SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(Amendment No. ________)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ENVIRONMENTAL PLUS, INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
* Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
Route 1, Box 41
Overton, Texas 75684
March ___, 1998
Dear Shareholder:
You are cordially invited to attend the special meeting of
Shareholders (the "Special Meeting") of Environmental Plus,
Incorporated, a Texas corporation (the "Company"), which will be
held on April 17, 1998, at 10:00 a.m., local time, at Route 1,
Box 41, Farm Road 2089, Overton, Texas 75684.
At this important Special Meeting, you will be asked to
consider and vote upon (i) a proposal to approve and adopt
amendments to the Articles of Incorporation of the Company (the
"Proposed Amendment") to (A) effect a reverse stock split in
which each share of Common Stock currently issued and outstanding
or held in treasury would be reclassified and exchanged into one-
tenth (1/10) of a share of new Common Stock of the Company (the
"Reverse Stock Split"), thereby reducing the number of issued and
outstanding shares of Common Stock of the Company from 40,433,549
to 4,043,354 (adjusted for the rounding of any fractional shares
up to the nearest whole share), and the par value of each share
of the Company's Common Stock would be increased from $0.001 to
$0.01 per share, and (B) change the name of the Company to "TTI
Industries, Incorporated" and (ii) a proposal to approve the
Company's sale (the "Proposed Disposition") of substantially all
of its assets resulting from its sale of the capital stock of (a)
Gulf Coast Towers, Inc., a wholly owned subsidiary of the Company
("GCT"), to George Davis, Chairman of the Board of the Company
("Davis"), in exchange for all of his outstanding shares (599,000
shares) of the Company's Series A convertible preferred stock,
$1.00 par value per share (the "Preferred Stock"), which were
issued in connection with the Company's acquisition of the assets
currently operated by GCT from Mr. Davis, and (b) FireZap, Inc.,
a wholly and subsidiary of the Company ("FZI"), to H. Wayne
Franklin in exchange for all of his outstanding shares (150,000
shares) of Company Preferred Stock which were issued in
connection with the Company's acquisition of FZI from Mr.
Franklin.
The Proposed Amendment and the Proposed Disposition are more
completely described in the accompanying Proxy Statement.
AT THE DIRECTORS MEETING HELD TO CONSIDER THE PROPOSED
AMENDMENT AND THE PROPOSED DISPOSITION, THE DIRECTORS OF THE
COMPANY CAREFULLY CONSIDERED AND APPROVED EACH PROPOSAL AS BEING
IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. THE
COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE PROPOSALS TO APPROVE AND ADOPT THE PROPOSED
AMENDMENT AND APPROVE THE PROPOSED DISPOSITION.
The Proposed Amendment and Proposed Disposition are
conditions precedent to the consummation of a Stock Purchase
Agreement dated as of January 15, 1998, pursuant to which the
controlling shareholders of the Company have agreed to sell a
controlling interest (an approximate 58% interest) of the
Company, which is intended to be consummated immediately
following the approval of the Proposed Amendment and Proposed
Disposition. Please see the accompanying Proxy Statement for
additional information regarding the Stock Purchase Agreement, a
copy of which is attached thereto in its entirety as Appendix B.
The affirmative vote of the holders of two-thirds (2/3) of
the outstanding shares of the Company's Common Stock is necessary
to approve each of the Proposed Amendment and Proposed
Disposition. Abstentions and broker non-votes will have no
effect on the approval of this Proposed Amendment or Proposed
Disposition. Pursuant to the Texas Business Corporation Act
("TBCA"), shareholders who vote against the Proposed Disposition
and comply with the detailed provisions contained in Articles
5.12 and 5.13 of the TBCA will be entitled to dissent from the
Proposed Disposition and the seek payment of the fair value of
their shares of Company Common Stock.
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
Shareholders
March ___, 1998
Page 2
A copy of Articles 5.12 and 5.13 of the TBCA is reproduced as
Appendix A to the attached Proxy Statement. Shareholders wishing
to dissent from the Proposed Disposition should read such
materials carefully.
The Board of Directors recognizes that the Proxy Statement
is a lengthy document. However, this document necessarily
results from the need to furnish you with appropriate
information. Accordingly, the Board of Directors requests that
you carefully review these materials before completing the
enclosed Proxy Card. SIGNED BUT UNMARKED PROXY CARDS RETURNED BY
SHAREHOLDER WILL BE DEEMED TO BE A VOTE FOR THE APPROVAL OF THE
PROPOSED AMENDMENT AND PROPOSED DISPOSITION. ACCORDINGLY,
SHAREHOLDERS RETURNING SIGNED BUT UNMARKED PROXY CARDS WILL WAIVE
THEIR DISSENTERS' RIGHTS.
Should you require assistance in completing your Proxy Card
or if you have any questions about the voting procedure or the
accompanying Proxy Statement, please feel free to contact the
Company at Route 1, Box 41, Overton, Texas 75684 (telephone
(903) 834-6965).
Very truly yours,
George Davis,
Chairman of the Board
<PAGE>
Environmental Plus, Incorporated
Route 1, Box 41
Overton, Texas 75684
_____________
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD APRIL 20, 1998
To the Shareholders of Environmental Plus, Incorporated:
Notice is hereby given that a Special Meeting of
Shareholders (the "Special Meeting") of Environmental Plus,
Incorparated, a Texas corporation (the "Company"), will be held
at the Company's offices at Route 1, Box 41, Farm Road 2089,
Overton, Texas on April 17, 1998, at 10:00 a.m. C.D.T., for the
purpose of considering and voting upon the following:
1. A proposal to approve and adopt amendments to the
Articles of Incorporation of the Company (the "Proposed
Amendment") to (i) effect a reverse stock split in which each
share of Common Stock currently issued and outstanding or held in
treasury would be reclassified and exchanged into one-tenth
(1/10) of a share of new Common Stock of the Company (the
"Reverse Stock Split"), thereby reducing the number of issued and
outstanding shares of Common Stock of the Company from 40,433,549
to 4,043,354 (adjusted for the rounding of any fractional shares
up to the nearest whole share), and the par value of each share
of the Company's Common Stock would be increased from $0.001 to
$0.01 per share, and (ii) change the name of the Company to "TTI
Industries, Incorporated."
2. A proposal to approve the Company's sale (the "Proposed
Disposition") of substantially all of its assets resulting from
its sale of the capital stock of (a) Gulf Coast Towers, Inc., a
wholly owned subsidiary of the Company ("GCT"), to George Davis,
Chairman of the Board of the Company ("Davis"), in exchange for
all of his outstanding shares (599,000 shares) of the Company's
Series A convertible preferred stock, $1.00 par value per share
(the "Preferred Stock"), which were issued in connection with the
Company's acquisition of the assets currently operated by GCT
from Mr. Davis, and (b) FireZap, Inc., a wholly and subsidiary of
the Company ("FZI"), to H. Wayne Franklin in exchange for all of
his outstanding shares (150,000 shares) of Company Preferred
Stock which were issued in connection with the Company's
acquisition of FZI from Mr. Franklin.
3. Such other business as may properly come before the
meeting or any other adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on
March 12, 1998 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the Special
Meeting. The affirmative vote of the holders of two-thirds (2/3)
of the outstanding shares of the Company's Common Stock is
necessary to approve each of (a) the Proposed Amendment to effect
the Reverse Stock Split and change of the Company's name, and (b)
the Proposed Disposition to effect the sale of substantially all
of the Company's assets. Shareholders are being asked to approve
the sale of the capital stock of GCT and FZI as a part of one
approval, and are not being requested, and will not be entitled,
to separately approve each disposition.
Pursuant to the Texas Business Corporation Act ("TBCA"),
holders of Company Common Stock who vote against the Proposed
Disposition and comply with the detailed provisions of Articles
5.12 and 5.13 of the TBCA will be entitled to dissent from the
Proposed Disposition and to seek payment of the "fair value" of
their shares of Company Common Stock. Because an executed Proxy
Card will be voted "FOR" the Proposed Disposition unless
otherwise specified, a shareholder returning a signed but
unmarked Proxy Card will waive his or her right to dissent from
the Proposed Disposition. A copy of Articles 5.12 and 5.13 of
the TBCA is reproduced as APPENDIX A to the
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<PAGE>
attached Proxy Statement. Shareholders wishing to dissent from
the Proposed Disposition should read such materials carefully.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY
STATEMENT.
Whether or not you expect to attend the Special Meeting in
person, you are urged to mark, sign and date the enclosed form of
proxy and return the same promptly so that your shares of stock
may be represented and voted at the meeting. The proxy may be
revoked at any time prior to the vote at the Special Meeting by
following the procedures set forth in the Proxy Statement.
The approval and adoption of the proposals set forth in the
Proxy Statement are conditions precedent to the consummation of a
Stock Purchase Agreement dated as of January 15, 1998, pursuant
to which George Davis, J. D. Davenport, Charles White, GD/JD,
Inc. (an entity owned by Messrs. Davis and Davenport) and
Northport Management Group, Inc. (an entity owned by Mr.
Davenport) have agreed to sell to Terminator Technologies, Inc.,
AMJ Resources, Inc. or their assigns approximately 58% of the
then outstanding shares of Company Common Stock. Mr. Davis
serves as the Chairman of the Company and Mr. Davenport serves as
its President. Messrs. Davis, Davenport and White comprise all
of the Company's directors. Upon the consummation of the Stock
Purchase Agreement, Messrs. Davenport and White have agreed to
resign from Company's Board of Directors and Frank W. Harrison,
Sr. and Joe Nicholson ("Director Appointees") will be appointed
to serve in their stead until the Company's next annual meeting
of shareholders and until their successors are duly qualified and
elected. Mr. Davis is expected to continue to serve as a
director of the Company, but will resign as Chairman of the
Board.
THE PROPOSED AMENDMENT AND PROPOSED DISPOSITION ARE INTENDED
TO BE EFFECTED IMMEDIATELY PRECEDING THE CLOSING UNDER THE STOCK
PURCHASE AGREEMENT. IN THE EVENT THAT THE STOCK PURCHASE
AGREEMENT IS TERMINATED FOR ANY REASON, WHETHER BEFORE OR AFTER
SHAREHOLDER APPROVAL OF THE PROPOSALS SET FORTH HEREIN AND IN THE
ACCOMPANYING PROXY STATEMENT IS OBTAINED, THE BOARD OF DIRECTORS
INTENDS TO ABANDON THE PROPOSED AMENDMENT AND PROPOSED
DISPOSITION.
ALTHOUGH NEITHER YOUR VOTE NOR APPROVAL OF THE DIRECTOR
APPOINTEE'S IS BEING SOUGHT OR IS REQUIRED, THE COMPANY IS
REQUIRED TO PROVIDE ITS SHAREHOLDERS A WRITTEN INFORMATION
STATEMENT AT LEAST TEN (10) DAYS PRECEDING THE EFFECTIVE DATE FOR
A CHANGE OF THE MAJORITY OF ITS DIRECTORS CONTAINING INFORMATION
REGARDING SUCH NEW DIRECTOR'S QUALIFICATIONS AND OTHER MATTERS.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT
FOR THE QUALIFICATIONS OF EACH DIRECTOR APPOINTEE.
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED ENVELOPE. YOUR PROMPT RESPONSE WILL BE
APPRECIATED.
By Order of the Board of Directors
George Davis
Chairman of the Board
Overton, Texas
March ____, 1998
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<PAGE>
PROXY STATEMENT
for
ENVIRONMENTAL PLUS, INCORPORATED
Route 1, Box 41
Overton, Texas 75684
_____________
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 17, 1998
This Proxy Statement and accompanying appendices and other
materials are being furnished in connection with the solicitation
of proxies by the Board of Directors of Environmental Plus,
Incorporated, a Texas corporation (the "Company"), to be used at
a Special Meeting of shareholders to approve proposed amendments
to the Company's Articles of Incorporation to effect a reverse
stock split and name change and to approve the proposed
disposition of substantially all of the Company's assets.
The proxies solicited hereby for the Special Meeting may be
revoked, subject to the procedures described herein, at any time
up to and including the date of the Special Meeting.
This Proxy Statement and the accompanying appendices and
Proxy Card are first being mailed to the Shareholders of
Environmental Plus, Incorporated on or about March 23, 1998.
This date of this Proxy Statement is March 10, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
SOLICITATION AND REVOCATION OF PROXIES........................1
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS......................2
General.....................................................2
Quorum and Voting...........................................2
Rights of Dissenting Shareholders...........................2
Security Ownership of Principal Shareholders
and Management............................................3
INFORMATION CONCERNING THE COMPANY............................5
Business....................................................5
Recent Events...............................................6
Market for Common Equity and Related
Shareholder Matters.......................................7
Management's Discussion and Analysis or
Plan of Operation.........................................7
Management..................................................10
Executive Compensation......................................11
Employment Agreements and Change In Control
Arrangements..............................................12
Section 16(a) Reporting.....................................12
Certain Relationships And Related Transactions..............12
PROPOSAL NO. 1 ITEM 1 ON PROXY
APPROVAL AND ADOPTION OF AN AMENDMENT OF THE
COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT
A REVERSE STOCK SPLIT AND NAME CHANGE.........................13
Reverse Stock Split.........................................13
Change of Name..............................................15
PROPOSAL NO. 2 ITEM 2 ON PROXY
DISPOSITION OF GULF COAST COOLING TOWER SERVICES, INC.
AND FIREZAP, INC..............................................16
Background of the Proposed Disposition......................16
Reasons for the Proposed Disposition........................17
Regulatory Approvals........................................17
Accounting Treatment........................................17
Federal Income Tax Consequences.............................17
Pro Forma Financial Information.............................17
Interested Parties..........................................18
Material Differences in Rights of Security Holders..........18
Accountants.................................................18
INDEX TO FINANCIAL STATEMENTS.................................F-1
APPENDIX A - TBCA ARTICLES 5.12 AND 5.13......................A-1
APPENDIX B - STOCK PURCHASE AGREEMENT.........................B-1
APPENDIX C - AMENDED AND RESTATED ARTICLES OF INCORPORATION...C-1
<PAGE>
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying proxy are
furnished in connection with the solicitation of proxies by the
Board of Directors of Environmental Plus, Incorporated, a Texas
corporation (the "Company"), for use at a Special Meeting of
Shareholders of the Company (the "Special Meeting") to be held at
the time and place and for the purposes set forth in the
accompanying Notice of Special Meeting of Shareholders and any
adjournment(s) thereof. The Proxy Statement also contains
information regarding the anticipated new directors of the
Company that are anticipated to serve following the consummation
of the Stock Purchase Agreement (defined below). The approval of
the proposals set forth herein are conditions precedent to the
consummation of the Stock Purchase Agreement. See "Information
Regarding the Company - Recent Events" for a discussion of the
terms of the Stock Purchase Agreement.
The proxy, which is enclosed with this Proxy Statement and
Notice of Meeting, contains a space where each shareholder may
indicate whether the shareholder chooses to vote his or her
shares for or against or to abstain from voting on each of the
proposals set forth therein, and to authorize the proxies to vote
in their discretion with respect to any other proposal brought
before the Special Meeting. If the proxy is returned to the
Company and the shareholder specifies how the proxy is to be
voted, it will be voted in accordance with such instruction. If
the proxy is returned to the Company and no indication is given
as to how the proxy is to be voted, the proxy will be voted by
the persons named in the proxy at the Special Meeting: FOR the
adoption and approval of amendments to the Company's Articles of
Incorporation (the "Proposed Amendment") to effect a one for ten
reverse stock split (the "Reverse Stock Split") and to change the
name of the Company to "TTI Industries, Inc.," and FOR the
approval of the sale of substantially all of the Company's assets
(the "Proposed Disposition") resulting from the sale of the
capital stock of Gulf Coast Towers, Inc. ("GCT") and FireZap,
Inc. ("FZI"), each of which is a wholly-owned subsidiary of the
Company. If any other matters properly come before the Special
Meeting the proxies will vote upon such matters according to
their judgment.
The giving of a proxy does not preclude the right to vote in
person should the person giving the proxy so desire, and the
person giving the proxy has the power to revoke it at any time
before it has been exercised either by furnishing the Secretary
of the Company at the Company's offices at Route 1, Box 1,
Overton, Texas 75684 written notice of revocation, by properly
executing and submitting a subsequently dated proxy or by
attending the meeting and voting in person. No such notice of
revocation or later-dated proxy will be effective, however, until
received by the Company at or prior to the Special Meeting. Mere
attendance at the Special Meeting will not of itself revoke the
proxy.
The enclosed proxy is solicited by and on behalf of the
Board of Directors of the Company in connection with the terms of
the Stock Purchase Agreement among Terminator Technologies,
Incorporated ("TTI") and AMJ Resources, Inc. ("AMJ" and
collectively, with TTI and their designated assignees referred to
as "Buyer"), George Davis, J. D. Davenport, GD/JD, Inc. (an
entity owned by Messrs. Davis and Davenport), Northport
Management Group, Inc. (an entity owned by Mr. Davenport) and
Charles White (collectively, the "Selling Shareholders"), and the
Company dated as of January 15, 1998. Pursuant to the terms of
the Stock Purchase Agreement, the Selling Shareholders have
agreed to sell to Buyer approximately 58% of the outstanding
shares of the Common Stock of the Company, following which Buyer
would control the business affairs of the Company. The Board of
Directors is soliciting proxies for the approval of the proposals
set forth in the Proxy Statement to facilitate the closing under
the Stock Purchase Agreement, which the Board of Directors
anticipates will result in the Company becoming owned by a group
of investors with greater access to capital resources and
business plans for the Company. The expense of solicitation of
the proxies for the Special Meeting, including the cost of
mailing, will be borne by the Company. THE PROPOSED AMENDMENT
AND PROPOSED DISPOSITION ARE INTENDED TO BE EFFECTED IMMEDIATELY
PRECEDING THE CLOSING UNDER THE STOCK PURCHASE AGREEMENT. IN THE
EVENT THAT THE STOCK PURCHASE AGREEMENT IS TERMINATED FOR ANY
REASON, WHETHER BEFORE OR AFTER SHAREHOLDER APPROVAL OF THE
PROPOSAL SET FORTH HEREIN IS OBTAINED, THE BOARD OF DIRECTORS
INTENDS TO ABANDON THE PROPOSED AMENDMENT AND THE PROPOSED
DISPOSITION.
In addition to the use of the mails, the Company may request
persons holding stock in their name or custody, or in the name of
the nominee, to send proxy materials to their principals and
request authority for the execution of the proxies, and the
Company will reimburse such person for their expense in so doing.
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<PAGE>
To the extent necessary in order to assure sufficient
representation at the Special Meeting, officers and regular
employees of the Company and others regularly retained by the
Company, at no additional compensation, will request the return
of the proxies personally, by telephone or telegram. The extent
to which this will be necessary depends entirely on how promptly
proxies are received, and shareholders are urged to send their
proxies without delay. In addition, the Company may make
arrangements with brokers, nominees, fiduciaries and other
custodians to reimburse them for their charges and expenses in
forwarding proxy materials to the beneficial owners of the
Company's stock. Management has no knowledge or information that
any other person will specially engage any persons to solicit
proxies.
VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS
General
- -------
The close of business on March 12, 1998 has been fixed as
the record date (the "Record Date") for the determination of
shareholders of the Company entitled to notice of and to vote at
the Special Meeting and any adjournment(s) thereof. On that date
there were outstanding and entitled to be voted at the Special
Meeting 40,433,549 shares of the Company's common stock, $.001
par value (the "Common Stock"), constituting the only class of
stock entitled to vote at the Special Meeting. Each share of
Common Stock is entitled to one vote on each matter presented to
the shareholders.
Quorum and Voting
- -----------------
In accordance with the Texas Business Corporation Act (the
"TBCA") and the Bylaws of the Company, the presence, in person or
by proxy, of the holders of a majority of the outstanding shares
of Common Stock entitled to vote is necessary to constitute a
quorum to transact business at the meeting. Abstentions (and
broker nonvotes) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on
proposals presented to the shareholders, whereas broker nonvotes
are not counted for purposes of determining whether a proposal
has been approved. Assuming the presence of a quorum, the
affirmative vote of the holders on the Record Date of two-thirds
of the outstanding shares of Common Stock, represented in person
or by proxy, at the Special Meeting is necessary for the approval
of the Proposed Amendment and the Proposed Disposition and the
affirmative vote of the holders on the Record Date of a majority
of the outstanding shares of Common Stock, represented in person
or by proxy at the Special Meeting is required to approve or
ratify each of the other proposals to be presented at the Special
Meeting. If a quorum is not present or represented at the
meeting, the shareholders entitled to vote thereat, present in
person or represented by proxy, have the power to adjourn the
meeting from time to time, without notice other than the
announcement at the meeting, until a quorum is present or
represented. At any such adjournment meeting at which a quorum
is present or represented, any business may be transacted at the
meeting as originally notified.
Rights of Dissenting Shareholders
- ---------------------------------
No shareholder will be entitled to exercise dissenters'
rights with regard to the Proposed Amendment. However, holders
of Company Common Stock will have the right to exercise
dissenters' rights with respect to the Proposed Disposition.
Pursuant to Articles 5.12 and 5.13 of the TBCA (the "Dissenters'
Statute"), holders of record of Company Common Stock who object
to the Proposed Disposition and who follow the procedures
prescribed by the Dissenters' Statute will be entitled to receive
a cash payment equal to the "fair value" of the shares of Company
Common Stock held by them. Set forth below is a summary of the
procedures holders of Common Stock must follow in order to
exercise dissenters' rights under the TBCA. This summary does
not purport to be complete and is qualified in its entirety by
reference to the Dissenters' Statute (a copy of which, as of the
date hereof, is attached to this Proxy Statement as Appendix A)
and to any amendments to, or modifications of, such provisions as
may be adopted after the date hereof.
Any holder of Common Stock contemplating the possibility of
objecting to the Proposed Disposition should carefully review the
text of APPENDIX A (particularly the specified procedural steps
required to perfect their
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<PAGE>
dissenters' rights) and should consult as appropriate with such
holder's legal counsel. These rights will be lost if the
procedural requirements of the Dissenters' Statute are not fully
and precisely satisfied.
