UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-KSB
MARK ONE:
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM
TO
-------------------- --------------------
COMMISSION FILE NUMBER 0-11453
AMERICAN PHYSICIANS SERVICE GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1458323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1301 CAPITAL OF TEXAS HIGHWAY AUSTIN, TEXAS 78746
(Address of principal executive offices) (Zip Code)
(512) 328-0888
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:
Common Stock, $.10 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d ) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB _____
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
Aggregate Market Value at March 20, 1997: $27,669,778
Indicate the number of shares outstanding of each of the registrant's class of
common stock, as of the latest practicable date.
NUMBER OF SHARES
OUTSTANDING AT
TITLE OF EACH CLASS MARCH 20, 1997
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Common Stock, $.10 par value 4,024,695
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the Registrant's definitive proxy material for the 1997
annual meeting of shareholders are incorporated by reference into Part III of
the Form 10-KSB.
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
American Physicians Service Group, Inc. (the "Company"), through its
subsidiaries, provides financial services that include management of malpractice
insurance companies and brokerage and investment services to individuals and
institutions. The Company has an affiliate which designs and markets software
packages to medical clinics, physician-hospital organizations, and medical
schools. The Company also owns space in the office building which serves as its
headquarters. Through its real estate subsidiary it leases space that is surplus
to its needs.
The Company owns 3,064,000 shares of common stock of Prime Medical
Services, Inc. ("Prime Medical"), representing at March 15, 1997 approximately
16% of the outstanding shares of common stock of Prime Medical. Two of Prime
Medical's eight directors are members of the Company's board of directors. The
Company records its pro-rata share of Prime Medical's results on the equity
basis. Prime Medical is the largest operator of lithotripters in the United
States, currently servicing over 400 hospitals in 32 states. Lithotripsy is a
non-invasive method of treating kidney stones through the use of shock waves.
The common stock of Prime Medical is traded on the NASDAQ National Market under
the symbol "PMSI." Prime Medical is a Delaware corporation which is required to
file annual, quarterly and other reports and documents with the Securities and
Exchange Commission, which reports and documents contain financial and other
information regarding Prime Medical. The summary information regarding Prime
Medical contained herein is qualified in its entirety by reference to such
reports and documents. Such reports and documents may be examined and copies may
be obtained from the offices of the Securities and Exchange Commission. Two of
the Company's five directors are members of Prime Medical's board of directors.
On October 31, 1996, the Company invested $3,300,000 in the common
stock of Exsorbet Industries, Inc. ("Exsorbet") (NASDAQ:EXSO) with a put option.
Exsorbet is a diversified environmental and technical services company. On
November 26, 1996, the Company exercised its put in exchange for a note
receivable from Exsorbet. The note is secured by the shares which were subject
to the put plus all of the stock and substantially all of the assets of a
wholly-owned subsidiary of Exsorbet. According to documents which Exsorbet has
filed with the Securities and Exchange Commission, Exsorbet has limited
liquidity, which would currently not allow payment of the Company's note, and is
considering various options to secure such funding, including a private
placement of debt or equity.
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The Company was organized in October 1974 under the laws of the State
of Texas. The Company maintains its principal executive office at 1301 Capital
of Texas Highway, Suite C-300, Austin, Texas 78746, and its telephone number is
(512) 328-0888. Unless the context otherwise requires, all references herein to
the "Company" shall mean American Physicians Service Group, Inc.
and its subsidiaries (other than Prime Medical).
The Company had previously published Spanish language buying guides of
U. S. businesses for distribution in Mexico. This business segment had been
unprofitable for the Company. In 1995 substantially all of the assets of this
business were sold. There was no material financial impact on the Company.
Financial Services
The Company's financial services consist of management services to a
medical malpractice insurance company by APS Insurance Services, Inc., a
wholly-owned subsidiary of the Company ("Insurance Services"), and brokerage and
investment services to individuals and institutions performed by APS Financial
Corporation, a wholly-owned subsidiary of the Company ("APS Financial").
Management of Medical Malpractice Insurance Company
Insurance Services, through its wholly-owned subsidiary APS Facilities
Management, Inc. ("FMI"), provides management services to a medical malpractice
insurance company, which is a reciprocal insurance exchange. A reciprocal
insurance exchange is an organization which sells insurance only to its
subscribers, who pay, in addition to their annual insurance premiums, a
contribution to the exchange's surplus. Such exchanges generally have no paid
employees but instead enter into a contract with an "attorney-in-fact," a firm
that provides all management and administrative services for the exchange. As
the attorney-in-fact for American Physicians Insurance Exchange ("APIE"), FMI
receives a percentage of the earned premiums of APIE. The amount of these
premiums can be adversely affected by competition. Substantial underwriting
losses, which might result in a curtailment or cessation of operations by APIE,
would also adversely affect FMI's revenue. To limit possible underwriting
losses, APIE currently reinsures its risk in excess of $250,000 per medical
incident. APIE offers medical professional liability insurance for doctors in
Texas and Arkansas. FMI's assets are not subject to any insurance claims by
policyholders of APIE.
FMI organized APIE and has been its exclusive manager since its
inception in 1975. The management agreement between FMI and APIE basically
provides for full management by FMI of the affairs of APIE under the direction
of APIE's doctor Board of Directors. Subject to the direction of this Board, FMI
sells and issues policies, investigates, settles and defends claims, and
otherwise manages APIE's affairs. In consideration for performing its services,
FMI receives a percentage fee based on APIE's earned premiums (before payment of
reinsurance premiums). FMI pays all salaries and personnel related expenses,
rent and office operations costs, data processing costs and many
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other operating expenses of APIE. APIE is responsible for the payment of all
claims, claims expenses, peer review expenses, directors' fees and expenses,
legal, actuarial and auditing expenses, its taxes and certain other specific
expenses. Under the agreement, FMI's authority to act as manager of the exchange
is automatically renewed each year unless a majority of the subscribers to APIE
terminates this agreement by reason of an adjudication that FMI has been grossly
negligent, has acted in bad faith or with fraudulent intent or has committed
willful misfeasance in its management activities.
During 1996, 1995 and 1994 approximately 45%, 26% and 29%,
respectively, of the Company's revenues from continuing operations and
substantially all of FMI's revenues were received pursuant to the agreement with
APIE discussed above. Termination of the agreement with APIE would have a
material adverse effect on the Company.
APIE is a reciprocal insurance exchange authorized to do business in
the states of Texas and Arkansas. APIE specializes in writing medical
professional liability insurance for health care providers. The insurance
written in Texas is primarily through purchasing groups, which insurance is not
subject to certain rate and policy form regulations issued by the Texas
Department of Insurance. Applicants for insurance coverage are reviewed based on
the nature of their practices, prior claims records and other underwriting
criteria. APIE is the third largest medical professional liability insurance
company in the State of Texas and is one of the largest in the State of
Arkansas. APIE is the only insurance company based in Texas that is wholly-owned
by its subscriber physicians.
Generally, medical professional liability insurance is offered on
either a "claims made" basis or an "occurrence" basis. "Claims made" policies
insure physicians only against claims actually made during the period covered by
the policy. "Occurrence" policies insure physicians against claims based on
occurrences during the policy period regardless of when the claim is actually
made. APIE offers only a "claims made" policy but provides for an extended
reporting option upon termination. APIE reinsures 100% of all coverage per
medical incident between $250,000 and $1,000,000, primarily through Lloyds of
London and certain other domestic and international insurance companies.
The following table presents selected financial and other data for
APIE. APIE has a contract to pay management fees to FMI based on APIE's earned
premiums before reinsurance. The fee percentage is 13.5% with the provision that
any profits of APIE will be shared equally with FMI so long as the total
reimbursement (fees and profit sharing) do not exceed a cap based on premium
levels. No profit sharing fee was received in 1993. In 1996, 1995, 1994, and
1992, management fees attributable to profit sharing were $1,191,000, $700,000,
$1,107,000, and $1,678,000, respectively.
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<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994 1995 1996
------ ------ ------ ------ -----
(thousands, except for
number of insureds)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earned premiums before
reinsurance premiums...... $27,934 $29,205 $30,261 $30,857 $28,754
Total assets................ 96,343 94,019 98,302 101,251 90,193
Total surplus............... 8,209 9,196 9,315 9,402 10,017
Management fees to FMI...... 5,397 (1) 3,790 (2) 4,703 (4) 5,010 (6) 5,281 (7)
Number of insureds......... 5,154 3,575 (3) 3,216 (5) 3,226 3,019
- ----------------
</TABLE>
(1) Gross fee of $5,450 less tax refund of $53 attributable to APIE's
association with FMI.
(2) Gross fee of $3,942 less tax refund of $152 attributable to APIE's
association with FMI.
(3) The decrease in the number of insureds primarily resulted from the
expiration in 1993 of APIE's contract with the University of
Arkansas Medical School.
(4) Gross fee of $5,193 less tax credit of $490 attributable to APIE's
association with FMI.
(5) The decrease was the result of APIE's decision to raise premiums on
certain unprofitable specialties. Included in the totals are
doctors for which APIE provides reinsurance through a relationship
with another malpractice insurance company.
(6) Includes $676 in fees from other carriers directly related to APIE's
controlled business.
(7) Includes $860 in fees from other carriers directly related to APIE's
controlled business.
Brokerage and Investment Services
APS Financial, a fully licensed broker/dealer, provides brokerage and
investment services to individual and institutional clients. APS Financial
provides complete portfolio accounting, analysis, and management services, to
insurance companies, banks, and public funds.
APS Financial's employees have extensive investment expertise and
knowledge. APS Financial is a member of the National Association of Securities
Dealers, Inc. ("NASD") and the Securities Investor Protection Corporation and,
in addition, is licensed in 44 states.
Retail commissions are charged on both exchange and over-the-counter
("OTC") transactions generally in accordance with a schedule which APS Financial
has formulated in accordance with NASD guidelines. When OTC transactions are
executed by APS Financial as a dealer, APS Financial receives, in lieu of
commission, mark-ups or mark-downs.
Every registered broker-dealer doing business with the public is
subject to stringent rules with respect to net capital requirements promulgated
by the Securities and Exchange Commission. These rules, which are designed to
measure the financial soundness and liquidity of broker-dealers, specify minimum
net capital requirements. Since the Company is not itself a registered
broker-dealer, it is not subject to these rules. However, APS Financial is
subject to these rules. Compliance with applicable net capital rules could limit
operations of APS Financial such as trading activities that
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require the use of significant amounts of capital. A significant operating loss
or an extraordinary charge against net capital could adversely affect the
ability of APS Financial to expand or even maintain its present levels of
business. At December 31, 1996, APS Financial was in compliance with all net
capital requirements.
APS Financial clears and executes its transactions through Southwest
Securities, Inc. ("Southwest") on a fully disclosed basis. Southwest also
processes orders and floor reports, matches trades, transmits execution reports
to APS Financial and records all data pertinent to trades. APS Financial pays a
fee based on the number and type of transactions performed by Southwest.
Computer Systems and Software Sales
In 1994, 1995 and the first six months of 1996, APS Systems, Inc. ("APS
Systems") sold computer systems and self-designed software designed for sale to
large, multi-physician medical clinics, medical schools, Physician Hospital
Organizations (PHOs) and other physician networks. The Company also provided
facilities management of the total data processing requirements for those
clinics, schools and networks.
Effective July 1, 1996, the Company entered into a software development
agreement with International Software Solutions, Inc. ("ISSI"). Under this
agreement, ISSI received newly issued shares of APS Systems, Inc. common stock,
which diluted the ownership of the Company to 49%. APS Systems subsequently
changed its name to Syntera Technologies, Inc. ("Syntera"). ISSI is engaged in
software consulting/contract programming and brings new technology to the
venture. Syntera will continue to focus on practice management software for the
medical industry which integrates patient registration, appointment scheduling,
chart tracking, billing, insurance processing and alternative delivery system
(HMO, PPO) tracking. Since July 1, 1996 and continuing through 1997, Syntera's
energies are largely being devoted to re-development. APS Systems' 15 years of
practice management knowledge and ISSI's technology base are being utilized to
replace all of Syntera's products with ones that meet the needs of the changing
healthcare marketplace. Syntera's shareholders expect to invest approximately
$3,000,000 in new capital in the joint development, including approximately
$1,000,000 by the Company.
Operations of Syntera are consolidated with the Company through June
30, 1996. Following that date, the Company recorded its pro-rata share of
Syntera's results on the equity basis.
Real Estate
APS Realty, Inc., a wholly-owned subsidiary of the Company ("APS
Realty"), owns condominium space in an office project located in Austin, Texas.
It leases approximately 57% of this space to the Company, its subsidiaries and
Prime Medical. The remainder is leased to unaffiliated parties.
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Competition
APIE competes with numerous insurance companies in Texas and Arkansas,
primarily Medical Protective Insurance Company, St. Paul Fire and Marine
Insurance Company, State Volunteer Mutual Company, Frontier Insurance Group,
Insurance Company of America, Texas Medical Liability Trust and CNA Insurance
Company. Many of these firms have substantially greater resources than APIE. The
primary competitive factor in selling insurance is a combination of price, terms
of the policies offered, claims and other service and claims settlement
philosophy.
APS Financial is also engaged in a highly competitive business. Its
competitors include, with respect to one or more aspects of its business, all of
the member organizations of the New York Stock Exchange and other registered
securities exchanges, all members of the NASD, registered investment advisors,
members of the various commodity exchanges and commercial banks and thrift
institutions. Many of these organizations are national rather than regional
firms and have substantially greater personnel and financial resources than the
Company. Discount brokerage firms oriented to the retail market, including firms
affiliated with commercial banks and thrift institutions, are devoting
substantial funds to advertising and direct solicitation of customers in order
to increase their share of commission dollars and other securities-related
income. In many instances APS Financial is competing directly with such
organizations. In addition, there is competition for investment funds from the
real estate, insurance, banking and thrift industries.
The computer-based management systems business is also highly
competitive. Syntera competes in this business with numerous large and small
competitors. Many of these firms also have substantially greater resources than
the Company. The primary competitive factors in this business include price,
system reliability and maintainability, applications software features, delivery
times and commitment to service and support.
Regulation
FMI has received certificates of authority from the Texas and Arkansas
insurance departments, licensing it on behalf of the subscribers of APIE. APIE,
as an insurance company, is subject to regulation by the insurance departments
of the States of Texas and Arkansas. These regulations strictly limit all
financial dealings of a reciprocal insurance exchange with its officers,
directors, affiliates and subsidiaries, including FMI. Premium rates,
advertising, solicitation of insurance, types of insurance issued and general
corporate activity are also subject to regulation by various state agencies.
APS Financial is subject to extensive regulation under both federal and
state laws. The Securities and Exchange Commission ("SEC") is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations, principally the NASD and the national securities exchanges. These
self-regulatory organizations adopt rules (subject to approval by the SEC) which
govern the industry and conduct periodic examinations of member broker-dealers.
APS Financial is also subject to regulation by state and District of Columbia
securities commissions.
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The regulations to which APS Financial is subject cover all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, uses and safekeeping of customers' funds and securities, capital
structure of securities firms, record-keeping and the conduct of directors,
officers and employees. Additional legislation, changes in rules promulgated by
the SEC and by self-regulatory organizations, or changes in the interpretation
or enforcement of existing laws and rules, may directly affect the method of
operation and profitability of APS Financial. The SEC, self-regulatory
organizations and state securities commissions may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of APS
Financial, its officers or employees. The principal purpose of regulation and
discipline of broker-dealers is the protection of customers and the securities
markets, rather than protection of creditors and shareholders of broker-dealers.
APS Financial, as a registered broker-dealer and NASD member
organization, is required by federal law to belong to the Securities Investor
Protection Corporation ("SIPC"). When the SIPC fund falls below a certain
minimum amount (as it did in 1994 and 1995), members are required to pay annual
assessments in varying amounts not to exceed .5% of their adjusted gross
revenues to restore the fund. This assessment amounted to approximately $7,300
in 1995 and $4,600 in 1994. The SIPC fund provides protection for customer
accounts up to $500,000 per customer, with a limitation of $100,000 on claims
for cash balances.
Employees
At March 1, 1997, the Company employed, on a full time basis,
approximately 90 persons, including 50 by Insurance Services, 28 by APS
Financial, and 12 directly by the Company. Syntera Technologies employed 28
persons. The Company considers its employee relations to be good. None of the
Company's employees is represented by a labor union and the Company has
experienced no work stoppages.
ITEM 2. PROPERTIES
APS Realty owns approximately 53,000 square feet of condominium space
in an office project. The Company, its subsidiaries and Prime Medical use
approximately 30,000 square feet of this space as their principal executive
offices, and APS Realty leases the remainder to third parties. The area
available for lease to third parties was 100% occupied as of March 25, 1997.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions that have
arisen in the ordinary course of business. The Company believes that the
liability provision in its financial statements is sufficient to cover any
unfavorable outcome related to lawsuits in which it is currently named.
Management believes that liabilities, if any, arising from these actions will
not have a significant adverse effect on the financial condition of the Company.
However, due to the uncertain nature of
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legal proceedings, the actual outcome of these lawsuits may differ from the
liability provision recorded in the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The following table represents the high and low prices of the Company's
Common Stock in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc., Automated Quotations System for the
periods indicated. At March 1, 1997, the Company had approximately 500
shareholders of record.
1996 1995
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High Low High Low
First Quarter $10 1/8 $5 1/4 $2 7/8 $2 3/8
Second Quarter 12 7/8 8 3 7/16 2 11/16
Third Quarter 10 5 7/8 4 1/2 3
Fourth Quarter 7 3/8 5 5/8 9 7/8 4
The Company has no present intention of paying any cash dividends on its Common
Stock in the foreseeable future. It is the present policy of the Board of
Directors to retain all earnings to provide funds for the growth of the Company.
The declaration and payment of dividends in the future will be determined by the
Board of Directors based upon the Company's earnings, financial condition,
capital requirements and such other factors as the Board of Directors may deem
relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
Forward-Looking Statements
The statements contained in this Report on Form 10-KSB that are not purely
historical are forward- looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. It is important to note that the Company's actual
results could differ materially from those in such forward-looking statements.
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The reader should consult the Company's reports on Forms 10-QSB and filings
under the Securities Act of 1993, for factors that could cause actual results to
differ materially from those presented.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgements with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-KSB will prove to be
accurate.
Results of Operations
1996 Compared to 1995
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Revenues from continuing operations decreased 43% in 1996 compared to 1995. Net
income decreased 5% and fully diluted earnings per share decreased 8%. The
reasons for these changes are described below.
Financial Services
Financial services revenues declined 36% in 1996 compared to 1995.
Insurance management operations were up by 5% as a result of a higher contingent
fee, which was based on improved profits at the managed insurance company.
Broker dealer revenues declined 61%. Approximately 60% of the decline was from
not being able to replace the sales of a key broker who left at the beginning of
1996. The balance of the decline was primarily attributed to higher interest
rates, which reduced activity in the bond market.
Financial services expenses declined 33% from 1995. The decline
reflects lower activity at the broker/dealer where lower commissions, payroll,
legal and office operations expenses combined for a 51% decline compared to
1995. Insurance management expenses increased 7%, primarily in the areas of
employment taxes and benefits and state taxes.
Results in this segment can vary from year to year. Insurance
management has a provision in its contract whereby it receives a portion of the
managed insurance company's profits. In the seven years under the contract,
profit-sharing has ranged from zero to 13% of the segment's revenues. The broker
dealer, primarily a provider of fixed income securities, is subject to general
market conditions as well as interest rates and is in an industry characterized
competition for top producing brokers. The broker/dealer continually seeks
quality brokers and is opening an office in another city in an effort to expand
its recruiting and sales base. While it expects positive results from these
actions, there is no assurance that it will be successful in returning to the
1995 level of performance.
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Computer Systems/Software
Revenues declined 66% compared to 1995. Approximately one half of the
decline was a result of the July 1, 1996 software development agreement which
reduced the Company's ownership to 49%. With the change to less than majority
ownership, the Company's interest in the segment was accounted for on the equity
basis and, consequently, no revenues were recorded. The balance of the decline
resulted from no new contracts being secured in 1996.
Expenses in 1996 decreased by 62% compared to 1995. Approximately one
half of the decline was, again, the result of the dilution of the company's
interest on July 1, 1996 and subsequent adoption of the equity method of
accounting, wherein no expenses are recorded on the minority owners financial
statements. The balance of the decrease was in costs of hardware and software
and in payroll and benefits, all of which reflect the lower sales.
Syntera entered a redevelopment phase at mid year. The new majority
owner brings added technical knowledge and the entire software line is being
redesigned. With new software, Syntera expects to broaden its marketing focus
and increase its sales. Being able to carry out its plans within its capital
constraints and marketing the new product successfully remain uncertainties.
Real Estate
Revenue increased 7% over 1995. The increase reflects rising lease
rates in Austin, Texas.
The 2% increase in real estate expenses reflects overall inflation from
1995 to 1996.
Investment and Other
The decline in investment and other income was primarily in the "other"
category, where 1995 results included a favorable settlement of prior
litigation. No similar benefit was received in 1996.
On October 31, 1996, the Company invested $3,300,000 in the common
stock of Exsorbet Industries, Inc. with a put option. On November 26, 1996, the
Company exercised its put in exchange for a note receivable from Exsorbet. The
note is secured by the shares which were subject to the put plus all of the
stock and substantially all of the assets of a wholly-owned subsidiary of
Exsorbet. According to documents which Exsorbet has filed with the Securities
and Exchange Commission, Exsorbet has limited liquidity, which would currently
not allow payment of the Company's note, and is considering various options to
secure such funding, including a private placement of debt or equity.
General and Administrative Expenses
The 93% decline in expenses was primarily a result of timing rather
than fundamental changes in operations. 1995's expenses included a contingency
provision established to guarantee a future yield on an account (see Note 9 to
the financial statements). In 1996, this contingency provision was adjusted
downward as a result of the account's actual performance. Approximately 72% of
the
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change between 1996 and 1995 resulted from this contingency provision.
Additionally, the successful collection of certain accounts receivable in 1996
caused the reversal in 1996 of an allowance for doubtful accounts, established
in 1995, and accounts for approximately 16% of the change between 1996 and 1995.
Approximately 9% of the decrease in 1996 expenses was from lower payroll costs.
