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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-16322
EVANS ENVIRONMENTAL CORPORATION
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(Name of Small Business Issuer in Its Charter)
COLORADO 84-1061207
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
99 S.E. FIFTH STREET, FOURTH FLOOR, MIAMI FLORIDA 33131
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(Address of Principal Executive Offices) (Zip Code)
(305) 374-8300
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Issuer's Telephone Number, Including Area Code
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.012 PAR VALUE
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Title of Class
Check whether the issuer (1) has filed all reports required to be filed by
Section 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 [X]
No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not 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.
[ ]
The issuer's revenues for its most recent fiscal year: $5,721,221.
The aggregate market value of the voting stock held by non-affiliates of the
Company was approximately $20,101,000 based on the average bid and asked price
of $1.45 on July 10, 1996.
As of July 10, 1996 the Company had a total of 16,740,126 shares of Common Stock
outstanding.
Transitional Small Business Disclosure format (check one):
Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(A) BUSINESS DEVELOPMENT
The Company is engaged, through its wholly-owned subsidiaries, in
environmental consulting and other environmental related services, including
testing and remediation (the "Consulting Division"). Until April 3, 1996, the
Company was also engaged in the production and sale of cable products (the
"Cable Products Division").
The Consulting Division's operations are conducted through Evans
Environmental Corporation, a Florida corporation ("Evans Environmental"), and
the following subsidiaries of Evans Environmental, all of which are incorporated
under the laws of the State of Florida: Evans Environmental & Geological
Services and Management, Inc. ("EE&G") and Evans Management Co. ("EMC"). The
Cable Products Division's operations were conducted through ABC Cable Products,
Inc., a Colorado corporation ("ABC"). Unless the context otherwise requires, the
word "Company" includes the parent company and all of its subsidiaries.
On July 8, 1996, the Company completed a Regulation S stock offering.
The offering involved a sale of 9,000,000 shares of Common Stock at an offering
price of $.90 per share generating gross proceeds to the Company of $8,100,000.
The offshore placement agent (the "Placement Agent") handling the offering
entered into an agency agreement which provided for a cash management and
selling fee aggregating $607,500, or 7.5% of the gross proceeds. In addition,
the Placement Agent received broker warrants to purchase 630,000 shares of
Common Stock, exercisable at $1.00 per share until July 8, 1998 and was
reimbursed for out of pocket expenses of approximately $140,000. Thus, net cash
proceeds to the Company in connection with this offering were approximately
$7,352,500.
On July 8, 1996, the Company acquired all the outstanding stock of
American Remedial Technologies, Inc., a Florida corporation ("ART"). ART
operates a soil remediation facility in Lynwood, California (the "Remediation
Division"). This facility is the only currently licensed fixed base facility for
thermal soil remediation in Los Angeles County, California. ART received its
permit to operate on December 26, 1995 and began full operations on January 2,
1996. Its licensed capacity approaches 20,000 tons per month. The acquisition of
ART will involve the Company in thermal remediation, a natural outgrowth of its
current environmental consulting and remediation activities.
The purchase price of ART consisted of cash payment of $6,000,000, the
issuance of 3,000,000 shares of unregistered Common Stock and the issuance of
1,000,000 shares of Series B Convertible Preferred Stock. The Series B
Convertible Preferred Stock is convertible into 10,000,000 shares of Common
Stock subject to an earn-out formula. As part of the acquisition, Mr. Enrique A.
Tomeu, the former shareholder of ART, was appointed Chief Executive Officer and
a Director of the Company. Mr. Tomeu has over 15 years experience in the
construction and environmental industries. See Section (c) Acquisition of the
Remediation Division of this Part I, Item 1.
On April 3, 1996, ABC ceased operation and sold all of its operating
assets for an aggregate of $550,000 in cash, a $1,000,000 promissory note and
the assumption by the buyer of $595,049 of ABC's liabilities. In April 1996, the
Company recorded a gain of $510,961, net of costs associated with the
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transaction, on the sale of its Cable Products Division. For all years presented
in this Form 10-KSB, the Company has shown the results of the Cable Products
Division separately as discontinued operations in the consolidated financial
statements. See Section (d) Discontinued Operations of this Part I, Item 1.