Under the Dissenters' Statute, any holder of Common Stock
who files with the Company, prior to the taking of the vote with
respect to the Proposed Disposition at the Special Meeting, a
written objection to the proposed action and stating that the
shareholder will exercise its right of dissent if the action is
effective and who complies with the other applicable procedural
requirements of the Dissenters' Statute, shall be entitled, if
the Proposed Disposition is consummated, to receive a cash
payment of the fair value of such shares. However, a shareholder
who votes such holder's Common Stock against approval of the
Proposed Disposition will not, solely by virtue of such vote,
satisfy the notice requirement referred to above. Further,
because an executed Proxy Card will be voted "FOR" the Proposed
Disposition unless otherwise specified, a shareholder returning a
signed but unmarked Proxy Card will waive his or her right to
dissent from the Proposed Disposition.
Written notices of the intent to exercise dissenters' rights
must be sent to the Company at Route 41, Box 1, Overton, Texas
75684, Attn: George Davis, prior to the taking of the vote at
the Special Meeting. A HOLDER OF COMMON STOCK WHO DOES NOT
SATISFY EACH OF THE REQUIREMENTS OF THE DISSENTERS' STATUTE WILL
NOT BE ENTITLED TO EXERCISE ANY RIGHTS OF DISSENT UNDER THE
PROVISIONS OF THE TBCA.
No later than ten (10) days after the Proposed Disposition
is effected, Company must deliver or mail to each dissenting
shareholder written notice that the action has been effected and
the shareholder may, within ten (10) days from the delivery or
mailing of such notice, make written demand on the Company for
the payment of the "fair value" of such shareholder's shares.
The demand must state the number and class of shares owned by the
shareholder and the "fair value" of the shares as estimated by
the shareholder. Any shareholder failing to make demand within
the 10-day period shall be bound by the Company's action. Not
later than twenty (20) days after making such written demand,
each holder of Common Stock who exercising dissenters' rights
must submit to the Company the certificate or certificates
representing such holder's shares of Common Stock for notation
thereon that such demand has been made. Upon making a demand for
value, a holder of Common Stock shall have no rights in the
Company by virtue of holding such shares, other than the right to
receive fair value for such shares.
Within twenty (20) days after receipt by the Company of a
demand for payment made by the dissenting shareholder, the
Company shall either accept the amount claimed in the demand or
provide the shareholder with the Company's estimate of the "fair
value" of the shares, in either case, along with an offer to pay
either the agreed or offered amount within ninety (90) days after
the date on which the action was effected (upon the surrender of
any certificates representing such shares, duly endorsed).
If within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed
upon between the shareholder and the Company, payment shall be
made within ninety (90) days after the date the action was
effected (upon the surrender of any stock certificates, duly
endorsed). If the Company and shareholder do not so agree within
such 60-day period, then either party may, within sixty (60) days
after the expiration of such 60-day period, seek a judicial
determination of the fair value of the shareholder's shares. The
court shall then determine which shareholders have properly
complied with the provisions of Article 5.12 and shall appoint
one or more qualified appraisers to determine that value.
The term "fair value" as used in the Dissenters' Statute
will be determined as of the day prior to the day of the Special
Meeting and will exclude any appreciation or depreciation
resulting from the Proposed Disposition.
Security Ownership of Principal Shareholders and Management
- -----------------------------------------------------------
The following table shows as of the Record Date the number
of shares beneficially owned by each director, each Director
Appointee, each executive officer of the Company included in the
Summary Compensation Table set forth under the caption "Executive
Compensation" below, and each person or entity known to the
Company to be the beneficial owner of more than 5% of the
outstanding Common Stock. Information regarding Director
Appointees is being provided to comply with Rule 14f-1
promulgated under the Securities Exchange Act of 1934, as
amended.
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<PAGE>
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Ownership(1) Percent of Class
- ------------------------ ------------------ ----------------
Northport Management 11,652,500 28.8%
Group, Inc.
607 South Garland
Overton, Texas 75684
J. D. Davenport(2)
607 South Garland
Overton, Texas 75684 11, 652,500 28.8%
GD/JD, Inc.
Route 1, Box 41
Overton, Texas 75684 340,000 0.9%
George Davis(3)
Route 1, Box 41
Overton, Texas 75684 12,925,000 31.5%
Charles I. White
P.O. Box 749
Bentonville, Arkansas 72712 3,774,000 9.3%
Frank W. Harrison, Sr.
3838 Oak Lawn, Suite 1000 0 0.0%
Dallas, Texas 75129(4)
Joe Nicholson(4)
2025 Oakmeadow Drive
Bedford, Texas 76021 0 0.0%
All executive officers
and directors as a 28,351,500 69.1%
group (consisting of
three persons)(5)
_______________________
(1) Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, based upon
40,433,519 shares of Company Common Stock outstanding as of
February 28, 1998. Unless otherwise indicated, each of the
persons named has sole voting and investment power with
respect to the shares reported.
(2) Mr. Davenport is the sole shareholder, director and officer
of Northport Management Group, Inc., ("Northport") and
therefore may be deemed to be the beneficial owner of the
shares held by Northport. Mr. Davenport exercises sole
voting and investment power with regard to such shares.
(3) Includes 599,000 shares of the Company's Preferred Stock
owned by Mr. Davis, which is convertible on a one-for-one
basis into Company Common Stock.
(4) Messrs. Harrison and Nicholson are anticipated to be
appointed directors of the Company in lieu of Messrs.
Davenport and White upon the closing under the Stock
Purchase Agreement. Mr. Davis is anticipated to continue to
serve as a director of the Company.
(5) Includes shares held directly or indirectly by Messrs.
Davis, Davenport and White.
INFORMATION CONCERNING THE COMPANY
Business
- --------
GENERAL. Environmental Plus, Incorporated (the "Company")
is in the business of the construction and repair of industrial
cooling towers, primarily in Texas, Louisiana and Arkansas, for
electric utility companies; and
-4-
<PAGE>
the marketing of a fire retardant foam as a fire fighting device
for industrial use. These activities are the result of the
acquisition of FZI and GCCTS during 1996.
In November 1995, the Company's majority shareholder sold
its shares comprising 90.01% of the issued and outstanding common
stock of the Company to Environmental Plus, Incorporated, which
subsequently changed its name to GD/JD, Inc. Effective March 12,
1996, Messrs. George Davis and J. D. Davenport, the new majority
shareholders of the Company were elected as Directors of the
Company to fill existing vacancies. In April 1996, Mr. James
Harris, the only remaining Director elected by the former
shareholder group resigned. On May 23, 1996, the Board of
Directors elected J. D. Davenport as President of the Company,
George Davis as Chairman of the Board of Directors, Secretary and
Treasurer of the Company and Charles I. White as Vice President
as well as a Director of the Company. The Directors were also
authorized to interview certified public accounting firms to
perform all required auditing, tax and audit work for the 1996
fiscal year. Additionally, on May 23, 1996, the Directors voted
to form a subsidiary of the Company under the name of Gulf Coast
Towers, Inc.
On June 1, 1996, the Company acquired 100% of the issued and
outstanding common stock of FZI. The consideration for the stock
of FZI included 450,000 shares of the Company's Preferred Stock.
The purchase agreement between the Company and FZI also provided
for certain contingent payments of an additional 450,000 shares
of the Company's Preferred Stock if FZI had net revenues for the
12 months ending June 1, 1997 of $900,000.00 or greater. The
acquisition resulted in FZI becoming a wholly owned subsidiary of
the Company. Effective July 9, 1997, because FZI did not meet
certain sales levels, the FZI holders of 300,000 shares of the
Company's Preferred Stock agreed to cancel their shares, thus
leaving only 150,000 shares of the Preferred Stock outstanding as
a result of the FZI transaction. The Company's Preferred Stock
is convertible on a share for share basis into Company common
stock. FZI is in the business of marketing a fire retarding foam
as a fire fighting device for industrial use. FZI, a Texas
corporation, was incorporated in January 1996. It was founded
for the purpose of marketing products produced by Fire Response
Systems International, Inc. of Houston, Texas. These products
are known as Aqueous Film Forming Foam ("AFFF") and are used by
fire fighters in cities, forests, agriculture, aviation, maritime
and other fire fighting application. Three basic products are
offered to FZI's customers, two of which are sold under the name
of Fire Away and Fire Choke and are designed to quench or choke
the fire by cutting off the oxygen. The Fire Quench product
market by the Company is produced by the Texas Department of
Corrections and may only be sold to tax supported entities. Like
the other two products, it is biodegradable and noncorrosive.
FZI has the exclusive right to market these products in the
United States.
FZI believes that it has a price advantage in the market it
serves as well as current environmental impact approval. FZI
also believes that its products meet the current guidelines of
the Department of Defense, the Environmental Protection Agency
and the General Service Administration.
Factory capacity is more than adequate to supply all the
product needed. Each of the producers are able to expand on very
short notice. All prices on the products are F.O.B., but FZI has
favorable rates with various freight lines. Additionally,
significant inventory can be achieved at no cost on Fire Quench
since the Texas Department of Corrections will ship the product
on consignment, with billing occurring when the products are
used. As of the fiscal year ended August 31, 1997, FZI
contributed no significant income to the Company.
Effective July, 1996, the Company acquired substantially all
of the assets of Gulf Coast Cooling Tower Services, Inc.
("GCCTS") from Mr. Davis. The value of the assets acquired by
the Company from GCCTS was $465,600 for which the Company paid
599,000 shares of the Company's Preferred Stock. The acquisition
resulted in the continuation of the business underlying the
assets (through the Company's subsidiary), which is construction
repair of industrial cooling towers primarily in Texas, Louisiana
and Arkansas for electric utility companies and related
consulting services.
On January 15, 1998, the Company, the Selling Shareholders
and the Buyer entered into the Stock Purchase Agreement, as a
result of which Buyer would become the new controlling
shareholder of the Company through the purchase of the majority
of the Company's outstanding shares of common stock from the
Selling Shareholders. The Stock Purchase Agreement is subject to
various closing conditions, including the completion and
satisfaction of various covenants by the Company and the
shareholder approvals set forth herein. If the Stock
-5-
<PAGE>
Purchase Agreement closes, the Company's operations are expected
to completely change prior to the end of fiscal 1998. See
"Information Regarding the Company - Recent Events."
Gulf Coast Towers, Inc., a wholly owned subsidiary of the
Company ("GCT"), which operates the business of GCCTS and is
located in Overton, Texas. It is in the business of constructing
and repairing industrial cooling towers primarily in Texas,
Louisiana and Arkansas. Its customers are generally in utility,
petro chemical and oil refining industries.
As of February 10, 1998, the Company had six (6) full time
employees.
PROPERTIES. The principal office of the Company is in
Overton, Texas. The Company obtained property at 701 Industrial
Blvd. in Borger, Texas which consists of 3.98 acres with a
warehouse and three (3) offices, and a warehouse and offices at
2227 Lake Road in La Marque, Texas when it purchased the assets
of GCCTS. The current facilities are suitable and adequate to
meet the Company's needs.
LEGAL PROCEEDINGS. The Company is not involved in any
material legal proceedings.
Recent Events
- -------------
The Company has incurred operating losses over the last two
(2) years which raises substantial doubt about the Company's
ability to continue as a going concern. Effective January 15,
1998 and as part of management's plan to have the Company
continue to operate in the foreseeable future, the Company
entered into the Stock Purchase Agreement. Pursuant to the terms
of the Stock Purchase Agreement, Buyer will become the new
controlling shareholder(s) and control group of the Company,
through the purchase of the majority shares of the Company from
the Selling Shareholders, who are also present management
shareholders. The Stock Purchase Agreement is subject to
completion and satisfaction of several covenants and conditions
as more fully set out in the Stock Purchase Agreement. As part
of the conditions, among other things, the Company will be
required to consummate the Reverse Stock Split. The Company
currently has 40,433,549 ($.001 par value) shares of common stock
and 749,000 ($1.00 par value) shares of preferred stock issued
and outstanding. After the Reverse Stock Split and the Proposed
Disposition, the Company will have zero (0) issued and
outstanding shares of Preferred Stock and 4,043,354 ($.01 par
value) shares of common stock issued and outstanding, subject to
adjustment to reflect the exchange of one whole share of common
stock for each fractional share resulting from the Reverse Stock
Split. TTI or its designee will own approximately 2,362,282
(approximately 58%) of the issued and outstanding common stock.
The Selling Shareholders and the Company will receive $105,003
and $20,000, respectively, as proceeds from the sale of shares
and warrants to Buyer.
In addition, subject to shareholder approval of the Proposed
Disposition, the Company will sell substantially all of its
assets (a) to Mr. George Davis in exchange for Mr. Davis'
transfer to the Company of 599,000 shares of preferred stock
($1.00 par value) presently owned by Mr. Davis and (b) to H.
Wayne Franklin in exchange for Mr. Franklin's transfer to the
Company of 150,000 shares of preferred stock owned by Mr.
Franklin. Additionally, Buyer will purchase from the Company a
warrant to purchase up to 1,500,000 additional common shares at
$0.04445 per share following the Reverse Stock Split.
TTI has virtually no business operations. Buyer plans to
operate the Company as a holding company and acquire through
subsidiaries rights to develop and market inventions, none of
which have yet been acquired.
A copy of the Stock Purchase Agreement is attached as
APPENDIX B to this Proxy Statement and is incorporated herein by
reference.
Market for Common Equity and Related Shareholder Matters
- --------------------------------------------------------
The common stock of the Company has traded from time to time
on the over-the-counter market. Due to the infrequency of trades
during the past three years, the Company does not believe that
there is an established public trading market for its common
stock.
-6-
<PAGE>
As of August 31, 1997, there were 1,512 holders of record of
the Company's common stock. There have been no dividends paid or
declared since the inception of the Company, and the Company's
present financial condition does not permit the payment of
dividends. The Company cannot predict when, if at all, it will
commence payment of dividends.
Management's Discussion and Analysis or Plan of Operation
- ---------------------------------------------------------
RESULTS OF OPERATIONS FOR THE YEARS ENDED AUGUST 31, 1996 AND
1997.
OVERVIEW. The Company's results of operations for fiscal
1996 and 1997 were significantly affected by the Company's
acquisition of substantially all of the assets of GCCTS in 1996.
Virtually all of the Company's revenues for fiscal 1997 were
derived from operations resulting from this acquisition. The
Company has incurred operating losses over the past two (2) years
which raises substantial doubt about its ability to continue as a
going concern.
GCT, a wholly owned subsidiary of the Company, undertakes
the Company's business of construction and repair of industrial
cooling towers, primarily in Texas, Louisiana and Arkansas. GCT
has entered into a maintenance contract with a Texas public
utility company through December 31, 1997. This contract
provided sufficient revenue during the period through August 31,
1997 to service all debt and pay all expenses of GCT's business.
GCT is engaged in active bidding for similar contracts with other
utility and petro chemical companies.
The Company does not believe that it will have to make any
material commitments for capital expenditures during the next
twelve months with respect to GCT's business as it anticipates
that income from operations will be a sufficient source of funds
to meet all capital needs.
GCT's need for employees fluctuates with its contractual
commitments to provide work and services. As a result, other
than its executive officers who will receive no compensation
until warranted by income, GCT has no full time employees. Any
employees hired will be compensated on a job-by-job basis or in
the form of commissions for sales.
In 1996, the Company also acquired all of the issued and
outstanding shares of common stock of FZI, which experienced very
little activity in fiscal year 1997. Since FZI operations
contributed little to the Company's revenues in fiscal 1997, any
impact on the Company's overall revenue was insignificant. The
Company believes that FZI's revenues for the next twelve months
will be sufficient to meet all capital needs, including those
necessary to continue FZI's research and development activities
regarding specialized fire fighting products.
The Company had no material commitments for capital
expenditures as of the end of fiscal 1997 and anticipates that it
will have no material commitments for capital expenditures during
fiscal 1997 which cannot be met with revenues generated from
operations.
REVENUES. Revenue from sales and other sources in fiscal
1997 was $528,662 compared to 129,770 in fiscal 1996. The sales
revenue in fiscal 1996 and 1997 reflected the Company's
acquisition of the assets of GCCTS, and to a much lesser degree
FZI.
COSTS AND EXPENSES. Costs of sales in fiscal 1997 were
$376,286 compared to $93,640 in fiscal 1996 reflecting the
increased revenue. The increase in costs of sales in fiscal 1997
from fiscal 1996 resulted from the increase in revenue from sales
during 1997. The general and administrative costs for fiscal
1997 were $241,667 compared to $30,426 in fiscal 1996. This
increase resulted from an increase in professional fees (legal
and accounting) to $97,716 for fiscal 1997 compared to $13,126
for fiscal 1996, an increase in bad debt allowance to $70,200 in
fiscal 1997 compared to $0 in fiscal 1996, and the general
increase in insurance, interest and bank charges and payroll
taxes.
OTHER OPERATING EXPENSES. During 1996, the officers of the
Company determined that they would not take a salary until cash
flow from operations permitted them to pay each of the three (3)
officers $50,000. Therefore, no salaries were paid in fiscal
1997 or 1996. The SEC staff has determined that the historical
statement of operations should reflect all costs of doing
business. Accordingly, officers' salaries for 1996 and 1997 were
imputed based
-7-
<PAGE>
on the actual number of months of operation during those periods.
This expense is reflected in the 1997 and 1996 statements of
operations and also as an increase to paid-in capital. Salaries
and benefits for fiscal 1997 were imputed at $33,860 compared to
$37,500 in fiscal 1996.
RESULTS OF OPERATIONS FOR THE THREE MONTH ENDED NOVEMBER 30, 1996
AND 1997.
GENERAL. The Company's results of operations for the
quarter ended November 30, 1997 were significantly affected by
the Company's acquisition in July, 1996 of substantially all of
the assets of GCCST. Virtually all of the Company's revenues for
the quarter ended November 30, 1997 were derived from operations
resulting from the GCCST acquisition. The Company has incurred
operating losses over the past two (2) years which raises
substantial doubt about its ability to continue as a going
concern.
GCT, a wholly owned subsidiary of the Company, undertakes
the Company's business of construction and repair of industrial
cooling towers, primarily in Texas, Louisiana and Arkansas. GCT
has entered into a maintenance contract with a Texas public
utility company which contract continued through December 31,
1997. This contract did not provide sufficient revenue to GCT
during the quarter ended November 30, 1997 to service all debt
and pay all expenses related to GCT's business. GCT is engaged
in active bidding for similar contracts with other utility and
petro chemical companies.
LIQUIDITY AND CAPITAL RESOURCES. The Company's working
capital deficit at November 30, 1997 was $(18,030) compared to a
working capital deficit of $(24,798) at August 31, 1997. Cash
and cash equivalent decreased to $2,556 at November 30, 1997,
compared to $19,226 at August 31, 1997. The decrease in cash and
cash equivalents was the result of the decrease in revenues and a
reduction in trade accounts payable during the quarter ended
November 30, 1997. During the quarter ended November 30, 1997,
cash was used to fund normal working capital requirements,
including efforts to market GCCT business. The trade accounts
receivable at November 30, 1997 was $19,578 compared to $12,880
at August 31, 1997.
The Company's inventory levels remained relatively constant
at $53,375 and $53,128 as of November 30, 1997 and August 31,
1997, respectively.
Trade accounts payable at November 30, 1997 decreased to
$47,527 from $71,083 at August 31, 1997 as a result of decreased
sales and payments made during the quarter.
The Company made no capital acquisitions or improvement
expenditures during the three month period ended November 30,
1997. While the Company is not anticipating any capital
expenditures over the next three quarters with respect to its
present operations, any funding for unexpected capital
expenditures or improvements will be paid from cash flows
generated through operating activities or additional sources of
financing, if available. See "Information Regarding the Company
- - Recent Events."
No significant disposition of equipment occurred during the
three month period ended November 30, 1997 and none is planned
during the next three month period.
RESULTS OF OPERATIONS. As discussed above, GCT has utilized
the assets acquired from GCCST to continue the Company's
business. GCT generated revenues during the quarter ended
November 30, 1997 pursuant to the maintenance contract with a
Texas public utility company. As discussed above, the
maintenance contract continued through December 31, 1997.
FZI experienced some activity in the quarter ended November
30, 1997, but contributed virtually no income towards the
Company's revenues for the quarter.
Revenue from sales and other sources for the quarter ended
November 30, 1997 was $17,703 and $8,568 respectively, compared
to $221,753 and $7,500 in the first quarter of fiscal 1997. The
decrease in sales revenue reflects a decline in the business
operations of GCT.
-8-
<PAGE>
The costs of sales for the quarter ended November 30, 1997
was $10,522 as compared to $210,476 during the first quarter of
fiscal 1997. The decrease in costs of sales is attributable to
the decrease in revenues during such periods.
During 1996, the officers of the Company determined that
they would not take a salary until cash flow from operations
permitted them to pay each of the three officers $50,000.
Salaries and benefits for the quarter ended November 30, 1997 was
$10,806 as compared to an imputed $37,500 for the three months
ended November 30, 1996. The SEC staff has determined that the
historical statement of operations should reflect all costs of
doing business. Accordingly, officers' salaries for 1996 were
imputed based on the actual number of months in operation in
1996. No officers' salaries were paid during the quarter ended
November 30, 1997.
General and Administrative expenses, which includes salaries
and benefits discussed above, decreased during the quarter ended
November 30, 1997 to $27,922 from $47,706 during the quarter
ended November 30, 1996. This decrease is attributable to
decreased sales activities during such periods.
The Company has no material commitments for capital
expenditures as of the end of its latest fiscal period. As
further discussed below, the Company intends to change the focus
of its operations.
NEW ACCOUNTING STANDARDS
Effective September 1, 1996, the Company adopted SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123
establishes a new, fair value-based method of measuring stock-
based compensation, but does not require an entity to adopt the
new method for preparing its basic financial statements. For
entities not adopting the new method for preparing basic
financial statements, SFAS No. 123 requires disclosures in the
footnotes of pro forma net earnings and earnings per share
information as if the fair value-based method had been adopted.
The Company expects no effect from the adoption of this new
standard.
In 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share." This Statement establishes
standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the previous standards
for computing earnings per share, and makes them comparable to
international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the
diluted EPS computation. This Statement is effective for
financial statements issued for periods ending after December 15,
1997. The Company will comply with the disclosure requirements
of SFAS 128 in its financial statements for its fiscal year
ending August 31, 1998.