Costs were lower due to reduced performance-based incentives, which are based on
the Company's pretax income and market price.
Interest expense declined 57% primarily due to reduced inventories at
the broker/dealer and the resultant reduction in margin borrowing.
Affiliates
Earnings from affiliates decreased 6% compared to 1995. Prime Medical
grew dramatically in 1996, but costs associated with acquisitions and a stock
offering reduced the impact of the growth in 1996. Primes's issuance of
additional shares in 1996 reduced the Company's ownership from 21% to 16%. The
Company, through its status as Prime's largest shareholder and through its
representation on Prime's board, continues to have significant influence at
Prime and accounts for its investment using the equity method.
1995 Compared to 1994
- ---------------------
Revenues from continuing operations in 1995 increased 16% compared to
1994. In 1995, net income increased 61% and fully diluted earnings per share
increased 40% compared to 1994. The reasons for these changes are described
below.
Financial Services
Financial services revenues were up 20% in 1995 over 1994. The increase
occurred at the broker/dealer, where falling interest rates attracted more bond
buyers. The broker/dealer also recorded an inventory profit in 1995 compared to
an equivalent loss in 1994.
Expenses increased 9% in 1995 over 1994. The increase was at the
broker/dealer, where increased sales resulted in increased sales commissions.
Computer Systems/Software
Revenues declined 12% compared to 1994. The decrease reflects being in
a later stage of the contracts where lower, but higher margin, revenues from
software and installation were being recognized, as opposed to the hardware
revenue being recognized in 1994. All contracts were substantially complete at
the end of 1995, compared to a backlog of approximately $1 million at the end of
1994. A lack of new contracts in 1995 reduced the backlog.
Expenses in 1995 decreased by 14% in 1995 compared to 1994. The
significant decrease was in hardware cost of sales, due to the lower volume of
hardware delivered in 1995. Costs of travel
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and legal were also reduced in 1995. Partially offsetting these reductions was
a 20% increase in personnel-related expenses.
Real Estate
Revenue increased 14% over 1994. The increase reflects rising lease
rates in Austin, Texas.
Expenses of the real estate segment increased 13% compared to 1994.
Utility and property tax rate increases along with depreciation on additional
buildouts were the primary factors in the increase.
Investment and Other
Approximately 90% of the increase over 1994 was the result of a
favorable settlement of prior litigation. The remainder of the increase resulted
primarily from higher investable balances in 1995.
General and Administrative Expenses
Approximately 67% of the increase in 1995 resulted from increasing
allowances for certain litigation and business related contingencies (see notes
to consolidated financial statements, Note 9). Performance-based incentive plans
increased in 1995 as a result of the Company's improved income and market
capitalization and accounted for approximately 14% of the increase over 1994.
The reversal in 1994 of certain allowances for litigation, which had been
settled in 1994, also caused expenses to be lower in 1994 compared to 1995.
Interest Expense decreased 18% due to lower rates on floating rate debt
and to lower debt outstanding.
Affiliates
Earnings from the Company's investment in Prime Medical increased by
59% compared to 1994. Acquisition of additional lithotripsy operations improved
Prime's profitability in 1995. Prime continues to seek growth through additional
acquisitions.
Inflation
The operations of the Company are not significantly affected by
inflation because, having no manufacturing operations, the Company is not
required to make large investments in fixed assets. However, the rate of
inflation will affect certain of the Company's expenses, such as employee
compensation and benefits.
12
<PAGE>
Liquidity and Capital Resources
Net working capital was $8,305,000 and $7,466,000 at December 31, 1996
and 1995, respectively. The increase in working capital is primarily the result
of income from operations, and from certain contracts/legal contingencies being
resolved for amounts less than had been accrued. Historically, the Company has
maintained a strong working capital position and, using that base, has been able
to satisfy its operational and capital expenditure requirements with cash
generated from its operating and investing activities. These same sources of
funds have also allowed the Company to pursue investment and expansion
opportunities consistent with its growth plans. The ability of the Company to
borrow against its investment in the common stock of Prime Medical (market value
$33,326,000 at December 31, 1996) gives it significant additional liquidity.
Capital expenditures for equipment were $123,000, $419,000, and
$99,000, in 1996, 1995 and 1994, respectively. In addition, the Company improved
or purchased office space in 1996, 1995 and 1994 for $21,000, $64,000 and
$86,000, respectively. The Company expects capital expenditures in 1997 to be
within the range of the prior three years.
Under the software development agreement at Syntera, the Company has
committed approximately $1,000,000 of new capital. At December 31, 1996,
approximately $120,000 of this commitment had been met and the balance is due in
1997, providing that the development proceeds as planned.
The sale of an apartment investment in 1994 for $811,000 was a
significant non-recurring item affecting cash flows.
Management believes that its present cash position together with funds
generated from operations and from the ability to borrow against its equity
position in affiliates will provide sufficient resources to meet all present and
reasonably foreseeable future capital needs.
13
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained in Appendix A
attached hereto.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
For the Year Ended or At December 31,
1996 1995 1994 1993 1992
---- ------ -------- -------- ------
Selected Income Statement Data:
<S> <C> <C> <C> <C> <C>
Revenues $11,646 20,490 17,737 16,720 17,015
Earnings from continuing operations before
income taxes and accounting changes 2,969 3,483 2,218 1,784 544
Net earnings $ 1,924 2,024 1,254 1,086 445
Per Share Amounts - Fully Diluted:
Net earnings $.45 .49 .35 .30 .11
Fully Diluted Weighted Average
Shares Outstanding 4,321 4,163 3,614 3,622 3,926
Selected Balance Sheet Data:
Total assets 24,468 23,740 19,918 18,326 18,024
Long-term obligations -- 574 878 1,215 1,639
Total liabilities 4,086 6,146 4,927 4,562 5,488
Total equity 20,382 17,594 14,491 13,688 12,459
Book value per share $5.03 4.80 4.47 4.15 3.85
</TABLE>
Financial information and schedules relating to Prime Medical Services,
Inc. are contained in Item 14(a) of the Annual Report on Form 10-K for the year
ended December 31, 1996 of Prime Medical Services, Inc., which Item 14(a) is
incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
14
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1997 annual meeting
of shareholders, except for the information regarding executive officers of the
Company which is presented below. The information required by this item
contained in such definitive proxy material is incorporated herein by reference.
As of March 1, 1997, the executive officers of the Company are as follows:
Name Age Position
- ---------- --- -------------------------------
Kenneth S. Shifrin 47 Chairman of the Board, President and
Chief Executive Officer
Duane K. Boyd, Jr. 52 Senior Vice President - Insurance
William H. Hayes 49 Senior Vice President - Finance and
Secretary
Thomas R. Solimine 38 Controller
All officers serve until the next annual meeting of directors and until
their successors are elected and qualified.
Mr. Shifrin has been Chairman of the Board since March 1990. He has
been President and Chief Executive Officer since March 1989 and was President
and Chief Operating Officer from June 1987 to February 1989. He has been a
Director of the Company since February 1987. From February 1985 until June 1987,
Mr. Shifrin served as Senior Vice President - Finance and Treasurer. He has been
Chairman of the Board of Prime Medical since October 1989. Mr. Shifrin is a
Certified Public Accountant and is a member of the Young Presidents
Organization.
Mr. Boyd has been Senior Vice President - Insurance since July 1991 and
has also been President and Chief Operating Officer of FMI since July 1991. Mr.
Boyd is a Certified Public Accountant and was with KPMG Peat Marwick from 1974
to June 1991. He was a partner specializing in the insurance industry prior to
joining the Company.
Mr. Hayes has been the Senior Vice President - Finance of the Company
since June 1995. Mr. Hayes was Vice President from June 1988 to June 1995 and
was Controller from June 1985 to June 1988. He has been Secretary of the Company
since February 1987 and Chief Financial Officer since June 1987.
Mr. Hayes is a Certified Public Accountant.
15
<PAGE>
Mr. Solimine has been Controller since June 1994. He has served as
Secretary for APS Financial since February 1995. From July 1989 to June 1994,
Mr. Solimine served as Manager of Accounting for the Company.
There are no family relationships, as defined, between any of the above
executive officers, and there is no arrangement or understanding between any of
the above executive officers and any other person pursuant to which he was
selected as an officer. Each of the above executive officers was elected by the
Board of Directors to hold office until the next annual election of officers and
until his successor is elected and qualified or until his earlier resignation or
removal. The Board of Directors elects the officers in conjunction with each
annual meeting of the stockholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is contained in the definitive
proxy statement of the Company to be filed in connection with its 1997 annual
meeting of shareholders, which information is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is contained in the definitive
proxy statement of the Company to be filed in connection with its 1997 annual
meeting of shareholders, which information is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the definitive
proxy statement of the Company to be filed in connection with its 1997 annual
meeting of shareholders, which information is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (1)
3.1 Restated Articles of Incorporation of the Company, as
amended.(6)
3.2 Amended and Restated Bylaws of the Company.(6)
4.1 Specimen of Common Stock Certificate.(2)
*10.1 American Physicians Service Group, Inc. Employees
Stock Option Plan.(2)
*10.2 Form of Employees Incentive Stock Option Agreement.(2)
16
<PAGE>
*10.3 Form of Employees Non-Qualified Stock Option Agreement.(2)
*10.4 American Physicians Service Group, Inc. Directors Stock
Option Plan.(2)
*10.5 Form of Directors Stock Option Agreement.(2)
*10.6 1995 Non-Employee Directors Stock Option Plan of American
Physicians Service Group, Inc.(11)
*10.7 Form of Non-Employee Directors Stock Option Agreement.(9)
*10.8 1995 Incentive and Non-Qualified Stock Option Plan of
American Physicians Service Group, Inc.(9)
*10.9 Form of Stock Option Agreement (ISO).(9)
*10.10 Form of Stock Option Agreement (Non-Qualified).(9)
*10.11 Management Agreement of Attorney-in-Fact, dated August
13, 1975, between the Company and American Physicians
Insurance Exchange.(2)
10.12 Rights Agreement dated August 16, 1989 between the
Company and Texas American Bridge Bank N.A., as rights
agent, and letter to the Company stockholders, dated
August 16, 1989.(5)
10.13 Stock Purchase Agreement dated October 11, 1989
between the Company and Texas American Energy
Corporation ("TAE"), Standstill Agreement dated
October 11, 1989 among the Company, TAE, Shamrock
Associates and Paul O. Koether, and Agreement dated
October 11, 1989 among the Company, Prime Medical and
Shamrock Associates.(3)
*10.14 Profit Sharing Plan or Trust, effective December 1, 1984,
of the Company.(4)
10.15 Loan Agreement dated April 7, 1992, among the Company,
APS Realty and NationsBank of Texas, N.A.(7)
10.16 Promissory Note dated April 7, 1992, executed by APS
Realty in the principal amount of $1,000,000 payable to
NationsBank of Texas, N.A.(7)
10.17 Stock Purchase Agreement dated September 30, 1996 between
the Company and Exsorbet Industries, Inc.(10)
17
<PAGE>
10.18 Stock Put Agreement dated September 30, 1996 between the
Company and Exsorbet Industries, Inc.(10)
10.19 Shareholder Rights Agreement dated September 30, 1996
between the Company and Exsorbet Industries, Inc.(10)
10.20 Warrant dated September 30, 1996 for shares of common
stock issued to the Company by Exsorbet Industries,
Inc.(10)
10.21 Contingent Warrant Agreement dated September 30, 1996
for shares of common stock issued to the Company by
Exsorbet Industries, Inc.(10)
10.22 Option Agreements dated September 30, 1996 for shares
of Exsorbet common stock issued to the Company by
officers and directors of Exsorbet Industries, Inc.(10)
10.23 Agreement dated September 30, 1996 with Exsorbet
Industries, Inc. related to options issued by officers
and directors of Exsorbet.(10)
10.24 Guaranty Agreements dated September 30, 1996 between
the Company and subsidiaries of Exsorbet Industries,
Inc.
(10)
10.25 Promissory Note dated November 26, 1996 executed by
Exsorbet Industries, Inc. and payable to the Company in
the amount of $3,300,000.(10)
11.1 Computation of per share earnings (included in Appendix
A).(10)
21.1 List of subsidiaries of the Company.(10)
23.1 Independent Auditors Consent of KPMG Peat Marwick, LLP.
(10)
27.1 Financial Data Schedule (EDGAR filing).
- ----------------
(*) Executive Compensation plans and arrangements.
(1) The exhibits listed will be furnished to any security holder upon
written request for such exhibit to W. H. Hayes, American Physicians Service
Group, Inc., 1301 Capital of Texas Highway, Suite C-300, Austin, Texas 78746. A
reproduction fee of $.20 per page will be charged for documents requested.
Copies of all public filings are also available from the SEC by calling
Disclosure, Inc. at 800-638-8241.
(2) Filed as an Exhibit to the Registration Statement on Form S-1,
Registration No. 2-85321, of the Company, and incorporated herein by reference.
18
<PAGE>
(3) Filed as an Exhibit to the Current Report on Form 8-K of the Company
dated October 20, 1989 and incorporated herein by reference.
(4) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1984 and incorporated herein by reference.
(5) Filed as an Exhibit to the Current Report on Form 8-K of the Company
dated September 5, 1989 and incorporated herein by reference.
(6) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1990 and incorporated herein by reference.
(7) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1992 and incorporated herein by reference.
(8) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company
for the year ended December 31, 1994 and incorporated herein by reference.
(9) Filed as an Exhibit to the Annual Report on Form 10-KSB of the Company
for the year ended December 31, 1995 and incorporated herein by reference.
(10) Filed herewith.
(b) Reports on Form 8-K.
No current report on Form 8-k was filed by the Company during the
fourth quarter of 1996.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By: /s/ Kenneth S. Shifrin
Kenneth S. Shifrin, Chairman of the
Board and Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By: /s/ Kenneth S. Shifrin
----------------------
Kenneth S. Shifrin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 26, 1997
By: /s/ W. H. Hayes
----------------
W. H. Hayes
Senior Vice President - Finance, Secretary
and Chief Financial Officer
(Principal Financial Officer)
Date: March 26, 1997
By: /s/ Thomas R. Solimine
----------------------
Thomas R. Solimine
Controller
(Principal Accounting Officer)
Date: March 26, 1997
20
<PAGE>
By: /s/ Richard J. Clark
--------------------
Richard J. Clark, Director
Date: March 26, 1997
By: /s/ Jack Murphy
---------------
Jack Murphy, Director
Date: March 26, 1997
By: /s/ Robert L. Myer
------------------
Robert L. Myer, Director
Date: March 26, 1997
By: /s/ William A. Searles
----------------------
William A. Searles, Director
Date: March 26, 1997
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By:
-----------------------------------
Kenneth S. Shifrin, Chairman of the
Board and Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By:
--------------------------
Kenneth S. Shifrin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 26, 1997
By:
-------------------------
W. H. Hayes
Senior Vice President - Finance, Secretary
and Chief Financial Officer
(Principal Financial Officer)
Date: March 26, 1997
22
<PAGE>
By:
-------------------------
Thomas R. Solimine
Controller
(Principal Accounting Officer)
Date: March 26, 1997
By:
-------------------------
Richard J. Clark, Director
Date: March 26, 1997
By:
-------------------------
Jack Murphy, Director
Date: March 26, 1997
By:
-------------------------
Robert L. Myer, Director
Date: March 26, 1997
By:
-------------------------
William A. Searles, Director
Date: March 26, 1996
23
<PAGE>
APPENDIX A
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report A-2
Financial Statements
Consolidated Statements of Earnings for the years A-3
ended December 31, 1996, 1995 and 1994.
Consolidated Balance Sheets at December 31, 1996 A-5
and December 31, 1995.
Consolidated Statements of Cash Flows for the years A-7
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity A-9
at December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements. A-10
A-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
American Physicians Service Group, Inc.:
We have audited the accompanying consolidated financial statements of American
Physicians Service Group, Inc. and subsidiaries ("Company") as listed in the
accompanying index. 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 financial position of American Physicians
Service Group, Inc. and subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Austin, Texas
February 28, 1997
A-2
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Revenues:
Financial services (Note 3) $ 8,863 13,762 11,451
Computer systems/software (Note 14) 1,590 4,738 5,404
Real estate (Note 6) 717 668 586
Investments and other (Note 2) 476 1,322 296
------ ------ ------
Total revenues 11,646 20,490 17,737
Expenses:
Financial services 7,736 11,582 10,626
Computer systems/software 1,627 4,262 4,970
Real estate 521 510 452
General and administrative 150 2,037 255
Interest 54 124 151
------ ------ ------
Total expenses 10,088 18,515 16,454
Operating income 1,558 1,975 1,283
Equity in earnings of
unconsolidated affiliates (Note 14) 1,411 1,508 950
Minority interest in consolidated
earnings -- -- ( 15)
------ ------ ------
Earnings from continuing operations before 2,969 3,483 2,218
income taxes
Income tax expense (Note 10) 1,045 1,108 798
------ ------ ------
Earnings from continuing operations 1,924 2,375 1,420
------ ------ ------
Loss from discontinued operations net of income
tax benefit of $-0-, $181 and $86 in 1996, 1995
and 1994, respectively -- ( 351) ( 166)
------ ------ ------
Net earnings $ 1,924 2,024 1,254
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
A-3
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Earnings per common share:
Primary:
Earnings from continuing operations $ 0.45 0.62 0.40
Discontinued operations -- (0.09) (0.05)
----- ----- -----
Net earnings $ 0.45 0.53 0.35
===== ===== =====
Fully diluted:
Earnings from continuing operations $ 0.45 0.57 0.40
Discontinued operations -- (0.08) (0.05)
----- ----- -----
Net earnings $ 0.45 0.49 0.35
===== ===== =====
Primary weighted average shares
outstanding 4,269 3,843 3,537
===== ===== =====
Fully diluted weighted average
shares outstanding 4,321 4,163 3,614
===== ===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
A-4
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
1996 1995
----- -----
ASSETS
Current assets:
Cash and cash equivalents $ 5,770 6,798
Marketable securities (Note 2) 29 2,004
Trading account securities 699 1,014
Management fees and other receivables (Note 3) 512 1,748
Income tax receivable 650 --
Notes receivable - current (Note 4) 3,447 223
Receivable from clearing broker 279 780
Net deferred tax asset (Note 10) -- 159
Prepaid expenses and other 239 312
------ ------
Total current assets 11,625 13,038
Notes receivable, less current portion (Note 4) 179 83
Property and equipment, net (Note 6) 1,781 2,129
Investment in affiliates (Note 14) 9,657 7,412
Other assets 1,226 1,078
------ ------
Total assets $24,468 23,740
======= =======
See accompanying notes to consolidated financial statements.
A-5
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
1996 1995
----- -----
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term obligations (Note 8) $ 542 299
Accounts payable - trade 382 353
Accrued compensation 252 861
Accrued expenses and other liabilities (Note 7) 2,144 3,501
Income taxes payable -- 558
----- -----
Total current liabilities 3,320 5,572
Net deferred income tax liability 766 --
Long-term obligations (Note 8) -- 574
----- -----
Total liabilities 4,086 6,146
Shareholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized -- --
Common stock, $0.10 par value, 20,000,000 shares
authorized; 4,049,195 issued at 12/31/96
and 3,663,871 at 12/31/95 405 366
Additional paid-in capital 5,366 4,530
Unrealized holding losses ( 11) --
Retained earnings 14,622 12,698
------- -------
Total shareholders' equity 20,382 17,594
Commitments and contingencies
(notes 6, 8, 9, 11, 12 and 14)
Total liabilities and shareholders' equity $24,468 23,740
======= =======
See accompanying notes to consolidated financial statements.
A-6
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 11,123 21,068 16,138
Cash paid to suppliers and employees ( 11,064) (17,860) (15,740)
Change in trading account securities 315 ( 353) 475
Change in receivable from clearing broker 501 ( 289) ( 308)
Interest paid ( 54) ( 124) ( 151)
Income taxes paid ( 611) ( 494) ( 15)
Interest, dividends and other investment
proceeds 459 1,322 456
------- ------- -------
Net cash provided by operating activities 669 3,270 855
Cash flows from investing activities:
Payments for purchase of property and
equipment ( 144) ( 483) ( 185)
Net decrease (increase) in marketable
securities 2,045 ( 530) ( 1,183)
Investment in affiliate ( 244) -- --
Proceeds from sale of fixed assets -- 47 76
Funds loaned to others ( 3,442) -- --
Proceeds from the sale of discontinued operation -- 67 --
Collection of notes receivable -- 1,119 1,863
Net cash provided by (used in) investing ------- ------- -------
activities ( 1,785) 220 571
Cash flows from financing activities:
Repayment of long-term obligations ( 163) ( 332) ( 613)
Decrease in minority interest -- -- ( 91)
Acquisition of treasury stock ( 453) ( 125) --
Exercise of stock options 704 499 --
------- ------- -------
Net cash provided by (used in) financing activities 88 42 ( 704)
Net change in cash and cash equivalents ( 1,028) 3,532 722
Cash and cash equivalents at beginning of period 6,798 3,266 2,544
----- ----- -----
Cash and cash equivalents at end of period 5,770 6,798 3,266
===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
A-7
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Consolidated Statements of Cash Flows, continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Reconciliation of net earnings to net cash from operating activities:
Net earnings $ 1,923 2,024 1,254
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization 324 399 323
Minority interest in consolidated earnings -- -- 15
Undistributed earnings of affiliate ( 1,411) ( 1,508) ( 950)
Recognition of long-term capital loss carryback -- -- 88
Loss (gain) on sale or disposition of assets -- ( 72) 31
Gain on sales of securities ( 81) ( 50) ( 33)
Change in federal income tax payable ( 584) 301 129
Provision for deferred income tax 925 27 480
Change in trading securities 315 ( 353) 475
Loss on permanent impairment of debt securities -- -- 160
Change in receivable from clearing broker 501 ( 289) ( 308)
Change in management fees and other receivable 17 1,183 ( 1,301)
Change in prepaids and other current assets 24 493 ( 358)
Change in long-term assets 265 -- --
Change in trade payable 53 ( 456) 11
Change in accrued expenses and other liabilities ( 1,602) 1,571 839
------- ------- -------
Net cash from operating activities $ 669 3,270 855
======= ======= =======
</TABLE>
Summary of non-cash transactions:
During 1996, non-qualified employee stock options were exercised which resulted
in a reduction of income tax payable and a corresponding addition to paid-in
capital of $624.