On December 27, 1995, the Company's shareholders approved a
one-for-four reverse split of the Company's Common Stock which became effective
December 29, 1995. The shareholders also approved an increase of the authorized
capitalization of the Company to 25 million post-split shares.
Effective December 26, 1995, the Company's Common Stock resumed trading
on the NASDAQ SmallCap Market(R) due to the reinstatement ordered by the NASD
Hearing Review Committee on December 22, 1995. The Company's Common Stock had
been delisted from the NASDAQ SmallCap Market(R) on August 23, 1995 by NASD
which alleged the Company had been delinquent in its public reporting
obligations. The Company vigorously protested the delisting and with significant
effort and expense was able convince the NASD Hearing Review Committee to relist
its Common Stock effective December 26, 1995.
In May 1995, the Company divested itself of the wet chemistry
laboratory operations of the Consulting Division. The purchaser bought all the
assets and essentially all operating liabilities of the laboratory operations.
The Company had, since March 1995, been planning to sell or liquidate its
laboratory operations and therefore provided for a reserve of $1,030,736 in the
year ended March 31, 1995. Subsequently, the purchaser filed for protection
under Chapter 11 of the United States Bankruptcy Code. While the Company
continues to pursue all legal rights and attempts to enforce its secured
position it has provided an additional loss reserve of $198,997 in the year
ended March 31, 1996.
In February 1995, the Company entered into an letter agreement with
R.G. Quintero & Co. ("Quintero"), a privately-owned accounting and consulting
company specializing in turning around, reorganizing and restructuring
companies, to assist the Company in stabilizing cash flows, developing and
implementing business plans, interfacing with investors, lenders, regulatory
authorities and other third parties, and positioning the Company for growth. In
connection therewith Mr. John C. Reynolds, a Quintero employee, was employed as
Interim President of the Company through July 11, 1996. See Part III, Item 9.
On October 29, 1993, the Company entered into an Amended and Restated
Share Exchange Agreement (the "Sector Agreement") with Sector Investments, Inc.
("Sector"), pursuant to which the Company acquired 100% of the capital stock
("ECI Shares") of Enviropact Consultants, Inc. ("ECI"). ECI was formed by
Enviropact, Inc. (the "Debtor"), which had filed a petition pursuant to Title
11, as amended, of the United States Code. Effective October 29, 1993, with the
approval of the United States Bankruptcy Court, ECI acquired certain assets of
the Debtor.
In consideration for the ECI Shares, the Company issued 225,000 shares
of its Common Stock (the "ECI Acquisition"), which number of shares may increase
or decrease by up to 25,000 based on certain conditions. In addition, the
Company issued 50,000 shares of Common Stock to a consultant
who facilitated the ECI Acquisition.
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(B) BUSINESS OF ISSUER
The Consulting Division consists of Evans Environmental and its
subsidiaries: EE&G, and EMC. The Consulting Division operates an environmental
testing, consulting, remediation and management service, including an
environmental testing laboratory specializing in asbestos in air and water; and
radon, more fully described below.
Environmental markets develop from and are driven by the promulgation
and enforcement of regulations protecting the environment. The environmental
field has grown rapidly to date and, in the opinion of management, is expected
to continue to grow. Within the broad scope of environmental consulting the
Company offers specialized services in specific market segments that may be the
focus of legislation or public awareness and concern. The Company has placed
particular emphasis on these smaller, niche markets, while continuing to offer a
"backbone" of general environmental services.
An example of the niche market is asbestos consulting and testing. This
market grew rapidly during the last several years due to intense public
awareness and consequent changes in legislation. The asbestos market, like most
niches areas, initially expanded rapidly, which was followed by a stabilizing
period and now is considered a mature market. The Company sees these niches as
relatively short-term because each time a remediation (removal) is performed,
the market size is diminished. In response, the Company has targeted similar
emerging markets, in varying stages of development, to pursue in a manner
similar to asbestos. Those that the Company presently plans to develop and
market include lead-based paint testing, indoor air quality testing, Title V
permitting, training and industrial hygiene/safety services, wetlands/ecological
management, including delineation and mitigation, computerized environmental
management systems, and emergency response services for hazardous and regulated
materials.