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." SFAS 131 establishes standards for the
way that public business enterprises report information about
operating segments in annual financial statements and requires
that those business enterprises report information about
operating segments in annual financial statements and requires
that those business enterprises report selected financial
information about operating segments in interim reports to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers. The disclosure requirements of SFAS Nos. 131
are effective for financial statements for financial years
beginning after December 15, 1997. SFAS No. 131 in its financial
statements for its fiscal year ending August 31, 1999.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the
programming code in existing computer systems and software as the
millennium (year 2000) approaches. The Company intends to
address problems with the "year 2000" issue during the upcoming
fiscal year. Management has not yet assessed the "year 2000"
compliance expense and related potential effect on the Company's
earnings.
-9-
<PAGE>
DEFERRED TAX ASSETS
At August 31, 1997 and 1996, the Company had deferred assets
totaling $91,184 and $28,284, respectively. The deferred tax
assets are the result of net operating losses and have been fully
reserved by valuation allowances because it is more likely than
not that the deferred tax assets will not be realized based on
the weight of available evidence.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Forward-looking statements in this report, including without
limitation, statements relating to the adequacy of the Company's
resources and any anticipated changes in the Company's business
following the consummation, if any, of the Stock Purchase
Agreement, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward-looking statement involve risks and
uncertainties, including without limitation; potential quarterly
fluctuation in sales; risks associated with acquisitions and
expansion, and other risks and uncertainties indicated from time
to time in the Company's filings with the Securities and Exchange
Commission.
Management
- ----------
EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR APPOINTEES. On
the Record Date, the executive officers and directors of the
Company were as follows:
J. D. Davenport, 60 Director (since 1996) and President
George Davis, 67 Director (since 1996), Secretary,
Treasurer and Chairman of the Board
Charles I. White, 63 Director (since 1996) and Vice
President
The following is a description of the business experience of and
other matters concerning the Company's executive officers and
directors.
J. D. Davenport serves as President of the Company. He has
served as President since May 23, 1996. From October 1993 to
December 1995, Mr. Davenport was the Chief Executive Officer of
Ness Environmental Plus, Inc. Prior to that time, Mr. Davenport
served as Chief Executive Office of Frontier Environmental, Inc.
from November 1991 until October 1993.
George Davis was elected Secretary, Treasurer and Chairman
of the Board of Directors of the Company in 1996. Mr. Davis is
also and has been President and Chief Executive Officer of Gulf
Coast Cooling Tower Service, Inc. since May 1976.
Charles I. White was elected Vice President and a Director
of the Company in 1996. He is and has been the owner of an
Arabian horse breeding and training farm since 1990.
Following the consummation of the Stock Purchase Agreement,
it is anticipated that Messrs. Davenport and White (collectively,
"Resigning Directors") will resign as directors of the Company
and that Frank W. Harrison, Sr. and Joe Nicholson (collectively
"Director Appointees") will be appointed as members of the
Company's Board of Directors. It is further expected that these
Director Appointees will serve as Executive Officers of the
Company following consummation of the Stock Purchase Agreement.
Mr. Davis is anticipated to continue to serve as a director of
the Company.
Frank W. Harrison, Sr. is anticipated to serve as the
Chairman of the Board of Directors, President and Chief Executive
Officer of the Company following the consummation of the Stock
Purchase Agreement. Since March of 1996, Mr. Harrison has served
as the Chairman and Chief Executive Officer of Terminator
Technologies, Inc., a Texas
-10-
<PAGE>
corporation that has virtually no business operations that was
formed to operate as a holding company to acquire through
subsidiaries rights to develop and market inventions, none of
which have yet been acquired. From January of 1993 through March
of 1996, Mr. Harrison has managed his own investments. Prior to
that time, Mr. Harrison served as the President of International
Research Securities, Inc., an investment firm.
Joe Nicholson is anticipated to serve as a Director of the
Company following the consummation of the Stock Purchase
Agreement. Since 1960, Mr. Nicholson has served as the President
of Joe Nicholson & Assoc., Inc., a corporation offering Dale
Carnegie training services.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS. The
Board of Directors conducts its business through meetings of the
Board of Directors. There is no separate audit or executive
committee. During the year ended August 31, 1997, the Board of
Directors held one special meetings. Each director attended at
least 75% of the total number of meetings of the Board of
Directors.
DIRECTOR COMPENSATION. No compensation was paid to any
director in fiscal 1997 in his capacity as a director.
Executive Compensation
- ----------------------
SUMMARY COMPENSATION TABLE. The following table sets forth
certain information regarding compensation paid during each of
the Company's last three fiscal years to the Company's chief
executive officer in all capacities. No other executive officer
of the Company received total salary and bonus compensation for
services rendered to the Company during fiscal 1997 in excess of
$100,000.
Effective July 1996, the Company acquired substantially all
of the assets of GCCTS from George Davis, the Company's Director
and Secretary. Mr. Davis abstained from voting as a Director of
the Company in the transaction. The value of the assets
according to the agreement between the parties is approximately
$465,600. The acquisition resulted in the continuation of the
business underlying the assets acquired (through the Company's
subsidiary, Gulf Coast Towers, Inc.), which is in the business of
the construction and repair of industrial cooling towers
primarily in Texas, Louisiana and Arkansas for electric utility
companies, and related consulting services. The purchase price
for the assets was 599,000 shares of Preferred Stock which is
convertible at the option of the holder on a one for one basis
into the Company's Common Stock.
During fiscal 1996 and 1997, the Company contracted with an
affiliate of Messrs. Davis and Davenport to perform certain
services regarding cooling tower sales. The Company paid this
affiliate approximately $64,000 and $177,000 in 1996 and 1997,
respectively. During 1997, the Company had notes payable and
outstanding to affiliates of George Davis in the amounts of
$12,000 and $1,000. During 1996, an affiliate of Messrs.
Davenport and Davis loaned the Company $4,000 and made payment on
behalf of the Company for $11,391. The net amount due to this
affiliate as of August 31, 1997 was forgiven and added to the
Company's additional paid in capital.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation Other Annual ---------------------
Fiscal ------------------- Compensation Securities Underlying
Name and Principal Position Year Salary Bonus ($)(1) Options(#)
- --------------------------- ------ ------------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
J. D. Davenport 1997(1) $ 0(2) - - -
President and Director
</TABLE
_________________________
(1) Mr. Davenport was elected President of the Company during
fiscal 1996.
(2) During fiscal 1997, the officers of the Company including
the President determined that they would not take a salary
until cash flow from operations permitted them to pay each
of the three officers $50,000. Therefore, no salaries were
paid in fiscal 1997. However, the staff of the Securities
and Exchange Commission has determined that the historical
statement of operations should reflect all costs of doing
business. Accordingly, officer's salaries for fiscal 1997
were imputed based on the actual number of months of
operation during fiscal 1997. This expense is reflected in
the 1997 statements of operations and also as an increase to
paid in capital. See the Financial Statements of the
Company contained in the Annual Report accompanying this
Proxy Statement.
-11-
<PAGE>
STOCK OPTION GRANTS IN FISCAL 1997. No stock options were
granted to the President during fiscal 1997. The Company has
never granted stock appreciation rights.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1997 AND FISCAL
YEAR END OPTION VALUES. The Company never granted any stock
options to the President.
Employment Agreements and Change In Control Arrangements
- --------------------------------------------------------
The Company does not have any employment agreements with any
of its officers. The Company anticipates that a change in
control of the Company will occur upon the anticipated
consummation of the Stock Purchase Agreement.
Section 16(a) Reporting
- -----------------------
Section 16(a) of the Exchange Act requires the Company's
directors and officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than
10% shareholders are required by Commission regulation to furnish
the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company, during the fiscal year
ended August 31, 1997, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that none of the
Company's officers or directors have filed Form 5s for the past
recently completed fiscal year which were due to be filed on or
about October 15, 1997.
Certain Relationships And Related Transactions
- ----------------------------------------------
Effective July 1996, the Company acquired substantially all
of the assets of Gulf Coast Cooling Tower Service, Inc. from the
Company's Director and Secretary, George Davis. Mr. Davis
abstained from voting as a Director of the Company in the
transaction. The value of the assets according to the agreement
between the parties in approximately $465,600. The acquisition
resulted in the continuation of the business underlying the
assets (through the Company's subsidiary, Gulf Coast Towers,
Inc.), which is the construction and repair of industrial cooling
towers primarily in Texas, Louisiana and Arkansas for electric
utility companies, and related consulting services. The purchase
price for the assets was 599,000 shares of the Company's Series A
Convertible Preferred Stock, par value of $1.00 which is
convertible on a one-for-one basis into the Company's Common
Stock.
During fiscal 1996 and 1997, the Company contracted with an
affiliate by common control, to perform certain services on the
cooling tower sales. Costs to the Company and cash disbursements
to the affiliate totaled $64,070 and $176,885 in 1996 and 1997,
respectively.
At year-end, the Company had certain notes payable to
related parties ($12,000 to GCCTS and $1,000 to a shareholder).
During 1996, GD/JC, Inc., an affiliate by common control, loaned
the Company $4,000 and made payments on behalf of the Company for
$11,391. The net amount due to GD/JD, Inc. as of August 31, 1997
was forgiven and added to additional paid to capital.
PROPOSAL NO. 1
ITEM 1 ON PROXY
APPROVAL AND ADOPTION OF AN AMENDMENT
OF THE COMPANY'S CERTIFICATE
OF INCORPORATION TO EFFECT A
REVERSE STOCK SPLIT AND NAME CHANGE
At the Special Meeting, the shareholders will vote upon a
proposal to approve and adopt an amendment (the "Proposed
Amendment") to the Company's Articles of Incorporation to (i)
effect a 1-for-10 reverse stock split
-12-
<PAGE>
(the "Reverse Stock Split") in which each share of issued Common
Stock of the Company, $0.001 par value per share, whether issued
and outstanding or held in treasury, will be reclassified and
changed into one-tenth (1/10) of a share of new Common Stock,
$0.01 par value per share, of the Company, and (ii) change the
name of the Company to "TTI Industries, Inc.," (the "Name
Change"). A copy of the proposed Amended and Restated Articles
of Incorporation are attached as APPENDIX C hereto which is
incorporated herein by this reference.
Reverse Stock Split
- -------------------
GENERAL. The Board of Directors of Company has approved and
recommends that the shareholders adopt the Proposed Amendment to
effect the Reverse Stock Split and the Name Change. If the
shareholders approve the Proposed Amendment, it will be filed
with the Secretary of State of the State of Texas on such date as
may be selected by the Company's Board of Directors, and will
become effective on the date of such filing (the "Split Effective
Date"). On the Split Effective Date, shareholders of the Company
who own ten or more shares on such date will be deemed to own one
new share for every ten shares previously owned, and a fractional
new share interest equivalent to one-tenth of a new share for
each additional share owned less than a multiple of ten shares.
Shareholders owning less than ten shares on the Split Effective
Date will be deemed to own a fractional new share interest
consisting of one-tenth new share for each share owned
immediately prior to the Split Effective Date. Pursuant to the
terms of the Reverse Stock Split, each fractional share to be
received by a shareholder following the Split Effective Date will
be exchanged by the Company for one whole share of Company Common
Stock. Consequently, on the Split Effective Date, each
fractional share will be "rounded up" to the nearest whole share
so that each shareholder owning an equity interest in the Company
prior to the Split Effective Date will continue to own at least
one share of Common Stock following the Split Effective Date. No
cash payments will be made in lieu of fractional shares.
As a result of the Reverse Stock Split, the par value of the
Company's Common Stock would be increased from $0.001 per share
to $0.01 per share and the number of shares authorized under the
Articles of Incorporation will remain at 100 million. As a
result, there will be no change to the "Common Stock" account on
the Company's balance sheet as of August 31, 1997 other than the
reduction in issued and outstanding shares from 40,433,549 to
4,043,354 shares (subject to adjustment for the "rounding up" of
fractional shares).
Although the Company's Board of Directors believes that the
Proposed Amendment to effect the Reverse Stock Split is
advisable, the Proposed Amendment may be abandoned by the Board
of Directors at any time before, during or after the Special
Meeting and prior to the Split Effective Date, without further
action by the Shareholders of the Company. In that regard,
Board of Directors intends to abandon the Reverse Stock Split if
the Stock Purchase Agreement is terminated.
Shareholders of the Company will have no dissenters' or
appraisal rights under Texas law or under the Company's
Certificate of Incorporation or Bylaws in connection with the
Reverse Stock Split.
REASONS FOR THE PROPOSED AMENDMENT TO EFFECT THE REVERSE
STOCK SPLIT. The Board of Directors is of the opinion that the
Proposed Amendment to effect the Reverse Stock Split is advisable
and in the best interests of the Company and its shareholders.
The Board of Directors of the Company believes that the
relatively low market price of the Common Stock may impair the
acceptability of the Common Stock to members of the investing
public. Although the number of shares outstanding should not
affect either the marketability of the Common Stock, the type of
investor who acquires it, or a Company's reputation in the
financial community, certain investors view low-priced stocks as
unattractive and certain brokerage firms, as a matter of policy,
will not extend margin credit on stocks trading at low prices.
Further, many brokerage firms are reluctant to recommend lower-
priced stocks to their clients or to hold them in their own
portfolios, and a variety of brokerage firm policies and
practices discourage individual brokers within those firms from
dealing in low-priced stocks because of the time-consuming
procedures that make the handling of low-priced stocks
economically unattractive.
Since the broker's commissions on low-priced stocks
generally represent a higher percentage of the stock price than
commissions on higher priced stocks, the current share price of
the Common Stock can result in individual Shareholders paying
transaction costs (commissions, markups or markdowns) that are a
higher percentage of their total share value than would be the
case if the share price was substantially higher. This factor is
-13-
<PAGE>
also believed to limit the willingness of institutions to
purchase the Common Stock at its current relatively low market
price. If approved, the Reverse Stock Split will result in some
Shareholders owning "odd-lots" of less than 100 shares of Common
Stock. Brokerage commissions and other costs of transactions in
odd-lots may be higher, particularly on a per-share basis, than
the cost of transactions in lots of 100 shares or more.
In addition, the Board of Directors believes that the
decrease in the number of shares of Common Stock outstanding as a
consequence of the proposed Reverse Stock Split and the resulting
anticipated increased price level will encourage greater interest
in the Common Stock by the financial community and the investing
public and possibly promote greater liquidity for the Company's
Shareholders, although it is possible that such liquidity could
be affected adversely by the reduced number of shares outstanding
after the Reverse Stock Split. Although any increase in the
market price of the new Common Stock resulting from the Reverse
Stock Split may be proportionately less than the decrease in the
number of shares outstanding, the proposed Reverse Stock Split
could result in a market price for the shares that would be high
enough to overcome the reluctance, policies and practices of
brokerage firms and investors referred to above and to diminish
the adverse impact of correspondingly higher trading commissions
for the shares.
There can be no assurance, however, that the foregoing hoped-
for effects will occur following the Reverse Stock Split, that
the market price of the new Common Stock immediately after
implementation the proposed Reverse Stock Split will be
maintained for any period of time, that such market price will
approximate ten times the market price before the proposed
Reverse Stock Split, or that such market price will exceed or
remain in excess of the current market price. BECAUSE THE
COMPANY IS ALSO SEEKING TO DIVEST ITSELF OF SUBSTANTIALLY ALL OF
ITS ASSETS, THE FUTURE MARKET PRICE OF THE COMMON STOCK WILL BE
AFFECTED IN LARGE PART BY THE ASSETS, CAPITAL OR BUSINESS
CONTRIBUTED TO OR OPERATED THROUGH THE COMPANY FOLLOWING THE
CLOSING UNDER THE STOCK PURCHASE AGREEMENT. HOWEVER, THE
PURCHASER OF THE CONTROL INTEREST IN THE COMPANY UPON THE
CONSUMMATION OF THE STOCK PURCHASE AGREEMENT HAS NO OBLIGATION
TO, AND HAS NOT INDICATED THAT IT WILL, OPERATE ANY BUSINESSES OR
ASSETS THROUGH THE COMPANY. THEREFORE, NO ASSURANCES CAN BE
GIVEN IN THIS REGARD.
Approval of the Proposed Amendment to effect the Reverse
Stock Split itself will not affect any Shareholder's percentage
ownership interest in the Company or proportional voting power,
except for minor differences resulting from the rounding of any
fractional shares up to the nearest whole share. The shares of
Common Stock which would be issued in connection with the Reverse
Stock Split will be fully paid and non-assessable. The voting
rights and other privileges of the holders of Common Stock will
not be affected substantially by adoption of the Proposed
Amendment to effect the Reverse Stock Split or the subsequent
implementation thereof. If for any reason the Board of Directors
deems it advisable to do so, the Proposed Amendment to effect the
Reverse Stock Split may be abandoned by the Board of Directors at
any time before, during or after the Special Meeting and prior to
the Split Effective Date, without further action by the
Shareholders of the Company.
FEDERAL INCOME TAX CONSEQUENCES. The Company has not sought
and will not seek an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. The Company, however,
believes that because the Reverse Stock Split is not part of a
plan to periodically increase a shareholder's proportionate
interest in the assets or earnings and profits of the Company,
the Reverse Stock Split will have the following federal income
tax effects.
(1) A shareholder will not recognize gain or loss on the
exchange other than to the extent of any cash received
in lieu of fractional shares. In the aggregate, the
shareholder's basis in the new shares will equal his
basis in the shares held before the exchange.
(2) A shareholders' holding period for the new shares will
be the same as the holding period of the old shares
exchanged therefor.
(3) The Reverse Stock Split will constitute a
reorganization within the meaning of Section
368(a)(1)(E) of the Code and the Company will not
recognize any gain or loss as a result of the Reverse
Stock Split.
-14-
<PAGE>
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARE INTEREST;
ESCHEAT. On the Split Effective Date, each certificate
representing existing shares of Common Stock will automatically
be deemed for all purposes to evidence ownership of the
appropriate reduced number of new shares of Common Stock and/or
the right to receive one whole share of Common Stock for any
fractional new share interest without any action by the
shareholder thereof. As soon as practicable after the Split
Effective Date, shareholders will be notified and requested to
surrender their certificates for their existing shares with
instructions as to how to receive new certificates. No
certificates should be surrendered until such notice is received.
Certificates for existing shares will be exchanged for
certificates representing new shares and any cash to which
transmitting Shareholders are entitled after the Reverse Stock
Split. Corporate Stock Transfer, the Company's transfer agent,
will act as the exchange agent for the shareholders in effecting
the exchange of their certificates.
Change of Name
- --------------
In connection with the Reverse Stock Split and proposed sale
of control of the Company pursuant to the Stock Purchase
Agreement, the Company proposes to change its name to "TTI
Industries, Incorporated." A copy of the Amended and Restated
Articles of Incorporation of the Company is attached to this
Proxy Statement as APPENDIX C and is incorporated herein by
reference.
Shareholder approval of this proposal is required under the
TBCA. Approval of the amendment and restatement of the Company's
Articles of Incorporation (the "Proposed Amendment") requires the
affirmative vote of the holders of two-thirds (2/3) of the
outstanding shares of Common Stock. Proxies will be voted for or
against such approval in accordance with specifications marked
thereon and, if no specification is made, will be voted FOR such
approval. If the Shareholders do not approve this proposal, then
the Articles of Incorporation will remain the same, and the
Proposed Amendments to effect the Reverse Stock Split and Name
Change will not be effected. THE SELLING SHAREHOLDERS, THE
HOLDERS OF APPROXIMATELY 68.6% OF THE OUTSTANDING SHARES OF
COMPANY COMMON STOCK (OR 27,752,500 SHARES OF COMPANY COMMON
STOCK, EXCLUDING ANY SHARES THAT MAY BE RECEIVED UPON THE
CONVERSION OF ANY PREFERRED STOCK), HAVE INFORMED THE COMPANY
THAT THEY INTEND TO VOTE ALL SHARES HELD BY THEM IN FAVOR OF THE
PROPOSED AMENDMENT (AND RESULTING REVERSE STOCK SPLIT AND NAME
CHANGE). ACCORDINGLY, SHAREHOLDER APPROVAL OF THE PROPOSED
AMENDMENT (AND RESULTING REVERSE STOCK SPLIT AND NAME CHANGE) IS
ASSURED. UNDER THE TEXAS BUSINESS CORPORATION ACT, SHAREHOLDERS
WHO VOTE AGAINST THE PROPOSED AMENDMENT (AND RESULTING REVERSE
STOCK SPLIT AND NAME CHANGE) WILL NOT HAVE ANY RIGHT TO DISSENT
WITH REGARD TO PROPOSED AMENDMENT (AND RESULTING REVERSE STOCK
SPLIT AND NAME CHANGE).
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S ARTICLES OF INCORPORATION IS
ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND TO EFFECT THE REVERSE STOCK SPLIT AND NAME
CHANGE UNANIMOUSLY RECOMMENDS THAT ITS SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT AND NAME CHANGE.
PROPOSAL 2
ITEM 2 ON PROXY
DISPOSITION OF
GULF COAST TOWERS, INC.
AND FIREZAP, INC.
At the Special Meeting, the shareholders will vote upon a
proposal to approve the disposition of substantially all of its
assets, consisting of the capital stock of (a) Gulf Coast Towers,
Inc., a wholly owned subsidiary of the Company, to George Davis,
Chairman of the Board of the Company, in exchange for all of his
shares (599,000 shares) of the preferred stock, $1.00 par value
per share, of the Company (the "GCT Sale") and (b) FireZap, Inc.,
a wholly owned subsidiary of the Company, to H. Wayne Franklin,
in exchange for all of his shares (150,000 shares) of Company
Preferred Stock (the "FZI Sale"). The Company is seeking
shareholder approval for the GCT Sale and the FZI Sale. These
assets of the Company collectively represent substantially all of
the Company's assets (collectively, the GCT Sale and the FZI Sale
are referred to as the "Proposed Disposition"). The Company
-15-
<PAGE>
has elected to have the Proposed Disposition approved as one
proposal, and therefore the shareholders will not have the
opportunity to separately vote on each Proposed Disposition.
The Proposed Disposition will constitute a sale of
substantially all of the Company's assets and therefore, under
Texas law, will require the affirmative vote of the holders of
two-thirds (2/3) of the outstanding shares of Common Stock.