During the third quarter, 1995, the investment in the Company by the Company's
affiliate, Prime Medical Services, Inc., became immaterial. Consequently,
Reciprocal Stockholdings fell to zero while the Company's investment in
affiliate increased by $543.
The Company acquired $294,000 in treasury stock by exchanging $294,000 in Prime
Medical Services, Inc. Common stock during 1995.
In 1995, the Company sold APS Communications in a non-cash transaction as
follows:
Note received $ 183
=====
Fixed assets sold ( 48)
Deferred income (135)
-----
$ (183)
=====
See accompanying notes to consolidated financial statements.
A-8
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Consolidated Statements of Shareholders'
Equity For the years ended December 31, 1996,
1995 and 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Stock paid-in holding Retained Reciprocal shareholders'
Shares Amount capital gains earnings stockholdings equity
-------------- --------- ------------- ------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994 3,471,689 347 4,468 -- 9,420 ( 547) 13,688
Net earnings -- -- -- -- 1,254 -- 1,254
Unrealized gains on securities
available for sale -- -- -- 44 -- -- 44
Shares repurchased & cancelled (5) -- -- -- -- -- --
Contributed capital -- -- 1 -- -- -- 1
Pro rata portion of Company
common stock held by
affiliate (Note 14) -- -- -- -- -- 4 4
-------------- --------- ------------- ------------- ----------- -------------- -------------
Balance December 31, 1994 3,471,684 $347 4,469 44 10,674 ( 543) 14,991
Net earnings -- -- -- -- 2,024 -- 2,024
Unrealized loss on securities
available for sale -- -- -- (44) -- -- (44)
Shares issued (Note 12) 314,333 31 468 -- -- -- 499
Shares repurchased &
cancelled (Note 14) (122,146) (12) (407) -- -- -- (419)
Pro rata portion of Company
common stock held by
affiliate (Note 14) -- -- -- -- -- 543 543
-------------- --------- ------------- ------------- ----------- -------------- -------------
Balance December 31, 1995 3,663,871 366 4,530 -- 12,698 -- 17,594
Net earnings -- -- -- -- 1,924 -- 1,924
Unrealized loss on securities
available for sale, net of tax -- -- -- (11) -- -- (11)
Shares issued (Note 12) 450,000 45 659 -- -- -- 704
Shares repurchased &
cancelled ( 64,676) ( 6) (447) -- -- -- (453)
Income tax benefit of
non-qualified option
exercises -- -- 624 -- -- -- 624
-------------- ---------- ------------- ------------- ----------- -------------- -------------
Balance December 31, 1996 4,049,195 405 5,366 (11) 14,622 -- 20,382
============== ========== ============= ============= =========== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
A-9
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes To Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) General
American Physicians Service Group, Inc. through its
subsidiaries, provides financial services that include
management of malpractice insurance companies and brokerage
and investment services to individuals and institutions.
Computer systems and software packages for medical clinics,
medical schools, physician hospital organizations and other
physician networks are provided by an affiliate. The brokerage
and computer businesses have clients nationally. Insurance
management is a service provided primarily in Texas, but is
available to clients nationally. American Physicians Service
Group, Inc. also owns space in the office building which
serves as its headquarters. Through its real estate subsidiary
it leases space that is surplus to its needs. During the three
years presented in the financial statements, financial
services and computer systems generated approximately 68% and
24%, respectively, of total revenues.
(b) Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles required 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.
(c) Principles of Consolidation
The consolidated financial statements include the accounts of
American Physicians Service Group, Inc. and of subsidiary
companies more than 50% owned ("Company"). Investments in
affiliated companies and other entities in which the Company's
investment is for less than 50% of the common shares
outstanding and where the Company exerts significant
influence, are accounted for by the equity method.
All significant intercompany transactions and balances have
been eliminated from the accompanying consolidated financial
statements.
(d) Revenue Recognition
Financial services revenues related to management fees are
recognized monthly as a percentage of the earned premiums of
the managed company. The profit sharing component
A-10
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
of these fees is recognized when it is reasonably certain that
the managed company will have an annual profit. Revenues
related to securities transactions are recognized on a trade
date basis.
Revenue from software product sales is recognized on the
percentage of completion method. Revenue from hardware sales
is recognized when the hardware is delivered. Maintenance and
service contracts related to software products are deferred
and recognized over the term of the contract (generally one
year) using the straight-line method.
Real estate rental income is recognized monthly based on lease
agreements. Costs of leasehold improvements are capitalized
and amortized monthly over the term of the lease.
Investment revenues are recognized as accrued on highly-rated
investments and as received on lesser grades.
(e) Broker, Dealer and Securities Transactions
Securities transactions are recorded in the accounts on a
trade date basis.
(f) Marketable Securities
The Company's investments in debt and equity securities are to
be classified in three categories and accounted for as
follows:
Classification Accounting
-------------- ----------
Held to maturity Amortized cost
Trading securities Fair value, unrealized gains and
losses included in earnings
Available for sale Fair value, unrealized gains and
losses excluded from earnings and
reported as a separate component of
stockholders' equity, net of
applicable income taxes
The Company has included its marketable securities in the
available for sale category.
(g) Property and Equipment
Property and equipment are stated at cost. Property and
equipment and rental property are depreciated using the
straight-line method over the estimated useful lives of the
respective assets (3 to 40 years).
A-11
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
(h) Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount
may not be recoverable. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of
the asset, a loss is recognized if there is a difference
between the fair value and carrying value of the asset.
(i) Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
(j) Earnings Per Share
Earnings per share have been computed based on the weighted
average number of shares outstanding and common share
equivalents.
(k) Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid
investments with an original maturity of 90 days or less.
(l) Post Retirement/Post Employment Benefits
The Company's employee benefits do not extend beyond an
employee's active employment.Consequently, no accrual for
future benefits as prescribed in Statement of Financial
Accounting Standards No. 106 and No. 112 has been recorded.
(m) Derivative Financial Instruments
The Company has not made use of derivative financial
instruments as defined in the Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 119,
Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments.
A-12
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, continued
(n) Notes Receivable
Notes receivable are recorded at cost, less allowances for
doubtful accounts when deemed necessary. Management,
considering current information and events regarding the
borrowers ability to repay their obligations, considers a note
to be impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual
terms of the note agreement. When a loan is considered to be
impaired, the amount of the impairment is measured based on
the present value of expected future cash flows discounted at
the note's effective interest rate. Impairment losses are
included in the allowance for doubtful accounts through a
charge to bad debt expense. Cash receipts on impaired notes
receivable are applied to reduce the principal amount of such
notes until the principal has been recovered and are
recognized as interest income, thereafter.
(o) Stock-Based Compensation
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("Statement 123"), but
applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its stock
option plans.
(p) Reclassification
Certain reclassifications have been made to amounts presented
in previous years to be consistent with the 1996 presentation.
(2) Marketable Securities
The Company holds various marketable securities as short-term
investments. At December 31, 1996 and 1995, these marketable
securities consisted of:
December 31,
1996 1995
----- -----
Equity securities, at cost $45,000 --
Debt securities, at cost $ -- $2,004,000
Less: adjustment to fair value ($16,000) --
-------- ---------
Total marketable securities at
fair value $29,000 $2,004,000
======== =========
A-13
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(2) Marketable Securities, continued
At December 31, 1996, there were $16,000 in gross unrealized losses. At
December 31, 1995 there were no gross unrealized gains or losses.
Investment income includes the following:
1996 1995 1994
----- ----- -----
Interest $ 351,000 $ 243,000 68,000
Realized gains 81,000 50,000 42,000
Realized losses -- -- ( 10,000)
Permanent impairment of
debt securities -- -- (160,000)
------- ------- -------
$ 432,000 $ 293,000 ( 60,000)
======= ======= =======
No individual issuer exceeded 10% of shareholders' equity at December
31, 1996 or 1995.
(3) Management Fees and Other Receivables
Management fees and other receivables consist of the following:
December 31,
1996 1995
----- -----
Management fees receivable $ 256,000 342,000
Trade accounts receivable 16,000 1,034,000
Less: allowance for doubtful accounts -- ( 132,000)
Accrued interest receivable 12,000 45,000
Other receivables 228,000 459,000
------- ---------
$ 512,000 1,748,000
======= =========
The Company earns management fees by providing for the full management
of American Physicians Insurance Exchange ("APIE") under the direction
of APIE's doctor Board of Directors. Subject to the direction of this
Board, FMI sells and issues policies, investigates, settles and defends
claims, and otherwise manages APIE's affairs. The Company has
previously managed other insurance companies.
The Company earned management fees of $5,561,000, $5,288,000 and
$5,358,000 and received expense reimbursements of $346,000, $355,000
and $247,000 for the years ended December 31, 1996, 1995 and 1994,
respectively, related to these agreements.
A-14
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(4) Notes Receivable
Notes receivable consists of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Reagan Publishing Company
The unsecured note bears interest at 7%.
Payments of $50,000 plus interest are due June 30, 1996, December
31, 1996, and June 30, 1997, with the balance due
December 31, 1997. The note is in default
at December 31, 1996 and the parties are
attempting to renegotiate the terms. $ 183,000 183,000
The Billings Clinic
The note is secured by computer equipment and bears interest at a
weighted average rate of 11.38%. Monthly payments of principal and
interest are due through
December 1996. -- 123,000
Exsorbet Industries, Inc.
This note is secured by 1,200,000 shares
of Exsorbet Industries, Inc. common stock
and certain assets of 7-7, Inc. The note
bears interest at 15.75%. Principal and
interest are due October 1, 1997. $3,300,000 --
Employees
Two employees have loans from the Company as employment inducements.
The notes are non-interest bearing and are being forgiven and
amortized monthly over three to four year periods. The notes are due
and payable should the employees
terminate employment. 143,000 --
--------- -------
3,626,000 306,000
Less current portion 3,447,000 223,000
--------- --------
Long term portion $ 179,000 83,000
========= ========
</TABLE>
A-15
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(4) Notes Receivable, continued
The Company's note receivable from Exsorbet Industries, Inc.
("Exsorbet") (NASDAQ:EXSO), a diversified environmental and technical
services company, is in excess of 10% of stockholders' equity at
December 31, 1996 and represents a concentration of credit risk.
Exsorbet's common stock sales price was $1.68 per share on the basis of
the average high and low sales price of the stock on March 7, 1997.
According to documents which Exsorbet has filed with the Securities and
Exchange Commission, Exsorbet has limited liquidity which would
currently not allow payment of the Company's note and, is considering
various options to secure such funding including a private placement
of debt or equity.
(5) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (Statement 107), requires that the
Company disclose estimated fair values for its financial instruments as
of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents 5,770 5,770 6,798 6,798
Marketable Securities and Trading
Account Securities 728 728 3,018 3,018
Management fees and other
Receivables 512 512 1,748 1,748
Notes receivable 3,626 3,594 306 293
Receivable from clearing broker 279 279 780 780
Debt 542 542 873 873
Accounts Payable 382 382 353 353
</TABLE>
Fair value estimates, methods, and assumptions are set forth below for
the Company's financial instruments.
Cash and Cash Equivalents
-------------------------
The carrying amounts for cash and cash equivalents approximate fair
value because they mature in less than 90 days and do not present
unanticipated credit concerns.
Marketable Securities and Trading Account
-----------------------------------------
The fair value of securities owned is estimated based on bid prices
published in financial newspapers or bid quotations received from
securities dealers. The carrying values of marketable securities are
A-16
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(5) Fair Value of Financial Instruments, continued
adjusted to market since such securities are in the available for sale
category. Trading account securities are carried at market value.
Management Fees and Other Receivables
-------------------------------------
The fair value of these receivables approximates the carrying value due
to their short-term nature and historical collectibility.
Notes Receivable
----------------
The fair value of notes has been determined using discounted cash flows
based on management's estimate of current interest rates for notes of
similar credit quality.
Receivable from Clearing Broker
-------------------------------
The carrying amounts approximate fair value because the funds can be
withdrawn on demand and there is no unanticipated credit concern.
Debt
----
The fair market value of debt approximates carrying value since it is
primarily floating rate debt based on current market rates.
Accounts Payable
----------------
The fair value of the payable approximates carrying value due to the
short-term nature of the obligation.
Limitations
-----------
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. Fair value estimates are based on existing on-and-off
balance sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. Other
significant assets and liabilities that are not considered financial
assets or liabilities include the deferred tax assets, property and
equipment, investment in Prime Medical, other assets, accrued expenses
and income tax payable. In addition, the tax ramifications related to
the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered
in the aforementioned estimates.
A-17
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(6) Property and Equipment
Property and equipment consists of the following:
December 31,
1996 1995
Office condominium $1,870,000 1,896,000
Furniture and equipment 2,386,000 3,422,000
--------- ---------
4,256,000 5,318,000
Accumulated depreciation and
amortization 2,475,000 3,189,000
--------- ---------
$1,781,000 2,129,000
The Company owns approximately 53,000 square feet in the condominium
building in which its principal offices are located. The Company, its
subsidiaries and affiliates occupy approximately 30,000 square feet and
the remainder is leased to third parties. Rental income received from
third parties during the years ended December 31, 1996, 1995 and 1994
totaled approximately $417,000, $382,000 and $308,000, respectively.
Future minimum lease payments to be received under the terms of the
office condominium leases are as follows: 1997 - $351,000; 1998 -
$326,000; 1999 - $59,000 and none thereafter.
Included in furniture and equipment at December 31, 1995 are computers
and equipment under capital lease of approximately $191,000.
Accumulated amortization on this equipment under capital lease was
$139,000 at December 31, 1995.
(7) Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following:
1996 1995
Taxes payable - other $ 74,000 150,000
Commissions payable 18,000 38,000
Deferred income 339,000 434,000
Health insurance and other claims
payable 87,000 73,000
Contractual/legal claims 1,352,000 2,360,000
Vacation payable 77,000 127,000
Funds held for others 63,000 51,000
Interest payable -- 5,000
Other 134,000 263,000
--------- ---------
$2,144,000 3,501,000
========= =========
A-18
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(8) Long-term Obligations
Long-term obligations consist of the following:
1996 1995
------ ------
Capital leases -- 180,000
Less amounts representing
interest -- ( 12,000)
Present value of net
minimum payments -- 168,000
Notes payable secured by office buildings 542,000 642,000
Other -- 63,000
------- -------
Total long-term obligations 542,000 873,000
Less current portion 542,000 299,000
------- -------
Long-term portion $ -- 574,000
======= =======
Notes payable secured by office buildings were at the prime rate of
interest and were payable monthly, in installments of approximately
$13,000, through April 1997 at which time the balance of $517,000 was
due. These notes were paid in full January, 1997.
(9) Commitments and Contingencies
In conjunction with the software development agreement between ISSI and
the Company's affiliate, Syntera, the Company is obligated to
contribute additional capital. At December 31, 1996, this commitment
amounted to approximately $880,000, due in 1997, and contingent upon
progress under the agreement proceeding as planned.
The Company has guaranteed the future yield of a customer's investment
portfolio beginning in January 1995 for up to a five and one-half year
period. Management believes that the Company's financial statements
adequately provide for any loss that might occur under this agreement;
however, as defined in AICPA Statement of Position 94-6, it is
reasonably possible that the Company's estimate of loss could change
over the remaining term of the agreement. Management is unable to
determine the range of potential adjustment since it is based on
securities markets, which are beyond its ability to control.
Rent expense under all operating leases for the years ended December
31, 1996, 1995 and 1994 was $51,000, $103,000 and $127,000,
respectively. Future minimum payments for leases which extend for more
than one year are not significant at December 31, 1996.
The Company is involved in various claims and legal actions that have
arisen in the ordinary course of business. The Company believes that
the liability provision in its financial statements is sufficient
A-19
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(10) Commitments and Contingencies, continued
to cover any unfavorable outcome related to lawsuits in which it is
currently named. Management believes that liabilities, if any, arising
from these actions will not have a significant adverse effect on the
financial condition of the Company. However, due to the uncertain
nature of legal proceedings, the actual outcome of these lawsuits may
differ from the liability provision recorded in the Company's financial
statements.
(10) Income Taxes
Income tax expense consists of the following:
Year Ended
December 31,
1996 1995 1994
----- ----- -----
Federal
Current $ 47,000 795,000 109,000
Deferred 925,000 27,000 480,000
State - current 73,000 105,000 123,000
------- ------- -------
$1,045,000 927,000 712,000
========= ======= =======
A reconciliation of expected income tax expense (computed by applying
the United States statutory income tax rate of 34% to earnings before
income taxes) to total income tax expense in the accompanying
consolidated statements of earnings follows:
Year Ended
December 31,
1996 1995 1994
----- ----- -----
Expected federal income
tax expense $ 972,000 1,003,000 668,000
State taxes 73,000 105,000 123,000
Other, net -- ( 181,000) ( 79,000)
--------- --------- --------
$1,045,000 927,000 712,000
========= ======= =======
Deferred tax assets are primarily the result of temporary differences
related to accounting for reserves for losses, amounts expensed for
financial purposes not deductible for tax purposes, fixed assets
(primarily differences in methods of depreciation) and investments
(primarily related to valuation allowances) for tax and book purposes.
A-20
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(10) Income Tax, continued
The tax effect of temporary differences that gives rise to significant
portions of deferred tax assets and deferred tax liabilities at
December 31, 1996 and 1995 are presented below:
1996 1995
Deferred tax assets: ----- -----
Marketable securities write downs not taken
for tax purposes $ 13,000 46,000
Accrued expenses 676,000 993,000
Accounts receivable, principally due
to allowance for doubtful accounts 60,000 77,000
Deferred income for books not for tax 30,000 129,000
Other 19,000 7,000
------- --------
Total gross deferred tax assets 798,000 1,252,000
Deferred tax liabilities:
Investment in Prime Medical Services, Inc.
due to use of equity method for books (1,512,000) (1,033,000)
Capitalized expenses, principally due to
deductibility for tax purposes ( 52,000) ( 60,000)
---------- ---------
Total gross deferred tax liabilities (1,564,000) (1,093,000)
---------- ---------
Net deferred tax asset (liability) ($ 766,000) 159,000
========== =======
The Company has not recorded a valuation allowance against the deferred
tax asset as management believes it is more likely than not that the
Company will fully realize the asset in the form of future tax
deductions since the temporary differences will reverse in the near
future. These deductions would be available to carryback to prior
years, if necessary.
(11) Employee Benefit Plans
The Company has an employee benefit plan qualifying under Section
401(k) of the Internal Revenue Code for all eligible employees.
Employees become eligible upon meeting certain service and age
requirements. Employees may defer up to 15% (not to exceed $9,500 in
1996) of their annual compensation under the plan. The Company, at its
discretion, may contribute up to 200% of the employees' deferred
amount. For the years ended December 31, 1996, 1995 and 1994,
contributions by the Company aggregated $104,000, $100,000, and
$105,000, respectively.
A-21
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(12) Stock Options
The Company has adopted, with shareholder approval, the "1995
Non-Employee Directors Stock Option Plan" ("Directors Plan") and the
"1995 Incentive and Non-Qualified Stock Option Plan" ("Incentive
Plan"). The Directors Plan provides for the issuance of up to 200,000
shares of common stock to non-employee directors who serve on the
Compensation Committee. The Incentive Plan provides for the issuance of
up to 800,000 shares of common stock to directors and key employees.
Options issued to employees are to be qualified incentive stock options
and those to directors non-qualified options.
The exercise price for each non-qualified option share is determined by
the Compensation Committee of the Board of Directors ("the Committee").
The exercise price of a qualified incentive stock option had to be at
least 100% of the fair market value of such shares on the date of grant
of the option. Under the Plans, option grants are limited to a maximum
of ten year terms, however, the Committee has issued all currently
outstanding grants with five year terms. The Committee also determines
vesting for each option grant and all outstanding options vest in three
equal annual installments beginning one year from the date of grant.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement 123"), but applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, in accounting
for its stock option plans. No cost from stock-based compensation
awards was recognized in 1996 or 1995. If the Company had elected to
recognize compensation cost of options granted based on the fair value
at the grant dates, consistent with Statement 123, net income and
earnings per share would have changed to the pro forma amounts
indicated below:
Year Ended December 31,
1996 1995
----- -----
Pro forma net income $1,594,000 1,975,000
Pro forma earnings per share - primary $0.37 0.51
- fully diluted $0.37 0.47
The fair value of the options used to compute the pro forma amounts is
estimated using the Black- Scholes option pricing model with the
following assumptions:
1996 1995
---- ----
Risk-free interest rate 6.06% 6.41%
Expected holding period 3.75 years 3.75 years
Expected volatility .692 .590
Expected dividend yield -0- -0-
A-22
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(12) Stock Options, continued
Statement 123 calls for a prospective application of compensation
relating to the grant of stock options and, consequently pro-forma
financial information may not be indicative of future amounts until the
new rules are applied to all outstanding nonvested awards.
Presented below is a summary of the stock options held by the Company's
employees and directors and the related transactions for the years
ended December 31, 1996 and 1995. Remaining options outstanding from
the Company's previous 1983 plans are included.
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
----------------------- --------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance at January 1 837,000 $2.18 921,000 $1.57
Options granted 295,000 9.32 235,000 3.82
Options exercised 450,000 1.53 314,000 1.59
Options forfeited/expired 31,000 6.16 5,000 2.45
------- ---- ------- ----
Balance at December 31 651,000 5.64 837,000 2.18
======= ==== ======= ====
Options exercisable 258,000 $2.22 550,000 $1.48
======= ==== ======= ====
</TABLE>
The weighted average fair value of Company stock options, calculated
using the Black Scholes option pricing model, granted during the years
ended December 31, 1996 and 1995 is $5.15 and $1.75 per option,
respectively.
The following table summarizes the Company's options outstanding and
exercisable options at December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Stock Options
Outstanding Exercisable
------------------------------------------- -------------------------
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life Price Shares Price
------- --------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
$1.38 to $3.50 336,000 2.4 years 2.46 251,000 2.28
$3.51 to $7.00 50,000 3.7 years 5.70 7,000 4.69
$7.01 to $10.50 265,000 4.5 years 9.67 -- --
------- --------- ---- ------- ----
Total 651,000 258,000
======= =======
</TABLE>
A-23
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(13) Discontinued Operations
On October 23, 1995 the Company sold substantially all of the assets of
APS Communications Corporation, a publisher of Spanish language
directories of U. S. businesses. The Company received cash, a note
(see note 4) and had certain liabilities assumed by the purchaser. The
gain on the sale, to be recognized on the installment basis as note
payments are received, will not be material to the Company's opera-
tions. No gain has been recognized through 1996. Historical results
from the operation are presented in the Consolidated Statements of
Earnings as "Loss from discontinued operations".