The development by the Company of technical programs (practices) to
serve these markets is in varying stages ranging from completed (asbestos
services) to relatively immature (wetlands and ecological services). The Company
anticipates that any such expansion of services will take place through a
combination of growth and acquisitions as determined by then current economic
and market conditions. There can be no assurance that the Company's strategy
will be successful, or that the anticipated growth in the environmental field,
in general, will occur.
CONSULTING, TESTING, REMEDIATION AND LABORATORY SERVICES. The Company
offers its clients consulting and testing; and laboratory services. Consulting
and testing services are offered in the following practice area: asbestos;
radon; lead-based paint; indoor air quality; water and soil analysis and
contamination; computerized environmental management systems; emergency
response; Title V permitting; environmental site assessments and geological
services (including underground storage tank management); and ecological
evaluation and mitigation (wetlands). Laboratory services include: asbestos in
air and water; and radon.
In support of its operations the Company maintains in-house quality
control/quality assurance manuals for transmission electron microscopy,
polarized light microscopy and phase contrast microscopy procedures, as well as
a Comprehensive Quality Assurance Plan for the sampling and analysis of water
and soil that has been approved by the Florida Department of Environmental
Protection ("FDEP"). Analyses are offered on a standard 5-day service or, if
requested, on a same-day service and, with respect to certain projects, sample
analysis can be provided on-site.
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The Company provides the following specific services:
/bullet/ ASBESTOS MANAGEMENT, CONSULTING, TESTING AND LABORATORY
ANALYSIS. Services include building inspections, preparation
of plans and specifications, contractor performance/compliance
monitoring, air quality testing, operations and maintenance
programs, abatement oversight and management, employee
awareness programs, expert witness testimony, and laboratory
services in Miami, Florida which include transmission electron
microscopy ("TEM"), polarized light microscopy ("PLM"), phase
contrast microscopy ("PCM"), and X-ray diffraction.
/bullet/ LEAD-BASED PAINT INSPECTION, HAZARD ASSESSMENT AND ABATEMENT
SUPERVISION. The Company uses an on-site testing,
non-destructive, field screening device for testing lead in
paint and soil, known as an X-ray Fluorescence MAP Spectrum
Analyzer. The Company is presently conducting lead paint
evaluations for a number of regional and municipal urban
housing authorities. The Company also performs confirmation
analysis on field obtained samples for lead-based paint.
/bullet/ INDOOR AIR QUALITY TESTING AND CONSULTING. The Company tests
for and identifies air quality problems caused by inadequate
ventilation and dirty air ducts, poorly designed systems,
newly applied solvents or preservatives, mold and fungus
growth, toxicological risk situations, improper use of
cleaning substances, tight buildings ("Sick Building
Syndrome") and building related illnesses. Consulting services
include the design and implementation of appropriate
modifications and expert witness testimony with respect to
these matters.
/bullet/ COMPUTERIZED ENVIRONMENTAL MANAGEMENT SYSTEM. The Company
has developed a user-friendly, Windows-based, computerized
data management system named "ECOS". The service provides a
custom-designed database management system to meet the needs
of the Company's clients. There are several modules available
for the system, including an Asset Manager, a Plant Manager
(with the responsibility of tracking and inventorying
hazardous chemicals), and an Employee Manager (which
schedules, tracks, and monitors employees with respect to
applicable regulations). Although made to stand on its own,
each system can be packaged together to form an overall
environmental management tool, providing the client has
overlapping needs.
/bullet/ WETLANDS AND ECOLOGICAL SERVICES. The Company furnishes
clients with an extensive and comprehensive range of
ecological related consulting services, from jurisdictional
wetland determinations through mitigation implementation.