Proxies will be voted for or against such approval in
accordance with specifications marked thereon and, if no
specification is made, will be voted FOR such approval. The
Selling Shareholders, the holders of approximately 68.6% of the
outstanding shares of Company Common Stock (or 27,752,500 shares,
excluding any shares that may be received upon the conversion of
any Preferred Stock), have informed the Company that they intend
to vote all shares owned by them in favor of the Proposed
Disposition. Accordingly, shareholder approval of the Proposed
Disposition is assured.
PURSUANT TO THE TEXAS BUSINESS CORPORATION ACT, HOLDERS OF
COMPANY'S COMMON STOCK WHO VOTE AGAINST THE PROPOSED DISPOSITION
AND COMPLY WITH THE DETAILED PROVISIONS CONTAINED IN ARTICLES
5.12 AND 5.13 OF THE TBCA WILL BE ENTITLED TO DISSENT FROM THE
PROPOSED DISPOSITION AND TO SEEK PAYMENT OF THE FAIR VALUE OF
THEIR SHARES OF COMPANY COMMON STOCK. A COPY OF ARTICLES 5.12
AND 5.13 OF THE TBCA IS ATTACHED AS APPENDIX A AND INCORPORATED
HEREIN BY REFERENCE. SHAREHOLDERS WISHING TO DISSENT FROM THE
PROPOSED DISPOSITION SHOULD READ SUCH MATERIALS CAREFULLY. SEE
ALSO "VOTING RIGHTS AND PRINCIPAL SHAREHOLDERS - DISSENTERS'
RIGHTS."
Background of the Proposed Disposition
- --------------------------------------
On June 1, 1996, the Company acquired all of the outstanding
shares of FZI from H. Wayne Franklin ("Franklin") in exchange for
450,000 shares of the Company's Series A Convertible Preferred
Stock, $1.00 par value per share (the "Preferred Stock"). The
Purchase Agreement between the Company and FZI provided for
certain contingent payments and contained representations and
warranties pertaining to anticipated revenues of FZI during the
twelve (12) month period ending June 1, 1997. Because FZI failed
to meet targeted net revenue levels, 300,000 shares of Company
Preferred Stock originally issued to Mr. Franklin were canceled,
as a result of which 150,000 shares remain outstanding. In July
1996, the Company sought to diversify its businesses and
acquired, through GCT, the business operations of GCCTS from
George Davis, the Chairman of the Company, for a total
consideration of 599,000 shares of Preferred Stock. Neither the
businesses of FZI nor GCT have produced the anticipated revenues
or earnings. In late 1997 and early 1998, the Company and the
former owners of FZI and GCT agreed to rescind the Company's
prior acquisition of these businesses, subject to the approval of
the Company's shareholders.
Reasons for the Proposed Disposition
- ------------------------------------
The Board of Directors believes that the Proposed
Disposition, on the terms and conditions set forth herein, is
advisable and in the best interest of the Company. As of the
date hereof, 749,000 shares of Preferred Stock were outstanding,
all of which would be canceled upon the consummation of the
Proposed Disposition. These shares of Preferred Stock have a par
value (and liquidation preference) of $1.00 per share, and the
Company has the right to redeem these shares at $2.00 per share
(for an aggregate of $1,498,000). Therefore, upon any
liquidation of the Company, the holders of the Preferred Stock
would be entitled to a liquidation preference of $749,000 before
any amounts would be available for distribution to holders of
Company Common Stock. For the fiscal year ended August 31, 1997
and periods subsequent to that time, the assets to be divested in
the Proposed Disposition accounted for all of the assets and
substantially all of the earnings (losses) of the Company. At
August 31, 1997, the Company's balance sheet reflected gross
assets of $481,182, total current liabilities of $174,737, and
shareholder's equity of $306,445. The Company's consolidated
statement of operations for the fiscal year ended August 31, 1997
reflected a net loss of $241,667 on total revenues of $528,662.
THE ASSETS AND BUSINESS TO BE DIVESTED IN THE PROPOSED
DISPOSITION CONSTITUTE SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS
AND BUSINESS. FOR A DESCRIPTION OF THESE ASSETS AND BUSINESS,
SEE "INFORMATION REGARDING THE COMPANY" AND THE FINANCIAL
STATEMENTS ATTACHED TO THIS PROXY STATEMENT.
-16-
<PAGE>
The Board believes that the elimination of the outstanding
Preferred Stock in exchange for the Permitted Disposition is in
the best interest of the Company when considered relative to
substantial liquidation and redemption price associated with the
Preferred Stock and the potential adverse effect of the
outstanding Preferred Stock on the Company's ability to raise
capital for its future business operations. However, no separate
fairness opinions or appraisals were sought or obtained by the
Board of Directors in evaluating the Proposed Disposition.
Further, George Davis, the Chairman and a principal Shareholder
of the Company, has a conflict of interest in recommending to the
shareholders the approval of the sale of GCT to Mr. Davis, and
therefore has abstained from making any recommendations regarding
the GCT sale.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE
PROPOSED DISPOSITION IS ADVISABLE AND IN THE BEST INTERESTS OF
THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS (WITH MR. DAVIS,
ABSTAINING FROM MAKING ANY RECOMMENDATION TO THE SHAREHOLDERS)
THAT ITS SHAREHOLDERS VOTE FOR APPROVAL OF THE PROPOSED
DISPOSITIONS.
Regulatory Approvals
- --------------------
No regulatory approvals are required to be obtained to
effect the Proposed Disposition.
Accounting Treatment
- --------------------
The Proposed Disposition will be accounted for as a sale of
the assets disposed of by the Company for the fair market value
of the shares of Preferred Stock received by the Company.
Federal Income Tax Consequences
- -------------------------------
The Company does not expect that there will be any
significant tax consequences resulting from the Proposed
Disposition because the Company's tax basis in the assets to be
transferred is greater than or equal to the "fair market value"
of the shares of the Preferred Stock that will be reconveyed to
the Company.
Pro Forma Financial Information
- -------------------------------
Following the consummation of the Proposed Disposition, the
Company is anticipated to have no assets and liabilities of less
than $5,000. The amounts to be received by the Company in
connection with the issuance of the warrant described below (see
"- Material Differences in Rights of Security Holder") are
expected to be utilized to pay a portion of the Company's
transaction costs associated with the Stock Purchase Agreement
and this Proxy Statement.
Interested Parties
- ------------------
Effective July 1996, the Company acquired substantially all
of the assets of GCCTS from the Company's Chairman, Director and
Secretary, George Davis. Mr. Davis abstained from voting as a
Director of the Company. Pursuant to the acquisition agreement
between the Company and Mr. Davis, the transaction was valued at
$465,600, in connection with which the Company issued 599,000
shares of its Preferred Stock.
Mr. Davis will exchange all of his shares of Preferred Stock
for the Company's Capital Stock of GCT. Mr. Davis has abstained
from voting as a director and recommending the Proposed
Disposition to Company's shareholders; however, Mr. Davis and the
other Selling Shareholders have informed the Company of their
intent to vote "FOR" the approval of the Permitted Disposition.
Pursuant to the terms of the Stock Purchase Agreement, at
closing the Selling Shareholders and Buyer will execute a
Shareholders Agreement which permits the Selling Shareholders to
require Buyer to purchase up to 25% of the remaining shares then
held by the Selling Shareholders at a price of $1.00 per share if
the market price for the Common Stock does not exceed $1.00 per
share within 25 months following the closing of the Stock
Purchase Agreement. In addition, the Shareholders Agreement
grants to each Selling Shareholder the right to participate in
the transfer or sale of any shares of Company Common Stock by
Buyer pro rata based upon the relative ownership
-17-
<PAGE>
percentage of the Selling Shareholders and Buyer at the time.
The Shareholders Agreement also grants to the Selling
Shareholders the right to acquire 10% of any new securities
issued by the Company to Buyer (other than securities issued
pursuant to the Warrant described below - See "Material
Differences in Rights of Security Holders") on the same terms and
conditions as offered to Buyer by the Company.
In addition, Messrs. Davis and Davenport will receive
approximately $70,000 and $35,000, respectively from the sale of
their shares of Company common stock pursuant to the terms of the
Stock Purchase Agreement. Because the Proposed Disposition is a
condition precedent to the Stock Purchase Agreement, Messrs.
Davis and Davenport have a financial interest in having the
Proposed Disposition approved to facilitate the sale of their
shares pursuant to the terms of the Stock Purchase Agreement.
Material Differences in Rights of Security Holders
- --------------------------------------------------
Upon the consummation of the Proposed Disposition, each of
the Company's shareholders will continue to own the same
percentage interest in the Company and have the same voting
rights associated therewith; however, the Company would have
disposed of substantially all of its assets and control of the
Company will have been acquired by Buyer.
In addition, pursuant to the terms of the Stock Purchase
Agreement, the Company has agreed to grant to Buyer a warrant
(the "Warrant") to acquire up to 1.5 million shares of Common
Stock (calculated following the Reverse Stock Split, which
Warrant would represent 15 million shares of Company Common Stock
prior to the Reverse Stock Split) with an exercise price of
$0.04445 per share. The Buyer paid the Company $20,000 to
acquire the Warrant, and the Company determined that the exercise
price was fair to the Company based upon the limited trading
market at the time. The exercise price also equals the per share
price at which the Selling Shareholders have agreed to sell their
shares (representing an approximate 58% of the Company's
outstanding shares) to Buyer. To the extent that future
exercises of the Warrant results in a dilution to the existing
shareholders, the Company's shareholders could be adversely
affected.
Accountants
- -----------
The Company does not expect its accountants, BDO Seidman,
LLP, to attend the Special Meeting, to make any statement at the
meeting or to be available to respond to questions at the Special
Meeting.
By Order of the Board of Directors
/s/ GEORGE DAVIS
George Davis
Chairman of the Board
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Index to Financial Statements............................................F-1
Report of Independent Certified Public Accountants (BDO Seidman, LLP)....F-2
Consolidated balance sheets at August 1997 and 1996......................F-3
Consolidated statements of operations for the years
ended at August 31, 1997 and 1996......................................F-4
Consolidated statements of changes in stockholders'
equity for the years ended August 31, 1997 and 1996....................F-5
Consolidated statements of cash flows for the years
ended August 31, 1997 and 1996.........................................F-6
Summary of accounting policies...........................................F-7
Notes to consolidated financial statements...............................F-12
Consolidated balance sheets at November 30, 1997 and
August 31, 1997 (unaudited)............................................F-18
Consolidated statement of operations for the three months
ended November 30, 1997 and 1996 (unaudited............................F-19
Consolidated statement of cash flows for the three months
ended November 30, 1997 and 1996 (unaudited)...........................F-20
Notes to unaudited financial statements..................................F-21
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders
Environmental Plus, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Environmental Plus, Inc., (F/K/A Kinlaw Energy Partners
Corporation) and Subsidiaries, (the "Company") as of August 31,
1996 and 1997 and the related consolidated statements of operations,
cash flows and stockholders' equity for each of the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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
provides a reasonable basis for our opinion.
As more fully described in Note 5, the Company engaged in
significant transactions with an affiliated company. In
addition, as described in Note 11, subsequent to year-end the
Company entered into a Stock Purchase Agreement, whereby the
majority of the Company's common shares will be sold to a new
control group.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of the Company as of August 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the
years then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
As discussed in Note 11 to the financial statements, the Company
has suffered recurring losses from operations that raise
substantial doubt about it's ability to continue as a going concern.
Management's plans in regard to this matter are also described
in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
December 17, 1997 BDO Seidman, LLP
F-2
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
=================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
August 31, 1997 1996
- ---------------------------------------------------------------------------------
ASSETS
Current
Cash $ 19,226 $ 10,561
Accounts receivable - trade, less
allowance for doubtful accounts
of $7,200 in 1997 12,880 47,250
Note receivable (Note 2) 55,210 201,369
Inventory (Note 1) 53,128 43,256
Other 9,495 16,833
- ---------------------------------------------------------------------------------
Total current assets 149,939 319,269
- ---------------------------------------------------------------------------------
NOTES RECEIVABLE - NET (NOTE 2) 195,184 76,000
- ---------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 3) 136,059 144,586
- ---------------------------------------------------------------------------------
OTHER
Goodwill and organization costs - net - 57,168
- ---------------------------------------------------------------------------------
$ 481,182 $597,023
=================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 71,083 $ 31,771
Accrued expenses 5,605 -
Line of credit and term notes (Note 4) 60,240 33,000
Notes payable and due to
related party (Note 4) 37,809 18,000
- ---------------------------------------------------------------------------------
Total current liabilities 174,737 82,771
- ---------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
- ---------------------------------------------------------------------------------
Stockholders' equity
Preferred stock,(100,000,000 authorized;
$1.00 par, 724,000 and 1,024,000 shares
issued and outstanding, respectively) 466,600 466,600
Common stock, (100,000,000 shares
authorized, $.001 par, 40,329,136
shares issued and outstanding) 40,328 40,328
Paid-in capital 644,084 610,224
Accumulated deficit (844,567) (602,900)
- ---------------------------------------------------------------------------------
306,445 514,252
- ---------------------------------------------------------------------------------
$ 481,182 $597,023
=================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>
F-3
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
=================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Years ended August 31, 1997 1996
- ---------------------------------------------------------------------------------
REVENUE:
Sales $ 495,104 $112,937
Other 33,548 16,833
- ---------------------------------------------------------------------------------
Total 528,652 129,770
- ---------------------------------------------------------------------------------
COST OF SALES 376,286 93,640
- ---------------------------------------------------------------------------------
IMPAIRMENT OF GOODWILL AND
ORGANIZATION COSTS (NOTE 11) 51,530 -
- ---------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE:
Salaries and benefits (Note 5) 109,674 37,500
Professional fees 97,716 13,126
Bad debt expense 70,200 -
Depreciation and Amortization 18,489 8,785
Insurance 13,036 -
Interest and bank charges 10,647 1,705
Other 9,200 1,344
Payroll taxes 6,020 -
Utilities 4,266 1,094
Supplies 3,255 3,002
- ---------------------------------------------------------------------------------
LOSS BEFORE EXTRAORDINARY ITEM (241,667) (30,426)
- ---------------------------------------------------------------------------------
EXTRAORDINARY ITEM - FORGIVENESS OF DEBT - 23,455
- ---------------------------------------------------------------------------------
NET LOSS (241,667) (6,971)
- ---------------------------------------------------------------------------------
PER SHARE DATA:
Net loss per share $ (.01) $ -
Weighted Average shares outstanding 40,329,136 38,376,609
=================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>
F-4
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended August 31, 1996 and 1997
=================================================================
<TABLE>
<CAPTION>
Preferred Stock Common Stock
$1.00 Par Value $.001 Par Value
---------------- --------------------
Additional Total
Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Balance, September 1, 1995 - $ - 37,735,285 $ 37,735 $543,256 $(595,929) $ (14,938)
Acquisition of Gulf
Coast assets 574,184 465,600 - - - - 465,600
Acquisition of Fire
Zap shares 450,000 1,000 - - - - 1,000
Common shares issued
for services - - 1,573,443 1,573 9,992 - 11,565
Sale of common shares
to officer - - 1,020,408 1,020 6,480 - 7,500
Imputed officers' salary
(Note 5) - - - - 37,500 - 37,500
Expenses paid by
shareholders - - - - 12,996 - 12,996
Net loss for the year - - - - - (6,971) (6,971)
- ---------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 1,024,184 466,600 40,329,136 40,328 610,224 (602,900) 514,252
Cancellation of
certain shares
related to Fire
Zap Acquisition (300,000) - - - - - -
Imputed Officers'
salary (Note 5) - - - - 33,860 - 33,860
Net loss for the year - - - - - (241,667) (241,667)
- ---------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1997 724,184 $466,600 40,329,136 $ 40,328 $ 644,084 $(884,567) $ 306,445
=====================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
=================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Years ended August 31, 1997 1996
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from operations $ (241,667) $ (30,426)
Adjustments to reconcile income (loss) from
operations to cash provided by (used in)
operating activities:
Depreciation and amortization 18,489 8,785
Impairment of goodwill and organization cost 51,529 -
Imputed officers' salaries 33,860 37,500
Provision for losses on accounts and
notes receivable 70,200 -
Change in assets and liabilities:
(Increase) decrease in accounts receivable-trade (5,830) (22,250)
(Increase) decrease in inventory (9,872) (7,300)
(Increase) decrease in notes receivable (3,025) -
(Increase) decrease in other assets 7,338 (20,582)
(Decrease) increase in accounts payable 39,312 21,436
(Decrease) increase in accrued liabilities 5,605 (5,023)
- ----------------------------------------------------------------------------------------
Net cash flows used in operating activities (34,061) (17,860)
- ----------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,323) -
- ----------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - affiliate 24,809 13,000
Proceeds from line of credit and notes payable - 7,500
Proceeds from term notes payable 30,000 -
Payments for line of credit and notes payable (7,760) -
Sale of common shares - 7,500
- ----------------------------------------------------------------------------------------
Net cash provided by financing activities 47,049 28,000
- ----------------------------------------------------------------------------------------
Increase in cash 8,665 10,140
Cash, beginning of year 10,561 421
- ----------------------------------------------------------------------------------------
Cash, ending of year $ 19,226 $ 10,561
========================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>
F-6
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Summary of Accounting Policies
=================================================================
NATURE OF BUSINESS AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Environmental Plus, Incorporated and its wholly-
owned subsidiaries Fire Zap, Inc. and Gulf Coast Towers, Inc.
from the date of their respective acquisitions, as discussed
below. All material inter-company transactions and balances
have been eliminated in consolidation.
Environmental Plus, Inc. and its subsidiaries (the Company) is
primarily in the business of construction and repair of
industrial cooling towers, primarily in Texas, Louisiana and
Arkansas for electric utility companies; and marketing of fire
retarding foam for industrial use. These activities are the
result of two significant acquisitions during 1996, as
discussed below.
ACQUISITIONS OF BUSINESS
On June 1, 1996, the Company purchased 100 percent of the
stock of Fire Zap, Inc. (FZI). The consideration for the
stock of FZI included 450,000 shares of the Company's Series
A Convertible Preferred Stock. The purchase agreement also
provides for certain contingent payment of an additional
450,000 preferred shares of the Company if the net revenues
for the twelve months ending June 1, 1997, of FZI products and
services exceeds $900,000. FZI is in the business of
marketing a fire retarding foam as a fire fighting device for
industrial use. The acquisition of FZI was accounted for as
a purchase. Accordingly, the purchase price was allocated to
the net assets acquired based upon their fair market values.
During fiscal 1997, the sellers of FZI returned for cancellation
300,000 shares of the aforementioned preferred stock at the
request of management. No consideration was exchanged for the
cancelled shares.
On June 15, 1996, the Company purchased substantially all of
the assets of Gulf Coast Cooling Tower Service, Inc. (GCCTS)
from the Company's director and secretary. The acquisition
resulted in the continuation of the business underlying the
assets through the Company's wholly-owned subsidiary Gulf
Coast Towers, Inc. (GCT). The consideration for the assets of
GCCTS included 599,000 shares of the Company's Series A
Convertible Preferred Stock. The acquisition was between
entities under common control and accordingly the purchase of
assets was recorded at historical value by the Company in a
manner similar to a pooling of interest.
The accompanying consolidated statements of operations reflect
the operating results of FZI and GCCTS since the effective
date of the acquisitions. The
F-7
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Summary of Accounting Policies
=================================================================
following pro forma unaudited
consolidated operating results of the Company is presented as
though the acquisitions occurred as of September 1, 1995.
However FZI results are included only for the period from
inception of FZI (January 22, 1996) to August 31, 1996.
1996
- --------------------------------------------------------------------
Net sales $ 429,000
Net income (loss) (3,500)
Earning (loss) per share $ -
The pro forma results have been prepared for comparative
purposes only and include certain adjustments. They do not
purport to be indicative of the consolidated results of
operations which actually would have resulted had the
combination been in effect on September 1, 1995, or of the
future results of operations of the consolidated entities.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclose of contingent
assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-
out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
computed using accelerated and straight-line methods over the
estimated useful lives of the assets. Leasehold improvements
are amortized over the estimated useful lives of the
improvements or the length of the lease, including anticipated
renewal periods, whichever is shorter.
ORGANIZATION COSTS AND GOODWILL
Organizational costs are costs directly associated with the
FZI business acquisition and the direct costs of acquiring the
KEP shares. The goodwill represents the net cost in excess of
net assets acquired in the FZI acquisition.
F-8
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Summary of Accounting Policies
==================================================================
The Company evaluates the recoverability and remaining life of
its goodwill and determines whether the goodwill should be
completely or partially written-off or the amortization period
accelerated. The Company will recognize an impairment of
goodwill if undiscounted estimated future operating cash flows
of the acquired business are determined to be less than the
carrying amount of the goodwill. If the Company determines
that the goodwill has been impaired, the measurement of the
impairment will be equal to the excess of the carrying amount
of the goodwill over the amount of the undiscounted estimated
future operating cash flows. If an impairment of goodwill were
to occur, the Company would reflect the impairment through a
reduction in the carrying value of goodwill.
During fiscal 1997, these Organization Costs and Goodwill were
determined to be completely impaired (see Note 11) and were
written-off through a reduction to their carrying value. Prior
to impairment, these costs were amortized over a five year
period.
TAXES ON INCOME
The Company accounts for income taxes under the asset and
liability method pursuant to Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes".
Under SFAS 109, deferred income taxes 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 basis. 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. Under SFAS 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that
includes the enactment date.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an
initial maturity of three months or less to be cash
equivalents.
F-9
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Summary of Accounting Policies
==============================================================
PER SHARE INFORMATION
Per share information is based on the weighted average number
of common and dilutive common equivalent shares outstanding.
Common stock equivalents in the form of stock options and
warrants are also considered in the computation, if dilutive.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments,"
requires that the Company disclose the estimated fair values
for its financial instruments for which it is practicable to
estimate their values. The following methods and assumptions
were used to estimate the fair value of each class of
financial instruments:
NOTES RECEIVABLE - Certain of the notes receivable have a
carrying value which approximates fair value because of the
short maturity of those instruments. For the long-term note
receivable, the carry value approximates fair value based on
bank loans held by the debtor with similar terms and
maturity.
