitee derives
an improper personal benefit; or

(iv) on account of any suit in which final judgment is
rendered against Indemnitee for an accounting of profits made from the
sale or purchase by Indemnitee of securities of the Company pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934,
as amended.

(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled. If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company on the one hand and
Indemnitee on the other hand from the events,

-3-

<PAGE> 4

circumstances, conditions, happenings, actions or transactions from which such
Proceeding arose, (ii) the relative fault of the Company (including its other
Authorized Representatives) on the one hand and of Indemnitee on the other hand
in connection with the events, circumstances and happenings which resulted in
such Expenses and Liabilities, such relative fault to be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the events, circumstances
and/or happenings resulting in such Expenses and Liabilities, and (iii) any
other relevant equitable considerations, it being agreed that it would not be
just and equitable if such contribution were determined by pro rata or other
method of allocation which does not take into account the foregoing equitable
considerations.

(c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.

(d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.

(e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.

5. Notification and Defense of Claims. (a) Promptly after the receipt
by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; provided,
however, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend
against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.

(b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

(i) The Company shall be entitled to participate therein at
its own expense.

(ii) Except as otherwise provided below, to the extent it may
elect to do so, the Company (jointly with any other indemnifying party
similarly notified) will be entitled to assume the defense thereof,
with counsel of its own selection reasonably satisfactory to
Indemnitee. After notice from the Company to Indemnitee of its election
so to assume the defense thereof, the Company will not be liable to
Indemnitee under this Agreement for any Expenses subsequently incurred
by Indemnitee in connection with the defense of such

-4-

<PAGE> 5

Proceeding other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ separate
counsel in such Proceeding but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (1) the employment
of separate counsel by Indemnitee has been authorized by the Company;
(2) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct
of the defense of such Proceeding; or (3) the Company shall not in fact
have employed counsel to assume the defense of such Proceeding, in each
of which cases the reasonable fees and expenses of Indemnitee's counsel
shall be borne by the Company. The Company shall not be entitled to
assume the defense of any Proceeding brought by or on behalf of the
Company or as to which Indemnitee shall have made the conclusion
provided for in (2) above. Nothing in this subparagraph (ii) shall
affect the obligation of the Company to indemnify Indemnitee against
Expenses and Liabilities paid in settlement for which it is otherwise
obligated hereunder.

(iii) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any
Proceedings or claims effected without its prior written consent. The
Company shall not settle any Proceeding or claim in any manner which
would impose any penalty or limitation on Indemnitee without
Indemnitee's prior written consent. Neither the Company nor Indemnitee
will unreasonably withhold or delay its consent to any proposed
settlement.

6. Advancement of Expenses, etc. If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, prior to the final disposition of such Proceeding, the Expenses
actually incurred by Indemnitee in investigating, defending or appealing such
Proceeding. Any judgments, fines or amounts to be paid in settlement of any
Proceeding shall also be advanced by the Company upon request by Indemnitee.
Advances made by the Company under this Section 6 are subject to refund by
Indemnitee as provided in Section 8.

7. Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim. If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement. The only defense to any
such action shall be that indemnification is not required by this Agreement.

(b) In the event that any action is instituted by Indemnitee to enforce
Indemnitee's rights or to collect monies due to Indemnitee under this Agreement
and if Indemnitee is successful in such action, the Company shall reimburse
Indemnitee for all Expenses incurred by Indemnitee with respect to such action.

-5-

<PAGE> 6

8. Repayment Obligation of Indemnitee. If the Company advances or pays
any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter be
finally adjudicated that Indemnitee was not entitled to be indemnified hereunder
for all or any portion of such amount, Indemnitee shall promptly repay such
amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.

9. Changes in Law. If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.

10. Continuation of Indemnity. All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.

11. Nonexclusivity. The indemnification and other rights provided by
any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's certificate of incorporation, (iii) the Company's
bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.

12. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable. Each
provision of this Agreement is a separate and independent portion of this
Agreement.

13. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties. No waiver of any of

-6-

<PAGE> 7

the provisions of this Agreement shall be binding unless executed in writing by
the person making the waiver nor shall such waiver constitute a continuing
waiver.

14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof. Each such notice or other communication shall be deemed to have
been duly given if (a) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, (b) transmitted by
facsimile transmission, at the time that receipt of such transmission is
confirmed, or (c) mailed by certified or registered mail with postage prepaid,
on the third business day after the date on which it is so mailed.

15. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.

16. Heirs, Successors and Assigns. (a) This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal representatives, executors, administrators,
heirs, devisees and legatees and (ii) the Company and its successors and
assigns. This Agreement shall not inure to the benefit of any other person or
Enterprise.

(b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 16 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.

-7-

<PAGE> 8

ENTERED into on the day and year first above written.

THE COMPANY:

CHEMICAL LOGISTICS CORPORATION

By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------

Address:

Telecopier:

-8-

<PAGE> 9

INDEMNITEE:

-------------------------------------------

Address:

Telecopier:

-9-

<PAGE> 1
EXHIBIT 10.3

CHEMICAL LOGISTICS CORPORATION
1998 STOCK PLAN

SECTION 1. Purpose of the Plan.

The Chemical Logistics Corporation 1998 Stock Plan (the "Plan") is
intended to promote the interests of Chemical Logistics Corporation, a Delaware
corporation (the "Company"), by encouraging officers, employees, directors and
consultants of the Company, its subsidiaries and affiliated entities to acquire
or increase their equity interest in the Company and to provide a means whereby
they may develop a sense of proprietorship and personal involvement in the
development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company thereby
advancing the interests of the Company and its stockholders. The Plan is also
contemplated to enhance the ability of the Company, its subsidiaries and
affiliated entities to attract and retain the services of individuals who are
essential for the growth and profitability of the Company.