(14) Investment in Affiliates
On October 12, 1989, the Company purchased for cash 3,540,000 shares
(42%) of the common stock of Prime Medical. Members of the Company's
Board currently serve as two of the eight directors of Prime Medical.
Prime Medical provides non-medical management services to lithotripsy
centers. In conjunction with the acquisition of additional lithotripsy
operations in June 1992, October 1993, and May 1996, the outstanding
shares of Prime Medical increased. These increases plus the sale of
Prime Medical shares owned by the Company under an option agreement
reduced the Company's ownership to 16% of the outstanding common stock
of Prime Medical. The Company's investment in Prime Medical is
accounted for on the equity method. The 3,064,000 shares of Prime
Medical common stock held by the Company had a market value of
$33,326,000 (carrying amount of $8,905,000) at December 31, 1996 based
on the market closing price of $10.875 per share.
At December 31, 1996 and 1995, the Company's retained earnings included
undistributed earnings, net of deferred tax, of Prime Medical totaling
$2,821,000 and $1,890,000, respectively.
The condensed balance sheet and statement of operations for Prime
Medical follow:
Condensed balance sheet at December 31, 1996 and 1995
1996 1995
---- ----
Current assets $ 40,073,000 10,938,000
Long-term assets 157,680,000 66,627,000
----------- ----------
Total assets 197,753,000 77,565,000
=========== ==========
Current liabilities 31,555,000 11,055,000
Long-term liabilities 89,771,000 23,760,000
Shareholders' equity 76,427,000 42,750,000
----------- ----------
Total liabilities and equity $197,753,000 77,565,000
=========== ==========
A-24
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Investment in Affiliates, continued
Condensed statement of operations for the years ended
December 31, 1996 and 1995
1996 1995
----- -----
Total revenue $ 72,404,000 23,195,000
========== ==========
Net income $ 8,961,000 7,204,000
========== ==========
The Company exchanged 575,000 shares of Prime stock for notes payable
from Prime amounting to $593,750, one half in April 1993 and the other
half in July 1995. The gain resulting from the difference between the
market value of the Prime stock and the Company's carrying basis of the
stock was not significant. The Company subsequently exchanged the notes
for 87,000 shares in 1995 and 90,000 shares in 1993 of its own common
stock (at current market value at exchange date) which was owned by
Prime.
On July 1, 1996, the Company entered into a software development
agreement with International Software Solutions, Inc. ("ISSI"). Under
this agreement, ISSI received newly issued shares of APS Systems, Inc.
common stock, which diluted the ownership of the Company to 49%. APS
Systems subsequently changed its name to Syntera Technologies, Inc.
("Syntera"). Members of Company management serve as two of Syntera's
four board members. Syntera is currently working to replace or upgrade
its product line, but will continue to focus on providing practice
management computer systems to medical clinics, medical schools and
physician hospital organizations (PHOs). Beginning July 1, 1996, the
Company applied the equity method of accounting to its 49% interest in
Syntera.
Operations of Syntera had been consolidated prior to that.
The condensed balance sheet and statement of operations for Syntera
follows:
Condensed balance sheet at December 31, 1996
Current assets $1,692,000
Long-term assets 262,000
---------
Total assets $1,954,000
=========
Current liabilities 358,000
Long-term assets --
Shareholders' equity 1,596,000
---------
Total liabilities and equity $1,954,000
=========
A-25
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(14) Investment in Affiliates, continued
Condensed statement of operations for the six months ended December 31,
1996
Total revenue $1,421,000
=========
Net Loss $ 155,000
=======
(15) Segment Information
The Company's financial services segment includes financial management
for an insurance company that provides insurance coverage to doctors
and hospitals, and brokerage and investment services to individuals and
institutions.
The computer systems/software segment consists of computer hardware and
software marketed to university medical schools and to clinics.
Real Estate income is derived from the leasing of office space.
1996 1995 1994
Operating Revenues:
Financial services $ 8,863,000 13,762,000 11,451,000
Computer systems/software 1,590,000 4,738,000 5,404,000
Real estate 717,000 668,000 586,000
---------- ---------- ----------
$11,170,000 19,168,000 17,441,000
========== ========== ==========
Operating Profit (Loss):
Financial services $ 1,123,000 2,118,000 731,000
Computer Systems/Software (37,000) 476,000 434,000
Real estate 147,000 96,000 77,000
---------- ---------- ---------
1,233,000 2,690,000 1,242,000
---------- ---------- ---------
Corporate investment and
other income 476,000 1,322,000 296,000
Corporate expenses (150,000) (2,037,000) ( 255,000)
Minority interest -- -- ( 15,000)
Equity in earnings of
Affiliates 1,410,000 1,508,000 950,000
--------- --------- --------
Earnings from continuing
operations before income
taxes 2,969,000 3,483,000 2,218,000
Income tax expense 1,045,000 1,108,000 798,000
--------- --------- ---------
A-26
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(15) Segment Information, continued
1996 1995 1994
----- ----- -----
Earnings from continuing
operations 1,924,000 2,375,000 1,420,000
Loss from discontinued
operations, net of income
tax benefit -- (351,000) (166,000)
--------- --------- ---------
Net earnings $ 1,924,000 2,024,000 1,254,000
========= ========= =========
Identifiable assets:
Financial services $11,667,000 11,816,000 10,161,000
Computer systems/software -- 1,732,000 1,426,000
Real estate 1,476,000 1,578,000 1,640,000
Corporate 10,788,000 8,614,000 6,094,000
Discontinued Operations -- -- 597,000
---------- ---------- ----------
$23,931,000 23,740,000 19,918,000
========== ========== ==========
Capital expenditures:
Financial service $ 88,000 262,000 31,000
Computer systems/software 18,000 80,000 48,000
Real estate 21,000 64,000 86,000
Corporate 17,000 73,000 12,000
Discontinued operations -- 4,000 8,000
------- ------- -------
$ 144,000 483,000 185,000
======= ======= =======
Depreciation/amortization
expenses:
Financial services $ 164,000 164,000 106,000
Computer systems/software 24,000 94,000 48,000
Real estate 129,000 126,000 113,000
Corporate 13,000 9,000 2,000
Discontinued operations -- 6,000 8,000
------- ------- -------
$ 330,000 399,000 277,000
======= ======= =======
Revenues attributable to customers generating greater than 10% of the
revenues of each segment:
Financial services
Company A 60% 36% 45%
Company B -- 10% --
A-27
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Notes to Consolidated Financial Statements, Continued
(15) Segment Information, continued
1996 1995 1994
----- ----- -----
Company C -- -- 12%
Company D -- 11% --
---- ---- ----
60% 57% 57%
==== ==== ====
Computer systems/software
Company E 56% 34% 28%
Company F -- 13% 11%
Company G -- 18% 29%
---- ---- ----
56% 65% 68%
==== ==== ====
At December 31, 1996 the Company had long-term contracts with company A
and was therefore not vulnerable to the risk of a near-term severe
impact from a reasonably possible loss of the revenue. Company E's
contract will expire in 1998 and will not be renewed. The Company
expects, but cannot be certain, that its affiliate will be able to
replace this revenue under its redevelopment plan (see "General
Information").
Operating profit is operating revenues less related expenses and is all
derived from domestic operations. Identifiable assets are those assets
that are used in the operations of each business segment (after
elimination of investments in other segments). Corporate assets consist
primarily of cash and cash investments, marketable securities and notes
receivable.
A-28
Exhibit 10.17
STOCK PURCHASE AGREEMENT
This Agreement is made and entered into on this 30th day of September,
1996, by and between American Physicians Service Group, Inc., a Texas
corporation (the "Buyer"), and Exsorbet Industries, Inc., an Idaho corporation
(the "Seller").
In consideration of the premises and the mutual promises herein made, and
in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows:
1. Definition~
"Exsorbet" and "Exsorbet Industries. Inc." refer to that certain entity
which is incorporated under the laws of the State of Idaho under the name
"Exsorbet Industries, Inc." as well as any successor corporation.
"Shareholder Rights Agreement" means an Agreement by and between American
Physicians Service Group, Inc. and Exsorbet Industries, Inc. dated September 30,
1996 and entitled "Shareholder Rights-Agreement..
"Stock Put Agreement" means an Agreement by and between American Physicians
Service Group, Inc. and Exsorbet Industries, Inc. dated September 30, 1996, and
entitled "Stock Put Agreement."
2. Purchase and Sale of 1,200,000 Shares of Common Stock.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, and further subject to the terms of the Stock Put Agreement and
Shareholder Rights Agreement, Buyer agrees to, and does hereby, purchase from
Seller One Million Two Hundred Thousand (1,200,000) shares of common (capital)
stock of Exsorbet Industries, Inc. at the price of Two Dollars and Seventy-Five
Cents (S2.75) per share.
(b) Delivery of Share Certificate. Buyer acknowledges receipt of a
certificate evidencing 1,200,000 shares of common stock of Exsorbet Industries,
Inc., such certificate being issued in the name of "American Physicians Service
Group, Inc."
(c) Payment. Seller acknowledges receipt of Three Million Three Hundred
Thousand U.S. Dollars ($3,300,000) from Buyer as payment in full for the shares
of stock specified above. Such sum is being delivered by wire transfer to a
banking account directed by Seller.
3. Stock Registration. Unless and until registered, all of the shares of
stock issued by Exsorbet Industries, Inc. pursuant to this Agreement may not be
sold or transferred unless and until registered or pursuant to a valid exemption
from registration. All stock certificates issued pursuant to this Agreement
shall bear a restrictive legend in substantially the following form:
<PAGE>
"No sale, offer to sell, or transfer of the shares represented by this
certificate shall be made unless a registration statement under the Federal
Securities Act of 1933, as amended, with respect to such shares is then in
effect or an exemption from the registration requirements of said act is then in
fact applicable to said shares."
4. Representations of Exsorbet. Seller represents and warrants the
following facts to be true as of the time of execution of this Agreement:
(a) Exsorbet Industries, Inc. is a corporation duly organized and existing under
the laws of the State of Idaho, and is in good standing within the State of
Idaho;
(b) Seller has full corporate power and authority to perform its obligations
hereunder;
(c) Neither the execution and the delivery of this Agreement, nor the
consummation of the transaction contemplated hereby, will violate any corporate
bylaws, corporate charter, court orders, injunctions, decrees, or rulings;
(d) There is only one class of stock of Exsorbet Industries, Inc., being the
common or capital stock of such corporation. There is only series of such stock.
There are no series or classes of stock with any preferred or preferential
rights;
(e) The stock of Exsorbet Industries, Inc. trades on the Nasdaq Stock Market,
Inc. SmallCap Market under the symbol "EXSO;" and
(f) The shareholders of Exsorbet Industries, Inc. have been requested to approve
a proposed merger of such corporation into Consolidated Eco-Systems, Inc., a
Delaware corporation. If such merger is approved, the Delaware corporation would
be the surviving corporation. Consolidated Eco-Systems,
Inc. is, or when organized will be, a wholly-owned subsidiary of Exsorbet
Industries, Inc. In the event that the proposed merger is approved, Exsorbet
Industries, Inc. binds and obligates itselfto insure, and warrants, that
Consolidated Eco-Systems, Inc. would be bound by each and every term of this
Agreement.
5. Representations and Understandings of American Physicians Service Group,
Inc. Buyer understands that the shares of stock issued pursuant to this
Agreement have not been, and will not by the terms of this Agreement be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering. The terms of this paragraph may
be modified or amended by other Agreements existing between the parties.
Buyer represents that:
2
<PAGE>
(i) it is acquiring the shares of common stock of Exsorbet Industries, Inc.
solely for its own account for investment purposes, and not with a view to the
distribution thereof;
(ii) it is a sophisticated investor with knowledge and experience in business
and financial matters;
(iii) it has received certain information concerning the Buyer and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the stock of the Seller, provided
however that the terms hereof shall be subject to a 60 day Stock Put Agreement
during which time Buyer shall be afforded the right to conduct full due
diligence inquiry of Seller, to the extent desired;
(iv) it is able to bear the economic risk and lack of liquidity inherent in
holding the stock of Seller;
(v) it is an Accredited Investor, as defined by Regulation D promulgated
pursuant to the Securities Act of 1933, as amended; and
(vi) it has full corporate power and authority to enter into this Agreement and
to consummate the transaction contemplated hereunder.
6. Subsidiary Disclosure. Exsorbet Industries, Inc. has provided
information concerning its operating structure and specifically including a list
of its subsidiary corporations. Exsorbet represents and warrants that such
information is complete and accurate. A list of subsidiary corporations
is attached hereto, marked as Exhibit "A" and incorporated herein by reference.
7. No Third Party beneficiaries. This Agreement shall not confer any rights
or remedies upon any person or entity other than the parties hereto and their
respective successors and permitted assigns.
8. Succession and Assigment. This Agreement shall be binding upon and inure
to the benefit of the parties named herein and their respective successors and
permitted assigns. No party may assign either this Agreement or any of his or
its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided. however, that Buyer may assign
this Agreement and its rights hereunder to any subsidiary or affiliate of Buyer,
and Buyer may transfer or convey its rights in any shares of stock of the Seller
and the Seller may merge with that certain Delaware corporation known as
Consolidated Eco-Systems, Inc., provided that such corporation agrees to be
completely bound by all terms of all contracts in existence between the parties.
9. Counterparts. This Agreement may be executed in one or more counterparts,
each of
3
<PAGE>
which shall be deemed an original but all of which together will constitute one
and the same instrument.
10. Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, retum receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Copy to: Charles E. Chunn, Ir., 1401 South Waldron Road,
Suite 201, Fort Smith, AR 72903.
If to the Buyer: Copy to: Duane K. Boyd, Jr., 1301 Capital of Texas Highway,
Suite C300, Austin, TX 78746-6550.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or otha communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas without giving effect to
any choice or conflict of law provision or rule that would cause the application
of the laws of any jurisdiction other than the State of Texas.
13. Amendments and Waivers. No amendment of any provision ofthis Agreement
shall be valid unless the same shall be in writing and signed by the Buyer and
the Seller. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
14. Severability. Any term or provision of this Agreement that is
invalid or unenforceable
4
<PAGE>
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereofor the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation "SELLER"
By:
Title
AMERICAN PHYSICIAN SERVICE GROUP, INC.
a Texas corporation
"BUYER"
By:
Title:
5
<PAGE>
EXHIBIT "A"
EXSORBET INDUSTRIES, INC.
REVENUE GENERATING SUBSIDIARY
CORPORATIONS
Consolidated Environmental Services, Inc., an Arkansas corporation;
Cierra, Inc., an Arkansas corporation.;
Larco Environmental Services, Inc., a Louisiana corporation.;
KR Industrial Service of Alabama, Inc., an Alabama corporation at present;
Exsorbet Technical Services, Inc., an Arkansas corporation, dlb/a SpilTech
Services, Inc.; and
Eco-Acquisition, Inc., an Arkansas corporation (this company will be changing
its name to Eco-Systems, Inc.).
This list does not include non-revenue generating
subsidiaries of Exsorbet Industries, Inc.
6
Exhibit 10.18
STOCK PUT AGREEMENT
THIS STOCK PUT AGREEMENT (this "Agreement") is made as of the 30th day
of September, 1996 (the "Effective Date"), by and between Exsorbet Industries,
Inc., an Idaho corporation ("Exsorbet") and American Physicians Service Group,
Inc., a Texas corporation ("APS").
RECITALS:
WHEREAS, APS has purchased 1,200,000 shares of the common stock of
Exsorbet; and
WHEREAS, Exsorbet desires to allow APS to cause Exsorbet, at APS'
option for a period of sixty (60) days, to purchase APS' holdings of Exsorbet
stock;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Shares Subject to this Agreement. The shares subject to this
Agreement are up to 1,200,000 shares of the outstanding common stock of Exsorbet
held by APS, including any increases, decreases or substitutions therefor which
occur after the date hereof as a result of any change (through recapitalization,
merger, consolidation, stock dividend, stock split, combination,
1
<PAGE>
reverse stock split or exchange of shares or otherwise) in the character or
amount of such shares prior to the exercise by APS of its rights hereunder.
2. Option to Sell. Exsorbet irrevocably and unconditionally grants to
APS the right, privilege and option to sell to Exsorbet and Exsorbet hereby
irrevocably and unconditionally agrees to purchase, the Shares, for the price
and on the terms provided herein. This option can be exercised by APS notifying
Exsorbet in writing of the intent to exercise the option, in which case Exsorbet
will have ten (10) days to complete the purchase as required herein. In the
event the parties cannot agree on a time and place for a closing of the
purchase, the closing will occur at the offices of APS in Austin, Texas, at 1:00
p.m. Austin time on the tenth day after APS has given notice of exercise to
Exsorbet.
3. Purchase Price and Payment. The total purchase price to be paid by
Exsorbet for all the Shares is $3,300,000, or $2.75 per share for purchase of a
portion of the Shares. The total purchase price shall be paid at closing in cash
or certified funds or by execution and delivery by Exsorbet of a promissory note
(the "Note") payable to the order of APS in the original principal amount of the
purchase price in the form of Exhibit-A hereto. In the event Exsorbet elects to
pay for the Shares by execution and delivery of the Note, APS shall be entitled
to retain a first-lien, perfected security interest in and to the Shares (in
addition to whatever other collateral may be used to secure Exsorbet's
obligations hereunder as contemplated in Section 5 below) and APS shall be
entitled to retain possession of the certificates evidencing the Shares to
perfect such security interest. In the event the purchase price is paid in cash
or certified funds, or upon payment in full of the Note and
2
<PAGE>
all interest due thereon, APS shall deliver to Exsorbet all certificates
representing the Shares sold, duly endorsed to Exsorbet.
4. Assignment. This option and the rights granted under this Agreement
may be transferred or assigned by APS to any affiliate or subsidiary of APS.
Otherwise, the rights and obligations of the parties under this Agreement may
not be assigned or transferred without the express prior written consent of the
other party.
5. Obligations of Exsorbet Secured. The obligations of Exsorbet under
and pursuant to this Agreement shall be secured by that certain Assignment and
Security Agreement of even date herewith pursuant to which Exsorbet grants a
security interest in certain collateral to APS to secure Exsorbet's obligations
under this Agreement. In addition, the obligations of Exsorbet under and
pursuant to this Agreement are further guaranteed by the payment and performance
guarantees of each of Exsorbet's subsidiaries.
6. Insufficient Surplus. In connection with the purchase of any Shares
by Exsorbet pursuant to this Agreement, if the surplus of Exsorbet shall prove
to be insufficient under then existing laws to allow Exsorbet to purchase all
the Shares which APS then elects to sell to Exsorbet, Exsorbet shall, within
sixty (60) days of receipt of APS's written notice of intent to exercise their
option to sell Shares hereunder, take such action, execute such instruments, and
otherwise do whatever may be necessary to increase its surplus to an amount
sufficient to authorize the purchase of such Shares, including but not limited
to, one or more of the following:
3
<PAGE>
(a) a recapitalization of Exsorbet so as to reduce its
capital and increase its surplus;
(b) a reappraisal of the assets of Exsorbet including
goodwill, if any, to reflect the market value of such
assets on the books of Exsorbet in the event such
value exceeds the book value thereof, so as to
increase such surplus; or
(c) any and all other means or procedures as permitted by
law.
7. Notices. All notices required to be given hereunder shall be
deemed to be duly given by personally delivering such
notice or by mailing it certified mail to all parties
hereto at the following address:
Exsorbet: Exsorbet Industries, Inc.
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
Attn: Charles E. Chunn, Jr.
APS: American Physicians Service Group, Inc.
1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746-6550
Attn: President
The foregoing addresses may be changed by providing written notice of
such change of address by certified mail to the other parties to this Agreement.
8. Exercise of Option. This option shall be exercisable at any
time or times until sixty (60) days after the Effective Date.
Upon expiration of this time period, if APS has not exercised
4
<PAGE>
its rights hereunder, Exsorbet shall pay APS $60,000 within five (5) days after
the expiration of such sixty (60) day period.
9. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their respective successors and
permitted assigns. Exsorbet may not assign this Agreement or any of its rights
or obligations hereunder without the prior express written consent of APS.
10. Governing Law. This Agreement shall be interpreted under the
laws of the State of Texas, and all obligations created hereunder are
performable in Travis County, Texas.
11. Further Assurances. All parties hereto agree to perform any
further acts and to execute and deliver any further documents which may be
reasonably necessary or convenient to carry out the provisions of this
Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement in
multiple counterparts in Austin, Texas on the day and year first above written.
EXSORBET: EXSORBET INDUSTRIES, INC.
By:
Printed Name:
Title:
APS: AMERICAN PHYSICIANS SERVICE
GROUP, INC.
By:
Printed Name:
Title:
6
Exhibit 10.19
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Agreement (this "Agreement") is made and entered into
the 30th day of September, 1996 (the "Effective Date"), by and between Exsorbet
Industries, Inc., an Idaho corporation ("Exsorbet") and American Physicians
Service Group, Inc., a Texas corporation ("APS").
R E C I T A L S
WHEREAS, APS has purchased 1,200,000 shares of Exsorbet common stock
and has entered into a Stock Put Agreement (the "Stock Put") pursuant to which
APS may cause Exsorbet to repurchase such common stock; and
WHEREAS, the obligations of Exsorbet under the Stock Put will be
secured by a first lien security interest in all the capital stock of the
Exsorbet subsidiary which acquires 7-7, Inc., an Ohio corporation, by merger,
and will be further secured by the payment and performance guarantees of all
subsidiaries of Exsorbet (all such guarantees, together with the security
agreement and other documents entered into from time to time by or for the
benefit of APS in connection with securing the obligations of Exsorbet under the
Stock Put are hereinafter collectively referred to as the "Security Documents");
and
1
<PAGE>
WHEREAS, APS has received a warrant (the "Warrant") to acquire 300,000
shares of the common stock of Exsorbet and has further received options (the
"Options") from certain stockholders of Exsorbet pursuant to which APS is
entitled to purchase, in the aggregate, an additional 1,700,000 shares of the
common stock of Exsorbet; and
WHEREAS, the parties hereto desire for APS to have certain registration
rights with regard to the 1,200,000 shares of common stock of Exsorbet purchased
by APS, and such additional Exsorbet common stock as may be acquired by APS
pursuant to the exercise of the Warrant and/or the Options, and to agree on
certain other matters concerning the governance of their affairs, on the terms
and conditions contained herein.