LINE OF CREDIT AND TERM NOTES - Based on the rates currently
available to the Company for bank loans with similar terms
and average maturities, the fair value of the line of credit
and term notes approximate the carrying value.
NOTES PAYABLE TO RELATED PARTY - The carrying value of notes
payable to related party approximates fair value because of the
short-maturity of those instruments.
NEW ACCOUNTING STANDARDS
Effective September 1, 1996, the company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 123
establishes a new, fair value-based method of measuring stock-
based compensation, but does not require an entity to adopt the
new method for preparing its basic financial statements. For
entities not adopting the new method for preparing basic
financial statements, SFAS No. 123 requires disclosures in the
footnotes of pro forma net earnings and earnings per share
information as if the fair value-based method had been adopted.
The Company expects no effect from the adoption of this new
standard.
F-10
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Summary of Accounting Policies
=================================================================
In 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share". This Statement
establishes standards for computing and presenting earnings
per share and applies to entities with publicly held common
stock or potential common stock. This Statement simplifies
the previous standards for computing earnings per share, and
makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the
diluted EPS computation. This Statement is effective for
financial statements issued for periods ending after
December 15, 1997. The Company will comply with the
disclosure requirements of SFAS 128 in its financial
statements for its fiscal year ending August 31, 1998.
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 establishes
standards for the way that public business enterprises
report information about operating segments in annual
financial statements and requires that those business
enterprises report selected financial information about
operating segments in interim reports to shareholders.
It also establishes standards for related disclosures
about products and services, geographic areas, and major
customers. The disclosure requirements of SFAS Nos. 131
are effective for financial statements for financial years
beginning after December 15, 1997. The Company will comply
with the disclosure requirements of SFAS No. 131 in its
financial statements for its fiscal year ending August 31,
1999.
F-11
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
=================================================================
1. INVENTORIES
Inventories at August 31, 1997 and 1996 consist primarily of
parts for construction of cooling towers and trailers
totaling $53,128 and $43,256, respectively.
2. NOTES RECEIVABLE
Notes receivable are unsecured and consist of the following:
August 31, August 31
1997 1996
--------------------------------------------------------------------------
12.5% note due from Lewis Industries,
principal and interest payable on or
before December 15, 2005 (see Note 11) $183,798 $201,369
Prime plus 1% note due from Tri-State,
principal and interest payable on or
before June 2, 2000 74,396 76,000
12.5 % note due from Lewis Industries,
principal and interest payable on or
before October 8, 1997 25,000 -
12.0% note due from Fire Response
Systems Inc., principal and
interest payable on or before August
30, 1998 - Fire Zap Inc. 30,210 -
-----------------------------------------------------------------------
313,394 277,369
Less reserve for doubtful accounts 63,000 -
-----------------------------------------------------------------------
$250,394 $277,369
=======================================================================
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
August 31, August 31,
1997 1996
-------------------------------------------------------
Land $ 21,500 $ 21,500
Building and improvements 75,633 75,633
Machinery and equipment 29,646 25,323
Transportation equipment 29,819 29,819
-------------------------------------------------------
156,598 152,275
Accumulated depreciation (20,539) (7,689)
-------------------------------------------------------
$136,059 $144,586
=======================================================
F-12
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================
4. LINE OF CREDIT AND NOTES PAYABLE TO RELATED PARTIES
At August 31, 1997, the Company had net borrowings of
$30,240 under a revolving line of credit with a bank. The
maximum borrowings under the line of credit is $37,000 and the
agreement terminates as of July 31, 1998. The line of credit is
secured by a note receivable from Fire Response Systems of FZI
and accrues interest at 11.5 percent. In addition, the Company
also had net borrowings of $30,000 under term note payable
agreement which matures as of December 5, 1997. This note is
secured by inventory of FZI and accrues interest at prime rate
plus 3 percent (11.5 percent at August 31, 1997).
Notes payable to related parties consist of the following:
August 31, August 31,
1997 1996
- ------------------------------------------------------------
12% unsecured demanding note
payable to officer $ -- $ 5,000
10% unsecured note payable to
GCCTS, due July 31, 1998 22,000 12,000
10% unsecured note payable to
shareholder, due July 31, 1998 14,779 1,000
Other 1,030 --
- ------------------------------------------------------------
$ 37,809 $ 18,000
============================================================
5. TRANSACTIONS WITH RELATED PARTIES
During fiscal 1996 and 1997 the Company contracted with an
affiliate by common control, to perform certain services on the
cooling tower related sales. Costs to the Company and cash
disbursements to the affiliate totaled $64,070 and $176,885 in
1996 and 1997, respectively.
At year end the Company had certain notes payable to related
parties as discussed in Note 4. During 1996 GD-JD, Inc., an
affiliate by common control, loaned the Company $4,000 and made
payments on behalf of the Company for $11,391. The net amount
due GD-JD, Inc. at August 31, 1996 was forgiven and added to
additional paid-in capital.
During fiscal 1996, certain expenses totaling $23,445 were
paid on behalf of the Company by non-shareholders. These
payments are recorded as forgiveness of debt.
F-13
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
=================================================================
During 1996 and 1997, the officers of the Company determined
that they would not take a salary until cash flow from operations
permitted them to pay each of the three officers $50,000.
Therefore, no salaries were paid in fiscal 1996 and 1997. The
SEC staff has determined that the historical statement of
operations should reflect all costs of doing business (SAB 79).
Accordingly, officers' salaries for 1996 and 1997 were imputed.
This expense is reflected in the 1996 and 1997 statement of
operations and also as an increase to paid-in capital.
6. INCOME TAXES
During the years ended August 31, 1996, the Company utilized
net operating loss carryforwards of $30,529 to offset taxable
income. Therefore, there is no provision for federal income tax
for the years then ended. This resulted in a reduction of the
recorded deferred tax asset at August 31, 1996 of $10,400,
respectively. The related valuation allowance was reduced
accordingly. As of August 31, 1997 and 1996, management
established a 100 percent valuation allowance since it is more
likely than not the deferred tax assets will not be realized
based on the weight of available evidence.
In accordance with the Internal Revenue Code, the
availability to carry forward net operating losses incurred prior
to 1987 are limited due to a significant change in ownership
during that year. If not utilized, these net operating losses
will begin to expire in 2006. The remaining net operating losses
for tax purposes, are approximately $100,832. However, during
fiscal 1996 there was another significant change in ownership
which will further limit the availability of those net operating
losses (Note 10). The extent of the limitation has not been
determined. The Company has investment tax credits available to
be carried forward to offset income tax in the amount of $3,364
which expire in 1998 through 2001.
The net deferred tax asset in the accompanying balance
sheets includes the following at August 31:
1997 1996
- -------------------------------------------------------
Deferred tax asset $ 91,184 $ 28,284
Less valuation allowance 91,184 28,284
- -------------------------------------------------------
-- --
- -------------------------------------------------------
Net deferred tax asset $ -- $ --
=======================================================
F-14
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
=================================================================
The valuation allowance activity for the years ended August
31, consists of the following:
1997 1996
- -----------------------------------------------------------------
Balance, beginning of year $ 28,284 $ 38,684
Utilization of net operating losses -- (10,400)
Current year net operating loss 62,900 --
- -----------------------------------------------------------------
Balance, end of year $ 91,184 28,284
=================================================================
7. PREFERRED STOCK
The Series A preferred stock was issued in conjunction with
the FZI and GCCTS acquisitions. The terms of each share of the
Series A Convertible Preferred Stock will, at the option of the
shareholders, be convertible into one share of the Company's
common stock. The Company may upon written thirty day notice
delivered to the shareholders prior to the time of any conversion
of such stock into the Company's common stock, repurchase such
preferred stock for cash equal to two times the par value of such
Preferred Stock. Shareholders are able to convert the Preferred
Stock into shares of common stock of the Company at any time
after the date of issue. In the event the Company delivers
written notice to the shareholders of its intent to repurchase
the Preferred Stock, shareholders will have twenty days to
deliver written notice to buyer of their intent to convert the
Preferred Stock into buyer's common stock.
8. COMMITMENTS AND CONTINGENCIES
The Company entered into a Financial Advisory Agreement with
Barron and Chase Securities. As part of the agreement the
Company issued 1,500,000 shares of its common stock. The
agreement outlines the duties of the financial advisor and the
fees for the related services.
Fire Zap, Inc. entered into a management agreement with
certain of its officers in February 1996, which stipulates salary
and bonus requirements. The term of the agreement is twenty
years.
The Company is generally self-insured for losses and
liabilities related primarily to workers' compensation, health
and welfare claims, physical damage to property, business
interruption resulting from certain events, and comprehensive
general, product and vehicle liability.
F-15
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
=================================================================
9. RETIREMENT PLAN
Effective August 1, 1994, the Company was provided with a
401(k) Retirement Savings Plan (the Plan) through KOC, that
covered substantially all of its employees. Under the provisions
of the Plan, employees were limited in contributions to 20
percent of their gross wages. The Company contributed $.25 for
each dollar of the first $1,000 contributed by employees.
Pursuant to the change in ownership as discussed in Note 10, the
employees are no longer covered under this Plan.
10. CHANGE IN OWNERSHIP
In September 1991, ownership of the common stock shares held
by Joe D. Kinlaw was transferred to the Kinlaw Family Trust.
This trust is an irrevocable trust for the benefit of Mr.
Kinlaw's minor children. Through October 1995, the Trust was
controlled by trustees unaffiliated with Mr. Kinlaw. In October
1995, the above mentioned trustees resigned and Jim Harris was
appointed trustee of the Trust.
Subsequent to August 31, 1995, 34,000,000 shares of the
Company's common stock, which were held by the Kinlaw Family
Trust, were sold to Environmental Plus, Inc.
11. SUBSEQUENT EVENT AND GOING CONCERN
The Company has incurred operating losses over the last two
years, which raises doubt about the Company's ability to continue
as a going concern.
During January 1998 and as part of management's plan to
have the Company continue to operate in the foreseeable future, a
Stock Purchase Agreement was entered into among Terminator
Technologies, Inc. (TTI), a Texas corporation, EPI and various
shareholders of EPI. As stated in the Agreement, TTI will become
the new control group through the purchase of the majority shares
of EPI and its various shareholders. However, the agreement is
subject to completion and satisfaction of several covenants and
conditions of agreement. As part of the conditions, EPI will
consummate a reverse stock split of its common shares on the
basis of 1 for 10. The Company currently has 40,329,136 shares
of common stock and 1,024,000 shares of preferred stock issued
and outstanding. After the reverse stock split and as a part of
the Agreement, EPI would no longer have any outstanding shares
of preferred stock and 4,062,006 shares of common stock outstanding.
TTI will own 2,472,282 (61 percent) shares of the outstanding
common stock. The various shareholders and EPI will receive
$105,003 and $20,000, respectively, as proceeds from sale of
shares to TTI. As part of the Agreement, certain shareholders will
retain the notes receivable from Lewis Industries and Tri-State
as discussed in Note 2. The Agreement expires on February 28,
1998 or at the date set forth therein.
F-16
<PAGE>
ENVIRONMENTAL PLUS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================
If the Stock Purchase Agreement is consummated, TTI expects
to contribute significant operating assets and working capital to
the Company. Management believes that the Stock Purchase Agreement
will be completed during fiscal 1998 and should provide adequate
assets and working capital to allow the Company to continue for the
foreseeable future.
12. SUPPLEMENTAL CASH FLOW INFORMATION
During the fiscal 1997 and 1996 no cash was paid for
interest or income taxes.
As described in Note 5, the Company recognized forgiveness
of debt income in 1996 in the amount of $23,455.
As described in the Accounting Policies, during fiscal 1996
the Company issued 574,184 preferred shares and 450,000 common
shares in the acquisitions of Gulf Coast Towers, Inc. and Fire
Zap, Inc., respectively.
During 1996 the Company issued 1,573,443 common shares for
services provided. Also in 1996, additional paid-in capital was
credited for the payment of certain accruals totaling $12,996 by
shareholders.
F-17
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
November 30, 1997 and August 31, 1997
<TABLE>
<CAPTION>
November 30, August 31,
1997 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 2,556 $ 19,226
Accounts receivable - trade 19,578 12,880
Note receivable 29,412 55,210
Inventory 53,375 53,128
Other 5,835 9,495
--------- --------
Total current assets 110,756 149,939
NOTE RECEIVABLE 179,455 195,184
PROPERTY, PLANT AND EQUIPMENT - NET 132,847 136,059
OTHER
Goodwill and organization costs- net -- --
--------- ---------
$ 423,058 $ 481,182
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 47,527 71,083
Accrued expenses 4,870 5,605
Line of credit and term notes 57,902 60,240
Notes payable and due to related parties 18,487 37,809
--------- ---------
Total Current Liabilities $ 128,786 $ 174,737
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, (100,000,000 authorized;
$1.00 par, 1,024,000 shares issued and
outstanding, respectively) 466,600 466,600
Common stock (100,000,000 shares
authorized, $.001 par, 40,329,136
shares issued and outstanding) 40,328 40,328
Paid-in Capital 644,084 644,084
Accumulated deficit (856,740) (844,567)
--------- ---------
Total Stockholders' Equity 294,272 306,445
--------- ---------
$ 423,058 481,182
========= =========
</TABLE>
F-18
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended November 30, 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Sales $ 17,703 $ 221,753
Interest 8,568 7,500
---------- ----------
Total 26,271 229,253
COST OF SALES 10,522 210,476
GENERAL AND ADMINISTRATIVE
Depreciation and amortization 3,213 4,484
Payroll taxes 338 --
Interest and bank charges 2,822 1,023
Supplies 187 604
Professional fees 3,560 900
Taxes and licenses 530 237
Utilities and telephone 1,192 1,375
Salaries and benefits 10,806 37,500
Travel 650 683
Insurance 3,855 --
Other Administrative Expenses 769 900
---------- ---------
Total General and Administrative 27,922 47,706
NET INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (12,173) (28,929)
INCOME TAXES -- --
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (12,173) (28,929)
EXTRAORDINARY ITEM - FORGIVENESS OF DEBT -- --
NET INCOME (LOSS) (12,173) (28,929)
PER SHARE DATA:
Net income (loss) per share -- --
Weighted Average shares outstanding 40,329,136 40,329,136
</TABLE>
F-19
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months ended November 30, 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from operations $ (12,173) $ (28,929)
Adjustments to reconcile income (loss)
from operations to cash provided by
(used in) operating activities:
Depreciation and amortization 3,213 4,484
Imputed officers' salaries -- 37,500
Change in assets and liabilities:
Increase in accounts receivable - trade (6,698) (198,865)
(Increase) decrease in inventory 247 43,256
Decrease in other assets 3,660 2,500
Increase (Decrease) in accounts payable
and accrued expenses (24,291) 139,932
--------- ---------
Net cash flows used in operating activities (36,536) (123)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets -- --
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit and
notes payable -- --
Retirement of debt (21,660) --
Collection of note receivable 41,526 --
Loan on note receivable -- --
Net cash flows provided by financing activities 19,866 --
Increase (Decrease) in Cash (16,670) (123)
Cash, beginning of period 19,226 10,561
--------- ---------
Cash, end of period $ 2,556 $ 10,438
</TABLE>
F-20
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
AND SUBSIDIARIES
Notes to Financial Statements
November 30, 1997
- -------------------------------------------------------------------------
NOTE 1 - STATEMENT BY MANAGEMENT CONCERNING INTERIM FINANCIAL
INFORMATION
The financial information for November 30, 1997, included
herein is unaudited and does not include all information and
footnotes required by generally accepted accounting principles
for complete financial statements; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management,
necessary to a fair statement of the results for the interim
period. It is suggested, however, that the accompanying
financial statements be read in conjunction with the financial
statements and notes thereto incorporated by reference in the
Company's August 31, 1997 Annual Report on Form 10-K.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended November 30, 1997, the Company used
cash to pay interest expense in the amount of $794. No cash was
paid for income taxes.
F-21
<PAGE>
APPENDIX A
TBCA Articles 5.12 and 5.13
---------------------------
Set forth below is a reproduction of Articles 5.12 and 5.13 of
the Texas Business Corporation Act:
ARTICLE 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID
CORPORATE ACTION
A. Any shareholder of any domestic corporation who has the
right to dissent from any of the corporate actions referred to in
Article 5.11 of this Act may exercise that right to dissent only
by complying with the following procedures:
(1)(a) With respect to proposed corporate action
that is submitted to a vote of shareholders at a meeting,
the shareholder shall file with the corporation, prior to
the meeting, a written objection to the action, setting out
that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's
address, to which notice thereof shall be delivered or
mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the
corporation, in the case of action other than a merger, or
the surviving or new corporation (foreign or domestic) or
other entity that is liable to discharge the shareholder's
right of dissent, in the case of a merger, shall, within ten
(10) days after the action is effected, deliver or mail to
the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from
the delivery or mailing of the notice, make written demand
on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment
of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day
immediately preceding the meeting, excluding any
appreciation or depreciation in anticipation of the proposed
action. The demand shall state the number and class of the
shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder
failing to make demand within the ten (10) day period shall
be bound by the action.
(b) With respect to proposed corporate action that is
approved pursuant to Section A of Article 9.10 of this Act,
the corporation, in the case of action other than a merger,
and the surviving or new corporation (foreign or domestic)
or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the date the action is
effected, mail to each shareholder of record as of the
effective date of the action notice of the fact and date of
the action and that the shareholder may exercise the
shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any
articles or documents filed by the corporation with the
Secretary of State to effect the action. If the shareholder
shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing
of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares
shall be the value thereof as of the date the written
consent authorizing the action was delivered to the
corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in
anticipation of the action. The demand shall state the
number and class of shares owned by the dissenting
shareholder and the fair value of the shares as estimated by
the shareholder. Any shareholder failing to make demand
within twenty (20) day period shall be bound by the action.
2. Within twenty (20) days after receipt by the
existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, of a demand
for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation
(foreign or domestic) or other entity shall deliver or mail
to the shareholder a written notice that shall either set
out that the corporation (foreign or domestic) or other
entity accepts the amount claimed in the demand and agrees
to pay that amount within ninety (90) days after the date on
which the action was effected, and, in the case of shares
represented by certificates, upon the surrender of the
A-1
<PAGE>
certificates duly endorsed, or shall contain an estimate by
the corporation (foreign or domestic) or other entity of
the fair value of the shares, together with an offer to pay
the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of
notice within sixty (60) days after the date from the
shareholder that the shareholder agrees to accept that
amount and, in the case of shares represented by
certificates, upon the surrender of the certificates duly
endorsed.
3. If, within sixty (60) days after the date on which
the corporate action was effected, the value of the shares
is agreed upon between the shareholder and the existing,
surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, payment for the shares
shall be made within ninety (90) days after the date on
which the action was effected and, in the case of shares
represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in
the shares or in the corporation.
B. If, within the period of sixty (60) days after the date
on which the corporate action was effected, the shareholder and
the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, do not so agree, then the
shareholder or the corporation (foreign or domestic) or other
entity may, within sixty (60) days after the expiration of the
sixty (60) day period, file a petition in any court of competent
jurisdiction in the county in which the principal office of the
domestic corporation is located, asked for a finding and
determination of the fair value of the shareholder's shares.
Upon the filing of any such petition by the shareholder, service
of a copy thereof shall be made upon the corporation (foreign or
domestic) of other entity, which shall, within ten (10) days
after service, file in the office of the clerk of the court in
which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who
have demanded payment for their shares and with whom agreements
as to the value of their shares have not been reached by the
corporation (foreign or domestic) or other entity. If the
petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanies by such a
list. The clerk of the court shall give notice of the time and
place fixed for the hearing of the petition by registered mail to
the corporation (foreign or domestic) or other entity and to the
shareholders named on the list at the addresses therein stated.
The forms of the notices by mail shall be approved by the court.
All shareholders thus notified and the corporation (foreign or
domestic) or other entity shall thereafter be bound by the final
judgment of the court.
C. After the hearing of the petition, the court shall
determine the shareholders who have complied with the provisions
of this Article and have become entitled to the valuation of and
payment for their shares, and shall appoint one or more qualified
appraisers to determine that value. The appraisers shall have
power to examine any of the books and records of the corporation
the shares of which they are charged with the duty of valuing,
and they shall make a determination of the fair value of the
shares upon such investigation as to them may seem proper. The
appraisers shall also afford a reasonable opportunity to the
parties interested to submit to them pertinent evidence as to the
value of the shares. The appraisers shall also have such power
and authority as may be conferred on Masters in Chancery by the
Rules of Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the
shares of the shareholders adjudged by the court to be entitled
to payment for their shares and shall file their report of that
value in the office of the clerk of the court. Notice of the
filing of the report shall be given by the clerk to the parties
in interest. The report shall be subject to exceptions to be
heard before the court both upon the law and the facts. The
court shall by its judgment determine the fair value of the
shares of the shareholders entitled to payment for their shares
and shall direct the payment of that value by the existing,
surviving, or new corporation (foreign or domestic) or other
entity, together with interest thereon, beginning 91 days after
the date on which the applicable corporate action from which the
shareholder elected to dissent was effected to the date of such
judgment, to the shareholders entitled to payment. The judgment
shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by
certificates only upon, and simultaneously with, the surrender to
the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, of duly endorsed
certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those
shares or in the corporation. The court shall allow the
appraisers a reasonable fee as court costs, and all court costs
shall be allotted between the parties in the manner that the
court determines to be fair and equitable.
A-2
<PAGE>
E. Shares acquired by the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case
may be, pursuant to the payment of the agreed value of the shares
or pursuant to payment of the judgment entered for the value of
the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all
other cases, may be held and disposed of by the corporation as in
the case of other treasury shares.
F. The provisions of this Article shall not apply to a
merger if, on the date of the filing of the articles of merger,
the surviving corporation is the owner of all the outstanding
shares of the other corporation, domestic or foreign, that are
parties to the merger.