SECTION 2. Definitions.

As used in the Plan, the following terms shall have the meanings set
forth below:

"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.

"Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award, Phantom Shares, Bonus Shares, Other Stock-Based Award
or Cash Award.

"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

"Board" shall mean the Board of Directors of the Company.

"Bonus Shares" shall mean an award of Shares granted pursuant to
Section 6(e) of the Plan.

"Cash Award" shall mean an award payable in cash granted pursuant to
Section 6(g) of the Plan.

"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations thereunder.

<PAGE> 2

"Committee" shall mean the Compensation Committee of the Board.

"Consultant" shall mean any individual who is a Director, a member of
the Board of Directors of an Affiliate, and any other individual who renders
consulting services to the Company or an Affiliate for a fee.

"Director" means a "non-employee director" of the Company, as defined
in Rule 16b-3.

"Employee" shall mean any employee of the Company or an Affiliate or
any person who has been extended an offer of employment by the Company or an
Affiliate.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

"Fair Market Value" shall mean, with respect to Shares, the closing
sales price of a Share on the applicable date (or if there is no trading in the
Shares on such date, on the next preceding date on which there was trading) as
reported in The Wall Street Journal (or other reporting service approved by the
Committee). In the event the Shares are not publicly traded at the time a
determination of its fair market value is required to be made hereunder, the
determination of fair market value shall be made in good faith by the Committee.

"Incentive Stock Option" or "ISO" shall mean an option granted under
Section 6(a) of the Plan that is intended to qualify as an "incentive stock
option" under Section 422 of the Code or any successor provision thereto.

"Non-Qualified Stock Option" or "NQO" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.

"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

"Other Stock-Based Award" shall mean an award granted pursuant to
Section 6(h) of the Plan that is not otherwise specifically provided for, the
value of which is based in whole or in part upon the value of a Share.

"Participant" shall mean any Employee or Consultant granted an Award
under the Plan.

"Performance Award" shall mean any right granted under Section 6(d) of
the Plan.

"Person" shall mean individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.

"Phantom Shares" shall mean an Award of the right to receive Shares
issued at the end of a Restricted Period which is granted pursuant to Section
6(f) of the Plan.

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<PAGE> 3

"Restricted Period" shall mean the period established by the Committee
with respect to an Award during which the Award either remains subject to
forfeiture or is not exercisable by the Participant.

"Restricted Stock" shall mean any Share, prior to the lapse of
restrictions thereon, granted under Sections 6(c) of the Plan.

"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act, or any successor rule or regulation thereto as in effect from time
to time.

"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.

"Shares" or "Common Shares" or "Common Stock" shall mean the common
stock of the Company, $0.01 par value, and such other securities or property as
may become the subject of Awards under the Plan.

"Stock Appreciation Right" or "Right" shall mean any right to receive
the appreciation of Shares granted under Section 6(b) of the Plan.

"Substitute Award" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by (i) a company
acquired by the Company or one or more of its Affiliates, or (ii) a company with
which the Company or one or more of its Affiliates combines.

SECTION 3. Administration.

The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee. Subject to the following, the Committee, in its
sole discretion, may delegate any or all of its powers and duties under the
Plan, including the power to grant Awards under the Plan, to the Chief Executive
Officer or President of the Company, subject to such limitations on such
delegated powers and duties as the Committee may impose. Upon any such
delegation all references in the Plan to the "Committee", other than in Section
7, shall be deemed to include the Chief Executive Officer or President;
provided, however, that such delegation shall not limit the Chief Executive
Officer's or President's right to receive Awards under the Plan. Notwithstanding
the foregoing, the Chief Executive Officer or President may not grant Awards to,
or take any action with respect to any Award previously granted to, a person who
is an officer or a member of the Board. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to a Participant; (iii) determine the number of Shares to
be covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection

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<PAGE> 4

with, Awards; (iv) determine the terms and conditions of any Award; (v)
determine whether, to what extent, and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other amounts payable with
respect to an Award shall be deferred either automatically or at the election of
the holder thereof or of the Committee; (vii) interpret and administer the Plan
and any instrument or agreement relating to an Award made under the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any stockholder and any Employee.

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided in Section
4(c), the number of Shares with respect to which Awards may be granted under the
Plan shall be 15% of the aggregate number of Shares outstanding determined
immediately prior to the grant of such Award; however, Incentive Stock Options
may not be granted with respect to more than 1,000,000 Shares. If any Award is
forfeited or otherwise terminates or is canceled without the delivery of Shares
or other consideration, then the Shares covered by such Award, to the extent of
such forfeiture, termination or cancellation, shall again be Shares with respect
to which Awards may be granted.

(b) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.

(c) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the holder
of an outstanding Award; provided, in each case, that with respect to Awards of
Incentive Stock Options and Awards intended to qualify

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<PAGE> 5
as performance based compensation under Section 162(m)(4)(C) of the Code, no
such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code or would cause such
Award to fail to so qualify under Section 162(m) of the Code, as the case may
be, or any successor provisions thereto; and provided, further, that the number
of Shares subject to any Award denominated in Shares shall always be a whole
number.

SECTION 5. Eligibility.

