FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: August 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-13041
ENVIRONMENTAL PLUS, INCORPORATED
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 75-1939021
- --------------- -------------------
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation
or organization)
ROUTE 1, BOX 41, OVERTON, TEXAS 75684
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (903) 834-6965
Securities registered pursuant to
Section 12(b) of the Exchange Act:
None.
Securities registered pursuant to
Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Sections 13 or 15(d) of the Exchange Act, during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $528,652.
The number of shares outstanding of common stock as of November 30,
1997 was 40,371,873. There was no established published market,
value for the Registrant's stock during the last fiscal year.
Although there were published bid and asked prices, Registrant
believes the quotes were too sparse and varied to be indicative
of an established market value.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibits under Part IV are incorporated by reference to
exhibits of the registrant's Form 10 Registration Statement and its
Form 10-K for fiscal years ended August 31, 1988 through 1996 and
Registrant's Forms 10-Q for the first 3 quarters of fiscal 1997.
<PAGE>
ENVIRONMENTAL PLUS, INCORPORATED
FORM 10-KSB
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED AUGUST 31, 1997
PART I
ITEM 1. BUSINESS
Environmental Plus, Inc. (the "Company"), is in the business
of construction and repair of industrial cooling towers, primarily
in Texas, Louisiana and Arkansas, for electric utility companies;
and the marketing of a fire retardant foam as a fire fighting
device for industrial use. These activities are the result of two
significant acquisitions during 1996.
Prior to the acquisition of substantially all of the shares
of the Company by Environmental Plus, Incorporated during the fiscal
year 1996, the Company operated as Kinlaw Energy Partners Corporation,
a Texas corporation, which was formed in December 1983.
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 KEPC Director 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 FireZap, Inc. ("FZI"), a Texas
corporation. The consideration for the stock of FZI included
450,000
<PAGE>
shares of the Company's Series A Convertible Preferred Stock ($1.00
par value). The purchase agreement between the Company and FZI also
provided for certain contingent payments of an additional 450,000
shares of the Company's Series A Convertible Preferred Stock ($1.00
par value) 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 Series A Convertible Preferred
Stock ($1.00 par value) agreed to cancel their shares, thus leaving
only 150,000 shares of the Series A Convertible Preferred Stock
outstanding as a result of the FZI transaction. The Company's
Series A Convertible Preferred Stock is convertible on a share for
share basis into 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 currently has three major competitors in the market.
However, FZI believes that it has a price advantage as well as
current approval on environmental impact. 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.
<PAGE>
Effective June, 1996, the Company acquired substantially all
of the assets of Gulf Coast Cooling Tower Services, Inc. ("GCCTS")
from the Company's Director and Secretary, George Davis. The
historical 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 Series A Convertible Preferred Stock, ($1.00 par value).
The acquisition resulted in the continuation of the business
underlying the assets (through the Company's subsidiary Gulf Coast
Towers, Inc.), which is construction repair of industrial cooling
towers primarily in Texas, Louisiana and Arkansas for electric
utility companies and related consulting services.
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 and
Arkansas. Its customers are generally in utility, petro chemical
and oil refining industries.
On January 15, 1998, a Stock Purchase Agreement was entered
into among the Company and various shareholders of the Company
and Terminator Technologies, Inc. ("TTI"), a Texas corporation,
as a result of which TTI, or its affiliates, will become the new
controlling shareholders of the Company through the purchase of
the majority of the shares of common stock of the Company from
its present controlling shareholders. The agreement with TTI
is subject to various closing conditions, including completion
and satisfaction of various covenants by the Company. If the
conditions are satisfied and the transaction contemplated by
the agreement closes, Company operations are expected to
completely change prior to the end of fiscal 1998. See Item 6
- - Management's Discussion and Analysis or Plan of Operation
and Note 11 to Notes to Consolidated Financial Statements in
this Form 10-KSB.
The Company has six (6) full time employees.
<PAGE>
"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 on 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.
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.
<PAGE>
ITEM 2. 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.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 9, 1997, at a duly convened annual meeting of the
Shareholders of the Company, the shareholders elected Mr. J.D.
Davenport, Mr. George Davis and Mr. Charles I. White to serve as
directors of the Company. For each of the Directors nominated and
elected at the meeting, of the 40,371,873 shares entitled to vote,
33,358,203 shares voted for the nominees, 85 against and 341 were
withheld.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 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.
<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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
Results of Operations.
- ---------------------
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.
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 the Company
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 Fire Zap, Inc. ("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.
<PAGE>
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.
Results of Operations for the years ended
August 31, 1996 and 1997.
- -----------------------------------------
Revenues
Revenue from sales and other sources in fiscal 1997 was
$528,652 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 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 1996. This increase resulted from an
increase in professional fees (legal and accounting) to $97,716
for fiscal 1997 compared to $13,126 for 1996, an increase
in bad debt allowance to $70,200 in 1997 compared to -0- in
1996, and a 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 officers' 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 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. As discussed above, salaries
and benefits for fiscal 1997 were imputed at $33,860
compared to $37,500 in fiscal 1996.