Wetlands perform vital water quality functions, provide a
sensitive wildlife habitat, and serve as an influential part
in recreation and aesthetic appeal. The increasing value of
wetlands is being recognized by the regulatory community. As
such, newer and more restrictive regulations defining the
activities permitted in wetlands, along with subsequent
mitigation requirements are routinely being approved by
Federal, state, and local regulatory agencies. The Company
provides a full service approach which enables it to
efficiently assist clients in addressing these evolving
regulations concerning environmentally safe areas. Wetland
determinations, delineations, and permitting utilize methods
set forth by the U.S. Army Corps of Engineers, Florida
Department of Environmental Resources, the South West
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Florida Water Management District, and local regulatory
agencies. These methods address Hydrophytic Vegetation, Hydric
Soils, and Hydrology.
/bullet/ EMERGENCY RESPONSE. The Company has experience in immediate
and planned response procedures to emergencies involving
hazardous and regulated materials. Using rotating teams,
positioned throughout Florida, the Company responds rapidly to
turn potentially dangerous circumstances into manageable
situations. The Company provides emergency response for a
multitude of situations ranging from small scale chemical
spills to large scale transportation accidents. The Company's
goal is to promote safety and limit liability by providing:
risk assessments; site monitoring and documentation of
incident and response activities; coordination with client,
response contractors, regulatory personnel; assistance with
site stabilization; and full documentation of incident. The
end result is a written report detailing the chronological
events through the remediation of the incident, including
response records, photo-documentation and laboratory data.
These reports provide historical reference in a proactive risk
management program and are effective tools in dealing with
insurance companies, regulatory agencies, and other
professionals.
/bullet/ TITLE V PERMITTING. Recent modifications to the 1990 Clean
Air Act (Title V) affect a broad range of clients including
those engaged in the following activities: chemical processing
and/or storage; incineration; spray operations (eg: paint
booths); welding; use of Ozone depleting substances;
electrical generation; and boiler operations of 250 million
BTU or greater. The Company offers a variety of services to
target hazardous air pollutants ("HAPs") and help clients
comply with permitting requirements and avoid potential fines
resulting from non-compliance.
/bullet/ TRAINING, INDUSTRIAL HYGIENE AND SAFETY SERVICES. The Company
offers industrial hygiene and safety services, including
training courses in the Company's practice areas, general
industrial hygiene management, worker exposure assessment and
evaluation, lock-out/tag-out program assessment and
development and ergonomic evaluation.
/bullet/ GEOLOGICAL SERVICES:
/bullet/ ENVIRONMENTAL SITE ASSESSMENTS. Phase I Assessments
include on-site inspection and interviews, radon
screening, perimeter inspection, development of title
chain of custody, complete record and CERCLIS/NPL
review, aerial photograph review, review of well
field protection area, regulatory agency review and
asbestos screening. Phase II Assessments address
specific problems revealed during initial
investigations, including on-site sampling and
analysis techniques.
/bullet/ UNDERGROUND STORAGE TANK TESTING AND MANAGEMENT
PROGRAM. The Company has established what management
perceives to be good relations with regulatory
agencies and, on occasion, has been successful in
reducing its client's liabilities associated with
underground storage tanks through effective
negotiation and responsive action. Services include
design and implementation of initial remedial action
plans, development of contamination assessment
reports and remedial action plans, construction
supervision, acting as client liaison with
environmental
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regulators, attorneys, third party property owners
and insurance companies, permitting for remedial
action work, site access and easements, conducting
risk assessments, performing on-site clean-up
operations at contamination sites, providing
information and support services for all levels of
regulatory compliance, providing tank site closure
assessments and providing expertise for the state
reimbursement programs, including the preparation and
submittal of the various reimbursement application
packages.
/bullet/ WATER AND SOIL ANALYSIS AND CONSULTING. The Company
provides consultation, planning, and field sampling
for organic and inorganic chemical, physical and
biological parameters in drinking water, industrial
and domestic wastewater, groundwater and surface
water, soil and solid waste.