Any Employee or Consultant shall be eligible to be designated a
Participant. However, no Employee or Consultant may receive Options and/or Stock
Appreciation Rights with respect to more than 500,000 Shares during any calendar
year. The maximum dollar amount of any single Award, determined as of the date
of grant of such Award, that is not an Option or Stock Appreciation Right and
which is intended to qualify as "performance based" compensation under Section
162(m) of the Code that may be granted to any Participant in any calendar year
shall not exceed $4.0 million.

SECTION 6. Awards.

(a) Options. Subject to the provisions of the Plan, the Committee shall
have the authority to determine the Participants to whom Options shall be
granted, the number of Shares to be covered by each Option, the purchase price
therefor and the conditions and limitations applicable to the exercise of the
Option, including the following terms and conditions and such additional terms
and conditions, as the Committee shall determine, that are not inconsistent with
the provisions of the Plan.

(i) Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee at the time the
Option is granted.

(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part, and the method or methods by which, and the form or
forms (which may include, without limitation, cash, check acceptable to
the Company, Shares already-owned for more than six months, outstanding
Awards, Shares that would otherwise be acquired upon exercise of the
Option, a "cashless-broker" exercise (through procedures approved by
the Company), other securities or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price) in which payment of the exercise price with
respect thereto may be made or deemed to have been made.

(iii) Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code, or any successor provision,
and any regulations promulgated thereunder. Incentive Stock Options may
be granted only to employees of the Company and its parent corporation
and subsidiary corporations, within the meaning of Section 424 of the
Code. To the extent the aggregate Fair Market Value of the Shares
(determined as of the date of grant) of an Option

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<PAGE> 6

are exercisable for the first time during any calendar year (under all
plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such Shares in excess of $100,000 shall not be
Incentive Stock Options.

(iv) Automatic Director Options. Each Director automatically
shall receive NQO grants ("Director Options") as provided below:

Initial Grants. Subject to adjustment pursuant
Section 4(c), each individual who serves as a Director
immediately following the closing of the initial public
offering of the Shares (the "IPO Date") shall automatically
receive, on such date, a Director Option for 10,000 Shares.
Each individual who is elected or appointed as a Director for
the first time after the IPO Date shall automatically receive,
on the date of his or her election or appointment, a Director
Option for 10,000 Shares.

Annual Grants. Subject to adjustment pursuant Section
4(c), on the day of the regular Annual Meeting of the
Stockholders of the Company in each year that this Plan is in
effect (commencing with the 1999 Annual Meeting of
Stockholders), each individual who is a Director immediately
after such annual meeting and who was not elected or appointed
for the first time at or within the 90 days preceding such
Annual Meeting shall automatically receive a Director Option
for 5,000 Shares.

Director Options shall be subject to the following
terms:

(A) Subject to adjustment pursuant to Section 4(c),
the purchase price per Share purchasable under a
Director Option shall be the Fair Market Value per
Share on the date the Director Option is granted.

(B) Each Director Option shall become 100% vested
(exercisable) on the earliest of (1) the first day
that is six months after its date of grant, (2) a
Change in Control, or (3) the Director's termination
from the Board due to death or disability (as
determined by the Board). Upon a Director's
termination from the Board, all Director Options not
then vested as provided above shall be immediately
forfeited unexercised.

(C) Each Director Option shall expire 10 years from
its date of grant, but shall be subject to earlier
termination as follows: Director Options must be
exercised within three months of the date such
Participant ceases to serve as a member of the Board,
unless such termination results from the
Participant's death or disability (as determined by
the Board), in which case the Participant's Director
Options may be exercised by the Participant's legal
representative or the person to whom the
Participant's rights shall pass by will or the laws
of descent and distribution, as the case may be,
within one

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<PAGE> 7

year from the date of termination; provided, however,
that such event shall not extend the normal
expiration date of such Director Options.

(D) To the extent not in conflict with the above
provisions, Director Options shall be subject to the
other terms and provisions of the Plan applicable to
Options.

In the event that the number of Shares available for grants
under this Plan is insufficient to make all automatic Director Option
grants provided for in this paragraph (iv) on the applicable date, then
all Directors who are entitled to a grant on such date shall share
ratably in the number of Shares then available for grant under this
Plan, and shall have no right to receive a grant with respect to the
deficiencies in the number of available Shares and all future Director
Option grants under this paragraph (iv) shall terminate.

(b) Stock Appreciation Rights. Subject to the provisions of the Plan,
the Committee shall have the authority to determine the Participants to whom
Stock Appreciation Rights shall be granted, the number of Shares to be covered
by each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof. A Stock
Appreciation Right may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to another Award. A Stock
Appreciation Right granted in tandem with or in addition to another Award may be
granted either at the same time as such other Award or at a later time.

(i) Grant Price. The grant price of a Stock Appreciation Right
shall be determined by the Committee on the date of grant.

(ii) Other Terms and Conditions. Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall determine,
at or after the grant of a Stock Appreciation Right, the term, methods
of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right. Any such determination by the
Committee may be changed by the Committee from time to time and may
govern the exercise of Stock Appreciation Rights granted or exercised
prior to such determination as well as Stock Appreciation Rights
granted or exercised thereafter. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation
Right as it shall deem appropriate.

(c) Restricted Stock. Subject to the provisions of the Plan, the
Committee shall have the authority to determine the Participants to whom
Restricted Stock shall be granted, the number of Shares of Restricted Stock to
be granted to each such Participant, the duration of the Restricted Period
during which, and the conditions, including performance criteria, if any, under
which, the Restricted Stock may be forfeited to the Company, and the other terms
and conditions of such Awards.