G. In the absence of fraud in the transaction, the remedy
provided by this Article to a shareholder objecting to any
corporation action referred to in Article 5.11 of this Act is the
exclusive remedy for the recovery of the value of his shares or
money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, complies with the
requirements of this Article, any shareholder who fails to comply
with the requirements of this Article shall not be entitled to
bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
Article 5.13. Provisions Affecting Remedies of Dissenting
Shareholders
A. Any shareholder who has demanded payment for his shares
in accordance with either Article 5.12 or 5.16 of this Act shall
not thereafter be entitled to vote or exercise any other rights
of a shareholder except the right to receive payment for his
shares pursuant to the provisions of those articles and the right
to maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the
respective shares for which payment has been demanded shall not
thereafter be considered outstanding for the purposes of any
subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation
thereof in its shareholder records. Within twenty (20) days
after demanding payment for his shares in accordance with either
Article 5.12 or 5.16 of this Act, each holder of certificates
representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such
demand has been made. The failure of holders to certificated
shares to do so shall, at the option of the corporation,
terminate such shareholder's rights under Articles 5.12 and 5.16
of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated
shares for what payment has been demanded or shares represented
by a certificate on which notation has been so made shall be
transferred, any new certificate issued therefor shall bear
similar notation together with the name of the original
dissenting holder or such shares and a transferee of such shares
shall acquire by such transfer no rights in the corporation other
than those which the original dissenting shareholder had after
making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares
in accordance with either Article 5.12 or 5.16 of this Act may
withdraw such demand at any time before payment for his shares or
before any petition has been filed pursuant to Article 5.12 or
5.16 of this Act asking for a finding and determination of the
fair value of such shares, but no such demand may be withdrawn
after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If,
however, such demand shall be withdrawn as hereinbefore provided,
or if pursuant to Section B of this Article the corporation shall
terminate the shareholder's rights under Article 5.12 or 5.16 of
this Act, as the case may be, or if no petition asking for a
finding and determination of fair value of such shares by a court
shall have been filed within the time provided in Article 5.12 or
5.16 of this Act, as the case may be, or if after the hearing of
a petition filed pursuant to Article 5.12 or 5.16, the court
shall determine that such shareholder is not entitled to the
relief provided by those articles, then, in any such case, such
shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the corporate
action from which he dissented and shall be bound thereby, the
right of such shareholder to be paid the fair value of his shares
shall cease, and his status as a shareholder shall be restored
without prejudice to any corporate proceedings which may have
been taken during the interim, and such shareholder shall be
entitled to receive any dividends or other distributions made to
shareholders in the interim.
<PAGE>
APPENDIX B
STOCK PURCHASE AGREEMENT
AMONG
TERMINATOR TECHNOLOGIES, INC.,
AMJ RESOURCES, INC.,
ENVIRONMENTAL PLUS, INCORPORATED,
J.D. DAVENPORT,
CHARLES WHITE,
GD.JD, INC.,
AND
NORTPORT MANAGEMENT GROUP, INC.
January 15, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURCHASE AND SALE OF EPI SHARES; CLOSING 1
1.1. Purchase and Sale of EPI Shares 1
1.2. Closing 2
ARTICLE 2.REPRESENTATIONS AND WARRANTIES OF EPI AND
SELLING SHAREHOLDERS 2
2.1. Organization; Good Standing 2
2.1. Subsidiaries 2
2.2. Capitalization 2
2.3. Authority; Enforceability; Non-Contravention 3
2.4. Taxes 3
2.5. Property 4
2.6. Transferred Shares 4
2.7. Contracts 4
2.8. Litigation 4
2.9. Governmental Permits 4
2.10. Compliance with Laws 4
2.11. Employee Plans 5
2.12. Finder's Fees 5
2.13. Directors, Officers and Employees 5
2.14. Bank Accounts, etc. 5
2.15. Real Property 5
2.16. Employees, Labor Matters, Etc. 5
2.17. HSR 6
2.18. Records 6
2.19. Further Representation 6
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF TTI 6
3.1. Organization; Good Standing; Listing 6
3.2. Authority; Enforceability; Non-Contravention 6
3.3. Finder's Fees 7
3.4. HSR 7
3.5. Investment Intent 7
3.6. Further Representations 7
ARTICLE 4. COVENANTS OF EPI AND THE SELLING SHAREHOLDERS 7
4.1. Operation Prior to the Closing Date 7
4.2. No Solicitation 8
ARTICLE 5. ADDITIONAL AGREEMENTS 9
5.1. Shareholders Meetings; Proxy Statement 9
(i)
<PAGE>
5.2. Access 9
5.3. Reasonable Efforts 10
5.4. Public Announcements 10
5.5. Notification of Certain Matters 10
5.6. Resignation of Directors of EPI 10
5.7. Proposed Stock Split 10
5.8. Expenses 11
5.9. Retirement of Preferred Shares 11
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING BY BUYER 11
6.1. Representations and Warranties 11
6.2. EPI Documents 11
6.3. Selling Shareholder Documents 12
6.4. EPI Obligations Performed 12
6.5. Satisfaction or Waiver of Conditions
Precedent of EPI 12
6.6. TTI's Investigation 12
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING BY EPI AND THE
SELLING SHAREHOLDERS 13
7.1. Stockholder Approval 13
7.2. Representations and Warranties 13
7.3. TTI Documents 13
7.4. Satisfaction or Waiver of Conditions
Precedent of TTI 14
7.5. TTI Obligations Performed 14
ARTICLE 8. TERMINATION 14
8.1. Termination by Mutual Consent 14
8.2. Termination by EPI or the Selling Shareholders 14
8.3. Termination by TTI 14
8.4. Termination Resulting from Acquisition Proposals 15
8.5. Effect of Termination 15
ARTICLE 9. DEFINITIONS 15
9.1. Definitions 15
9.2. Defined Terms 18
ARTICLE 10. MISCELLANOUS 18
10.1. Expenses of the Transaction 18
10.2. Further Assurances 18
10.3. Notices 18
10.4. No Modification Except in Writing 19
10.5. Entire Agreement 19
10.6. Severability 19
10.7. Assignment 19
10.8. Publicity; Announcements 20
10.9. Choice of Law 20
10.10. Captions; Construction 20
(ii)
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made
and entered into as of the 15th day of January, 1998, by and
among TERMINATOR TECHNOLOGIES, INCORPORATED, a Texas corporation
("TTI"), AMJ RESOURCES, INC., a Delaware Corporation ("AMJ" and
collectively with TTI and their respective assigns, referenced to
as "Buyer"), ENVIRONMENTAL PLUS, INCORPORATED, a Texas
corporation ("EPI"), GEORGE DAVIS, ("Davis"), J. D. DAVENPORT
("Davenport"), CHARLES WHITE ("White"), GD/JD, INC. ("GD/JD") and
NORTHPORT MANAGEMENT GROUP, INC. ("Northport"). Collectively,
Davis, Davenport, White, GD/JD and Northport are referred to as
the "Selling Shareholders."
W I T N E S S E T H:
WHEREAS, EPI has proposed to consummate a reverse stock
split on the terms set forth in Schedule A (the "Proposed Stock
Split"), pursuant to which each outstanding share of EPI Common
stock, $ .001 par value per share, will be converted into 0.1
shares of EPI common stock, $.01 par value per share (the "EPI
Shares");
WHEREAS, except as otherwise set forth herein, all
references to EPI Shares contained herein assume consummation of
the Proposed Stock Split;
WHEREAS, the Selling Shareholders desire to sell to Buyer an
aggregate of 2,362,282 EPI Shares ("Transferred Shares") as
further set forth on Schedule A attached hereto, which
Transferred Shares will represent approximately 58% of the then
outstanding shares of EPI Common;
WHEREAS, EPI desires to sell to Buyer, and Buyer desires to
purchase from EPI, a warrant (the "Warrant") to acquire up to 1.5
million EPI Shares (the "Warrant Shares"), upon terms and
conditions set forth herein;
WHEREAS, the parties hereto desire to make certain
representations, warranties and agreements in connection with the
proposed purchase and sale of EPI Shares and to set forth various
conditions to the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises,
representations and warranties and mutual covenants and
agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the parties hereto, intending to be legally
bound, hereby agrees as follows:
ARTICLE 1. PURCHASE AND SALE OF EPI SHARES; CLOSING
1.1. PURCHASE AND SALE OF EPI SHARES. In reliance upon the
representations and warranties and subject to the terms and
conditions of this Agreement, (a) each Selling Shareholder hereby
agrees to sell, assign, transfer and deliver to Buyer, and Buyer
hereby agrees to purchase from each Selling
-1-
<PAGE>
Shareholder, the number of Transferred Shares set forth beside
each such Selling Shareholder's name on Schedule A attached hereto,
at the Closing at the purchase price of $0.04445 per EPI Share
("Per Share Purchase Price"), representing an aggregate amount of
$105,003.43 (the "Shareholder Proceeds"), and (b) EPI hereby agrees
to sell and issue to Buyer, and Buyer agrees to purchase from EPI,
at the Closing the Warrant for an aggregate consideration of
$20,000 (the "EPI Proceeds"). The Warrant shall provide the Buyer
the right to acquire up to 1.5 million shares of (EPI Common at an
exercise price per share equal to the Per Share Purchase Price,
and shall expire on January 5, 2000. The Warrant shall be in
substantially the same form and substance as Exhibit A attached
hereto.
1.2. CLOSING. The Closing of the purchase and sale of
the Transferred Shares and the Warrant (the "Closing") shall take
place at 10:00 a.m. on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the fifth
(5th) business day after the satisfaction or waiver of the
conditions set forth in Articles 6 and 7 hereof, unless another
date or place is agreed to in writing by the parties hereto, at
the offices of Arter & Hadden LLP, Dallas, Texas, or some other
mutually agreeable location in Dallas, Texas.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF EPI AND SELLING
SHAREHOLDERS
EPI and each Selling Shareholder hereby jointly and
severally represent and warrant to Buyer with regard to EPI, and
each Selling Shareholder represents and warrants with respect to
itself or himself individually, as applicable as follows;
provided that, the representations and warranties set forth below
assume the consummation of the disposition of the shares of GCCTS
and FZI by EPI prior to the Closing and therefore do not include
any assets or liabilities or other matters relating to GCCTS or
FZI:
2.1. ORGANIZATION; GOOD STANDING. EPI is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Texas and is qualified as a foreign corporation
in all jurisdictions in which it is required to qualify as a
result of the conduct of its business or ownership of its
properties and where the failure to be so qualified could
reasonably be anticipated to have a Material Adverse Effect. EPI
has delivered to TTI complete and correct copies of its
Certificate of Incorporation and Bylaws as in effect on the date
hereof.
2.2. SUBSIDIARIES. EPI does not have any Subsidiaries, and
does not own, directly or indirectly, any shares of stock or any
other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, Joint Venture,
association or other Person.
2.3. CAPITALIZATION. The authorized capital stock of EPI as
of the date of this Agreement consists of 100,000,000 shares of
common stock, $.001 par value per share, of which 40,433,549
shares are issued and outstanding, and 100,000,000 shares of
preferred stock, $1.00 par value per share ("EPI Preferred"), of
which 1,049,000 shares are issued and outstanding. Following the
Proposed Stock Split and other transactions contemplated hereby,
the authorized capital stock of EPI will consist of 100,000,000
shares of common stock, $.01 par value per share, of which
4,043,354 shares will be issued and outstanding, and 100,000,000
shares of Preferred Stock, $1.00 par value per share, none of
which will be outstanding. There are no outstanding options,
warrants, calls, puts, commitments and other rights to purchase,
or securities or other rights convertible or exchangeable
-2-
<PAGE>
into, capital stock of EPI. All securities issued or issuable by
EPI have been paid for and delivered in accordance with the terms
of applicable agreements or instruments, duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto and are
not subject to personal liability by reason of being such
holders; none of such securities were issued in violation of the
preemptive rights of any holder of any security of EPI or any
similar rights granted by EPI or Applicable Law. Schedule 2.3
also sets forth the anticipated stock ownership of EPI following
the Proposed Stock Split. No person has any rights to require or
join in the registration of any securities of EPI.
2.4. AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. EPI has
the corporate power and authority to conduct the business and
activities conducted by it and to own or lease the assets owned
or leased by it. EPI, GD/JD and Northport, as applicable, each
has the corporate power and authority (subject to the approval of
the shareholders of EPI as set forth in Section 7.1) to execute
and deliver this Agreement and all other documents required to be
executed and delivered by EPI, GD/JD and Northport, as
applicable, hereunder, to consummate the transactions hereby
contemplated, and to take all other actions required to be taken
by such party pursuant to the provisions hereof. This Agreement
and all other documents required to be executed and delivered by
EPI hereunder have been duly authorized by all corporate action
necessary on the part of EPI, GD/JD and Northport, as applicable,
(subject to the approval of the shareholders of EPI as set forth
in Section 7.1) and have been duly, or will when executed and
delivered be duly, executed and delivered by EPI and the Selling
Shareholders, as applicable and constitute the legal, valid and
binding obligations of such party, enforceable against such party
in accordance with their terms. Neither the execution nor the
delivery of this Agreement or any other documents required to be
executed and delivered by EPI or the Selling Shareholders
hereunder or the consummation of the transactions contemplated
hereby (i) conflicts with or constitutes any violation or breach
of the Certificate of Incorporation or the Bylaws of EPI or such
Selling Shareholders; (ii) constitutes any violation or breach
of, or gives any other Person any rights (including any right of
acceleration, termination or cancellation) under, any EPI
Contract or other document or agreement to which EPI is a party,
the violation of which, in the aggregate, could reasonably be
expected to have a Material Adverse Effect; (iii) constitutes a
violation of any Order or Applicable Law; or (iv) will result in
the creation of any Lien on any of the assets or properties of
EPI or the Selling Shareholders. None of the Selling
Shareholders is suffering under any legal disability which would
prevent him, her or it from executing, delivering or performing
the obligations hereunder or consummating the transactions
contemplated hereby or made such execution, delivery, performance
or consummation verbal or subject to necessary ratification, and
no signature or consent of any third party is necessary in
connection therewith for the transactions contemplated hereby to
be binding upon and enforceable against the Selling Shareholders
and their property.
2.5. NO UNDISCLOSED LIABILITIES. EPI does not have any
Liabilities that, in the aggregate, reasonably could be
anticipated to exceed $5,000 except for legal, accounting, and
similar transaction costs incurred in connection with this
Agreement or transactions contemplated hereby.
2.6. TAXES. All Taxes levied, assessed, or imposed upon EPI
have been duly and freely paid. All filings, returns, and
reports with respect to Taxes required by any foreign or domestic
law or regulation to be filed by EPI on or prior to the date
hereof have been duly and timely filed, except where such
failures to file, in the aggregate, could not reasonably be
anticipated to result in EPI's payment of in excess of $5,000 for
periods prior to December 31, 1997. There are no agreements,
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waivers or other arrangements (oral or written) currently in
force providing for extensions of time with respect to the
assessment or collection of unpaid Taxes, nor, are there any
actions, suits, proceedings, inquiries, investigations or claims
of any nature or kind whatsoever now pending or, to the Knowledge
of EPI, threatened, against EPI with respect to any such returns
or reports, or any such Taxes, or any matters under discussion
with any federal, state, county, local or other authority
relating to Taxes.
2.7. PROPERTY. EPI has no material assets.
2.8. TRANSFERRED SHARES. Immediately prior to and at the
Closing and following the Proposed Stock Split, the Selling
Shareholders shall be the sole and lawful owner of the shares set
forth beside each such shareholder's name identified as
"Transferred Shares" in Schedule A hereto, representing 2,362,282
shares or approximately 58% of the outstanding shares of EPI at
Closing. On the Closing Date, the Selling Shareholders shall
hold all Transferred Shares free and clear of all liens, and
covenants or adverse claims of any kind or character. Each of
the Selling Shareholders has full records and beneficial
ownership of the number of shares of EPI Common set forth on
Schedule A. There are no written instruments, buy-sell
agreements or other agreements by and between or among EPI, any
EPI Subsidiary or any of the Selling Shareholders, whether or not
EPI is a party thereto, imposing any restrictions upon the
transfer prohibiting the transfer of or otherwise pertaining to
Transferred Shares or the ownership thereof.
2.9. CONTRACTS. EPI is not a party to any material
contract. At or prior to Closing, EPI shall cancel all contracts
other than those specifically designated by Buyer to continue
following the Closing.
2.10. LITIGATION. There is no claim or Proceeding, in each
case domestic or foreign, pending or, to the Knowledge of EPI,
threatened against, or involving the properties or business of
EPI which (a) questions the validity of the issuance of the
capital stock of EPI, this Agreement or any action taken or to be
taken by EPI pursuant to or in connection with this Agreement; or
(b) could otherwise reasonably be anticipated to have a Material
Adverse Effect.
2.11. GOVERNMENTAL PERMITS. EPI does not own, hold or
possess any Governmental Permits.
2.12. COMPLIANCE WITH LAWS. Except for any violations of
Applicable Law arising from EPI's failure to timely file its
Annual Report on Form 10-K for its fiscal year ended August 31,
1997 (which remains unfiled). EPI has complied with Applicable
Law and Orders of any Governmental Authority having jurisdiction
over it or its operations, including, but not limited to, all
rules or regulations regulating, if applicable, zoning, fair and
equal employment practices, the safety of the workplace, the
discharge of materials into the Environment or otherwise relating
to the protection of the Environment, antitrust, anti-monopoly or
anti-competitive activities, wages, hours, collective bargaining
and the payment of withholding and social security taxes except
to the extent that such non-compliance or partial compliance
could not reasonably be anticipated to have a Material Adverse
Effect. EPI has not received any written notice or, to its
Knowledge, oral notice from any Person to the effect that, or
otherwise been advised that, EPI is not in compliance with any
Applicable Law, ordinance, regulation, building or zoning law,
except to the extent that such non-compliance or partial
compliance could not reasonably be anticipated to have a Material
Adverse Effect, and EPI has no reason to anticipate that any
existing circumstances are likely to result in a violation of any
law, statute,
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ordinance or regulation, the non-compliance or partial compliance
with which could reasonably be anticipated to have a Material
Adverse Effect.
2.13. EMPLOYEE PLANS. EPI does not maintain, or during the
three year period preceding the date hereof has not maintained,
any "employee benefit plan," as such term is defined in section
3(3) of ERISA, whether or not subject to ERISA, or any bonus,
incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock appreciation,
stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan,
program, arrangement, agreement, policy or understanding, whether
written or unwritten, that provides or may provide benefits or
compensation in respect of any employee or former employee of EPI
or the beneficiaries or dependents of any such employee or former
employee (such employees, former employees, beneficiaries and
dependents collectively, the "EPI Employees") or under which any
EPI Employee is or may become eligible to participate or derive a
benefit, or any other plan which exists to benefit or compensate
employees, (collectively, the "EPI Plans").
2.14. FINDER'S FEES. EPI has not taken any action which
would impose any obligation or liability to any person for
finder's fees, agent's commissions or like payments in connection
with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.15. DIRECTORS, OFFICERS AND EMPLOYEES. Schedule 2.15 sets
forth a list of all directors, officers or managers of EPI.
Except as set forth on Schedule 2.15, EPI does not have any
outstanding loans or extension of credit to, or any contracts,
agreements or understandings with, any executive officer or
director or member of their immediate family or any person with
which any such person has a material relationship.
2.16. BANK ACCOUNTS, ETC. Schedule 2.16 sets forth a list of
all (i) bank accounts of EPI and the persons authorized to draw
thereon and the balances thereof as of the date hereof; (ii) safe
deposit boxes of EPI and the persons who have access thereto; and
(iii) powers of attorney for tax purposes or otherwise and a
summary of the terms thereof.
2.17. REAL PROPERTY. EPI does not own or lease, directly or
indirectly, or have any fixed or contingent obligation to
acquire, any interest in any real property that is used in any
manner in connection with its respective business.
2.18 EMPLOYEES, LABOR MATTERS, ETC. There are no labor
disputes currently subject to any grievance procedure,
arbitration or litigation and there is no petition pending or, to
the Knowledge of EPI, threatened with respect to any employee
employed in the operation of the business of EPI that could
reasonably be anticipated to have a Material Adverse Effect. To
the Knowledge of EPI, EPI has complied with all provisions of
Applicable Law pertaining to the employment of employees,
including, without limitation, all such Applicable Law relating
to labor relations, equal employment, fair employment practices,
entitlement, prohibited discrimination or other similar
employment practices or acts, except to the extent that any
failure so to comply, individually or together with all other
such failures, has not had or resulted in, or could not
reasonably be anticipated to have or result in, a Material
Adverse Effect.
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2.19. HSR. Immediately prior to the Closing, the "Person"
(as defined in the regulations issued by the Federal Trade
Commission under the HSR Act) within which EPI is included will
have total assets (as shown on its last regularly prepared
balance sheet) and annual net sales (as shown on its last
regularly prepared annual statement of income and expenses) of
less than $100,000,000.
2.20 RECORDS. The respective minute books, comment books of
account, stock record books and other records of EPI, all of
which have been or will be made available to Buyer, contain
accurate and complete records of all corporate actions of the
respective stockholders and boards of directors (and committees
thereof) during the periods of time in which such minute books
were maintained.
2.21. FURTHER REPRESENTATION. No representation or warranty
of EPI contained in this Agreement contains any untrue statement
of, or omits to state, a material fact necessary in order to make
the statements made herein, in light of the circumstances under
which they are made, not misleading. Copies of all documents
listed in the Schedules and furnished or given, or to be
furnished or given, by EPI to Buyer or Buyer's agents are or will
be true, complete and genuine.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF TTI
TTI and AMJ hereby represent and warrant, jointly and
severally, to EPI and the Selling Shareholders that as of the
date hereof:
3.1. ORGANIZATION; GOOD STANDING. TTI and AMJ are each a
corporation duly organized, validly existing and in good standing
under the laws of the States of Texas and Delaware, respectively,
and are qualified as a foreign corporation in all jurisdictions
in which it is required to qualify as a result of the conduct of
its business or ownership of its properties and where the failure
to be so qualified could reasonably be anticipated to have a
Material Adverse Effect. TTI and AMJ have delivered to EPI and
the Selling Shareholders complete and correct copies of their
Articles of Incorporation and Bylaws as in effect on the date
hereof.
3.2. AUTHORITY; ENFORCEABILITY; NON-CONTRAVENTION. TTI and
AMJ each have the corporate power and authority to execute and
deliver this Agreement and all other documents required to be
executed and delivered by Buyer hereunder, to consummate the
transactions hereby contemplated, and to take all other actions
required to be taken by Buyer pursuant to the provisions hereof.