MARKETING
The Company's marketing activities are conducted primarily by its
full-time marketing and sales staff. Their activities include direct contact,
seminars, literature, telemarketing and direct mail. The Company also utilizes
outside marketing and sales consultants where it is deemed appropriate.
CUSTOMERS
For the fiscal years ended March 31, 1996 and 1995, no one customer
accounted for more than 10% of the Company's total consolidated revenues. A
majority of the Company's client sites are
located in Florida.
BACKLOG
The Company does not have any backlog because its consulting services
are performed when ordered.
COMPETITION
The Company operates in highly competitive industries in which there
are many companies with greater resources and facilities. Some of the Company's
jobs require the availability of performance bonding and bid bonding. As of July
12, 1996, the Company has been able to obtain such bonding as needed, but no
assurance can be given that the Company will be able to obtain such bonding in
the future. Consequently, if such bonding were to become unavailable, the
Company would likely be at a competitive disadvantage.
GOVERNMENT REGULATION
The Company is subject to extensive and evolving government regulations
administered by various state and federal agencies and authorities. In many
respects, these regulations both govern the operation of the Company and
contribute to the demand for its services. Although the Company's clients remain
responsible by law for their environmental problems, the Company must comply
with the requirements of those laws applicable to its services. The relevant
laws and regulations that may affect the Company's operations include the U.S.
Environmental Protection Agency regulations and state
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regulations regarding asbestos consulting, state regulations regarding
professional engineering, professional geology, federal and state regulations
governing the generation, treatment, transportation and disposal of hazardous
wastes, the clean-up of hazardous waste sites and those governing workers in the
workplace. Many of these areas are both relatively new and rapidly developing
and, therefore, the Company cannot predict the extent to which the Company's
operations may be affected by changes to enforcement policies applied pursuant
to current laws or by the enactment of new environmental laws and regulations.
The Company's operations are currently conducted under the following
protocols and maintain the following certifications and/or accreditations:
/bullet/ Florida Department of Business and Professional Regulation
("DBPR") licenses individuals who practice as asbestos
consultants, engineers, geologists and professional
scientists. Certain Company employees are individually
licensed by the DBPR. In addition recent legislation requires
that all firms conducting asbestos consulting services are
required to be licensed by the DBPR. The Company is licensed
by the DBPR as an asbestos consulting services firm, a
professional engineering firm and certified geology business.
/bullet/ The National Institute of Standards and Technology's National
Voluntary Laboratory Accreditation Program ("NVLAP"). The
Company maintains accreditation through NVLAP for both TEM and
PLM. This accreditation program governs sampling protocol,
analysis methodology, and quality control/quality assurance
procedures.
/bullet/ Florida Department of Health & Rehabilitative Services
("HRS"). The Company is an HRS certified laboratory for the
analysis of asbestos in drinking water.
/bullet/ The Company is an HRS certified radon measurement business,
has 2 HRS certified radon measurement specialists, and 3 HRS
certified radon measurement technicians on staff.
/bullet/ Florida Department of Environmental Protection ("DEP"). The
Company is regulated and follows an approved DEP Comprehensive
Quality Assurance Plan that serves as a guide for all field
sampling, analysis methodology, waste disposal and quality
control for field and in-house work.
/bullet/ NIOSH/OSHA. The Company's laboratory performs sampling and
analysis utilizing approved NIOSH methodology and adheres to
an in-house Health and Safety Plan that incorporates OSHA's
health and safety standards.
The Company provides a number of environmental consulting services,
including the assessment and remediation of contaminated sites related to
discharges of petroleum products from petroleum storage systems that are
eligible for reimbursement of cleanup costs under the State of Florida's Inland
Protection Trust Fund program (the "FIPT"). The Company enters into contracts
from time to time with third parties for the purpose of funding such remediation
work, subject to payment of a markup or handling fee to such funders. In the
event the State of Florida were to determine that certain costs are not
reimbursable, such contracts generally provide that the Company is required to
bear all costs not
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reimbursed. There can be no assurance that the State of Florida will fully
reimburse costs submitted in the Company's pending applications for
reimbursement of costs.