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<PAGE> 8

(i) Dividends. Dividends paid on Restricted Stock may be paid
directly to the Participant, may be subject to risk of forfeiture
and/or transfer restrictions during any period established by the
Committee or sequestered and held in a bookkeeping cash account (with
or without interest) or reinvested on an immediate or deferred basis in
additional shares of Common Stock, which credit or shares may be
subject to the same restrictions as the underlying Award or such other
restrictions, all as determined by the Committee in its discretion.

(ii) Registration. Any Restricted Stock may be evidenced in
such manner as the Committee shall deem appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate
or certificates. In the event any stock certificate is issued in
respect of Restricted Stock granted under the Plan, such certificate
shall be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock.

(iii) Forfeiture and Restrictions Lapse. Except as otherwise
determined by the Committee or the terms of the Award that granted the
Restricted Stock, upon termination of a Participant's employment (as
determined under criteria established by the Committee) for any reason
during the applicable Restricted Period, all Restricted Stock shall be
forfeited by the Participant and re-acquired by the Company. The
Committee may, when it finds that a waiver would be in the best
interests of the Company and not cause such Award, if it is intended to
qualify as performance based compensation under Section 162(m) of the
Code, to fail to so qualify under Section 162(m) of the Code, waive in
whole or in part any or all remaining restrictions with respect to such
Participant's Restricted Stock. Unrestricted Shares, evidenced in such
manner as the Committee shall deem appropriate, shall be issued to the
holder of Restricted Stock promptly after the applicable restrictions
have lapsed or otherwise been satisfied.

(iv) Transfer Restrictions. During the Restricted Period,
Restricted Stock will be subject to the limitations on transfer as
provided in Section 6(j)(iii).

(d) Performance Awards. The Committee shall have the authority to
determine the Participants who shall receive a Performance Award, which shall be
denominated as a cash amount at the time of grant and confer on the Participant
the right to receive payment of such Award, in whole or in part, upon the
achievement of such performance goals during such performance periods as the
Committee shall establish with respect to the Award.

(i) Terms and Conditions. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine the
performance goals to be achieved during any performance period, the
length of any performance period, the amount of any Performance Award
and the amount of any payment or transfer to be made pursuant to any
Performance Award.

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<PAGE> 9

(ii) Payment of Performance Awards. Performance Awards may be
paid (in cash and/or in Shares, in the sole discretion of the
Committee) in a lump sum or in installments following the close of the
performance period, in accordance with procedures established by the
Committee with respect to such Award.

(e) Bonus Shares. The Committee shall have the authority, in its
discretion, to grant Bonus Shares to Participants. Each Bonus Share shall
constitute a transfer of an unrestricted Share to the Participant, without other
payment therefor, as additional compensation for the Participant's services to
the Company.

(f) Phantom Shares. The Committee shall have the authority to grant
Awards of Phantom Shares to Participants upon such terms and conditions as the
Committee may determine.

(i) Terms and Conditions. Each Phantom Share Award shall
constitute an agreement by the Company to issue or transfer a specified
number of Shares or pay an amount of cash equal to a specified number
of Shares, or a combination thereof to the Participant in the future,
subject to the fulfillment during the Restricted Period of such
conditions, including performance objectives, if any, as the Committee
may specify at the date of grant. During the Restricted Period, the
Participant shall not have any right to transfer any rights under the
subject Award, shall not have any rights of ownership in the Phantom
Shares and shall not have any right to vote such shares.

(ii) Dividends. Any Phantom Share award may provide that any
or all dividends or other distributions paid on Shares during the
Restricted Period be credited in a cash bookkeeping account (without
interest) or that equivalent additional Phantom Shares be awarded,
which account or shares may be subject to the same restrictions as the
underlying Award or such other restrictions as the Committee may
determine.

(g) Cash Awards. The Committee shall have the authority to determine
the Participants to whom Cash Awards shall be granted, the amount, and the terms
or conditions, if any, as additional compensation for the Participant's services
to the Company or its Affiliates. A Cash Award may be granted (simultaneously or
subsequently) separately or in tandem with another Award and may entitle a
Participant to receive a specified amount of cash from the Company upon such
other Award becoming taxable to the Participant, which cash amount may be based
on a formula relating to the anticipated taxable income associated with such
other Award and the payment of the Cash Award.

(h) Other Stock-Based Awards. The Committee may also grant to
Participants an Other Stock-Based Award, which shall consist of a right which is
an Award denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, Shares as is deemed by the Committee to be
consistent with the purposes of the Plan. Subject to the terms of the Plan, the
Committee shall determine the terms and conditions of any such Other Stock-Based
Award.

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<PAGE> 10

(i) Replacement Grants. Awards may be granted from time to time in
substitution for similar awards held by employees of other corporations who
become Participants as the result of a merger or consolidation of the employing
corporation with the Company or any subsidiary, or the acquisition by the
Company or any subsidiary of the assets of the employing corporation, or the
acquisition by the Company or any subsidiary or an affiliate of stock of the
employing corporation. The terms and conditions of substitute Awards granted may
vary from the terms and conditions set forth in the Plan, to the extent the
Committee, at the time of grant, deems it appropriate to conform, in whole or in
part, to the provisions of awards in substitution for which they are granted.

(j) General.

(i) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other Award
granted under the Plan or any award granted under any other plan of the
Company or any Affiliate. Awards granted in addition to or in tandem
with other Awards or awards granted under any other plan of the Company
or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.