NOW, THEREFORE, for and in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Registration Rights.
(a) APS shall have the registration rights set forth herein
with respect to (i) the 1,200,000 shares of Exsorbet common stock purchased by
APS in connection with which this Agreement was entered into, and (ii) any
shares of the common stock of Exsorbet which APS acquires upon exercise of
rights granted pursuant to the Warrant, the Options or this Agreement, and (iii)
all stock (and rights related thereto) received with respect to any stock
described in (i) and/or (ii) by virtue of any stock dividends, stock splits,
mergers, consolidations, reclassifications or similar
2
<PAGE>
transactions or occurrences. The stock of Exsorbet owned by APS which is subject
to the registration rights provided in this Agreement is hereinafter referred to
as the "Registerable Stock." To exercise its registration rights, APS must
deliver to Exsorbet a written request (the "Request") requesting that Exsorbet
effect the registration under the Securities Act of 1933, as amended (the
"Securities Act"), and the registration and/or qualification under applicable
state securities laws (the "State Laws") of all or a specified portion of the
Registerable Stock, and specifying the intended method of methods of disposition
thereof, the jurisdictions in which such offering will be made and whether such
requested registration is to be an underwritten offering.
(b) Exsorbet will use its best efforts to effect the
registration under the Securities Act and the registration and/or qualification
under the State Laws of the Registerable Stock, to the extent required to permit
the disposition thereof in accordance with the methods and in the jurisdictions
set forth in the Request; provided that Exsorbet may include in such
registration statement securities of Exsorbet ("Other Registerable Securities")
to be offered and sold by or on behalf of Exsorbet or any other security holder
of Exsorbet who possesses a right to have such securities included in such
registration statement and who timely exercises such right in connection with
the registration hereunder; provided that whenever Exsorbet shall effect a
registration pursuant to this Agreement in connection with an underwritten
offering, if (A) any underwriter representing APS in such offering advises APS
in writing that, in its opinion, the inclusion of Other Registerable Securities
would adversely affect such offering and (B) APS shall not have consented in
writing to the inclusion of such Other Registerable Securities, then no
securities other than shares of Registerable Stock shall be included among the
securities covered by such registration. A registration requested pursuant to
this Agreement shall be deemed to have been effected (i) if and
3
<PAGE>
when a registration statement filed with the Securities and Exchange Commission
(the "Commission") relating to the Registerable Stock has been declared
effective by the Commission or otherwise has become effective and registration
and/or qualification under all applicable State Laws has been completed;
provided that a registration requested pursuant to this Agreement shall not be
deemed to have been effected if after such registration has become effective,
such registration statement is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court due to reasons that are not the fault of APS and/or are not based on any
act or omission of APS, or (ii) if Exsorbet has commenced preparation of such a
registration statement under the Securities Act and such registration and/or
qualification under the State Laws and such registration statement does not
become effective or such registration and/or qualification is not completed in
either case by reason of the unreasonable refusal to proceed or lack of
reasonable cooperation of APS, Exsorbet shall be deemed to have effected a
registration under this Agreement and shall have no further obligation pursuant
hereto. If a requested registration pursuant to this Agreement involves an
underwritten offering, the underwriter(s) thereof shall be selected or approved
by APS. Notwithstanding the foregoing, APS agrees that for a period of one (1)
year after the Effective Date, APS will not request Exsorbet (except for
requests pursuant to subsection (f) below) to register more than 1,000,000
shares of Registerable Stock and that if APS requests the registration of any
excess Registerable Stock during the one (1) year period, then Exsorbet will
have sole discretion as to whether to allow APS to include in the registration
any additional Registerable Stock over such 1,000,000 share maximum. However, if
APS requests a registration in the one (1) year period after the Effective Date
and Exsorbet declines to allow APS to include all of the shares of Registerable
Stock owned by APS in such registration, then Exsorbet
4
<PAGE>
will cause all remaining shares of Registerable Stock owned by APS at the
conclusion of the one (1) year period to be fully registered and freely
tradeable within thirty (30) days after the expiration of the one (1) year
period after the Effective Date. Except for multiple registrations required by
the foregoing provisions, or as a result of registrations pursuant to subsection
(f) below, Exsorbet will not be required to effect more than one (1)
registration pursuant to this Agreement. Furthermore, in the event APS acquires
at least 1,000,000 shares of registered and freely tradeable Exsorbet common
stock within the sixty (60) day period immediately following the Effective Date,
then APS will not request Exsorbet to register (other than a registration
pursuant to subsection (f) below) any Registerable Stock before the expiration
of one (1) year after the Effective Date.
(c) Except as otherwise prohibited by applicable law, Exsorbet
will pay all fees and expenses incurred by Exsorbet in connection with the
registration of the Registerable Stock; except for any underwriting commissions,
transfer taxes, and fees and expenses of counsel for APS, if any, attributable
to the sale of the Registerable Stock, all of which shall be borne by APS.
(d) If Exsorbet is required to use its best efforts to effect
a registration of the Registerable Stock under this Agreement, Exsorbet shall:
(i) promptly prepare and use its best efforts to
file with the Commission (but in no event more than thirty (30) days after
receipt of the Request from APS) a registration statement, on such
appropriate registration form of the Commission as shall permit the disposition
of the Registerable Stock and any Other Registerable Securities in accordance
with the intended method(s) of distribution specified in the Request for such
registration and use its best efforts thereafter to cause such registration
statement to become effective within thirty (30) days after filing;
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<PAGE>
(ii) prepare and file as soon as reasonably
practicable with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and such prospectus
current and to comply with the provisions of the Securities Act with respect
to the disposition of the Registerable Stock until the earliest of (A)
such time as all of the Registerable Stock has been disposed of in
accordance with the intended methods of disposition by APS, or (B) the
expiration of the three (3) year period that shall commence on the filing of
the registration statement pursuant to subparagraph (i) above;
(iii) furnish to APS such number of copies of preliminary prospectuses and
prospectuses included in such registration statement and each amendment and
supplement thereto as APS may reasonably request in order to facilitate the
disposition of the Registerable Stock;
(iv) use its best efforts to register or qualify the Registerable Stock
under the State Laws within thirty (30) days after the filing of the
registration statement with the Commission and to keep such registration or
qualification in effect for so long as the registration statement filed
with the Commission remains in effect as provided in (ii), above, provided
that Exsorbet shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which it
would not otherwise be obligated to be so qualified, or to subject itself
to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction, or to qualify as a dealer in securities;
(v) notify APS, at any time when a prospectus is required to be delivered
by APS under the Securities Act, upon discovery by Exsorbet that the prospectus
included in such registration statement, as then in effect, or filed with the
Commission pursuant to Rule 424(b),
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<PAGE>
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, whereupon APS shall
suspend any offers or sales of Registerable Stock until such time as such
prospectus, as amended or supplemented from time to time, shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(vi) furnish, at the request of APS, on the date that such shares are
delivered to the underwriter or underwriters for sale in connection with a
registration pursuant to this Agreement, if such shares of Registerable Stock
are being sold through underwriters, (i) an opinion, dated such date, of the
counsel representing Exsorbet for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter dated such date, from
the independent certified public accountants of Exsorbet, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
(e) APS shall cooperate fully with Exsorbet in connection with
effecting a registration pursuant to this Agreement, including but not limited
to furnishing such information as Exsorbet may from time to time reasonably
request and as shall be required by law or by the Commission in connection with
such registration. In connection with the preparation and filing of any
registration statement under the Securities Act pursuant to this Agreement,
Exsorbet will give APS, APS' underwriters, if any, and APS' counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them
7
<PAGE>
reasonable access to its books and records and such opportunities to discuss the
business of Exsorbet with its officers and the independent public accountants
who have certified its financial statements as shall be reasonably necessary to
conduct a reasonable investigation within the meaning of the Securities Act.
(f) If Exsorbet at any time (including, without limitation, at
any time during the one (1) year period after the Effective Date) proposes to
register any of its securities for sale to the public for its own account and/or
for the account of any other person, under the Securities Act (other than by a
registration on Form S-4, S-8 or any successor similar forms or any other
Commission form of limited applicability which would not permit such additional
registration), and if at such time APS has, or has the right to acquire, any
stock of Exsorbet that could qualify as Registerable Stock, Exsorbet will, at
least sixty (60) days prior to filing the registration statement, give written
notice to APS of its intention to do so and, subject to the provisions hereof,
permit APS to include in such registration their Registerable Stock. Any such
registration shall be at Exsorbet's expense, except for underwriter's discounts
or commissions or broker's commissions, if any, attributable to such
Registerable Stock and except for any other expenses which APS elects to incur
in connection therewith or is otherwise required to bear pursuant to this
Agreement. To exercise its rights pursuant to this subsection, APS must deliver
a Request to Exsorbet in accordance with the provisions of Section 1(a), and
Exsorbet will use its best efforts to effect the registration under the
Securities Act of all Registerable Stock which Exsorbet has been so requested to
register; provided that if, any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Exsorbet
shall determine for any reason not to register or to delay registration of such
securities, Exsorbet may, at its election, give
8
<PAGE>
written notice of such determination to APS and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registerable Stock in connection with such registration, and (ii) in the
case of a determination to delay registering shall be permitted to delay
registering any Registerable Stock being registered pursuant to this subsection
for the same period as the delay in registering such other securities.
If a registration pursuant to this subsection involves an underwritten
offering of the securities so being registered for sale for the account of
Exsorbet, to be distributed by or through one or more underwriters, whether or
not the Registerable Stock so requested to be registered for sale is also to be
included in such underwritten offering, and the managing underwriter of such
underwritten offering informs Exsorbet in writing of its belief that the number
of securities requested to be included in such registration exceeds the number
which can be sold in (or during) the time of such offering, then Exsorbet may
include in such offering all securities proposed by Exsorbet to be sold for its
own account; and Exsorbet shall only be required to use its best efforts to
include Registerable Stock in such registration on a pro rata basis (based on
the number of shares of securities held by all persons who have a contractual
right to have their securities included in the proposed registration and who
make a written request for inclusion of their shares in the proposed
registration) to the extent possible such that the total number of securities to
be included does not exceed the level recommended by the managing underwriter.
The obligations of Exsorbet described in subparagraphs (iii) and (v) of Section
1(d) shall apply to any registration under this Section 1(f) which includes
Registerable Stock. Furthermore, the provision in Section 1(b) that Exsorbet
shall not be required
9
<PAGE>
to effect a registration prior to the expiration of one (1) year after the
Effective Date, shall not apply to any registration pursuant to this Section
1(f).
(g) In connection with any registration or qualification of
the Registerable Stock under this Agreement: (i) Exsorbet shall indemnify and
hold harmless APS and each underwriter thereof, including but not limited to
each person, if any, who controls APS or such underwriter within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including but not limited to reasonable expenses
incurred in investigation, preparing and defending against any claim) to which
such APS, underwriters or controlling persons may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise, insofar as the same arise out of or are based upon or are
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (as amended or
supplemented if Exsorbet shall have furnished any amendments or supplements
thereto) furnished pursuant to this Agreement or insofar as the same arise out
of or are based upon or are caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or insofar as the same arise out of or are
based upon any violation by Exsorbet of the Securities Act or the Exchange Act
or any rule or regulation thereunder; except that the foregoing indemnity
obligations shall not apply insofar as such losses, claims, damages, liabilities
or expenses arise out of or are based upon or are caused by any untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished in writing by or on behalf of APS or any such underwriter
or control person, or arise out of or are based upon any violation of the
Securities Act, Exchange Act or any rule or regulation thereunder by APS or any
such underwriter or control person,
10
<PAGE>
and (ii) APS shall indemnify Exsorbet, its affiliates and their respective
officers, directors and control persons against all such losses, claims,
damages, liabilities and expenses (including but not limited to reasonable
expenses incurred in investigating, preparing and defending against any claim)
insofar as the same arise out of or are based upon or are caused by any such
untrue statement or alleged untrue statement or any such omission or alleged
omission based upon information furnished in writing by or on behalf of APS or
any such underwriter or control person or arise out of or are based upon any
violation of the Securities Act, Exchange Act or any rule or regulation
thereunder by APS or any such underwriter or control person; provided, however,
that the liability of APS hereunder shall be limited to the lesser of (i) the
net proceeds, if any, received by APS upon sale of the Registerable Stock
pursuant to any registration effected hereunder, or (ii) the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of shares of Registerable Stock sold by APS under
such registration statement bears to the total public offering price of all
securities sold thereunder.
Promptly upon receipt by a party indemnified under this
Agreement of notice of the commencement of any action against such indemnified
party with respect to which indemnity or reimbursement may be sought against any
indemnifying party under this Agreement, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Agreement unless such failure shall materially adversely affect the defense of
such action. In case notice of commencement of any such action shall be given to
the indemnifying party as above provided, the indemnifying party shall be
11
<PAGE>
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable expenses incurred
in investigating, preparing and defending against any claim) shall be paid by
the indemnified party unless (a) the indemnifying party agrees to pay the same,
(b) the indemnifying party fails to assume the defense of such action with
counsel reasonably satisfactory to the indemnified party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party), or (c) the named parties to any such
action (including any impleaded parties) have been advised by such counsel that
representation of such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). In the event
that either of the circumstances described in clauses (b) and (c) of the
immediately preceding sentence shall occur, the indemnified party shall have the
right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of any such action, with the expenses
and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party shall be liable for any settlement entered into without its
consent.
(h) With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of the shares
of Registerable Stock to the public without registration, Exsorbet agrees to (i)
make and keep, at all times, public information available
12
<PAGE>
as those terms are understood and defined in Rule 144 under the Securities Act,
(ii) use its diligent best efforts to file with the Commission in a timely
manner all reports and other documents required of Exsorbet under the Securities
Act and the Securities Exchange Act of 1934, as amended, at any time after it
has become subject to such reporting requirements, and (iii) furnish to APS,
upon request, a written statement as to Exsorbet's compliance with the reporting
requirements of Rule 144 and a copy of the most recent annual and quarterly
report of Exsorbet, and such other reports and documents so filed as APS may
reasonably request in availing itself of any rule or regulation of the
Commission allowing it to sell any such securities without registration.
2. Representations and Warranties. Exsorbet represents and warrants to APS
as follows:
(a) Exsorbet is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Idaho and has full corporate
power and authority to carry on its business as now conducted and to enter
into and perform this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by Exsorbet and constitutes the valid
and binding obligation of Exsorbet enforceable against it in accordance with
its terms.
(b) The 1,200,000 initial shares of Exsorbet common stock
purchased by APS, and any other common stock of Exsorbet issued to APS by
Exsorbet pursuant to the Warrant or this Agreement, when issued, will have been
duly and validly authorized and issued, will be fully paid and nonassessable and
will not have been issued in violation of the preemptive rights of any person or
applicable federal or state securities laws.
(c) There is only one class of common stock of Exsorbet
outstanding and such stock trades on the Nasdaq Stock Market, Inc. SmallCap
Market under the symbol "EXSO."
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<PAGE>
(d) Exsorbet has made available to APS copies of Exsorbet's
annual report on Form 10-K for the year ended December 31, 1995, and its
quarterly reports on Form 10-Q (or Form 10-Q/A where applicable) for the
quarters ended March 31, 1996 and June 30, 1996, (collectively, the "Periodic
Reports"), in the form filed with the Commission pursuant to the requirements of
the Exchange Act. At the time of filing, the Periodic Reports were appropriately
responsive to the requirements of the Exchange Act, were complete and proper in
form and did not contain an untrue statement of a fact or omit to state a fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Since
June 30, 1996, and through the date of this Agreement, no event has occurred as
a consequence of which Exsorbet would be required to file, on or before the date
of this Agreement, a current report on Form 8-K pursuant to the requirements of
the Exchange Act.
3. Other Agreements.
(a) Exsorbet agrees to reimburse APS for APS' legal fees up to
$10,000, plus travel and other out-of-pocket expenses incurred by legal counsel
for APS in connection with the transactions contemplated by this Agreement, the
Warrant and the Options and in connection with the loan evidenced by the
Security Documents. Such amount shall be payable upon execution of this
Agreement.
(b) APS agrees to hold 1,000,000 of the shares of common stock
of Exsorbet initially purchased by APS for at least one (1) year after the
Effective Date; except that APS may sell such shares prior to such time (i)
pursuant to the Stock Put, and/or (ii) pursuant to a registration of such shares
as contemplated by this Agreement. Furthermore, in the event APS desires to sell
14
<PAGE>
more than 20,000 shares of Exsorbet common stock for cash on any particular day
(other then pursuant to a registration statement in effect with respect
thereto), then APS will give Exsorbet five (5) days advance written notice of
such intention, specifying the price, or other pricing methodology, and any
other terms and conditions of such sale, and Exsorbet shall be entitled, during
such five (5) day period to elect to purchase such stock from APS on the same
terms and conditions, provided such purchase by Exsorbet must be concluded
within three (3) days of exercising the election; provided the restriction
contained in this sentence shall not apply to APS unless all Exsorbet
shareholders owning five percent (5%) or more of Exsorbet common stock agree to
be bound in writing by the same restrictions.
(c) Exsorbet agrees to cause one (1) individual designated by
APS to be appointed to Exsorbet's Board of Directors promptly after the October,
1996 Exsorbet shareholder meeting, and to nominate and use its best efforts to
cause the Exsorbet shareholders to elect and thereafter maintain a designee of
APS as an Exsorbet Board member for the period designated below. In the event
APS acquires fifty percent (50%) of the aggregate shares of Exsorbet common
stock APS is entitled to purchase under the Warrant and Options pursuant to
exercise of the Warrant and/or any of the Options, then APS shall be entitled to
designate a second individual to serve on the Board of Directors of Exsorbet,
and Exsorbet agrees to cause such person to be promptly appointed to its Board
of Directors and to nominate and use its best efforts to cause the Exsorbet
shareholders to elect and thereafter maintain such second designee in place for
the period specified below. Once APS has the right to designate a second
Exsorbet Board member, in the event the size of the Exsorbet Board of Directors
is increased or otherwise becomes larger then ten directors, then APS shall be
entitled to designate a third individual to serve on the Board of Directors of
Exsorbet, and
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<PAGE>
Exsorbet shall cause such person to be promptly appointed and shall nominate and
use its best efforts to cause the Exsorbet shareholders to elect and thereafter
maintain a third APS designee on the Board of Directors for the period stated
below. The foregoing provisions related to the designation by APS of individuals
to serve on the Board of Directors of Exsorbet shall remain in place until APS
(together with its subsidiaries and affiliates) owns less than five percent (5%)
of the issued and outstanding common stock of Exsorbet, and thereafter in the
event APS exercises its rights under the Stock Put until APS has been paid in
full all amounts due APS upon sale of the stock to Exsorbet pursuant to the
Stock Put. All APS designees to the Board of Directors of Exsorbet may be
changed from time to time by written notice of APS to Exsorbet. Exsorbet agrees
to cause such new designees to be elected to its Board of Directors promptly
upon receipt of such notice. Each individual designated by APS to serve on the
Board of Directors of Exsorbet shall be the beneficiary of at least $3 million
of director and officer insurance coverage maintained by Exsorbet (subject to
reasonable deductibles, which deductibles shall be paid by Exsorbet) and
otherwise reasonably acceptable to APS. Exsorbet further agrees that, as long as
APS has the right to designate any Exsorbet directors, Exsorbet will take such
steps as may be necessary to cause its articles of incorporation and bylaws to
contain indemnity provisions in favor of such directors to the maximum extent
allowed by applicable law.
(d) Exsorbet agrees to consult with APS concerning the form of
any and all press releases related to the transactions contemplated by the
purchase of the 1,200,000 shares of Exsorbet common stock, this Agreement, the
exercise of the Stock Put, the Warrant and/or any of the Options, and the
acquisition of 7-7, Inc., and to obtain the approval of APS prior to the
dissemination thereof, which approval shall not be unreasonably withheld.
16
<PAGE>
(e) In the event that, at any time during a period of three
(3) years after the Effective Date, Exsorbet proposes to engage in any
transaction that involves the issuance of additional Exsorbet equity securities,
options or other rights to acquire Exsorbet equity securities, or rights
convertible into any Exsorbet equity securities, or proposes to engage in any
other non-equity related transaction that involves amounts in excess of $100,000
(all the foregoing are collectively referred to as "Target Transactions"), in
which any person or entity who owns five percent (5%) or more of Exsorbet's
outstanding common stock ("Major Shareholders") is to be a participant, or has
the right to participate, APS shall have a right of first refusal to participate
in any such transaction on the same basis and terms as the applicable Major
Shareholder(s). Exsorbet agrees to give APS sixty (60) days advance written
notice of any proposed Target Transaction, including a full description of the
terms and conditions thereof, and to make available such information as APS
shall reasonably request in connection with reaching a decision as to whether to
exercise APS' right of first refusal. To exercise its right of first refusal,
APS must notify Exsorbet in writing prior to the expiration of such sixty (60)
day period and, if it exercises such right, shall be entitled to participate in
the Target Transaction on the same terms and conditions as the applicable Major
Shareholder(s). In the event there are substantial modifications to the proposed
terms of any such Target Transaction during such sixty (60) day period, APS
shall be entitled to a new notice and sixty (60) day period in which to
determine to exercise its right of first refusal. Furthermore, Exsorbet agrees
to cause all Exsorbet shareholders who are also directors of Exsorbet, as of the
Effective Date, or thereafter, to execute and deliver to APS an agreement in
form and substance acceptable to APS, to vote their shares in favor of the
election of APS designees to the Exsorbet Board of Directors as contemplated in
subsection (c) above.
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<PAGE>
(f) In the event any shareholder defaults under any of the
Options and APS is unable, within thirty (30) days of such default (without
recourse to litigation), to acquire the Exsorbet common stock subject to any of
such Options, then Exsorbet will sell to APS such number of shares of Exsorbet
common stock, at the exercise price stated in the applicable Option, as APS
would have been able to purchase under the Options in default.