This Agreement and all other documents required to be executed
and delivered by Buyer hereunder have been duly authorized by all
corporate action necessary on the part of Buyer and have been
duly, or will when executed and delivered be duly, executed and
delivered by Buyer and constitute the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance
with their terms. Neither the execution nor the delivery of this
Agreement or any other documents required to be executed and
delivered by Buyer hereunder or the consummation of the
transactions hereby contemplated by Buyer (i) conflicts with or
constitutes any violation or breach of the Articles of
Incorporation or the Bylaws of either Buyer; (ii) constitutes any
violation or breach of, or gives any other Person any rights
(including any right of acceleration, termination or
cancellation) under, any contract or other document or agreement
to which either Buyer is a party, the violation of which, in the
aggregate, could reasonably be expected to have a Material
Adverse Effect; (iii) constitutes a violation of any Order or
Applicable Law; or (iv) will result in the creation of any Lien
on any of the assets
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or properties of either Buyer. There are no consents, approvals,
permissions, licenses, authorizations or other requirements
described by any Applicable Law or by contract required to be
obtained or filed by either Buyer to permit the consummation by
either Buyer of the Transactions contemplated herein.
3.3. FINDER'S FEES. Buyer has not taken any action which
would impose any obligation or liability to any person for
finder's fees, agent's commissions or like payments in connection
with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.4. HSR. Immediately prior to the Closing, the "Person"
(as defined in the regulations issued by the Federal Trade
Commission under the HSR Act) within which Buyer is included will
have total assets (as shown on its last regularly prepared
balance sheet) and annual net sales (as shown on its last
regularly prepared annual statement of income and expenses) of
less than U.S. $ 100,000,000.
3.5. INVESTMENT INTENT. Buyer is acquiring the Transferred
Shares and the Warrant (and any Warrant Shares issued or issuable
upon the exercise thereof) purchased by it for its own account,
for investment and not with a view to, or for sale in connection
with, a distribution of such shares of EPI Common or any part
thereof. Buyer understands that the shares of EPI Common acquired
hereunder have not been, and will not be, registered under the
Securities Act of 1933, as amended, or under any state securities
laws, and are being offered or sold in reliance upon federal and
state exemptions for transactions not involving any public
offering. Buyer is a sophisticated investor with knowledge and
experience in business and financial matters and is experienced
in the valuation of businesses similar to EPI. Buyer has
received information concerning EPI and has been afforded, prior
to the Closing Date, the opportunity to ask questions of, and
receive answers from, EPI and the Selling Shareholders and to
obtain any additional information, to the extent available to EPI
without unreasonable effort or expense, necessary for Buyer to
make an informed investment decision with regard to the
Transferred Shares, the Warrant and the Warrant Shares.
3.6. FURTHER REPRESENTATION. No representation or warranty
of Buyer contained in this Agreement contains any untrue
statement of, or omits to state, a material fact necessary in
order to make the statements made herein, in light of the
circumstances under which they are made, not misleading. Copies
of all documents listed in the Schedules and furnished or given,
or to be furnished or given, by Buyer to EPI, the Selling
Shareholders or their respective agents are or will be true,
complete and genuine.
ARTICLE 4. COVENANTS OF EPI AND THE SELLING SHAREHOLDERS
EPI and the Selling Shareholders hereby agree to perform as
follows:
4.1. OPERATION PRIOR TO THE CLOSING DATE. Subject to the
provisions of Section 4.2, from the date hereof through the
Closing Date:
(a) EPI shall not engage in any practice, take any
action or enter into any transaction other than in the
customary and ordinary course of business without giving
prior notice to TTI.
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<PAGE>
(b) EPI shall use its best efforts to (i) pay and
perform all of its debts, liabilities and obligations
consistent with past practices, except to the extent being
contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been established,
(ii) comply in all respects with Applicable Law, except, in
each case, where the failure to so perform or comply could
not reasonably be anticipated to have a Material Adverse
Effect. Except as herein, EPI shall (i) not take any
action, and shall endeavor in good faith not to permit any
event to occur, which would cause or constitute a material
breach, or would, if such action or event had occurred prior
to the date of this Agreement, have caused or constituted a
material breach, of any of the representations and
warranties set forth in Article 2 hereof; (ii) in the event
of, and promptly after the occurrence of, or promptly after
becoming aware of the occurrence of or the impending or
threatened occurrence of, any event which would cause or
constitute a material breach or would, if it had occurred
immediately prior to the date hereof, have caused or
constituted a material breach of any of the representations
and warranties set forth in Article 2, give notice thereof
to Buyer; and (iii) use its best efforts to prevent or
promptly to remedy such breach.
(c) Except as contemplated herein, EPI shall not (i)
repurchase, declare or pay any dividends, (ii) make any
other distributions consisting of cash or marketable
securities or any combination thereof, or (iii) issue, sell
or agree to sell any shares of its capital stock, or any
securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe for, any shares
of its capital stock.
(d) EPI shall cancel all EPI contracts and extinguish
any liquidated or contingent Liabilities such that, at the
Closing, the combined total Liabilities of EPI shall not
exceed $5,000.
4.2. NO SOLICITATION. From and after the date hereof,
neither the Selling Shareholders nor EPI will, nor will they
permit any of their respective officers, directors, employees,
agents and other representatives (collectively,
"Representatives") to directly or indirectly, solicit, initiate
or encourage (including by way of furnishing information) any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal (as
defined herein) from any Person or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal.
EPI and the Selling Shareholders shall immediately cease and
cause to be terminated any existing solicitation, discussion or
negotiation with any parties conducted heretofore by such party
or any Representatives with respect to any of the foregoing. To
the extent permitted by Applicable Law, EPI and the Selling
Shareholders will promptly notify Buyer of any such discussion or
negotiations, requests for such information or the receipt of any
Acquisition Proposal, including (a) the identity of the person or
group engaging in such discussions or negotiations, requesting
such information or making such Acquisition Proposal and (b) the
material terms and conditions of any Acquisition Proposal. As
used in this Agreement, "Acquisition Proposal" shall mean any
proposal or offer considered for a tender or exchange offer, a
merger, consolidation or other business combination involving EPI
or any proposal to acquire in any manner a substantial equity
interest in or businesses or asset of EPI. Notwithstanding the
foregoing, nothing in this Section 4.2 shall prohibit the Board
of Directors of EPI from furnishing information to or entering
into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal to acquire EPI pursuant
to a merger, consolidation, share exchange, purchase of a
substantial portion of the assets, business combination or some
other
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transaction, if, and only to the extent that (A) the Board of
Directors determines in good faith that such action is required
for the Board of Directors to comply with its fiduciary duty to
its stockholders, (B) prior to furnishing such information to, or
entering into discussions with or negotiations with, such person
or entity, to the extent permitted by Applicable Law, EPI
provides notice to Buyer to the effect that it is furnishing
information to, or entering into discussions or negotiations
with, such person or entity, and (C) to the extent permitted by
Applicable Law, EPI keeps Buyer informed, on a current basis, of
the status of any such discussions or negotiations.
ARTICLE 5. ADDITIONAL AGREEMENTS.
5.1. SHAREHOLDERS MEETING; PROXY STATEMENT.
(a) EPI shall take all action necessary in
accordance with Applicable Law and in accordance with its
certificate or articles of incorporation and bylaws to
convene a meeting of its respective stockholders as promptly
as practicable after the preparation of the Proxy Statement
(defined below), to consider and vote upon the approval of
this Agreement and transactions contemplated hereby.
Specifically, EPI shall seek the approval of its
shareholders for the following transactions (collectively,
the "Requested Approvals"): (i) the Proposed Stock Split and
adjustments to authorize capital, upon the terms set forth
in Section 5.7 hereof, (ii) the sale of the capital stock of
Gulf Coast Cooling Tower Service, Inc., a wholly owned
subsidiary of EPI ("GCCTS") to Davis in exchange for all of
his shares of EPI Preferred, (iii) the sale of the capital
stock of Fire Zap, Inc. ("FZI") to H. Wayne Franklin in
exchange for all of his shares of EPI Preferred, (iv) the
proposed amendment to its Certificate of Incorporation to
change its name from "Environmental Plus, Incorporated" to
"TTI Industries, Incorporated", and (v) the proposed
issuance of the Warrant.
(b) EPI shall prepare and file with the
Securities and Exchange Commission ("SEC") as soon as
practicable a proxy statement (the "Proxy Statement") with
regard to the Requested Approvals and any other matters
desired to be submitted for the approval of the shareholders
of EPI, and the Parties shall take such other actions as EPI
may reasonably request in connection with the preparation of
such Proxy Statement none of the information included by any
Party shall contain any material misstatement of fact or
omit to state and material fact or any facts necessary to
make these statements contained therein not misleading.
5.2. ACCESS. Each of Buyer (the "Reviewing Party") and
their respective officers, employees and representatives
(including independent public accountants, investment bankers,
environmental consultants and counsel), as applicable, will at
all reasonable times be permitted reasonable access to the
corporate offices and other facilities of EPI (the "Disclosing
Party"); will be permitted to make copies of or abstracts from
all of the books and records, financial and operating data and
other information of the Disclosing Party; and will be permitted
to discuss the affairs and accounts of the Disclosing Party with
the directors, officers, employees, counsel, and accountants of
the Disclosing Party. In the event the transactions contemplated
hereby should not close for any reason, the Reviewing Party
agrees that it will promptly return to the Disclosing Party all
such documents (including copies thereof) furnished by or on
behalf of the Disclosing Party to the Reviewing Party and its
representatives and the Reviewing Party shall hold in confidence
and shall not use or disclose to any
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third party any information concerning the Disclosing Party
obtained from such documents or otherwise in connection with the
transactions contemplated by this Agreement unless (a) such
information was at the time of its use or disclosure to any third
party by the Reviewing Party in the public domain other than as a
result of any breach of this provision by the Reviewing Party or
(b) such disclosure is required by Applicable Law.
5.3. REASONABLE EFFORTS. Each of the parties agrees to use
its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by
this Agreement, including (a) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary
registrations and filings (including filings with Governmental
Authorities) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Authority; (b) the
obtaining of all necessary consents, approvals or waivers from
third parties, the absence of which, in the aggregate, could
reasonably be anticipated to have a Material Adverse Effect; (c)
the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby including
seeking to have any stay or temporary restraining order entered
by any court or other Governmental Authority vacated or reversed;
and (d) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by this
Agreement.
5.4. PUBLIC ANNOUNCEMENTS. Buyer and EPI will consult with
each other before issuing any press release with respect to the
transactions contemplated by this Agreement, and shall not issue
any such press release without the prior consent of the other,
which consent shall not be unreasonably withheld or delayed,
unless otherwise required under Applicable Law.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each Party shall give
to the other prompt notice of: (i) any notice of, or other
communication relating to, a default or event that, with notice
or lapse of time or both, would become a default, received
subsequent to the date of this Agreement and prior to the Closing
under any note, license, agreement or other instrument or
obligation other than in respect of defaults which, individually
or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect; (ii) from and after the Proxy
Mailing Date, prompt notice of the occurrence of any event that
would require the information regarding EPI contained in the
Proxy Statement to be amended or supplemented under applicable
securities laws; and (iii) any Material Adverse Effect or the
occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to
result in a Material Adverse Effect. Each party shall give the
other prompt notice of any written notice or other written
communication from any third party alleging that the consent of
such third party is or may be required in connection with the
transactions contemplated by this Agreement.
5.6. RESIGNATION OF DIRECTORS OF EPI. EPI shall deliver to
Buyer, except as otherwise requested by Buyer, the written
resignation of all directors of EPI effective as of the Closing.
5.7. PROPOSED STOCK SPLIT. Functional Shares prior to the
Closing, EPI shall take such action as is necessary to cause a
reverse stock split of its shares of EPI Common, pursuant to
which
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each outstanding share of EPI Common will be exchanged for 0.1
shares of EPI Common; following the Proposed Stock Split,
fractional EPI Shares shall be repurchased by EPI at the Per
Share Purchase Price.
5.8. EXPENSES. EPI shall pay any and all expenses incurred
in connection with the Transactions contemplated hereby to the
extent and only to the extent that such expenses do not exceed
the EPI Proceeds from the sale of the Warrant or any proceeds
from the exercise of the warrant to purchase Warrant Shares. Any
other expenses shall be the joint and several responsibility of
the Selling Shareholders, and the Selling Shareholders shall
discharge all of such obligations prior to Closing.
5.9. RETIREMENT OF PREFERRED SHARES; SALE OF GCCTS AND FZI.
Prior to the Closing, EPI shall take such action as is necessary
to cause the cancellation of all outstanding shares of EPI
Preferred. In connection with such cancellation, EPI shall
transfer to Davis, and Davis shall accept as consideration for
the cancellation of shares of EPI Preferred held by Davis, the
capital stock of GCCTS that was acquired by EPI from Davis in
1996. In addition, EPI shall transfer to H. Wayne Franklin as
consideration for the cancellation of the shares of EPI Preferred
held by him, the capital stock of FZI that was acquired by EPI
from him in 1996.
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING BY BUYER
The obligations of Buyer to consummate the Transactions are
subject to fulfillment, or written waiver signed by Buyer, of
each of the following conditions precedent on or prior to the
Closing Date.
6.1. REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty made by EPI and the Selling
Shareholders shall be true and correct (a) in all respects (with
regard to representation and warranties subject to materiality or
Material Adverse Effect qualifications) and (b) in all respects
other than the failure of which could not reasonably be
anticipated to have a Material Adverse Effect (with regard to
representations and warranties not subject to materiality or
Material Adverse Effect qualifications), in each case when made,
and shall be true and correct in all such respects as if
originally made on and as of the Closing Date.
6.2. EPI DOCUMENTS. EPI shall have delivered the following
to Buyer in form and substance reasonably satisfactory to Buyer
and its counsel:
(a) A certificate signed by the chief executive
officer of EPI, on behalf of and in his capacity as an
officer of EPI, confirming, on and as of the Closing Date,
(i) the satisfaction of the conditions contained in Section
6.1 pertaining to EPI (ii) that the Liabilities of EPI as of
such date do not exceed $5,000, and (iii) EPI's compliance
in all material respects with the applicable covenants set
forth in Articles 4 and 5.
(b) The Warrant.
(c) An opinion of counsel in a form reasonably
acceptable to Buyer.
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6.3. SELLING SHAREHOLDER DOCUMENTS. The Selling
Shareholders shall have delivered the following to Buyer in form
and substance reasonably satisfactorily to Buyer and its counsel:
(a) A certificate signed by each Selling Shareholder
(or an authorized representative thereof) confirming, all
and as of the Closing Date, (i) the satisfaction of the
conditions in Section 6.1 pertaining to the Selling
Shareholders (ii) that the Liabilities of EPI as of such
date do not exceed $5,000, and (iii) the Selling
Shareholder's compliance in all material respects with the
applicable covenants set forth in Articles 4 and 5.
(b) Undated resignations of all officers and directors
of EPI, to be effective at Closing.
(c) Standard investment letters by all persons holding
shares of EPI Common issued in transactions that were not
registered under the Securities Act of 1933 (collectively
referred to as the "Restricted Securities").
(d) Unconditional releases executed by each Selling
Shareholder releasing EPI from any obligations of any kind
to Selling Shareholders.
(e) A Shareholder's Agreement in the form attached
hereto as Exhibit B between the holders of all Restricted
Securities.
(f) A certificate signed by each Selling Shareholder
that, as of the Closing Date and to the best of their
knowledge, the shareholders of EPI are substantially the
same as the list of shareholdings and shareholders groups
attached hereto at Schedule 2.3 (designating therein
shareholder's holding Restricted Securities) dated no less
than 30 days prior to the Closing Date.
(g) Certificates representing an aggregate of
2,362,282 shares of EPI Common (following the Proposed Stock
Split), representing 58% of the then outstanding shares of
EPI Common, duly endorsed in blank or accompanied by duly
executed instruments of transfer, transferring to TTI good
title to the Transferred Shares, free and clear of all
liens.
6.4. EPI OBLIGATIONS PERFORMED. All obligations of EPI to
be performed hereunder through and including the Closing Date
shall have been performed in all material respects.
6.5. SATISFACTION OR WAIVER OF CONDITIONS PRECEDENT OF EPI.
Each of the conditions precedent to the obligations of EPI set
forth in Article 7 shall have been satisfied or otherwise waived
by EPI.
6.6. BUYER'S INVESTIGATION.
(a) The investigation by Buyer and its representatives
in connection with the transactions contemplated by this
Agreement shall not have caused Buyer or its representatives
to become aware of any facts or circumstances which relate
to the business,
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operations, assets, properties, liabilities, financial
condition, results of operation or affairs of EPI that, in
the good faith business judgment of Buyer, either (i)
represent a material adverse change or state of facts that
could reasonably be expected to result in a material adverse
change in the business, operations, assets, properties or
prospects of EPI from that described in Article 2 hereof, or
(ii) represent in the aggregate previously undisclosed
Liabilities that could reasonably be anticipated to result
in Damages in excess of $5,000.
(b) Buyer may deliver, based upon its review of
information delivered to or discovered by it on or prior to
the earlier of (i) the date on which the Proxy Statement is
to be mailed to the shareholders of EPI and Buyer ("Proxy
Mailing Date") or (ii) January 31, 1998, written notice of
its election to terminate this Agreement as a result of the
failure to satisfy the conditions in clause (a) above,
specifying in reasonable detail the reason therefor, and
Buyer's failure to deliver such termination notice on or
prior to such date shall constitute waiver of this condition
by Buyer.
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING BY EPI AND THE
SELLING SHAREHOLDERS.
The obligation of EPI to consummate the transactions
contemplated hereby is subject to fulfillment, or written waiver
signed by EPI and the Selling Shareholders, of each of the
following conditions precedent on or prior to the Closing Date.
7.1. STOCKHOLDER APPROVAL. The Required Approvals shall
have been approved by the requisite vote of the holders of the
EPI Shares in accordance with Applicable Law and its Certificate
of Incorporation and Bylaws.
7.2. REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty made by Buyer shall be true and
correct (a) in all respects (with regard to representations and
warranties subject to materiality or Material Adverse Effect
qualifications) and (b) in all respects other than the failure of
which could not reasonably be anticipated to have a Material
Adverse Effect (with regard to representations and warranties not
subject to materiality or Material Adverse Effect
qualifications), in each case when made and shall be true and
correct in all such respects as if originally made on and as of
the Closing Date.
7.3. BUYER DOCUMENTS. Buyer shall have executed and
delivered to EPI in form and substance reasonably satisfactory to
EPI and its counsel:
(a) A certificate of the chief executive officer of
Buyer, on behalf of and in his respective capacity as an
officer of Buyer, confirming, on and as of the Closing Date,
the satisfaction of the condition contained in Section 7.2
and the compliance by Buyer in all material respects with
the applicable covenants set forth in Articles 4 and 5.
(b) An investment representation letter regarding
Buyer's purchase of the Transferred Shares, the Warrant and
any Warrant Shares.
-13-
<PAGE>
(c) The Shareholders Agreement, executed by Buyer.
(d) The Shareholder Proceeds, payable as follows:
(i) Upon the execution hereof, $10,000;
(ii) Upon the delivery of the closing documents
to the Escrow Holder (defined below) by the
Selling Shareholders and EPI, $50,000;
(iii) No less than 10 days preceding the Closing,
$45,000.
Joel Held, Esq. of Arter & Hadden, LLP shall act as the "Escrow
Holder" for the funds and the documents to be delivered prior to
Closing. Escrow Holder shall be indemnified by all parties
hereto in and acting upon the joint written instructions of the
parties hereto with regard to the release of any documents or
funds, and Escrow Holder shall not have any obligation to release
any documents or funds so deposited without the written approval
of all parties hereto. Escrow Holder shall be fully indemnified
by all parties (jointly and severally) hereto for all actions
taken in release upon such joint instructions or otherwise.
Notwithstanding the preceding sentence, Escrow Holder shall be
deemed to have fully discharged his duties hereunder upon the
return of all documents and/or funds held hereunder to the Party
delivering the same.
(e) The EPI Proceeds, which shall be deposited
with the Escrow Holder concurrent with the delivery of the
installment to be paid pursuant to (d)(iii) above.
7.4. SATISFACTION OR WAIVER OF CONDITIONS PRECEDENT OF
BUYER. Each of the conditions precedent to the obligations of
Buyer set forth in Article 6 shall have been satisfied or
otherwise waived by EPI.
7.5. BUYER OBLIGATIONS PERFORMED. All obligations of Buyer
to be performed hereunder through and including the Closing Date
shall have been performed in all material respects.
ARTICLE 8. TERMINATION
8.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and may be abandoned at any time prior to the Closing
Date, before or after the approval of this Agreement by the
shareholders of EPI and Buyer, by the mutual consent of Buyer and
EPI.
8.2. TERMINATION BY EPI OR THE SELLING SHAREHOLDERS. This
Agreement may be terminated and the Transactions may be abandoned
by EPI if the closing conditions set forth in Article 7 shall not
have been satisfied in full or waived on or before April 9, 1998
or the date set forth therein.
8.3. TERMINATION BY BUYER. This Agreement may be terminated
by Buyer if the closing conditions set forth in Article 7 shall
not have been satisfied in full or waived on or before April 9,
1998 or the date set forth therein.
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<PAGE>
8.4. TERMINATION RESULTING FROM ACQUISITION PROPOSALS. In
the event that any Person shall have made an Acquisition
Proposal, and the Board of Directors of EPI approves the
execution of an agreement relating thereto or recommends to the
stockholders of EPI the acceptance of any such acquisition
proposal, then the Selling Shareholders shall promptly, but in no
event later than two days after the date of such Board approval
or recommendation, pay to Buyer a fee of $5,000 as liquidated
damages, this Agreement shall terminate and the parties shall
have no further liability or obligations hereunder.
8.5. EFFECT OF TERMINATION. In the event of the termination
of this Agreement and abandonment of the Transactions (other than
as provided in Section 8.4 above, in which case the payment of
the amount specified therein shall be deemed to be liquidated
damages for any claims under this Agreement arising from a
termination resulting from an Acquisition Proposal), this
Agreement shall terminate and the parties shall have no
liabilities or obligations to each other hereunder, except as
provided in Section 5.2; provided that nothing contained herein
shall relieve any party of liability for fraud or willful breach
of this Agreement.