The State of Florida ceased the processing of applications for new work
under the Petroleum Contamination Reimbursement Program under the FIPT with
limited exceptions for certain active sites. In its place, the State of Florida
has implemented, under the FIPT, a prioritized Petroleum Cleanup Program based
upon pre-approved scope of work and costs.
The Company has claims, as of June 18, 1996, submitted and pending
submission totaling, net of reserves, of approximately $700,969 and $131,953,
respectively, under the FIPT's prior program. As of June 18, 1996, the Company
does not have any claims to be submitted under the new program.
INTELLECTUAL PROPERTY RIGHTS
The Company does not have any copyrights, patents or trademarks, nor
does it believe the absence of such intellectual property rights is likely to
have a materially adverse impact on its business. However, in connection with
its new computerized environmental management software, the Company is currently
reviewing any potential copyright and trademark rights.
RESEARCH AND DEVELOPMENT
For the fiscal years ended March 31, 1996 and 1995, the Company did not
expend any funds on research and development activities.
ENVIRONMENTAL CONSIDERATIONS
While it does not generate hazardous waste, the Company does, through
its laboratories, handle potentially hazardous materials as samples submitted
for analysis. These samples are disposed of under State-approved plans for the
temporary storage, transport and disposal of such materials. All hazardous waste
is stored in appropriate drums and packaged for shipping according to Federal
Department of Transportation regulations to an approved waste disposal site by
an approved hazardous waste hauler. The Company's cost of compliance with
environmental laws and regulations is approximately $5,000 per year, primarily
for hazardous waste disposal. See "Governmental Regulation", above, for a
discussion of other environmental laws and regulations to which the Company is
subject and the effects of compliance with such laws and regulations on the
Company.
SEASONALITY
The Company's revenues increase during the second quarter of each
fiscal year, due to the work done for school district clients. This is the time
of the year when schools are partly vacant and most remediation work is
scheduled. Other than this item, there is no seasonality with respect to the
Company's business.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The raw materials, including the chemicals and products used by the
Company are believed by the Company to be in wide supply and available from a
number of sources.
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INFLATION
Management believes that inflation does not materially affect the
operations of the Company.
EMPLOYEES
As of July 1, 1996, the Company employed 78 full-time employees. No
employees are members of a collective bargaining unit under a union
representation contract. Management believes its relations
with its employees are good.
(C) ACQUISITION OF THE REMEDIATION DIVISION
As discussed above, on July 8, 1996, the Company purchased American
Remedial Technologies, Inc., a Florida corporation ("ART"), which was organized
in 1994 for the purpose of providing environmental services and remediation of
petroleum contaminated soil (the "Remediation Division"). ART operates a soil
remediation facility in Lynwood, California, which is designed to service
primarily Southern California's metropolitan areas. The 150,000 square feet
totally enclosed indoor facility is the only currently licensed fixed base
facility for thermal soil remediation in Los Angeles County, California. The
facility is a multiple technology soil recycling operation designed to treat
nonhazardous petroleum hydrocarbon contaminated soil. The thermal desorption
system can process 50 tons of contaminated soil per hour and is capable of
operating up to 24 hours per day, 7 days a week. ART received its permit to
operate on December 26, 1995 and began full operations on January 2, 1996. Its
permitted capacity approaches 20,000 tons per month. The acquisition of ART will
involve the Company in thermal remediation, a natural outgrowth of its current
environmental consulting and bioremediation activities.
The soil treatment is performed using thermal desorption and enhanced
bio-remediation technologies which are designed to effectively destroy and
minimize hydrocarbon contamination and thus eliminate associated liability under
federal and state anti-pollution laws. The ART facility was designed and built
to the rigorous specifications and requirements of the California EPA, the Los
Angeles Regional Water Quality Control Board, and the South Coast Air Quality
Management District, as well as the City of Lynwood.
ART is subject to extensive and evolving government regulations
administered by various state and federal agencies and authorities. In many
respects, these regulations both govern the operation of ART and contribute to
the demand for its services. Although the ART's clients remain responsible by
law for their environmental problems, ART must comply with the requirements of
those laws applicable to its services. The relevant laws and regulations that
may affect the ART's operations include the U.S. Environmental Protection
Agency and state and local regulations.