(g) For a period of sixty (60) days after the Effective Date,
APS shall be entitled to full access to the books, records and management of
Exsorbet and its subsidiaries, during reasonable business hours, to afford APS a
full opportunity to perform a due diligence review with regard to the business,
financial and legal affairs of Exsorbet.
(h) APS acknowledges and agrees that Exsorbet has disclosed to
APS that Exsorbet is considering a merger into a Delaware corporation, whereby
the Delaware corporation will be the surviving corporation, and which would
result in the change of the name Exsorbet to "Consolidated Eco-Systems, Inc."
For all purposes of this Agreement the term "Exsorbet" shall refer to such
surviving successor corporation in the event that such merger and/or name change
is consummated, and all terms and provisions of this Agreement, including all
terms providing for receipt of Exsorbet common stock and other terms and
conditions shall apply with regard to such proposed merger. APS shall be
entitled to cause the surviving corporation after any such merger to re-execute
documents evidencing the Stock Put, any or all of the Security Documents, the
Warrant and this Agreement in the name of the successor corporation, but
otherwise to be identical in terms to the terms of the original agreements.
(i) In the event APS purchases any Exsorbet common stock
during the sixty (60) day period immediately following the Effective Date, other
than the initial 1,200,000 shares
18
<PAGE>
purchased as described in the recitals hereto and other than any purchases
through exercise of the Warrant or any of the Options, at a per share price of
$2.75 or less ("Other Purchased Stock"), then APS will not exercise its right to
purchase, under the Options, the number of shares equal to the number of shares
of Other Purchased Stock it acquired during such sixty (60) day period. The
foregoing shall not in any way limit APS' ability to exercise all of its rights
under and pursuant to the Warrant.
4. Remedies. This Agreement may be enforced at either law or in equity,
including, but not limited to, injunctive relief. In case any one or more of the
provisions of this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, any other provision hereof in this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. Such invalid, illegal or
unenforceable provisions shall be given effect to the maximum extent then
permitted by law. Exsorbet shall be deemed to be in default under this Agreement
if there is a default (which is not cured after any required notices of default
and opportunity to cure) under the Warrant or any of the Security Documents.
5. Governing Law and Venue. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas
(except the laws of that jurisdiction that would render such choice of law
ineffective). Venue for any action relating to this Agreement shall be proper
only in Texas.
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<PAGE>
6. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, and all
of which together shall constitute one and the same instrument.
7. Inurement. This Agreement shall be binding upon the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns. This Agreement shall not be assignable by any party hereto without the
express written consent of the other party hereto in each instance; provided
that upon written notice to Exsorbet, APS may assign its rights and obligations
under this Agreement to any affiliate or subsidiary of APS.
8. Reservation of Shares. Exsorbet shall at all times until the
expiration of the rights provided under the Warrant and the Options, reserve for
issuance and delivery the number of shares of Exsorbet common stock as shall be
required for issuance and delivery pursuant to the Warrant and this Agreement.
9. Notices. Any notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (a) when
personally delivered to the relevant party at its address as set forth below or
(b) if sent by mail, on the third day following the date when deposited in the
United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
1301 Capital of Texas Highway, Suite C-300
20
<PAGE>
Austin, Texas 78746-6550
Attn: President
Exsorbet: Exsorbet Industries, Inc.
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
Attn: Charles E. Chunn, Jr.
Each party may change its address for purposes of this Agreement by proper
notice to the other party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EXSORBET: EXSORBET INDUSTRIES, INC.
By:
Printed Name:
Title:
APS: AMERICAN PHYSICIANS SERVICE
GROUP, INC.
By:
Printed Name:
Title:
22
Exhibit 10.20
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES
ACT"). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION UNDER THE SECUlUTIES ACT OR SUCH OFFER, SALE OR TRANSFER IS
EXEMPT FROM SUCH REGISTRATION.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: September 30, 1996
Warrants
to Purchase 300,000 Shares
of Common Stock, S0.001 Par Value Per Share
EXSORBET INDUSTRIES, INC., an Idaho corporation (the "Company"), hereby
certifies that American Physician Service Group, Inc., its successors and assign
(collectively, the "Holder"), for value received, is entitled to purchase from
the Company at any time commencing on October 1, 1996 and ending on December 5,
1996 up to 300,000 shares (the "Shares") of the Company's common stock, par
value S0.001 per share (the "Common Stock"), at a price of S2.75 per share (the
"Exercise Price").
1. Exercise of Warrants. Upon presentation and surrender of this Common
Stock Purchase Warrant Certificate ("Warrant Certificate" or "this Certificate")
during the Exercise Period, with the attached Purchase Form duly executed, at
the administrative office of the Company at 1401 South Waldron Road, Suite 201,
Fort Smith, Arkansas 72903, together with a check payable to the Company in the
amount of the Exercise Price multiplied by the number of Shares being purchased,
the Company will cause its Transfer Agent to deliver to the holder hereof,
certificates of Common Stock which in the aggregate represent the number of
Shares being purchased. All or less than all of the Warrants represented by this
Certificate may be exercised and, in case of the exercise of less than all, the
Company, upon surrender hereof, will deliver to the holder a new Warrant
Certificate representing the number of shares which have not been exercised.
2. Exercise Period. The right to acquire shares of the Company pursuant
to this Warrant Certificate shall commence on October 1, 1996 and terminate upon
December 5, 1996 (the "Exercise Period"). After December 5, 1996, this Warrant
Certificate shall become null and void with respect to any remaining shares
which could have been, but were not, acquired by the Holder hereof during the
Exercise Period.
3. Rights and Obligations of Holders of this Certificate. (a) The Holder of
this Certificate shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity; provided, however, that
in the event any certificate representing shares of Common Stock or otha
securities is issued to the holder hereof upon exercise of some or all of the
Warrants,
<PAGE>
such holder shall, for all purposes, be deemed to have become the holder of
record of sueh Common Stock on the date on which this Certificate, together with
a duly executed Purchase Form, was surrendered and payment of the aggregate
Exercise Price was made, irrespective of the date of delivery of sueh share
certifieate.
(b) In case the Company shall (i) pay a dividend in Common Stock or make a
distribution in Common Stock, (ii) subdivide its outstanding Common Stock into a
greater number of shares, or (iii) combine its outstanding Common Stock into a
smaller number of shares (including a recapitalization in connection with a
consolidation or merger in which the Company is the continuing corporation),
then the Exercise Price on the record date of such division or the effective
date of such action shall be adjusted by multiplying such Exereise Price by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event and
the number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
( c) In case of any consolidation or merger of the Company with or into
another corporation (other than any consolidation or merger in which the Company
is the continuing corporation and which does not result in any increase,
decrease, or other reclassification of the outstanding shares of Common Stock)
or the conversion of such outstanding shares of Common Stock into shares or
other stock or other securities or property, or the sale or transfer of the
property of the Company as an entirety or substantially as an entirety, there
shall be deliverable upon exercise of the Warrant Certificate (in lieu of the
number of shares of Common Stock theretofore deliverable) the number of shares
of stock or other securities or property to which a holder of the number of
shares of Common Stoek which would otherwise have been deliverable upon the
exercise of this Warrant Certificate would have been entitled upon such action
if this Warrant Certifieate had been exercised immediately prior to such action.
4. Common Stock. (a) The Company covenants and agrees that all shares of
Common Stock issuable upon exercise of this Warrant Certificate will, upon
delivery, be duly and validly authorized and issued, fully-paid and
non-assessable.
(b) The Company covenants and agrees that it will at all times prior to
expiration of this Warrant Certificate reserve and keep available an authorized
number of shares of its Common Stock and other applicable securities sufficient
to permit the exercise in full of all outstanding options, warrants and rights,
including the Warrants.
5. Issuance of Certificates. As soon as possible after full or partial
exercise of this Warrant, but in any event no more than five (5) business days,
the Company, at its expense, will cause to be issued in the name of the and
delivered to the holder of this wanant, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which that
holder shall be entitled on such exercise. No Fractional shares will be issued
on exercise of this Warrant. If on any exercise of this Warrant, a fractional
share results, the Company will pay the cash value of that
<PAGE>
fractional share, calculated on the basis of the Exercise Price. All such
certificates shall bear a restrictive legend to the effect that the Shares
represented by such certificate have not been registered under the Securities
Act of 1933, as amended, and the Shares may not be sold or transferred
in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold face language appeanng on
Page l of this Warrant Cenificate.
6. Disposition of Warrants or Shares. The holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation ofthe provisions of the Securities Act of
1933, as amended, and tbe rules and regulations promulgated thereunder
(collectively, the "Act").
7. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and otber communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered mail, return receipt requested, postage prepaid, or by U.S. express
mail service or private overnight courier service sucb as Federal Express. Any
such notice shall be deemed to have been given (a) on tbe business day
immediately subsequent to mailing, if sent by U.S. express mail service or
private overnight courier service, or (b) five (5) business days following the
mailing thereof, if mailed by certified or registered mail, postage prepaid,
return receipt requested, and all such notices shall be sent to the following
addresses (or to such other address or addresses as a party may have advised the
other in the manner provided in this Section):
If to the Company:
Charles E. Chunn, Jr.
1401 South Waldron Road, Suite 201
Fort Smith, AR 72903
If to the Holder:
Duane K. Boyd, Jr. 1301 Capital of Texas Highway Suite C-300 Austin, TX 78746.
8. Goveming Law. This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and govemed by the laws of the State
of Texas without giving effect to the conflicts of laws provisions.
9. Successors and Assigns. This Warrant Certificate shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
10. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not be a part of this
Certificate.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or by facsimile, by one of its officers hereunto duly
authorized.
EXSORBET INDUSTRIES, INC.
Date: September 30, 1996
By:
Executive Vice-President
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby irrevocably elects to exercise ______ of the
Warrants represented by this Common Stock Warrant Certificate, and to purchase
the shares of Common Stock issuable upon the exercise of such Warrants and
requests that certificates for securities be issued in the name of:
- --------------------------------------------------
(Please type or print name and address)
- --------------------------------------------------
- --------------------------------------------------
(Social Security or tax identification number)
and delivered to _________________________________
(Please type or print name and addras)
and, if such number of Warrants shall not be all the Warrants evidenced by this
Common Stock Warrant Certificate, that a new Common Stock Warrant Certificate
for the balance of such Warrants be registered in the name of, and delivered to,
the Holder at the address stated below.
In full payment of the purchase price with respect to tne Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
S _______ by check or money order payable in United States currency to the
order of Exsorbet Industries, Inc., or its successor.
American Physicians Service Group, Inc.
Dated:___________ By:___________________________________
Name:
Title:
--------------------------------------
(Address)
--------------------------------------
--------------------------------------
(Social Security or tax identification number)
<PAGE>
Exchange Act General Rules and Regulations
Note: "Policy-making function" is not intended to include policy-making
functions that are not significantt. If pursuant to Item 401 (b) of Regulation
S-K the issuer identifies a person as an "executive officer," it is presumed
that the Board of Directors has made that judgment and that the persons so
identified are the officers for purposes of Section 16 of the Act, as are such
other persons enumerated in this paragraph (f), but not in Item 401 (b).
(g) The term "portfolio securities" shall mean all securities owned by an
entity, other that securities issued by the entity.
(h) Tbe term "put equivalent position" shall mean a derivative security
position that increases in value of the underlying equity decreases, including,
but not limited to, a long put option and a short call option position.
Rule 16a-2. Persons and Transactions Subject to Section 16.
Any person who is the beneficial owner, directly or indirectly, of more
that 10 percent of any class of equity securities ( 10 percent beneficial
owner") registered pursuant to Section 12 of the Act, any director or officer of
the issuer of such securities, and any person specified in Section 17(a) of the
Public Utility Holding Company Act of 193S or Section 30(f) of tbe Investment
Company Act of 1940, including any person specified in Rule 16a-8, shall be
subject to the provisions of Section 16 of the Act. The rules under Section 16
of the Act apply to any class of equity securities of an issuer whether or not
registered under Section of the Act. The rules under Section 16 of the Act also
apply to nonequity securities as provided by the Public Utility Holding Company
Act of 1935 and the Investment Company Act of 1940. With respect to transactions
by persons subject to Section 16 of the Act:
(a) A transaction(s) carried out by a director or officer in the six months
prior to the director or officer becoming subject to Section 16 oftbe Act shall
be subject to Section 16 of the Act reported on tbe first required Form 4 only
if tbe transaction(s) occurred within six months of the transaction giving rise
to the Form 4 filing obligation and the director or officer became subject to
Section 16 of tbe Act solely as a result of the issuer registering a class of
equity securities pursuant to Section 12 of the Act.
(b) A transaction(s) following cessation of director or officer status
shall be subject to Section 16 of the Act only if executed within six months of
a transaction that occurred while that person was a director or officer.
(c ) The transaction that results in a person becoming a 10 percent
beneficial owner is not subject to Section 16 of the Act unless the person
otherwise is subject to Section 16 of the Act. A 10 percent beneficial owner not
otherwise subject to Section 16 of the Act must report only those transactions
conducted while tbe beneficial owner of more that 10 percent of a class of
equity securities of tbe issuer registered pursuant to Section 12 of the Act.
(d) (1) Transactions by a person or entity shall be exempt from the
provisions of Secdon 16 of the Act for the 12 months following appointment and
qualification, to the extent such person or entity is acting as:
(i) Executor or administrator of tbe atate of a decedent;
(ii) Guardian or member of a committee for an incompetent;
(iii) Receiver, trustee in bankruptcy, assignee for tbe benefit of
creditors, conservator, liquidating agent, or other similar person duly
authorized by law to administer the estate or assets of another person; or
(iv) Fiduciary in a similar capacity.
(Bulletin Not 14S,06-10-94)
Exhibit 10.21
CONTINGENT WARRANT AGREEMENT
This Contingent Warrant Agreement (this "Agreement") is executed and
delivered by Exsorbet Industries, Inc. an Idaho Corporation for the benefit of
American Physicians Service Group, Inc., a Texas corporation ("APS").
RECITALS
WHEREAS, Exsorbet and APS are engaging in certain transactions pursuant
to which, among other things, certain shareholders of Exsorbet are to execute
and deliver option agreements to APS authorizing APS to purchase certain shares
of Exsorbet common stock (the "Option Agreements"); and
WHEREAS, Exsorbet has agreed that, in the event of any default under
any of the Option Agreements, Exsorbet will sell the corresponding number of
shares of Exsorbet common stock to APS as necessary to allow APS to purchase the
same number of shares as would have been the case had there not been a default
under the applicable Option Agreements; and
WHEREAS, certain of the stockholders who were to execute and deliver
Option Agreements to APS at the closing of the transactions contemplated above
(the "Closing") have not done so, resulting in APS receiving total share
purchase rights which are 400,000 shares less than originally bargained for, and
Exsorbet has agreed to execute and deliver this Agreement to APS whereby
Exsorbet will either cause such additional Option Agreements to be executed and
delivered to APS or will sell the corresponding number of shares to APS.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Exsorbet hereby agrees as follows:
1. Exsorbet will use its best efforts to cause one or more of its
shareholders to execute and deliver, on or before October 30, 1996, option
agreements (the "Additional Options") to APS allowing APS to purchase, in the
aggregate, 400,000 shares of Exsorbet common stock at a purchase price of $2.75
per share. The Additional Options shall be exercisable at any time prior to the
expiration of sixty (60) days from the date executed and delivered to APS, in
substance and form acceptable to APS and shall otherwise be in the same form as
the Option Agreements delivered at the Closing. The 400,000 shares subject to
the Additional Options shall be in addition to the shares covered by the Option
Agreements delivered at the Closing.
2. In the event Exsorbet is unsuccessful, on or before October 30,
1996, in causing the execution and delivery to APS of all the Additional
Options, then Exsorbet will execute and deliver to APS a warrant to purchase,
for $2.75 per share, the number of shares of Exsorbet common stock as determined
by subtracting the number of shares purchasable by APS under any Additional
Options that were obtained and delivered to APS by October 30, 1996 from the
400,000 share total.
1
<PAGE>
Such additional warrant shall be exercisable at any time prior to the expiration
of sixty (60) days from the date executed and delivered to APS, and shall
otherwise be identical in form to that certain Common Stock Purchase Warrant
Certificate dated September 30, 1996, pursuant to which Exsorbet granted APS the
right to purchase up to 300,000 shares of Exsorbet common stock (the "Original
Warrant').
3. The 400,000 share total referred to in paragraphs 1 and 2 above, and
the corresponding $2.75 per share purchase price, shall be subject to the same
automatic adjustments as provided for in the Original Warrant.
4. This Agreement shall be construed and enforced in accordance with
the laws of the State of Texas. Exsorbet acknowledges and agrees that its
delivery of this Agreement and its performance of its obligations hereunder are
a material inducement to APS agreeing to consummate the transactions at the
Closing.
IN WITNESS WHEREOF, Exsorbet has executed and delivered this Agreement,
intending to be legally bound thereby, on September 30, 1996.
EXSORBET INDUSTRIES, INC.
By:
Printed N
Title:
2
Exhibit 10.22
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and DR. Edward Schrader, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 0 shares of common stock of
Exsorbet, such shares having been issued pursuant to Rule 144 of tne United
States Securities and Exchange Commission ("Rule 144"). Such shares of common
stock are subject to the provisions of Rule 144 and all applicable state and
federal securities regulations and statutes. Stockholder will not transfer or
assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
335,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire 0 shares of common
stock of Exsorbet, representing a portion of those shares identified in
paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
167,500 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headings. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: Ed Schrader
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainda shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Kenneth McDonald, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 545,388 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
514,469 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire 190,000 shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
- -0- shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headinys. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: Ken McDonald, KR
Industrial Service of Alabama, Hwy 195 North, Double Springs, AL 35553.
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Gary Cotten, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of -0- shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
100,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire -0- shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
100,000 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headinys. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: Gary Cotten,
2406 Oakhurst, Ada, OK 74820.
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and James J. Conners, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 120,000 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
125,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire 120,000 shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
2,500 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headinys. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: 10539 Co. Rd. 1
Fairhope, AL 36532
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Robert Vick, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 120,000 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
125,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire 120,000 shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
2,500 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headinys. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: _____________
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any section or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Sam Sexton III, an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stocknolder is the owner of 5,000 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
295,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire -0- shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
200,000 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of notification by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headings. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: 1401 S. Waldron
#201, Fort Smith, Ark. 72903
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any secdon or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Charles E. Chunn, Jr., an individual ("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 85,000 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
275,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire -0- shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
180,000 shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of not)fication by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headings. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: ______________
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any secdon or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of September, 1996
by and between American Physicians Service Group, Inc. ("APS"), a Delaware
corporation, and Larry Woodcock and Marilyn Woodcock, individuals
("Stockholder").
IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Identification of Exsorbet Industries. Inc. Exsorbet Industries, Inc. is
an Idaho corporation, having its principal place of business in Jackson,
Mississippi. The only class of common stock of Exsorbet Industries, Inc. trades
on the Nasdaq Stock Market, Inc. SmallCap Market under the symbol "EXSO". As
used herein, the term "Exsorbet" shall refer to Exsorbet Industries, Inc. and
its successors.
2. Disclosures. Stockholder has disclosed to APS that Exsorbet, through its
Board of Directors, has proposed merger into a Delaware corporation, whereby tne
Delaware corporation would be the surviving corporation, and changing the name
of Exsorbet to Consolidated EcoSysterns, Inc. The term "Exsorbet" shall refer to
such surviving or successor corporation in the event that such merger and/or
name change is approved.
3. Representations. Stocknolder has made no representadons to APS
concerning the financial condition of Exsorbet and its subsidiaries. Stockholder
has made no representations or warranties concerning the future value of
Exsorbet stock, future earnings of Exsorbet, or any other representations
concerning Exsorbet, except as are identified herein.
4. Stock Ownership. Stockholder is the owner of 1,152,021 shares of common
stock of Exsorbet, such shares having been issued pursuant to Rule 144 of
the United States Securities and Exchange Commission ("Rule 144"). Such shares
of common stock are subject to the provisions of Rule 144 and all applicable
state and federal securities regulations and statutes. Stockholder will not
transfer or assign any of such stock until expiration of this option agreement.
5. Option Agreements. Stockholder possesses a present right to acquire
200,000 shares of common stock of Exsorbet pursuant to an option agreement or
agreements, copies of which are attached hereto. Stockholder will not transfer,
extinguish or assign any of such options or rights thereunder until expiration
of this option agreement.
6. Option Grant to APS. For a period of sixty days after September 30,
1996, Stockholder grants to APS an exclusive right to acquire 317,500 shares of
common stock of Exsorbet, representing a portion of those shares identified
in paragraph 4, above. The acquisition price shall be $2.75 per share.
7. Additional Option Grant to APS. For a period of sixty days after
September 30, 1996, Stockholder grants to APS an exclusive right to acquire
- -0- shares of common stock of Exsorbet, by exercising such portion of the
options identified in paragraph 5, above as necessary to acquire such number of
shares. The acquisition price shall be S2.75 per share.
<PAGE>
8. Exercising of Stock Options. Stockholder warrants and covenants with
APS that he will, upon exercising of the option specified in paragraph 6 or
7, above, exercise the option agreements with Exsorbet, acquiring the number
of shares being ultimately transferrable to APS. Such option exercise shall
occur within two business days of not)fication by APS that it is exercising
the option specified herein.
9. APS Agreements. APS: (A) understands that the Exsorbet stock has not
been, and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptdons for transactions not involving any public offering; (B) is
acquiring the Exsorbet stock for its own account for investment purposes, and
not with a view to the distribution thereof; (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received or will receive certain information concerning Exsorbet and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Exsorbet stock; (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Exsorbet stock;
and (F) is an Accredited Investor, as defined in Regulation D promulgated
pursuant to the Secunties Act of 1933, as amended.
10. Paragraph Headings. Paragraph Headings, being the underlined portion at
the beginning of each section, are intended for assistance only and shall not
alter, modify, amend, or change the meanings of the written paragraphs.
11. Construction. This Agreement shall be liberally construed in favor of
granting an exclusive option upon the terms specified herein. In furtherance
thereof, this Agreement shall be construed in accordance with the laws and
statutes of the State of Texas, being the principal place of business of APS.