(ii) Forms of Payment by Company Under Awards. Subject to the
terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise or payment of an Award may be made in such form or forms as
the Committee shall determine, including, without limitation, cash,
Shares, other securities, other Awards or other property, or any
combination thereof, and may be made in a single payment or transfer,
in installments, or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment
or crediting of reasonable interest on installment or deferred
payments.

(iii) Limits on Transfer of Awards.

(A) Except as provided in (C) below, each Award, and
each right under any Award, shall be exercisable only by the
Participant during the Participant's lifetime, or by the
person to whom the Participant's rights shall pass by will or
the laws of descent and distribution.

(B) Except as provided in (C) below, no Award and no
right under any such Award may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered
by a Participant otherwise than by will or by the laws of
descent and distribution (or, in the case of Restricted Stock,
to the Company) and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company or any Affiliate.

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<PAGE> 11

(C) Notwithstanding anything in the Plan to the
contrary, to the extent specifically provided by the Committee
with respect to a grant, an Option other than an Incentive
Stock Option, may be transferred to immediate family members
or related family trusts, limited partnerships or similar
entities or on such terms and conditions as the Committee may
establish.

(iv) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee; provided, that in no
event shall the term of any Award exceed a period of 10 years from the
date of its grant.

(v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
requirements of the SEC, any stock exchange upon which such Shares or
other securities are then listed, and any applicable Federal or state
laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

(vi) Consideration for Grants. Awards may be granted for no
cash consideration or for such consideration as the Committee
determines including, without limitation, such minimal cash
consideration as may be required by applicable law.

(vii) Delivery of Shares or other Securities and Payment by
Participant of Consideration. No Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Award
Agreement (including, without limitation, any exercise price, tax
payment or tax withholding) is received by the Company. Such payment
may be made by such method or methods and in such form or forms as the
Committee shall determine, including, without limitation, cash, Shares,
other securities, other Awards or other property, withholding of
Shares, cashless exercise with simultaneous sale, or any combination
thereof; provided that the combined value, as determined by the
Committee, of all cash and cash equivalents and the Fair Market Value
of any such Shares or other property so tendered to the Company, as of
the date of such tender, is at least equal to the full amount required
to be paid pursuant to the Plan or the applicable Award Agreement to
the Company.

(viii) Performance Criteria and Payment Limits. The Committee
shall establish performance goals applicable to those Awards (other
than Options and Rights) the payment of which is intended by the
Committee to qualify as "performance-based compensation" as described
in Section 162(m)(4)(C) of the Code. Until changed by the Committee,
the performance goals shall be based upon the attainment of such target
levels of net income, cash flows, return on equity, profit margins,
sales, stock price, market share improvement, achievements of national
accounts, reductions in costs of goods sold, and/or earnings per share
as may be specified by the Committee. Which factor or factors to be
used with respect

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<PAGE> 12

to any grant, and the weight to be accorded thereto if more than one
factor is used, shall be determined by the Committee at the time of
grant. A performance goal need not be based on an increase or a
positive result and may include, for example, maintaining the status
quo or limiting economic losses. With respect to any Restricted Stock
Award, Phantom Stock Award, Other Stock-Based Award, or Cash Award
granted in tandem with, and expressed as a percentage of, a
Share-denominated Award, which is intended to qualify as
"performance-based compensation", the maximum payment to any
Participant with respect to such Award shall be an amount (in cash
and/or in Shares) equal to the Fair Market Value of the number of
Shares subject to such Award.

SECTION 7. Amendment and Termination.

Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:

(i) Amendments to the Plan. Except as required by applicable
law or the rules of the principal securities market on which the shares
are traded and subject to Section 7(ii) below, the Board or the
Committee may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of any stockholder, Participant, other holder or
beneficiary of an Award, or other Person.

(ii) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter any Award
theretofore granted, provided no change, other than pursuant to Section
7(iii), in any Award shall reduce the benefit to Participant without
the consent of such Participant. Notwithstanding the foregoing, with
respect to any Award intended to qualify as performance-based
compensation under Section 162(m) of the Code, no adjustment shall be
authorized to the extent such adjustment would cause the Award to fail
to so qualify.

(iii) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(c) of
the Plan) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan. Notwithstanding the foregoing,
with respect to any Award intended to qualify as performance-based
compensation under Section 162(m) of the Code, no adjustment shall be
authorized to the extent such adjustment would cause the Award to fail
to so qualify.

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SECTION 8. Change in Control.

Notwithstanding any other provision of this Plan to the contrary, in
the event of a Change in Control of the Company all outstanding Awards
automatically shall become fully vested immediately prior to such Change in
Control (or such earlier time as set by the Committee), all restrictions, if
any, with respect to such Awards shall lapse, all performance criteria, if any,
with respect to such Awards shall be deemed to have been met in full, and unless
the Company survives as an independent publicly traded company, all Options and
Stock Appreciation Rights outstanding at the time of the event or transaction
shall terminate, except to the extent provision is made in writing in connection
with such event or transaction for the continuation of the Plan and/or the
assumption of the Options and Stock Appreciation Rights theretofore granted, or
for the substitution for such Options or Stock Appreciation Rights of new
options or stock appreciation rights covering the stock of a successor entity,
or the parent or subsidiary thereof, with appropriate adjustments as to the
number and kinds of shares and exercise prices, in which event the Plan and
Options and Stock Appreciation Rights theretofore granted shall continue in the
manner and under the terms so provided. For purposes of this Plan, a "Change in
Control" shall be deemed to occur if:

(i) any person, other than the Company or an employee benefit
plan of the Company, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended) of any voting security of the Company and immediately
after such acquisition such person is, directly or indirectly, the
Beneficial Owner of voting securities representing 50% or more of the
total voting power of all of the then-outstanding voting securities of
the Company;

(ii) the individuals (A) who, as of the effective date of the
Company's registration statement with respect to its initial public
offering, constitute the Board of Directors of the Company (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of the Company and whose election, or nomination for election,
to the Board of Directors of the Company was approved by a vote of at
least two-thirds (2/3) of the Original Directors then still in office
(such directors becoming "Additional Original Directors" immediately
following their election) or (C) who are elected to the Board of
Directors of the Company and whose election, or nomination for election,
to the Board of Directors of the Company was approved by a vote of at
least two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election) (such
individuals being the "Continuing Directors"), cease for any reason to
constitute a majority of the members of the Board of Directors of the
Company;

(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of
the total voting power represented by the voting securities of the
surviving entity outstanding immediately

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<PAGE> 14

after such transaction being Beneficially Owned by at least 75% of the
holders of outstanding voting securities of the Company immediately
prior to the transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially
altered in the transaction; or

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).

SECTION 9. General Provisions.

(a) No Rights to Awards. No Employee, Consultant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Consultants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.

(b) Withholding. The Company or any Affiliate is authorized to withhold
from any Award, from any payment due or transfer made under any Award or under
the Plan or from any compensation or other amount owing to a Participant the
amount (in cash, Shares, other securities, Shares that would otherwise be issued
pursuant to such Award, other Awards or other property) of any applicable taxes
payable in respect of an Award, its exercise, the lapse of restrictions thereon,
or any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. In addition, the Committee may
provide, in an Award Agreement, that the Participant may direct the Company to
satisfy such Participant's tax obligation through the "constructive" tender of
already-owned Shares or the withholding of Shares otherwise to be acquired upon
the exercise or payment of such Award.

(c) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

(d) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal law.

(e) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot

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<PAGE> 15

be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.

(f) Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Award if, acting in its sole discretion, it
determines that the issuance of transfer or such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.

(g) No Trust or Fund Created. Neither the Plan nor the Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any general unsecured creditor of the
Company or any Affiliate.

(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.

(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

(j) Parachute Tax Gross-Up. If it shall be finally determined that the
grant, payment or acceleration of vesting or payment, whether in cash or stock,
of any Award made to a Participant under the Plan is subject to the excise tax
imposed by Section 4999 of the Code, the Company shall pay such person an amount
of cash (the "Additional Amount") such that the net amount received by such
person after paying all applicable taxes (and any interest and penalties imposed
with respect thereto) on such Additional Amount shall be equal to the amount
that such person would have received if Section 4999 were not applicable.

SECTION 10. Effective Date of the Plan.

The Plan shall be effective as of the date of its approval by the Board.

SECTION 11. Term of the Plan.

No Award shall be granted under the Plan after the 10th anniversary of
the date the Plan is adopted by the Board. However, unless otherwise expressly
provided in the Plan or in an applicable

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<PAGE> 16

Award Agreement, any Award granted prior to such termination, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under such Award,
shall extend beyond such termination date.

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<PAGE> 1
EXHIBIT 10.4

CHEMICAL LOGISTICS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN

Chemical Logistics Corporation (the "Company") hereby
establishes the Chemical Logistics Corporation Employee Stock Purchase Plan
(the "Plan"), the terms of which are as set forth below.

1. Purpose of the Plan.

The purpose of the Plan is to provide an incentive for
present and future employees of the Participating Companies to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of shares of Common Stock. It is the intention of
the Company that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. Accordingly, the provisions of the Plan shall be
administered, interpreted and construed in a manner consistent with the
requirements of that section of the Code.

2. Definitions.

As used in the Plan the following terms shall have the
meanings set forth below:

(a) "Account" means a notional account established for a
Participant by the Participating Company to which his contributions
are credited.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the Compensation Committee of the
Board.

(e) "Common Stock" means the common stock, $0.01 par value,
of the Company.

(f) "Eligible Compensation" means, with respect to each
Participant, the total cash compensation paid to the Participant by
the Participating Companies each pay period during the applicable
Option Period, and including any elective salary deferral
contributions made therefrom pursuant to Code Sections 125, 129 or
401(k).

(g) "Eligible Employee" means an employee of the Participating
Companies who is customarily employed for at least 20 hours per week
and more than five months in a

<PAGE> 2

calendar year, but excluding any person who is, for purposes of
Section 423 of the Code, a 5% or more stockholder of the Company or
any Subsidiary.

(h) "Enrollment Date" means the first day of each Option
Period.

(i) "Exercise Date" means the last day of each Option Period.

(j) "Exercise Price" means the price per share of the shares
of Common Stock offered in a given Option Period determined as
provided in Section 10 below.

(k) "Fair Market Value" means, with respect to a share of
Common Stock as of any Enrollment Date or Exercise Date, the closing
sales price per share of the Common Stock for such date (or, in the
event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported in The Wall Street
Journal or in such other reporting service as approved by the
Committee.

(l) "Option Period" means each six-month period commencing on
January 1 and terminating on the following June 30 or commencing on
July 1 and terminating on the following December 31; provided,
however, notwithstanding the foregoing (1) the initial Option Period
shall commence on the first pay period following the effective date of
the Form S-8 Registration Statement covering the shares of Common
Stock issuable under the Plan and shall end on December 31, 1998 and
(2) upon the termination of the Plan or upon such other events as the
Committee may provide, the final Option Period may be less than six
months.