<PAGE>
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 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.
<PAGE>
Subsequent Event.
- -----------------
The Company has incurred operating losses over the last two 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, a Stock Purchase Agreement was entered into among
Terminator Technologies, Inc. ("TTI"), a Texas corporation, the
Company and various shareholders, including the management shareholders
of the Company (the "Agreement"). According to the Agreement, TTI or
it designee will become the new controlling shareholder(s) and control
group of the Company, through the purchase of the majority shares of
EPI from certain shareholders of the Company, including present
management shareholders. The Agreement is subject to completion and
satisfaction of several covenants and conditions as more fully set
out in the Agreement. As part of the conditions, among other things,
the Company will be required to consummate a reverse stock split of
its shares on the bases of 1-for-10. The Company currently has
40,433,549 ($.001 par value) shares of common stock and 749,000
($1.00 par value) shares of preferred stock issued and outstanding.
After the reverse stock split and as part of the Agreement, the
Company will have zero (0) issued and outstanding shares of
preferred stock and 4,043,354 ($.01 par value) shares of common
stock issued and outstanding. TTI or its designee will own
approximately 2,362,282 (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 a warrant to TTI.
In addition, pursuant to the Agreement, and subject to
shareholder approval, the Company will sell substantially all
of its assets to Mr. George Davis in exchange for Mr. Davis',
transfer to the Company of 599,000 shares of preferred ($1.00
par value) stock presently owned by Mr. Davis. Additionally,
TTI will purchase from the Company a warrant to purchase up
to 1,500,000 additional common shares at $.04445 per share
following the proposed reverse stock split, subject to the
present selling shareholders right to purchase 10% of those
shares.
TTI, a Texas corporation, has virtually no business
operations. TTI plans to operate as a holding company and
through subsidiaries, none of which have yet been formed,
acquire rights to develop and market inventions, none of
which have yet been acquired.
While TTI or its designees would become controlling
shareholders of the Company upon completion and closing of
the Agreement with the Company, and while it is not
obligated by the Agreement to do so, the Company believes
that TTI intends to conduct its own ongoing operations
through the Company.
A copy of the Agreement between TTI, the Company and certain
of its shareholders is being filed with this Form 10-KSB and is
specifically incorporated herein by reference.
<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.
<PAGE>
ITEM 7. 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
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE MATTERS.
None.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
Name Positions Held
---- --------------
J.D. Davenport President and Director
George Davis Secretary, Treasurer and
Chairman of the Board of
Directors (Chief Accounting
Officer)
Charles I. White Vice President and Director
Mr. Davenport acted as Chief Executive Officer of Ness
Environmental, Inc. from October 1993 until December 1995. Prior
to this time, Mr. Davenport was Chief Executive Officer of Frontier
Environmental, Inc. from November 1991 until October 1993.
Mr. Davis is and has been President and Chief Executive
Officer of Gulf Coast Cooling Tower Service, Inc. since May 1976.
Mr. White operates an arabian horse breeding and training farm
and has since 1990.
None of the officers or directors of the Company had
directorships of any other reporting companies.
None of the officers or directors are involved in any legal
proceedings.
Under the Company's Bylaws which became effective as of August
31, 1987, each Director serves until the next succeeding annual
meeting and until his successor is elected and qualified or until
his death, resignation or removal. Annual meetings of shareholders
and directors are held at such time and place as the Board of
Directors may from time to time determine. These Directors were
elected on July 9, 1997.
ITEM 10. EXECUTIVE COMPENSATION.
During 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 (3) officers $50,000. Therefore, no
officers' 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 1997 were imputed based on the actual number of
months of operation during 1997. This expense is reflected in
<PAGE>
the 1997 statements of operations and also as an increase to paid-
in capital. As discussed above, salaries and benefits for fiscal
1997 were imputed at $33,860 compared to $37,500 in fiscal 1996.
No officers' salaries were paid in 1995.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information with
respect to each person known by the Company to be a director or
officer of the Company, who beneficially owns five percent or more
of the Company's Common Stock, and all directors and officers as a
group.
<TABLE>
<CAPTION>
Name and Address of Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership(1) of Class
- ----------------- ------------------- ------------------------ ----------
<S> <C> <C> <C>
Common Stock Northport Management Group, Inc.(2) 11,652,500 30.0%
607 South Garland
Overton, Texas 75684
Common Stock George Davis 12,925,000 33.3%
Route 1, Box 41
Overton, Texas 75684
Common Stock Charles I. White 3,774,000 9.7%
P.O. Box 749
Bentonville, AR 72712
- ---------------------
(1) The beneficial owner listed has the sole power to vote
and dispose of the shares owned of record by it.
(2) Northport Management Group, Inc. is a Texas corporation
of which Mr. J.D. Davenport is President and the owner
of the majority of common stock.