12. Advice to Seek Legal Counsel. Stockholder has sought and obtained the
advice of counsel prior to entering this Agreement or has been strongly advised
to obtain legal counsel concerning the advisability of entering this Agreement.
In entering this Agreement, Stockholder is not relying upon any statements,
representations, or opinions of: (a) any attomeys or counsel for or of Exsorbet
or APS; (b) any representatives, agents, officers, employees, or directors of
Exsorbet Industries, Inc., its subsidiaries, or APS; or (c) any person other
than his retained legal attorney.
13. Notices. Notices to Stockholder shall be delivered to: Larry and
Marilyn Woodcock, 1890 Swisco Road, Sulpher, LA 70663.
Notices to APS shall be delivered to: Duane Boyd, Jr., 1301 Capital of
Texas Highway, Suite C-300, Austin, TX 78746.
All notices shall be delivered by certified mail with a retum receipt
requested, by ovemight courier, or by facsimile. All notices shall be complete
upon delivery.
14. Cooperation. Stockholder agrees to fully cooperate with APS in the
event that APS elects to exercise any rights under this Agreement. Stockholder
shall take no action which would obstruct the ability of APS to exercise its
rights under this Agreement.
<PAGE>
15. Procedure for Exercising Option. APS may exercise its rights under this
Agreement by giving written notice to the Sharebolder in the manner specified in
paragraph 13, above. Such written notice shall be in any reasonable form
sufficient to notify Stockholder of the exercising of the option. Full payment
shall be due upon the delivery of any or all shares from Stockholder to APS.
Upon exercising of any options, Stockholder shall arrange for: (i) delivery of
existing shares, if any, to APS within five business days; (ii) exercising of
any stock options with Exsorbet within two business days; and (iii) delivery of
stock certificates obtained upon exercise of stock ophons within two business
days of receipt of such stock certificates.
16. Severability. In the event that any secdon or paragraph contained
herein shall be invalid, unlawful, or unenforceable, the remainder shall be
severable, valid, and effective as if such invalid, unlawful, or unenforceable
section or paragraph were not contained herein.
17. Consideration. In consideration of the Agreements contained herein, APS
is providing the sum of One Hundred Dollars (S 100.00) to Stockholder.
Stockholder accepts such amount as full and complete consideration for this
Agreement.
18. Complete Agreement. This Agreement is the full and complete agreement
between the parties. There are no agreements or understandings between the
parties which are not contained herein.
19. Adjustments in Option. In the event that the common stock of Exsorbet is
changed into or exchanged for a different number or kind of shares of Exsorbet
or other securides by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or combination of shares, the
option granted to APS herein shall be subject to an appropriate and equitable
adjustment in the number and kind of shares as to which the option, or
portions thereof then unexercised, shall be exercisable, to the end that
after such event the proportionate interest of APS shall be maintained as before
the occurrence of such event. Such adjustment in the option shall be made
without change in the total price applicable to the unexercised portion of the
option.
20. APS Party Appointed Attorney-in-Fact. Stockholder hereby irrevocably
appoints APS as attorney-in-fact of Stockholder (such power of attomey being
coupled with an interest), with full authority in the place and stead of
Stockholder and in the name of Stockholder, APS or otherwise, from time to time
on APS' discretion and upon the occurrence of any default by Stockholder of any
of Stockholder's obligations hereunder, to take any action and to execute any
instrument which APS may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation to assign and transfer the stock
which is the subject of this Agreement to APS, or any part thereof, absolutely
and to execute and deliver endorsements, assignments, conveyances, bills of sale
and other instruments with power to substitute one or more persons or
corporation with like power.
21. Binding Effect. This Option Agreement shall inure to the benefit of,
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Stockholder may not assign
its rights or obligations hereunder without the prior express written consent of
APS in each instance.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement upon the day
and year first above written.
------------------------
Stockholder
Exhibit 10.23
AGREEMENT OF EXSORBET INDUSTRIES. INC.
Exsorbet Industries, Inc. hereby indicates that it has no legal basis to
object to the option agreement between those stockholders identified in Exhibit
"A" attached hereto and American Physicians Service Group, Inc. Therefore,
Exsorbet Industries, Inc. agrees that it has no basis to fail to consent to the
terms of such option agreement.
As such, Exsorbet Industries, Inc. indicates that it will be lawfully bound
to comply with the provisions of the option agreement, in all particulars, and
specifically including sections 4, 5, 6, 7, and S.
Exsorbet Industries, Inc., therefore, indicates that it will comply with
the provisions of the option agreement and the direction of those persons
indicated on Exhibit "A," as are necessary for such persons to comply with the
individual agreements existing between such persons and American Physicians
Service Group, Inc.
The provisions ofthis Agreement shall be enforceable against Exsorbet
Industries, Inc. Upon failure of Exsorbet Industries, Inc. to comply in all
particulars with the provisions ofthis Agreement, this Agreement shall be
enforceable by specific performance, injunctive relief, or otherwise.
Exsorbet Industries, Inc. consents to the exclusive jurisdiction of the Courts
in Travis County, Texas for enforcement of any of the provisions of this
Agreement.
Exsorbet Industries, Inc. has further indicated to American Physicians
Service Group, Inc., and hereby represents and warrants, that in the event of
election of the option to acquire the shares specified in such option agreements
and following failure of delivery of the shares within 60 days after November
30, 1996, that Exsorbet Industries, Inc. will take such steps to insure that the
number of shares not previously delivered are delivered to American Physicians
Service Group, Inc., at the same cost, without regard to whether such shares
should come from an individual shareholder or be issued by Exsorbet Industries,
Inc.
This Agreement shall be construed in accordance with the laws and statutes of
the State of Texas.
EXSORBET INDUSTRIES, INC.
By:
Title:
Executed on this 30th day of September, 1996.
Exhibit 10.24
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by Consolidated Environmental Services, Inc., an Arkansas
corporation ("Guarantor"), for the benefit of American Physicians Service Group,
Inc., a Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
APSGI/Exsorbet
GUARANTY AGREEMENT Page 1
Initials
<PAGE>
5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: Consolidated Environmental Services, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
Consolidated Environmental Services, Inc.
(an Arkansas corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by Cierra, Inc., an Arkansas corporation ("Guarantor"),
for the benefit of American Physicians Service Group, Inc., a Texas corporation
("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: Cierra, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
Cierra, Inc.
(an Arkansas corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by Larco Environmental Services, Inc., a Louisiana corporation
("Guarantor"), for the benefit of American Physicians Service Group, Inc., a
Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: Larco Environmental Services, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
Larco Environmental Services, Inc.
(an Louisiana corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by KR Industrial Services of Alabama, Inc., an Alabama
corporation ("Guarantor"), for the benefit of American Physicians Service Group,
Inc., a Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: KR Industrial Services of Alabama, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
KR Industrial Services of Alabama, Inc.
(an Alabama corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by Exsorbet Technial Services, Inc., an Arkansas corporation
("Guarantor"), for the benefit of American Physicians Service Group, Inc., a
Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: Exsorbet Technical Services, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
Exsorbet Technical Services, Inc.
(an Arkansas corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by Eco Acquisition, Inc., Inc., an Arkansas corporation, also
known as Eco-Systems, Inc.("Guarantor"), for the benefit of American Physicians
Service Group, Inc., a Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: Eco Acquisition, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
Eco Acquisition, Inc.
(an Arkansas corporation)
By:
Name:
Title:
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty") is made as of the 30th day of
September, 1996, by 7-7 Merger, Inc., Inc., an Arkansas corporation,
("Guarantor"), for the benefit of American Physicians Service Group, Inc., a
Texas corporation ("Creditor").
FOR VALUE RECEIVED, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor hereby jointly, severally, absolutely, irrevocably, and
unconditionally guarantees to Creditor (a) the prompt payment and performance of
(i) any and all sums becoming due and payable pursuant to the Stock Put
Agreement dated September 30, 1996, executed by Exsorbet Industries, Inc., an
Idaho corporation ("Debtor") and Creditor, including without limitation any sums
which may hereafter become due and owing on the Promissory Note (the "Note"), in
the original principal amount of $3,300,000.00, which may be executed by Debtor
pursuant to the Stock Put Agreement, and payable to the order of Creditor,
including without limitation any and all interest thereon (other than such
interest as may be in excess of the maximum lawful amount), late charges (if
any), and costs of collection (including reasonable attorney's fees); (ii) all
other sums and indebtedness described in or secured by the Transaction Documents
(as defined below); (iii) any and all other sums becoming due and payable by
Debtor to Creditor as a result of advances made by Creditor pursuant to the
terms of the Transaction Documents, including without limitation the repayment
of any future advances made by Creditor to Debtor and the repayment of any sums
advanced for the protection of Creditor's security pursuant to the Transaction
Documents; (iv) any and all renewals, extensions, replacements, rearrangements,
substitutions, or modifications of all or any part of the Indebtedness
(collectively, the "Indebtedness"), and (b) the performance of any and all
obligations, warranties, representations, covenants and agreements made by
Debtor in connection with the Transaction Documents, as the same may be amended,
modified, or restated from time to time (the "Obligations").
2. Transaction Documents. The term "Transaction Documents" shall mean:
the Stock Put Agreement dated September 30, 1996, executed by and between Debtor
and Creditor; the Note (if and when executed pursuant to the terms of the Stock
Put Agreement); the Warrant executed by Debtor in favor of Creditor; the
Shareholder Rights Agreement executed by Debtor and Creditor; the Assignment and
Security Agreement dated September 30, 1996, executed by and between Debtor and
Creditor, and all other security agreements, assignments, and other documents
executed by Debtor for the benefit of Creditor to secure the payment and
performance of the Indebtedness and Obligations and creating a lien and security
interest against the real or personal property described therein (the
"Collateral"); any other Guaranty Agreements or surety agreements executed in
favor of Creditor and guaranteeing the Note; and any other agreement, document,
or instrument executed by Debtor or any other guarantor in connection with the
transaction evidenced by the Stock Put Agreement.
3. Nature of Guaranty. Guarantor agrees that this Guaranty is an
absolute, complete, continuing, unconditional and irrevocable guaranty of
payment and performance of the Indebtedness and the Obligations.
4. Renewals and Extensions. This Guaranty applies to, and the
Indebtedness shall additionally mean and refer to, any and all renewals,
extensions, modifications, alterations, refinancings and rearrangements of all
or any part of the Indebtedness.
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5. Representations and Warranties. Guarantor hereby represents
and warrants the following to Creditor:
(a) Guarantor may reasonably expect to benefit, directly or
indirectly, from the making of this Guaranty and from and from each and every
renewal, extension, modification, alteration, refinancing, and rearrangement of
all or any part of the Indebtedness, the release of collateral or other
relinquishment of legal rights made or granted or to be made or granted by
Creditor to Debtor and the amendment or modification of the terms and conditions
of the Obligations, and the Board of Directors of Guarantor has determined that
Guarantor may reasonably be expected to benefit, directly or indirectly, from
the making of this Guaranty and has adopted resolutions stating the same; and
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Debtor and is
familiar with the value of any and all collateral intended to be security for
the payment of all or any part of the Indebtedness or for the performance of all
or any of the Obligations; provided, however, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into this Guaranty;
and
(c) Guarantor has adequate means to obtain from Debtor on a
continuing basis information concerning the financial condition of Debtor and
Guarantor is not relying on Creditor to provide such information to Guarantor
either now or in the future; and
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and performance of this
Guaranty and any other agreements executed by Guarantor contemporaneously
herewith do not and will not violate (i) any agreement or instrument to which
Guarantor is a party, (ii) any law, rule, regulation or order of any
governmental authority to which Guarantor is subject, or (iii) its articles or
certificate of incorporation or bylaw; and
(e) neither Creditor nor any other party has made any
representation, warranty or statement to Guarantor in order to induce Guarantor
to execute this Guaranty; and
(f) the financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to Creditor are and shall
be true and correct in all material respects and fairly present the financial
position of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected in the financial
statements and other financial information regarding Guarantor heretofore
delivered to Creditor since the date of the last statement thereof; and
(g) as of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be
solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will
continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor
is and will continue to be able to pay its debts as they mature, and (iv) if
Guarantor is not an individual, Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which it is
about to engage.
6. Inducement to Creditor. Guarantor acknowledges that this
Guaranty is given to induce Creditor to extend credit to Debtor which would not
be extended except in reliance upon this Guaranty.
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7. Terms of Guaranty and Indebtedness and Obligations. This Guaranty
contains the entire agreement between Guarantor and Creditor with respect to
Guarantor's guarantee of the Indebtedness and Obligations; provided, however,
this Guaranty is in addition to and does not replace, cancel, modify, impair, or
affect any other guaranty executed by Guarantor and now or hereafter held by
Creditor that relates to Debtor or any other person or entity. No
representations or agreements have been made by Creditor to Guarantor except as
contained in this Guaranty. Guarantor has read and understands the implications
of this Guaranty. Guarantor agrees to the terms, provisions and conditions of
the Note, the Transaction Documents which may have been or may hereafter be
executed by Debtor or other persons evidencing, securing, or in connection with
the Indebtedness or Obligations or any part thereof, and agrees that Guarantor's
liability shall in no manner be affected, impaired or released by reason of any
term, provision, or condition of the Note, the Transaction Documents or by the
failure, refusal, or omission of Creditor to enforce or observe any of same or
by any action taken or omitted to be taken by Creditor pursuant thereto or in
connection therewith.
8. Payment and Performance by Guarantor. In each event that all or any
portion of the Indebtedness shall become due and remain unpaid (however the
maturity may have occurred), Guarantor will, upon demand, pay the amount due to
Creditor (other than any interest as may be in excess of the maximum lawful
amount), without notice having been given to Guarantor previous to such demand
of the acceptance by Creditor of this Guaranty or of the creating or incurring
of such indebtedness. Guarantor specifically agrees that it shall not be
necessary or required in order to enforce any obligations under this Guaranty
that Creditor has made demand for payment upon Debtor or any other person liable
on the Indebtedness for payment thereof or for performance of the Obligations or
has presented same for payment by Debtor or any other person liable thereon or
has made protest thereof or has given notice to Debtor or any other party liable
thereon of the maturity or nonpayment of the Indebtedness. All amounts becoming
payable by Guarantor to Creditor under this Guaranty shall be payable at
Creditor's address stated below, or at such other address as directed by
Creditor in written notice to Guarantor. All payments made upon the Indebtedness
at any time shall be deemed to have been paid by Debtor unless express notice in
writing is given to Creditor at the time of payment by Guarantor that Creditor
has been paid by Guarantor. Upon demand by Creditor, Guarantor shall perform or
cause to be performed any or all of the Obligations.
9. Suit on Guaranty. Suit may be brought by Creditor against Guarantor
alone, or jointly and severally against Guarantor and any one or more other
guarantors of the Indebtedness and/or Obligations, without impairing the rights
of Creditor against Debtor or other guarantors of the Indebtedness and/or
Obligations.
10. Costs of Collection. Guarantor agrees to pay all costs of
collection, including reasonable attorney's fees and expenses, if this Guaranty
is placed in the hands of an attorney for collection or is collected through any
court.
11. Waiver by Guarantor. Guarantor specifically waives any notice (i)
of acceptance of this Guaranty by Creditor, (ii) of the creation, advancement,
increase, existence, renewal, extension, modification, refinancing, or
rearrangement of the Indebtedness, or any indulgence with respect to the
Indebtedness, or any part thereof, (iii) of nonpayment thereof or default
thereon or in the performance of the Obligations, and (iv) of any amendment,
modification, or restatement of all or any of the Obligations. Guarantor waives
grace, demand, protest, presentment, and notice of intent to accelerate the
maturity of the Indebtedness, notice of acceleration of the maturity of the
Indebtedness, demand, protest, or presentment with respect to the Indebtedness,
and Guarantor waives notice of the amount of the Indebtedness outstanding at any
time. Guarantor agrees that the
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maturity of the Indebtedness, or any part thereof, may be accelerated, renewed,
extended, modified, refinanced, or rearranged or any other indulgence may be
granted with respect thereto by Creditor at its will or as may be agreed by
Debtor without notice to or further consent by Guarantor at any time. Guarantor
agrees that Guarantor shall not be considered a "Debtor" as defined in Section
9.105 of the Texas Business and Commerce Code.
12. Guarantor's Direct Liability. Creditor shall not be required,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty, or requiring payment of the Indebtedness by Guarantor hereunder or
performance of the Obligations, or at any time thereafter, to do any of the
following: (a) proceed to obtain or assert a claim for personal judgment against
Debtor for the Indebtedness or make any effort at collection of the Indebtedness
from Debtor; (b) foreclose against or seek to realize upon the Collateral or any
security now or hereafter existing for the Indebtedness or Obligations; (c) file
suit or proceed to obtain or assert a claim for personal judgment against any
other party (including any maker, guarantor, endorser or surety) liable for the
Indebtedness or make any effort at collection of the Indebtedness from any such
other party; (d) exercise or assert any other right or remedy to which Creditor
is or may be entitled in connection with the Indebtedness or Obligations or any
security or other guaranty therefor; (e) assert or file any claim against the
assets or estate of Debtor or other person liable for the Indebtedness or
Obligations, or any part thereof; (f) take any action against Debtor or any
other person, to exhaust its remedies against endorsers, the Collateral or other
collateral or security, or to resort to any balance of any deposit account or
credit on the books of Creditor in favor of Debtor or any other person; or (g)
pursue any other remedies Creditor may have in connection with the Indebtedness
or Obligations.
13. Obligations Not Impaired. Guarantor's obligations under this
Guaranty shall not be released, diminished, impaired, reduced, or adversely
affected, and Guarantor waives any common law, equitable, statutory or other
rights that Guarantor might otherwise have, as a result of any of the following:
(a) any full or partial release of the liability of Debtor,
any other guarantor of the Indebtedness and/or Obligations, or any other person
primarily or secondarily liable on the Indebtedness and/or Obligations, or any
part thereof (including any maker, endorser, guarantor or surety), whether such
liability is direct or indirect, joint, several, or joint and several, it being
recognized, acknowledged and agreed that Guarantor may be required to pay the
Indebtedness and perform the Obligations in full without assistance of any other
party, and Guarantor has not been induced to enter into this Guaranty on the
basis of an understanding or agreement that other parties will at all times be
liable to pay the Indebtedness or perform the Obligations, or that Creditor will
look to other parties to pay the Indebtedness or perform the Obligations;
provided, however, nothing in this Guaranty shall waive or release, either
expressly or impliedly, any rights of subrogation, reimbursement or contribution
that Guarantor may have, after payment in full of the Indebtedness and
performance of the Obligations, against others liable under the Indebtedness or
for performance of the Obligations, but Guarantor's rights of subrogation,
reimbursement and contribution are secondary, subordinate and inferior to the
rights and claims of Creditor;
(b) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of Debtor, or any
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings affecting Debtor or any of its assets;
(c) any impairment, modification, release or limitation of
liability of Debtor, or stay of foreclosure or other lien enforcement
proceedings against Debtor, or Debtor's property, or Debtor's estate in
bankruptcy, or any modification, discharge or extension of the Indebtedness
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resulting from the operation of any present or future provision of the Federal
Bankruptcy Code or other bankruptcy laws, or from the decision of any court, it
being recognized, acknowledged and agreed that Guarantor shall remain liable on
the Indebtedness and the Obligations, notwithstanding any act, omission or thing
which might, but for the provisions hereof, otherwise operate as a legal or
equitable discharge of Guarantor;
(d) any release of, subordination of, or substitution of
any security or other guaranty now or hereafter held by Creditor for payment of
the Indebtedness and performance of the Obligations, or of any part thereof;
(e) Creditor's failure to use diligence or care in
preserving the liability of any person on the Indebtedness or the Obligations,
or in bringing suit to enforce collection of the Indebtedness or performance of
the Obligations;
(f) the addition of another guarantor or guarantors of
the Indebtedness or Obligations;
(g) the substitution or withdrawal of collateral or
release of security;
(h) any renewal, extension, modification, alteration,
refinancing or rearrangement of or any other indulgence with respect to the
Indebtedness or Obligations, or any part thereof;
(i) the exercise, failure to exercise, delay, omission or lack
of diligence or care by Creditor in exercising any right or power conferred upon
Creditor in this Guaranty, the Note, or any Transaction Document evidencing,
securing or relating to the Note or by law or in equity;
(j) Debtor's not being liable for the Indebtedness or
performance of the Obligations because the act of creating the Indebtedness or
Obligations is ultra vires, or the officers or persons creating the Indebtedness
or Obligations acted in excess of their authority, or for any reason the
Indebtedness or Obligations cannot be enforced against Debtor;
(k) any payment by Debtor to Creditor if such payment is held
to constitute a preference under the Federal Bankruptcy Code or other bankruptcy
laws, or if for any other reason Creditor is required to refund such payment to
Debtor or pay the amount thereof to any other party;
(l) Guarantor's being or becoming liable for any
indebtedness owing by Debtor to Creditor, by endorsement or otherwise, other
than under this Guaranty; or
(m) the invalidity, illegality or unenforceability of all or
any part of the Indebtedness, for any reason whatsoever, including without
limitation the fact that the Note or other Transaction Documents pertaining to
the Indebtedness or Obligations have been forged or otherwise are irregular or
not genuine or authentic.
14. Application of Payments. If Creditor should collect or receive any
payments from any person other than Guarantor, or funds which are not
specifically required by law or agreement to be applied to the Indebtedness,
then Creditor may, in Creditor's sole discretion, apply such payments to any
indebtedness of Debtor other than the Indebtedness. Guarantor agrees that
Creditor may apply payments or other funds received by Creditor from Debtor,
from any other party obligated on the Indebtedness, from the liquidation of any
collateral now or hereafter securing the Indebtedness, or from any other source,
including without limitation, insurance proceeds and
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condemnation, to the Indebtedness in any manner or order as Creditor may deem
appropriate in its sole and absolute discretion.