(m) "Participant" means an Eligible Employee who has elected
to participate in the Plan by filing an enrollment agreement as
provided in Section 7 below.

(n) "Participating Companies" means the Company and each
present and future Subsidiary, which the Committee, in its sole
discretion, from time to time designates to be a Participating
Company.

(o) "Subsidiary" means any corporation, domestic or foreign,
of which the Company owns, directly or indirectly, not less than 50%
of the total combined voting power of all classes of stock or other
equity interests and that otherwise qualifies as a "subsidiary
corporation" within the meaning of Section 424(f) of the Code or any
successor thereto.

3. Shares Reserved for the Plan.

There shall be reserved for issuance and purchase by
Participants under the Plan an aggregate of 1,000,000 shares of Common Stock,
subject to adjustment as provided in Section 15 below. Shares of Common Stock
subject to the Plan may be newly issued shares or treasury shares, including
shares acquired by the Company in the open market for purposes of the Plan. If
and to the

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<PAGE> 3
extent that any option to purchase shares of Common Stock shall not be
exercised for any reason or if such right to purchase shares shall terminate as
provided herein, the shares that have not been so purchased hereunder shall
again become available for the purposes of the Plan unless the Plan shall have
been terminated.

4. Administration of the Plan.

(a) The Plan shall be administered by the Committee which
shall have authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to correct any defect or rectify
any omission in this Plan or to reconcile any inconsistency in this Plan or any
option, and to make all other determinations necessary or advisable for the
administration of the Plan, all of which actions and determinations shall be
final, conclusive and binding on all persons. The act or determination of a
majority of the members of the Committee shall be deemed to be the act or
determination of the Committee.

(b) The Committee may request advice or assistance or employ
such other persons as it in its discretion deems necessary or appropriate for
the proper administration of the Plan, including, but not limited to employing
a brokerage firm, bank or other financial institution to assist in the purchase
of shares, delivery of reports or other administrative aspects of the Plan and
to establish and maintain brokerage accounts for the Participants.

(c) All Eligible Employees granted options under the Plan
shall have the same rights and privileges; however, the Plan will not fail to
satisfy this requirement merely because the amount of Common Stock which may be
purchased by any Eligible Employee is determined on the basis of a uniform
relationship to the Eligible Compensation of Eligible Employees, or because the
Plan provides that no Eligible Employee may purchase more than a maximum amount
of Common Stock as set forth under the Plan.

(d) The Company shall pay all administrative costs of the
Plan.

5. Eligibility to Participate in the Plan.

Subject to the further provisions of the Plan, each Eligible
Employee on an Enrollment Date shall be eligible to participate in the Plan for
the Option Period beginning on that Enrollment Date.

6. Option Periods.

The Plan shall consist of consecutive Option Periods, which
continue automatically, until the Plan is terminated.

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<PAGE> 4

7. Election to Participate in the Plan.

(a) Each Eligible Employee may elect to participate in the
Plan by completing an enrollment agreement in the form provided by the Company
and filing such enrollment agreement with his Participating Company prior to
the applicable Enrollment Date, unless another time for filing the enrollment
form is set by the Committee for all Eligible Employees with respect to a given
Option Period.

(b) Payroll deductions for a Participant shall commence on the
first payroll date following the Enrollment Date and shall end on the last
payroll date in the Option Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in Section 12.

(c) Unless a Participant elects otherwise prior to the
Enrollment Date of the immediately succeeding Option Period, an Eligible
Employee who is participating in an Option Period as of the Exercise Date of
such Option Period shall be deemed (i) to have elected to participate in the
immediately succeeding Option Period and (ii) to have authorized the same
payroll deduction for such immediately succeeding Option Period as was in
effect for such Participant immediately prior to the succeeding Option Period.

8. Payroll Deductions.

(a) All Participant contributions to the Plan shall be made
only by payroll deductions. At the time a Participant files the enrollment
agreement with respect to an Option Period, the Participant shall authorize
payroll deductions to be made on each payroll date during the Option Period in
an amount of from 1% to 10% of the Eligible Compensation which the Participant
receives on each payroll date during such Option Period. The amount of such
payroll deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Eligible Compensation. A Participant may not make any additional
contributions to the Plan.

(b) All payroll deductions made for a Participant may be
deposited in the Company's general corporate account and shall be credited to
the Participant's Account under the Plan. No interest shall accrue or be
credited with respect to the payroll deductions of a Participant under the
Plan. All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.

(d) Notwithstanding the foregoing, no Participant may make
payroll deductions during any calendar year in excess of $21,250.

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<PAGE> 5

9. Grant of Options.

(a) Subject to the limitations set forth in Sections 3 and
9(b) hereof, on the Enrollment Date of each Option Period, each Participant
shall be granted an option to purchase on the Exercise Date for such Option
Period (at the Exercise Price determined as provided in Section 10 below) a
number of shares of the Company's Common Stock determined by dividing such
Eligible Employee's payroll deductions accumulated during the Option Period
(and any amounts carried over from the prior Option Period) by the applicable
Exercise Price.

(b) Notwithstanding any provision of the Plan to the contrary,
no Eligible Employee shall be granted an option under the Plan which permits
such Eligible Employee's rights to purchase stock under all employee stock
purchase plans of the Company and its parent corporation and Subsidiaries to
accrue at a rate which exceeds $25,000 of the Fair Market Value of such stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.