</TABLE>
The Company anticipates that a change in control of the
Company would occur upon the consummation of the Stock Purchase
Agreement. See "Management's Discussion and Analysis or Plan
of Operation - Subsequent Event." The Company does not know
of any other arrangement or pledge of its securities by persons
now considered in control of the Company that might result in a
change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective June 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 historic 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 (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.
<PAGE>
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 the year-end, the Company had certain notes payable to
related parties ($12,000 to GCCTS and $1,000 to a shareholder).
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 to GD-JD, Inc. as of
August 31, 1997 was forgiven and added to additional paid in
capital.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
The financial statements and schedule listed in the
accompanying index to financial statements are filed as part
of this annual report.
2. Exhibits.
No. Exhibit
--- -------
2.1 Agreement dated March 19, 1984 between Robert
L. From, Electronic Diagnostic, Inc. and Has
Oil & Gas, Inc.
2.2 Certificate of Merger dated August 31, 1984
issued by the Secretary of State of Texas in
connection with the merger of Electronic
Diagnostic, Inc., a New York corporation, into
HAS Acquisition Company, a Texas corporation,
which includes a Certificate of Merger as
filed with the Secretary of State of New York
pursuant to Section 907 of the New York
Business Corporation Law and Merger Agreement,
and Plan of Reorganization dated July 30, 1984
between Electronic Diagnostic, Inc. and HAS
Acquisition Company.
<PAGE>
2.3 Certificate of Merger dated August 31, 1984
issued by the Secretary of State of the State
of Texas in connection with the merger of HAS
Oil & Gas, Inc., a Texas corporation, into HAS
Acquisition Company, a Texas corporation,
which includes the Agreement and Plan of
Merger between HAS Acquisition Company and HAS
Oil & Gas, Inc. dated July 30, 1984.
3.1 Articles of Incorporation of HAS Acquisition
Company ("Registrant") as filed on December 7,
1983 with the Secretary of State of Texas.
3.2 Amendment to the Registrant's Articles of
Incorporation as filed with the Secretary of
the State of Texas on September 25, 1984
changing the name of the Registrant from HAS
Acquisition Company to HAS Oil & Gas, Inc.
3.3 Amendment to the Registrant's Articles of
Incorporation as filed with the Secretary of
State of the State of Texas changing the name
of the Registrant from HAS Oil & Gas, Inc. to
Kinlaw Energy Partners Corporation.
3.3 Amendment to the Registrant's Articles of
Incorporation as filed with the Secretary of
State of Texas changing the name from
Registrant from Kinlaw Energy Partners
Corporation to Environmental Plus, Inc.
3.3 Bylaws of Registrant.
4.1 Form of Common Stock Certificate of
Registrant.
10.1 Stock Purchase Agreement, dated as of January
15, 1998, by and among the Company, certain
of its shareholders and Terminator Technologies,
Inc. (filed herewith)
27.1 Financial Data Schedule (filed herewith)
b) Reports on Form 8-K
No Reports on Form 8-K were filed during the last quarter of the
period covered by this Annual Report.
c) Exhibits
Exhibits required by Item 601 of Regulation S-B are
incorporated by reference.
d) Additional Financial Statements.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENVIRONMENTAL PLUS, INC.
By: /s/ GEORGE DAVIS
-------------------------
George Davis, Chairman of February 18, 1998
the Board of Directors
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf
of the Registrant and in the capacity and on the date indicated:
/s/ GEORGE DAVIS
- ------------------------
George Davis February 18, 1998.
Chairman of the Board of
Directors
<PAGE>
Index to Financial Statements............................................F-1
Report of Independent Certified Public Accountants (BDO Seidman, LLP)....F-2
Consolidated balance sheets at August 31, 1996 and 1995..................F-3
Consolidated statements of operations for the years
ended 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
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>
<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
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
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<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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<PAGE>
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,
-4-
<PAGE>
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.
-5-
<PAGE>
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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<PAGE>
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.
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(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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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.
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"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).
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"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.
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"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
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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]
-20-
<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
-21-
<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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS OF ENVIRONMENTAL PLUS, INCORPORATED FOR THE
YEAR ENDED AUGUST 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 19,226
<SECURITIES> 0
<RECEIVABLES> 20,080
<ALLOWANCES> (7,200)
<INVENTORY> 53,128
<CURRENT-ASSETS> 149,939
<PP&E> 156,598
<DEPRECIATION> (20,539)
<TOTAL-ASSETS> 481,182
<CURRENT-LIABILITIES> 174,737
<BONDS> 0
0
466,600
<COMMON> 40,328
<OTHER-SE> (200,483)
<TOTAL-LIABILITY-AND-EQUITY> 481,182
<SALES> 495,104
<TOTAL-REVENUES> 528,652
<CGS> 376,286
<TOTAL-COSTS> 376,286
<OTHER-EXPENSES> 313,186
<LOSS-PROVISION> 70,200
<INTEREST-EXPENSE> 10,647
<INCOME-PRETAX> (241,667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241,667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241,667)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