15. Collection of Indebtedness. Guarantor expressly waives any right to
the benefit of or to require or control application of any security or the
proceeds of any security now existing or hereafter obtained by Creditor as
security for the Indebtedness, or any part thereof, and agrees that Creditor
shall have no duty to apply to the Indebtedness any monies, payments or other
property at any time received by or paid to or in the possession of Creditor,
except as Creditor shall determine in its sole discretion. Guarantor
specifically agrees that Guarantor shall not have any recourse or action against
Creditor by reason of any action Creditor may take or omit to take in connection
with the Indebtedness or Obligations, the collection of any sums or amounts
herein mentioned, or in connection with any security for or any other guaranty
of the Indebtedness and/or Obligations.
16. Subordination. Guarantor subordinates all indebtedness owing to
Guarantor from Debtor to the Indebtedness. Guarantor further subordinates any
liens or security interest it may have in the collateral or security of Debtor
(or any other party) to the liens and security interests in favor of Creditor
securing the Indebtedness and the Obligations. Guarantor agrees not to accept
any payments or satisfaction of any kind of any indebtedness of Debtor to
Guarantor. If Guarantor should receive any such payment or satisfaction for
indebtedness of Debtor to Guarantor in violation of the above terms, Guarantor
agrees to deliver the payment or satisfaction to Creditor, and until delivered,
Guarantor agrees to hold the same in trust for Creditor.
17. Notice of Litigation, Claims, and Financial Change. Guarantor shall
promptly inform Creditor of any litigation against Guarantor or affecting any
security for the Indebtedness or Obligations which, if determined adversely,
might have a material adverse effect upon the financial condition of Guarantor
or upon such security or might cause a default under any of the documents
evidencing, securing, or governing the Indebtedness or Obligations, any claim or
controversy which might become the subject of litigation, and any material
adverse change in the financial condition of Guarantor.
18. Usury Disclaimer. No provision herein or in any promissory note,
security instrument, or any other Transaction Document executed by Debtor or
Guarantor evidencing the Indebtedness shall be construed to be or to create a
contract by Guarantor to pay, as consideration for the use, forbearance, or
detention of money, interest in excess of the rate or amount allowed by law. If
any excess of interest in such respect is provided for herein or in any such
promissory note, security instrument, or any other Transaction Document, the
provisions of this Section shall govern, and neither Debtor nor Guarantor shall
be obligated to pay the amount of such interest to the extent that it is in
excess of the amount permitted by applicable law. The intention of the parties
is to conform strictly to the usury laws now in force, and all Promissory Notes
and Transaction Documents executed by Debtor or Guarantor evidencing the
Indebtedness or Obligations shall be held subject to reduction to the amount
allowed under said usury laws as now or hereafter construed by the courts having
jurisdiction.
19. Transferability. This Guaranty is intended for and shall inure to
the benefit of Creditor and each and every other person who shall from time to
time be or become the owner or holder of any of the Indebtedness, and each and
every reference herein to Creditor shall also include and refer to each and
every successor or assignee of Creditor at any time holding or owning any part
of or interest in any part of the Indebtedness. This Guaranty shall be
transferable and negotiable, with the same force and effect and to the same
extent that the Indebtedness is transferable, it being understood and stipulated
that upon the assignment or transfer by Creditor of any of the Indebtedness
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the legal holder or owner of the Indebtedness (or part thereof or interest
therein transferred or assigned by Creditor) shall also, unless provided
otherwise by Creditor in its transfer or assignment, have and may exercise all
of the rights granted to Creditor under this Guaranty to the extent of the part
of or interest in the Indebtedness assigned or transferred to said person.
Guarantor expressly waives notice of transfer or assignment of the Indebtedness,
or any part thereof, or of the rights of Creditor hereunder. Notwithstanding
anything in this Section to the contrary, all Indebtedness and Obligations to
Creditor shall be paid and performed in full first, before any assignee or
transferee shall receive any benefits of this Guaranty.
20. Information Concerning Guarantor. Guarantor acknowledges and agrees
that Creditor may transfer the Indebtedness or partial interests therein to one
or more transferees or participants. Guarantor authorizes Creditor to
disseminate any information Creditor has pertaining to the Indebtedness,
including, without limitation, credit information on Guarantor, to any such
transferee or participant or prospective transferee or participant.
21. Binding on Others. This Guaranty shall be binding upon
Guarantor and Guarantor's heirs, legal representative, personal representatives,
executors, administrators, successors and assigns.
22. Modification or Consent. No modification, consent or waiver of any
provision of this Guaranty shall be effective unless the modification, consent
or waiver is in writing and signed by an officer of Creditor, and then shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor
to any other or further notice or demand in similar or other circumstances. No
delay or omission by Creditor in exercising any power or right under this
Guaranty shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power under this Guaranty. All rights and remedies of
Creditor under this Guaranty are cumulative of each other and of every other
right or remedy which Creditor may otherwise have at law or in equity or under
any other contract or document, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
23. Waiver of Certain Statutory Provisions. Guarantor hereby waives all
rights to which Guarantor may be or might otherwise become entitled to with
respect to the provisions of Sections 34.02 and 34.03 of the Texas Business and
Commerce Code, as amended, and agrees that the rights of Guarantor pursuant to
the provisions of Section 34.04 of the Texas Business and Commerce Code, as
amended, shall be subject to, secondary, subordinate and inferior in all
respects to the rights of Creditor pursuant to this Guaranty.
24. Notices. Any notice or demand to Guarantor may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, in the United States mail, duly stamped and
addressed to Guarantor at Guarantor's address stated below, but actual notice,
however given or received, shall always be effective. The last preceding
sentence shall not be construed in anywise to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason. Creditor's and Guarantor's
respective addresses are:
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Creditor: American Physicians Service Group, Inc.
Attn: Mr. Duane K. Boyd
1301 Capital of Texas Hwy., Suite C-300
Austin, Texas, 78746
Guarantor: 7-7 Merger, Inc.
Attn:
1401 South Waldron, Suite 201
Fort Smith, Arkansas 72903
25. Governing Law and Place of Performance. GUARANTOR AGREES THAT
THIS GUARANTY IS GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF
TEXAS. This Guaranty is performable in Travis County, Texas, and Guarantor
hereby waives the right to be sued elsewhere.
26. Headings. Section headings of this Guaranty are inserted for
convenience of reference only, and shall not alter, define, or be used in
construing the text of such sections.
27. Pronouns. As used herein and when required by the context, each
number (singular and plural) shall include all numbers, and each gender shall
include all genders, and unless the context otherwise requires the word "person"
or "party" shall include "person, corporation, firm, partnership or
association".
28. Notice of Invalidity of Oral Agreements. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED this 30th day of September, 1996.
GUARANTOR:
7-7 Merger, Inc.
(an Arkansas corporation)
By:
Name:
Title:
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Exhibit 10.25
PROMISSORY NOTE
Austin, Texas, 1996
FOR VALUE RECEIVED, the undersigned, EXSORBET INDUSTRIES, INC., an
Idaho corporation, ("Maker") promises to pay to the order of AMERICAN PHYSICIANS
SERVICE GROUP, INC., a Texas corporation ("Payee"), at 1301 Capital of Texas
Hwy., Suite C-300, Austin, Texas, 78746 ("Payee's Address"), the principal
amount of Three Million Three Hundred Thousand and 00/100 Dollars
($3,300,000.00) (the "Principal Amount"), or such less amount as may be
outstanding from time to time, together with interest on the unpaid balance of
such amount as provided herein, in lawful money of the United States of America,
in accordance with all the terms, conditions, and covenants of this Note and the
Transaction Documents identified below.
1. Payment. The principal balance of this Note and all accrued
and unpaid interest is payable on or before October 1, 1997 (the "Maturity
Date").
2. Transaction Documents and Collateral. This Note is executed and
delivered by Maker pursuant to the terms of the Stock Put Agreement dated
September 30, 1996, executed by and between among Maker and Payee (the "Stock
Put Agreement"), and this Note evidences Maker's indebtedness owing by Maker to
Payee under the terms of such Stock Put Agreement. This Note is secured by,
inter alia, the following: the Assignment and Security Agreement dated September
30, 1996, executed by Maker as debtor and Payee as Secured Party (the
"Assignment"). This Note, the Stock Put Agreement, the Assignment, and all other
documents evidencing, securing, governing, guaranteeing, and/or pertaining to
this Note, including but not limited to those documents described above, are
sometimes collectively referred to as the "Transaction Documents". Payee and any
subsequent owner or holder of this Note is entitled to the benefits and security
provided in the Transaction Documents.
3. Interest Provisions.
(a) Rate. The principal balance of this Note from time to time
remaining unpaid prior to maturity shall bear interest at a fixed rate per annum
equal to fifteen and 75/100 percent (15.75%) (the "Note Rate"), but never
greater than the "Maximum Lawful Rate", as that term is defined in this Note.
(b) Maximum Lawful Interest. The term "Maximum Lawful Rate"
means the maximum rate of interest, and the term "Maximum Lawful Amount" means
the maximum amount of interest that are permissible under applicable state or
federal law for the type of loan evidenced by this Note and the other
Transaction Documents. If Article 1.04 of the Texas Credit Code is applicable to
this Note, and applicable state or federal law does not permit a higher interest
rate, the "Indicated (Weekly) Ceiling" (as defined as Article 1.04(a)(1) of the
Texas Credit Code) shall be the Interest Rate Ceiling applicable to this Note
and shall be the basis for determining the Maximum Lawful Rate in effect from
time to time during the term of this Note, unless a different Interest Rate
Ceiling is designated on the first page of this Note. If applicable state or
federal law allows a higher interest rate or federal law preempts the state law
limiting the rate of interest, then the foregoing Interest Rate Ceiling shall
not be applicable to this Note. If the Maximum Lawful Rate is increased by
statute or other governmental action subsequent to the date of this Note, then
the new Maximum Lawful Rate shall be applicable to this Note from the effective
date thereof, unless otherwise prohibited by applicable law.
EXHIBIT "A"
PROMISSORY NOTE Page 1 of 5 Exsorbet Industries, Inc.
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(c) Spreading of Interest. Because of the possibility of
irregular periodic balances of principal and premature payment, the total
interest that will accrue under this Note cannot be determined in advance. Payee
does not intend to contract for, charge, or receive more than the Maximum Lawful
Rate or Maximum Lawful Amount permitted by applicable state or federal law, and
to prevent such an occurrence Payee and Maker agree that all amounts of
interest, whenever contracted for, charged, or received by Payee, with respect
to the loan of money evidenced by this Note, shall be spread, prorated, or
allocated over the full period of time this Note is unpaid, including the period
of any renewal or extension of this Note. If demand for payment of this Note is
made by Payee prior to the full stated term, the total amount of interest
contracted for, charged, or received to the time of such demand shall be spread,
prorated, or allocated along with any interest thereafter accruing over the full
period of time that this Note thereafter remains unpaid for the purpose of
determining if such interest exceeds the Maximum Lawful Amount.
(d) Excess Interest. At maturity (whether by acceleration or
otherwise) or on earlier final payment of this Note, Payee shall compute the
total amount of interest that has been contracted for, charged, or received by
Payee or payable by Maker under this Note and compare such amount to the Maximum
Lawful Amount that could have been contracted for, charged, or received by
Payee. If such computation reflects that the total amount of interest that has
been contracted for, charged, or received by Payee or payable by Maker exceeds
the Maximum Lawful Amount, then Payee shall apply such excess to the reduction
of the principal balance and not to the payment of interest; or if such excess
interest exceeds the unpaid principal balance, such excess shall be refunded to
Maker. This provision concerning the crediting or refund or excess interest
shall control and take precedence over all other agreements between Maker and
Payee so that under no circumstances shall the total interest contracted for,
charged, or received by Payee exceed the Maximum Lawful Amount.
(e) Interest After Default. At Payee's option, the unpaid
principal balance shall bear interest after maturity (whether by acceleration or
otherwise) at the "Default Interest Rate." The Default Interest Rate shall be,
at Payee's option, (i) the Maximum Lawful Rate, if such Maximum Lawful Rate is
established by applicable law; or (ii) the Note Rate plus five (5) percentage
points, if no Maximum Lawful Rate is established by applicable law; or (iii)
eighteen percent (18%) per annum; or (iv) such lesser rate of interest as Payee
in its sole discretion may choose to charge; but never more than the Maximum
Lawful Rate or at a rate that would cause the total interest contracted for,
charged, or received by Payee to exceed the Maximum Lawful Amount.
(f) Daily Computation of Interest. To the extent permitted by
applicable law, Payee at its option may either (i) calculate the per diem
interest rate or amount based on the actual number of days in the year (365 or
366, as the case may be), and charge that per diem interest rate or amount each
day, or (ii) calculate the per diem interest rate or amount as if each year has
only 360 days, and charge that per diem interest rate or amount each day for the
actual number of days of the year (365 or 366 as the case may be). If this Note
calls for monthly payments, Payee at its option may determine the payment amount
based on the assumption that each year has only 360 days and each month has 30
days. In no event shall Payee compute the interest in a manner that would cause
Payee to contract for, charge, or receive interest that would exceed the Maximum
Lawful Rate or the Maximum Lawful Amount.
EXHIBIT "A"
PROMISSORY NOTE Page 2 of 5 Exsorbet Industries, Inc.
<PAGE>
4. Default Provisions.
(a) Events of Default and Acceleration of Maturity. Maker
agrees that an event of default shall exist under this Note and the other
Transaction Documents if: (i) Maker defaults in the payment of any installment
of principal, interest, or any other sum required to be paid under the terms of
this Note or any of the Transaction Documents; or (ii) there is a default in the
performance of any covenant, condition, or agreement contained in this Note or
any of the Transaction Documents, or an event of default or default otherwise
occurs or exists under any of the other Transaction Documents; or (iii) the
bankruptcy or insolvency of, the assignment for the benefit of creditors by, or
the appointment of a receiver for any of the property of, or the liquidation,
termination, dissolution or death or legal incapacity of, any party liable for
the payment of this Note, whether as maker, endorser, guarantor, surety or
otherwise. Maker agrees that if an event of default occurs, Payee may, without
notice or demand, except as otherwise required by statute or otherwise
specifically provided in this Note or any of the other Transaction Documents,
accelerate the maturity of this Note and declare the entire unpaid principal
balance and all accrued interest at once due and payable, foreclose all liens
and security interests securing this Note, and exercise all other rights and
remedies Payee may have under this Note and the other Transaction Documents,
including any one or more of the foregoing remedies.
(b) WAIVER BY MAKER. MAKER AND ALL OTHER PARTIES LIABLE FOR
THIS NOTE WAIVE DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR PAYMENT,
NOTICE OF NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE, NOTICE OF DISHONOR,
NOTICE OF INTENT TO ACCELERATE MATURITY, NOTICE OF ACCELERATION OF MATURITY, AND
DILIGENCE IN COLLECTION. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR OF THIS
NOTE WAIVES AND AGREES TO ONE OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF
TIME, AND ANY PARTIAL PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO
THE HOLDER OF THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES
NOTICE OF ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF
THIS NOTE.
(c) Non-Waiver by Payee. Any previous extension of time,
forbearance, failure to pursue some remedy, acceptance of late payments, or
acceptance of partial payment by Payee, before or after maturity, does not
constitute a waiver by Payee of its subsequent right to strictly enforce the
collection of this Note according to its terms.
(d) Remedies. Payee shall not be required to first file suit,
exhaust all remedies, or enforce its rights against any security in order to
enforce payment of this Note. The rights, remedies, and recourses of Payee, as
provided in this Note and in any of the other Transaction Documents, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefore shall arise, at the sole discretion of
Payee.
(e) Joint and Several Liability. Each Maker who signs
this Note, and all of the other parties liable for the payment of this Note,
such as guarantors, endorsers, and sureties, are jointly and severally liable
for the payment of this Note.
(f) Attorney's Fees. If Payee requires the services of an
attorney to enforce the payment of this Note or the performance of the other
Transaction Documents, or if this Note is collected through any lawsuit,
probate, bankruptcy, or other judicial proceeding, Maker agrees to pay Payee an
amount equal to its reasonable attorney's fees and other collection costs. This
provision shall be limited by any applicable statutory restrictions relating to
the collection of attorney's fees.
EXHIBIT "A"
PROMISSORY NOTE Page 3 of 5 Exsorbet Industries, Inc.
<PAGE>
5. Miscellaneous Provisions.
(a) Subsequent Holder. All references to Payee in this
Note shall also refer to any subsequent owner or holder of this Note by
transfer, assignment, endorsement, or otherwise.
(b) Transfer. Maker acknowledges and agrees that Payee may
transfer this Note or partial interests in the Note to one or more transferees
or participants. Maker authorizes Payee to disseminate any information it has
pertaining to the indebtedness evidenced by this Note, including, without
limitation, credit information on Maker and any guarantor of this Note, to any
such transferee or participant or prospective transferee or participant.
(c) Other Parties Liable. All promises, waivers, agreements,
and conditions applicable to Maker shall likewise be applicable to and binding
upon any other parties primarily or secondarily liable for the payment of this
Note, including all guarantors, endorsers, and sureties.
(d) Payment in U.S. Dollars. All payments and prepayments of
principal of or interest on this Note shall be made in lawful money of the
United States of America in immediately available funds, at the address of Bank
indicated above, or such other place as the holder of this Note shall designate
in writing to Maker. The books and records of Bank shall be prima facie evidence
of all outstanding principal of and accrued and unpaid interest on this Note.
(e) Payment on Business Days. The term "Business Day" shall
mean any day other than a Saturday, Sunday or any other day on which national
banking associations are authorized to be closed. If any payment of principal of
or interest on this Note shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and any such
extension of time shall be included in computing interest in connection with
such payment.
(d) Successors and Assigns. The provisions of this Note shall
be binding upon and for the benefit of the successors, assigns, heirs,
executors, and administrators of Payee and Maker.
(e) No Duty or Special Relationship. Maker acknowledges that
Payee has no duty of good faith to Maker, and Maker acknowledges that no
fiduciary, trust, or other special relationship exists between Payee and Maker.
If Payee and Maker are now engaged in or in the future engage in other business
transactions, such other business transactions are independent of this Note and
the indebtedness evidenced hereby and of the promises and covenants made by
Maker in this Note, and vice versa.
(f) Modifications. Any modifications agreed to by Payee
relating to the release of liability of any of the parties primarily or
secondarily liable for the payment of this Note, or relating to the release,
substitution, or subordination of all or part of the security for this Note,
shall in no way constitute a release of liability with respect to the other
parties or security not covered by such modification.
(g) Entire Agreement. Maker warrants and represents that
the Transaction Documents constitute the entire agreement between Maker and
Payee with respect to the indebtedness evidenced by this Note and agrees that no
modification, amendment, or additional
EXHIBIT "A"
PROMISSORY NOTE Page 4 of 5 Exsorbet Industries, Inc.
<PAGE>
agreement with respect to such indebtedness will be valid and enforceable unless
made in writing signed by both Maker and Payee.
(h) Maker's Address for Notice. All notices required to be
sent by Payee to Maker shall be sent by U.S. Mail, postage prepaid, to Maker's
Address stated next to Maker's signature below, until Payee shall receive
written notification from Maker of a new address for notice.
(i) Payee's Address for Payment. All sums payable by Maker to
Payee shall be paid at Payee's Address stated on the first page of this Note, or
at such other address as Payee shall designate from time to time.
(j) Chapter 15 Not Applicable. It is understood that Chapter
15 of the Texas Credit Code relating to certain revolving credit loan accounts
and tri-party accounts is not applicable to this Note.
(k) APPLICABLE LAW. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE
UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN TEXAS.
EXECUTED this day of , 1996.
MAKER:
Exsorbet Industries, Inc.
(an Idaho corporation)
By:
Name:
Title:
EXHIBIT "A"
PROMISSORY NOTE Page 5 of 5 Exsorbet Industries, Inc.
EXHIBIT 11.1
AMERICAN PHYSICIANS SERVICE GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(In thousands, except earnings per share)
Primary Fully Diluted
Earnings Earnings
Per Share Per Share
---------- -----------
1996
- ----
Net Income applicable to common stock ................. $ 1,924 1,924
Average number of shares outstanding .................. 4,025 4,025
Average stock option shares ........................... 244 296
------ ------
Shares for earnings calculation ................... 4,269 4,321
Net income per share .................................. $ 0.45 0.45
====== ======
1995
- ----
Net Income applicable to common stock ................. $ 2,024 2,024
Average number of shares outstanding .................. 3,480 3,480
Average stock option shares ........................... 363 683
----- ------
Shares for earnings calculation ................... 3,843 4,163
Net income per share .................................. $ 0.53 0.49
====== ======
NOTE:
Primary and fully diluted income per share were computed by dividing
net income by the average number of shares outstanding plus the common
stock equivalents which, would arise from the exercise of dilutive stock
options.
EXHIBIT 21.1
SUBSIDIARIES OF AMERICAN PHYSICIANS SERVICE GROUP, INC.
AS OF MARCH 25, 1997
Name of Subsidiary State of Incorporation
- ------------------- ----------------------
APS Communications Corporation Texas
APS Facilities Management, Inc. Texas
APS Financial Corporation Colorado
APS Insurance Services, Inc. Delaware
APS Realty, Inc. Texas
PLE Management, Inc. Texas
APS Insurance Agency, Inc. Texas
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
- --------------------------------------------------------------------------------
We consent to incorporation by reference in the registration statements (Nos.
33-66308, 333-07425, 333-07427) on Form S-8 of American Physicians Service
Group, Inc. of our report dated February 28, 1997, relating to the consolidated
balance sheets of American Physicians Service Group, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996 which report appears in the Annual Report on Form
10-KSB of American Physicians Service Group, Inc. for the year ended December
31, 1996.
Austin, Texas
March 28, 1997 BY: /s/ KPMG Peat Marwick, LLP
--------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1996 FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,770
<SECURITIES> 728
<RECEIVABLES> 4,249
<ALLOWANCES> 290
<INVENTORY> 0
<CURRENT-ASSETS> 11,625
<PP&E> 4,256
<DEPRECIATION> 2,475
<TOTAL-ASSETS> 24,468
<CURRENT-LIABILITIES> 3,320
<BONDS> 0
0
0
<COMMON> 405
<OTHER-SE> 19,977
<TOTAL-LIABILITY-AND-EQUITY> 24,468
<SALES> 0
<TOTAL-REVENUES> 11,646
<CGS> 365
<TOTAL-COSTS> 9,908
<OTHER-EXPENSES> 198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 2,969
<INCOME-TAX> 1,045
<INCOME-CONTINUING> 1,924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,924
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