ARTICLE 9. DEFINITIONS
9.1. DEFINITIONS. The terms used in this Agreement have the
respective meanings specified or referred to in this Article 9:
"Acquisition Proposal" shall have the meaning set forth in
Section 4.2.
"Applicable Law" means any federal, state, local, municipal,
foreign or other law, statute, legislation, act, constitution,
ordinance, code, treaty, rule, regulation or guideline applicable
to or against EPI or Buyer.
"Authorization" means any license, permit, authorization,
franchise, grant, registration, certificate, consent and waiver
awarded to EPI or Buyer by a Governmental Authority which is
used, useable or held for use in or in conjunction with or
otherwise associated with the business of EPI, or Buyer.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Dallas, Texas are
authorized or required to close.
"Close" or "Closing" means the consummation of the
Transactions as provided for in Section 1.3.
"Closing Date" means the date on which the Closing shall
occur as provided for in Section 1.3.
"Damages" means all losses,, liabilities, settlement
payments, awards, judgments, fines, penalties, damages,
deficiencies, court costs, costs of arbitration or administrative
proceedings, reasonable attorneys' fees and other reasonable
expenses and costs.
-15-
<PAGE>
"Disclosing Party" shall have the meaning set forth in
Section 5.2.
"Environment" means the soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient
air.
"EPI Plans" shall have the meaning set forth in Section 2.
13(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financial Statements" shall have the meaning set forth in
Section 2.5(a).
"FZI" shall have the meaning set forth in Section 5.1(a).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America. The
term "generally accepted accounting principles" shall mean
accounting principles which are (a) consistent with the
principles promulgated or adopted by the Financial Accounting
Standards Board and its predecessors as generally accepted
accounting principles, and (b) such that a certified public
accountant would, insofar as the use of accounting principles is
pertinent, be in a position to deliver an unqualified opinion as
to financial statements in which such principles have been
properly applied.
"GCCTS" shall have the meaning set forth in Section 5.1(a).
"Governmental Authority" means any federal, state, local,
municipal, foreign or other government or any federal, state or
local regulatory authority.
"Governmental Permits" means all licenses, consents,
franchises, permits, privileges, immunities, approvals,
certificates and other authorizations from a Governmental
Authority to EPI or Buyer, as applicable.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Joint Venture" means a joint venture, partnership, limited
liability company or other similar arrangement, whether in
corporate, partnership or other legal form.
"Knowledge" means (a) with respect to an individual
"knowledge" of a particular fact or other matter if such
individual is aware or should reasonably be aware, after due
inquiry, of such fact or other matter; (b) with respect to a
Person (other than an individual) "knowledge" of a particular
fact or other matter if any individual who is serving as a
director or executive officer of such Person has "knowledge" of
such fact or other matter; and (c) with respect to the warranties
made by EPI and the Selling Shareholders that EPI and the Selling
Shareholders based upon a reasonable investigation, believes is
true.
"Liabilities" means damages, obligations, claims, demands,
judgments or settlements of any nature or kind, known or unknown,
fixed, accrued, absolute or contingent, liquidated or
unliquidated, including all costs and expenses (legal, accounting
or otherwise).
-16-
<PAGE>
"Liens" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest or encumbrance against
any assets or properties.
"Material Adverse Effect" means any event or circumstance
which results in or is reasonably likely to result in a material
adverse change in (i) the financial condition, business,
operations, properties or prospects of the specified entity,
other than either general economic changes or regulatory or
competitive changes that affect their industry generally, over
which such entity has no control; (ii) the ability of such entity
to perform its obligations under this Agreement, or (iii) the
validity or enforceability of this Agreement.
"Order" means any order, judgment, injunction, or ruling
issued, made, entered or rendered by any court, administrative
agency or other Governmental Authority or by any arbitrator as to
which EPI or Buyer, is a party.
"Party" means EPI, Buyer or the Selling Shareholders as
applicable.
"Permitted Liens" means deposits under workmen's
compensation, unemployment insurance or social security laws, or
to secure statutory obligations or surety or similar bonds;
government charges or other governmental levies which are not yet
delinquent, or which are being contested in good faith by
appropriate proceedings with adequate reserves in conformity with
GAAP; statutory liens imposed by law incurred in the ordinary
course of business or for obligations not yet due to carriers,
warehousemen, laborers or materialmen; the interest or title of
any lessor and property pursuant to a lease of real property; and
other encumbrances other than those securing monetary obligations
that do not materially and adversely affect the use of property
as heretofore used in the ordinary course of business or
materially detract from the value thereof.
"Person" means any individual, corporation, partnership,
joint venture, estate, trust, cooperative, foundation, union,
syndicate, league, consortium, coalition, committee, society,
firm, company or other enterprise, association, organization or
other entity or Governmental Authority.
"Proceeding" means any suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding).
"Proxy Mailing Date" shall have the meaning set forth in
Section 6.6(b).
"Proxy Statement" shall have the meaning set forth in
Section 5.1(a).
"Representatives" shall have the meaning set forth in
Section 4.2.
"Subsidiary" means any entity in which EPI has the ability
to direct the management or affairs.
"Tax" or "Taxes" means any federal, state, local or foreign
income, sales, excise, real or personal property or other taxes,
assessments, fees, levies, duties, deductions or other charges of
any nature whatsoever (including, without limitation, interest
and penalties) imposed by any Applicable Law.
-17-
<PAGE>
"Transactions" means the (i) purchase and sale of the
Transferred Shares, (ii) purchase and sale of the Warrant Shares,
(iii) the Proposed Stock Split, (iv) the cancellation of shares
of EPI Preferred (v) distribution of shares of GCCTS and FZI, and
(vi) other transactions contemplated by this Agreement.
"TTI" shall have the meaning set forth in the Recitals.
9.2. DEFINED TERMS. In this Agreement, all definitions
shall be equally applicable to both the singular and the plural
forms.
ARTICLE 10. MISCELLANEOUS
10.1. EXPENSES OF THE TRANSACTION. Subject to Section 5.8,
each of EPI, TTI and the Selling Shareholders agrees to pay its
own fees and expenses in connection with this Agreement and the
transactions hereby contemplated, except as otherwise provided
herein.
10.2. FURTHER ASSURANCES. Each of EPI, TTI and the Selling
Shareholders agrees that it will, at any time and from time to
time after the Closing Date, upon the request of the other party,
do, execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged and delivered, all such further acts,
assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably required from time to time in
order to effectuate the provisions and purposes of this
Agreement.
10.3. NOTICES. All notices or other communications required
or permitted hereunder shall be in writing and shall be deemed
given or delivered (a) when delivered personally or by private
courier, (b) when actually delivered by registered United States
mail, return receipt requested, or (c) when sent by telecopy
(provided, however, that, it is telephonically or electronically
confirmed), addressed as follows:
If to Buyer, to:
Terminator Technologies, Incorporated
3838 Oak Lawn, Suite 1000
Dallas, Texas 75219
Attn: Frank Harrison
Phone: (214) 521-8300
Fax: (214) 521-8339
If to EPI, to:
Environmental Plus, Incorporated
Route 1, Box 41
Overton, Texas 75684
Attn: George Davis
Phone: (903) 834-6269
Fax: (903) 834-3943
-18-
<PAGE>
With copy to:
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75202
Attn: Joel Held, Esq.
Phone: (214) 761-4357
Fax: (214) 741-7139
If to Selling Shareholders, to:
J. D. Davenport
Charles White
George Davis
c/o Environmental Plus, Incorporated
Route 1, Box 41
Overton, Texas 75684
Phone: (903) 834-6269
Fax: (903) 834-3943
or such other address as such party may indicate by a notice
delivered to the other parties hereto in the manner herein
provided.
10.4. NO MODIFICATION EXCEPT IN WRITING. This Agreement
shall not be changed, modified, or amended except by a writing
signed by the party to be charged and this Agreement may not be
discharged except by performance in accordance with its terms or
by a writing signed by the party to which performance is to be
rendered.
10.5. ENTIRE AGREEMENT. This Agreement, together with the
Schedules and Exhibits hereto, sets forth the entire agreement
and understanding, and supersedes all prior agreements and
understandings, among the parties as to the subject matter
hereof.
10.6. SEVERABILITY. If any provision of this Agreement or
the application of any provision hereof to any person or in any
circumstances is held invalid, the remainder of this Agreement
and the application of such provision to other persons or
circumstances shall not be affected unless the provision held
invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
10.7. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be
assigned by any party hereto except with the prior written
consent of the other parties. Any purported assignment contrary
to the terms of this Agreement shall be void.
-19
<PAGE>
10.8. PUBLICITY; ANNOUNCEMENTS. Except to the extent
required by law, prior to the Closing Date, all publicity related
to the transactions contemplated hereby shall be subject to the
mutual approval of Buyer and EPI; provided, Buyer and EPI shall
be entitled to disclose the transactions contemplated hereby
without the prior approval of the other, but with prior notice to
the other, to the extent reasonably necessary for Buyer or EPI to
comply with applicable securities laws.
10.9. CHOICE OF LAW. This Agreement shall be deemed to have
been made in, and shall be construed in accordance with the laws
of the State of Texas, and its validity, construction,
interpretation and legal effect shall be governed by the laws of
the State of Texas applicable to contracts entered into and
performed entirely therein.
10.10. CAPTIONS; CONSTRUCTION. The captions appearing in
this Agreement are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope
and intent of this Agreement or any of the provisions hereof. All
uses of the term "including" shall be construed as descriptive
and not a limitation of the item described. All words used herein
shall be construed to be of such gender as the circumstances
require.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement to be effective as of the day and year first above
written.
ENVIRONMENTAL PLUS, INCORPORATED
By: /s/ J. D. DAVENPORT
-------------------------------------
Name: J. D. Davenport
-----------------------------------
Title: President
----------------------------------
TERMINATOR TECHNOLOGIES, INCORPORATED
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
AMJ RESOURCES, INC.
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SELLING SHAREHOLDERS:
--------------------
GD/JD, INC.
By: /s/ GEORGE DAVIS
-------------------------------------
Name: George Davis
-----------------------------------
Title: President
----------------------------------
NORTHPORT MANAGEMENT GROUP, INC.
By: /s/ J. D. Davenport
-------------------------------------
Name: J. D. Davenport
-----------------------------------
Title: President
----------------------------------
/s/ GEORGE DAVIS
----------------------------------------
GEORGE DAVIS
/s/ J. D. DAVENPORT
----------------------------------------
J. D. DAVENPORT
/s/ CHARLES WHITE
----------------------------------------
CHARLES WHITE
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<PAGE>
SCHEDULE A
------------
SCHEDULE OF TRANSFERRED SHARES
SHAREHOLDER
PROCEEDS TO BE
TRANSFERRED RECEIVED (AT
PRE-SPLIT SHARES $0.04445 PER
SELLING SHAREHOLDERS SHARES (POST-SPLIT SHARE)
- ------------------------- ---------- ------------- --------------
George Davis 11,259,570 1,125,957 $ 50,048.79
J. D. Davenport / 9,542,470 954,247 42,416.27*
Northport Management
Group, Inc.
Charles White 2,480,780 248,078 11,027.07*
GD/JD, Inc. 340,000 34,000 1,511.30*
---------- ----------- --------------
TOTAL 23,622,820 2,362,282 $105,003.43
* Pursuant to a separate agreement among the Selling
Shareholders, George Davis is to be paid all proceeds
payable with regard to the sale of the Transferred Shares
owned by him, Charles White and GD/JD, Inc., and $7,415.13
of the proceeds payable to J. D. Davenport / Northport
Management Group, Inc. with regard to the sale of the
Transferred Shares owned by them (representing a total
consideration to George Davis of $70,002.29).
<PAGE>
SCHEDULE 2.3
------------
ANTICIPATED STOCK OWNERSHIP OF EPI
----------------------------------
SHAREHOLDER GROUP NUMBER OF SHARES
(POST-SPLIT)
- ---------------------------------- -----------------
1. Publicly Held (free trading) 373,659
2. Buyer 2,362,282
3. Selling Shareholders 406,201
4. Baron / Chase 150,000
5. Wayland McMullen 7,168
6. B. Miller 28
7. Transferees from original 34 734,016
million
<PAGE>
SCHEDULE 2.15
-------------
LIST OF DIRECTORS, OFFICERS AND EMPLOYEES
DIRECTORS OFFICERS / EMPLOYEES
---------- --------------------
J. D. Davenport J. D. Davenport
(President)
George Davis George Davis
(Secretary, Treasurer and
Chairman)
Charles White Charles White
(Vice President)
<PAGE>
SCHEDULE 2.16
-------------
BANK ACCOUNTS
Account No. 1021966
First State Bank
P.O. Tower 70
Overton, Texas 75684
Authorized Signatories: George Davis and Jean Davis
<PAGE>
APPENDIX C
Amended and Restated Articles of Incorporation
of Environmental Plus, Incorporated
----------------------------------------------
ARTICLE I
---------
Pursuant to the provisions of Article 4.07 of the Texas
Business Corporation Act, the undersigned corporation hereby
adopts the following Amended and Restated Articles of
Incorporation which accurately copy the Amended and Restated
Articles of Incorporation and all amendments thereto that are in
effect to date and as further amended by such Amended and
Restated Articles of Incorporation as are hereinafter set forth
which contain no other change in any provisions thereof.
ARTICLE II
----------
The following amendments to the Articles of Incorporation
were adopted by the shareholders of the corporation on April
17th, 1998, in conformity with the provisions of the Texas
Business Corporation Act:
1. The name of the corporation was changed to TTI
Industries, Incorporated.
2. A ten-to-one reverse stock split was effected.
3. The par value of the common stock was changed to $0.01.
The amendments alter or change Article I of the Amended and
Restated Articles of Incorporation. Article XIV has been added
to the Amended and Restated Articles of Incorporation. The
following accurately copies the Articles of Incorporation and all
amendments thereto that are in effect as of the date hereof and
as further amended by these Amended and Restated Articles of
Incorporation and the following contains no other changes in any
provision thereof:
ARTICLE I
-----------
The name of the corporation is TTI Industries, Incorporated.
ARTICLE II
----------
The principal office of the corporation in the State of
Texas is located at 8800 North Central Expressway, Suite 900,
Dallas, Texas 75231. The name and address of its registered
agent is Joe D. Kinlaw.
ARTICLE III
-----------
The corporation may engage in any lawful act, activity
and/or business for which corporation may be organized under the
corporation laws of the State of Texas.
ARTICLE IV
----------
The total number of shares of common stock which the
Corporation shall have the authority to issue is one hundred
million (100,000,000), each of which shall have a par value of
$0.01.
ARTICLE V
---------
Pre-emptive rights are expressly denied. No shareholder
shall have the right to cumulate his votes at any election for
directors of this Corporation.
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<PAGE>
ARTICLE VI
----------
The members of the governing board shall be styled directors
and the number thereof shall be fixed as provided in the Bylaws
of the Corporation. The number so fixed by the Bylaws may be
increased or decreased from time to time as provided therein.
The name and post office address of the current Board of
Directors, which shall consist of at least one member, are as
follows:
NAME POST OFFICE ADDRESS
---- -------------------
Joe D. Kinlaw 8800 North Central Expressway
Suite 900
Dallas, Texas 75231
C. Reed Cagle 8800 North Central Expressway
Suite 900
Dallas, Texas 75231
C.E. Zimmerman 8800 North Central Expressway
Suite 900
Dallas, Texas 75231
ARTICLE VII
-----------
The Company shall have perpetual existence.
ARTICLE VIII
------------
Section 1. The Board of Directors is expressly authorized
to make, alter or amend the Bylaws of the Corporation.
Section 2. Authority is hereby expressly granted to and
vested in the Board of Directors to issue (i) notes, bonds,
debentures, warrants and other obligations of the Corporation
which may be convertible into stock of any class or classes of
securities as the Board of Directors may approve and (ii) such
warrants or other evidence of optional rights to purchase and/or
subscribe to stock of any such class or classes of securities;
all of which to be so issued and convertible upon such terms and
conditions and in such manner as may be fixed and stated by the
resolution or resolutions of the Board of Directors from time to
time adopted providing for the issuance thereof.
Section 3. The Board of Directors shall be authorized to
exercise all such powers and do all things and acts as may be
exercised or done by the Corporation, subject to the provisions
of the laws of the State of Texas, of these Articles of
Incorporation and of the Bylaws of the Corporation.
ARTICLE IX
----------
No contract or other transaction between the Corporation and
any other corporation and no other act of the Corporation shall,
in the absence of fraud, be invalidated or in any way affected by
the fact that any of the stockholders, directors or officers of
the Corporation are pecuniarily or otherwise interested in such
contract, transaction, or other act, or are stockholders,
directors or officers of such Corporation. Any stockholder,
director or officer of the Corporation, individually, or any firm
or association is so interested shall be disclosed or shall have
been known to the Board of Directors or a majority of such
members thereof as shall be present at any meeting of the Board
of Directors at which action upon any such contract or
transaction shall be taken; and any director of the Corporation
who is a stockholder, director or officer of such other
corporation or who is so interested may be
C-2
<PAGE>
counted in determining the existence of a quorum at any meeting
of the Board of Directors which shall authorize any such contract
or transaction and may vote thereat to authorize any such
contract or transaction with like force and effect as if he were
not such stockholder, director or officer of such other
corporation or not so interested; every stockholder, director or
officer of the Corporation being hereby relieved from any
disability which might otherwise prevent him from carrying out
transactions with or contracting with the Corporation for the
benefit of himself or any firm or corporation, association, trust
or organization in which or with which he may be in any wise
interested or connected.
ARTICLE X
---------
The Corporation shall indemnify its officers and directors
and may indemnify its other employees or agents to the full
extent permitted by law if any such person was or is a party, or
is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding. Such
right of indemnification shall not be deemed exclusive of any
other rights to which such person may be entitled under any
bylaw, agreement, vote of shareholders or otherwise.
ARTICLE XI
----------
No director of the Corporation shall be liable to the
Corporation or any of its shareholders or member for monetary
damages for an act or omission in the director's capacity as a
director provided, however, that the limitation of liability
contained in this Article XI shall not eliminate or limit the
liability of a director for:
1. A breach of a director's duty of loyalty to the
Corporation or its shareholders or members;
2. An act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the
law;
3. A transaction from which a director received an
improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's
office;
4. An act or omission for which the liability of a
director is expressly provided for by statute; or
5. An act related to an unlawful stock repurchase or
payment of a dividend.
ARTICLE XII
-----------
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in the Articles of
Incorporation, in the manner now or hereafter prescribed by
statue, and all rights conferred upon stockholders herein are
created subject to these reservations.
ARTICLE XIII
------------
The total number of shares of preferred stock which the
Corporation shall have the authority to issue is one hundred
million (100,000,000), each of which shall have a par value of
$1.00.
Authority is expressly granted to and vested in the Board of
Directors of the Corporation to provide for the issuance of the
preferred stock in one or more series and in connection therewith
to fix by resolutions providing for the issue of such series the
number of shares to be included in such series and the
designations and such voting powers, full or limited, or no
voting powers, and such of the preferences and relative,
participating, option or special
C-3
<PAGE>
rights, and the qualifications, limitations or restrictions
thereof, of such series of preferred stock, to the full extent
now or hereafter permitted by the laws of the State of Texas.
ARTICLE XIV
-----------
Each ten (10) shares of previously authorized common stock
of the corporation, par value 0.001 per share, issued and
outstanding immediately prior to the time of the filing and
recording of these Amended and Restated Articles of Incorporation
(the "Amendment") with the Office of the Secretary of State of
the State of Texas shall thereby and thereupon automatically be
combined without any further action into one (1) validly issued,
fully paid and nonassessable share of common stock of the
corporation, par value $0.01 per share. Further, every right,
option and warrant to acquire ten (10) shares of common stock of
the corporation, outstanding immediately prior to the time of
filing and recording of the Amendment in the Office of the
Secretary of State of the State of Texas, shall thereby and
thereupon automatically be converted without any further action
into the right to acquire one (1) share of common stock of the
corporation, upon the terms of the right, option or warrant,
except that the purchase price of the common stock, upon
exercising the right, option or warrant, shall be proportionately
increased. The corporation shall not issue fractional shares with
respect to the combination or conversion. To the extent that a
shareholder holds a number of shares of common stock immediately
prior to the filing and recording of the Amendment that is not
evenly divisible by ten (10), such shareholder shall receive one
additional share of common stock for each fractional share
otherwise issuable. The number of shares of authorized common
stock of the corporation will remain at 100,000,000 and will not
be affected by the Amendment.
C-4
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
Route 1, Box 41
Overton, Texas 75684
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.D. Davenport, George Davis and
Charles I. White and each or any of them, as Proxies, each with the
power to appoint his substitute, and hereby authorizes each of them
to represent and vote, as designated below, all of the shares of the
Common Stock of Environmental Plus, Incorporated (the "Company") held
of record by the undersigned at the close of business on March 12,
1998, at the Special Meeting of Stockholders to be held on April 17,
1998, or any adjournment(s) thereof.
1. PROPOSAL TO APPROVE AND ADOPT THE PROPOSED AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO (A) EFFECT THE REVERSE STOCK
SPLIT AND (B) CHANGE THE NAME OF THE COMPANY TO "TTI INDUSTRIES,
INCORPORATED".
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL TO APPROVE THE PROPOSED DISPOSITION OF
SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS.
/ / FOR / / AGAINST / / ABSTAIN
(Please complete and sign on other side)
<PAGE>
(continued from front)
Please execute this proxy as your name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate
name by the president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons. PLEASE MARK,
SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
- ---------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE APPROVAL AND ADOPTION OF
THE PROPOSED AMENDMENT UNDER PROPOSAL 1, AND APPROVAL OF THE PROPOSED
DISPOSITION UNDER PROPOSAL 2 AND IN THE DISCRETION OF THE PROXIES
WITH RESPECT TO ANY OTHER MATTER THAT IS PROPERLY PRESENTED AT THE
MEETING.
DATED:____________________, 1998
________________________________________
Signature
________________________________________
Signature If Held Jointly