10. Exercise Price.

The Exercise Price of each share of Common Stock offered in a
given Option Period shall be the lower of: (i) 85% of the Fair Market Value of
a share of Common Stock on the applicable Enrollment Date, or (ii) 85% of the
Fair Market Value of a share of Common Stock on the applicable Exercise Date.

11. Exercise of Options.

Unless a Participant withdraws from the Plan as provided in
Section 12, the Participant's option for the purchase of shares will be
exercised automatically on each Exercise Date, and the maximum number of whole
shares subject to the option will be purchased for the Participant at the
applicable Exercise Price with the accumulated payroll deductions credited to
the Participant's Account. Any payroll deductions remaining credited to the
Participant's Account after the Exercise Date shall be carried over to the next
Option Period.

12. Withdrawal; Termination of Employment.

(a) A Participant may withdraw all but not less than all of
the payroll deductions credited to the Participant's Account under the Plan at
any time by giving written notice to the Company. All of the Participant's
payroll deductions credited to the Participant's Account will be paid to him
promptly after receipt of the Participant's notice of withdrawal, the
Participant's participation in the Plan will be automatically terminated, and
no further payroll deductions for the purchase of shares will be made. Payroll
deductions will not resume on behalf of a Participant who has withdrawn from
the Plan unless written notice is delivered to the Company within the
enrollment period preceding the commencement of a new Option Period directing
the Company to resume payroll deductions.

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<PAGE> 6

(b) In the event a Participant ceases to be an Eligible
Employee during an Option Period for any reason including, without limitation,
death, the Participant will be deemed to have elected to withdraw from the
Plan, the payroll deductions credited to the Participant's Account will be
returned to the Participant, and the Participant's options to purchase shares
under the Plan will be terminated.

(c) A Participant's withdrawal from an Option Period will not
affect the Participant's eligibility to participate in a succeeding Option
Period.

13. Transferability.

Options to purchase Common Stock granted under the Plan are
not transferable by a Participant and are exercisable only by the Participant.

14. Reports.

Statements of Accounts will be given to Participants as soon
as reasonably practical following each Exercise Date, which will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any, of such Participant's
Account.

15. Adjustments Upon Changes in Capitalization.

(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments may be made in the number and/or kind of shares, and the per share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.

(b) In the event of the proposed dissolution or liquidation of
the Company, a proposed sale of all or substantially all of the assets of the
Company, or any proposed transaction in which the Company will not survive as
an independent publicly traded company, including the merger of the Company
with or into another corporation, the Option Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Committee.

(c) In all cases, the Committee shall have full discretion to
exercise any of the powers and authority provided under this Section 15, and
the Committee's actions hereunder shall be final and binding on all
Participants. No fractional shares of stock shall be issued under the Plan
pursuant to any adjustment authorized under the provisions of this Section 15.

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<PAGE> 7

16. Amendment of the Plan.

The Board may at any time, or from time to time, amend the
Plan in any respect; provided, however, that the Plan may not be amended in any
way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto, including, without limitation, shareholder
approval if required.

17. Termination of the Plan.

The Plan and all rights of Eligible Employees hereunder shall
terminate:

(a) on the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares
remaining available for purchase under the Plan; or

(b) at any time, at the discretion of the Board.

In the event that the Plan terminates under circumstances
described in Section 17(a) above, reserved shares remaining as of the
termination date shall be sold to Participants on a pro rata basis.

18. Notices.

All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

19. Shareholder Approval.

The Plan shall be subject to approval by the shareholders of
the Company within twelve months after the date the Plan is adopted by the
Board. If such shareholder approval is not obtained prior to the first Exercise
Date, the Plan shall be null and void and all Participants shall be deemed to
have withdrawn on such Exercise Date pursuant to Section 12.

20. Conditions Upon Issuance of Shares.

(a) The Plan, the grant and exercise of options to purchase
shares of Common Stock under the Plan, and the Company's obligation to sell and
deliver shares upon the exercise of options to purchase shares shall be subject
to all applicable federal, state and foreign laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required. In the event the Company is
required to obtain from any commission or agency authority to issue any stock
certificate, the inability of the Company to obtain

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<PAGE> 8

from any such commission or agency authority that counsel for the Company deems
necessary for the lawful issuance of any such certificate will relieve the
Company from liability to any Participant, except to return to him the amount
of the balance in his account.

(b) The Company may make such provisions as it deems
appropriate for withholding of amounts that the Company determines it is
required to withhold pursuant to applicable tax laws in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.

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<PAGE> 1

EXHIBIT 21.1

Following the consummation of the Acquisitions and the Offering, Chemical
Logistics Corporation will have the following subsidiaries:

G. S. Robins & Company
Industrial Chemicals, Inc.
Chemical Solvents, Inc.
Pavlish Real Estate Holding Company
Tilley Chemical Co., Inc.
D.J.J. Equity Corporation
Cron Chemical Corporation
Magnolia Chemical & Solvents, Inc.
Rayver, Inc.
Brown Chemical Co., Inc.
Brown Realty Incorporated
Tarr, Inc.
Tarr, Inc. of Arizona
Tarr Trucking, Inc. (50% owned by Tarr, Inc.,
50% owned by Tarr, Inc. of Arizona)
A.C.C., Inc. t/a American Chemicals Co., Inc.
Houston Solvents and Chemical Company, Inc.
d/b/a Southwest Solvents & Chemicals
SS&C Properties, Inc.
Dallas Solvents and Chemicals Co., Inc.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of this
registration statement.

ARTHUR ANDERSEN LLP

Houston, Texas

October 8, 1998