The environmental and resource recovery industry in the United States
represents a market estimated at approximately U.S. $20 billion per year. In
general, the market is divided between investigative/remediation design
functions (consulting) and the actual clean-up operations (contracting or
remediation). As the clean-up technology has increased in efficiency and
effectiveness and many of the accumulated problems have been identified and
defined, the market has shifted toward an increase in dollars spent with firms
combining consulting and actual site remediation. Recovery and recycling is the
fastest growing and largest sector of the environmental industry. As landfills
and other limited
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disposal areas are depleted, the United States must find or develop alternatives
for the beneficial re-use of waste streams and other products.
Many consulting firms which already have relationships established with
clients generated by successful completion of the investigative phase of a
problem are typically in an excellent position to move forward into the actual
remediation phase in a "turn-key" approach. Most consulting firms are, however,
at best poorly equipped to carry out large scale remediation projects.
Consequently, the natural synergy between the established market share of the
consulting firm and the abilities to satisfy the market need of the
contracting/remediation firm has lead to a trend toward consolidation of
consulting and remediation companies.
The national soil remediation market, a segment of the environmental
and resource recovery market, is approximately U.S. $2 billion per year. ART is
directly providing comprehensive services to this market through: (a) thermal
treatment for remediation of petroleum contaminated soil, provided through its
fixed-site facilities and plans for acquiring mobile units; and (b) plans for
the thermal treatment for bio-solids, producing a fertilizer by-product.
ART is marketing these services directly to multinational and national
corporations in the following industry groups: oil companies; aerospace
manufacturing; automobile industry; chemical manufacturing and distribution;
local and state agencies; and electronics industry.
ART offers its customers a "turn-key" solution to soil remediation,
enhanced by the liability protection provided through the thermal remediation
process contrasted with other less effective treatment methods or disposal
options. Major generators of contaminated soil are aware of the staggering costs
of litigation and remediation which have been incurred as they clean up their
contaminated soils.
(D) DISCONTINUED OPERATIONS
As discussed above, on April 3, 1996, ABC Cable Products, Inc. ("ABC")
ceased operations and disposed of all of its operating assets. As such, the
Company has treated the Cable Products Division as discontinued operations for
all periods presented in this Form 10-KSB. The purchaser of the assets of ABC
was ICX International, Inc. ("ICX"), who had been the major supplier to ABC for
the past few years. There are no material relationships between ICX or its
shareholders and the Company or any of its officers, directors, or control
persons. The Company received at closing $550,000 cash and a promissory note in
the amount of $1,000,000. The note, which is fully collateralized by certain
irrevocable letters of credit, has payment dates of July 1, 1996 ($500,000),
March 5, 1997 ($250,000) and September 5, 1997 ($250,000). The September 5, 1997
payment will automatically accelerate if certain of the underlying letters of
credit are not renewed. In addition, at closing, ICX assumed certain liabilities
of ABC aggregating $595,049. The July payment was received in a timely manner.
The sale of ABC's operating assets and operations enabled the Company
to concentrate its efforts in the area of environmental consulting, testing,
engineering and remediation. In addition, the sale gave senior Company
management additional financial resources, and time to focus on acquisitions in
the environmental field, such as the purchase of ART, where it has ten years of
experience.
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The activities of ABC included the distribution of wireless converter
remote control units, and fiber optic transmitters and receivers. ABC introduced
original cable television ("CATV") converter compatible control units to the
cable television market during the latter part of 1986. These remote control
units were designed to replace the CATV converter control supplied by the cable
television system. ABC supplied most major multiple system operators (MSO) and
CATV systems with remote control units. During September 1993, ABC shipped its
first production fiber optic transmitters and receivers. The CBLinX(TM) family
of optical transmitters and receivers was intended to be a cost effective
alternative for providing limited channels of video and data within the CATV,
telecommunications and security market places.
ABC distributed dedicated remote control units manufactured principally
by manufacturers in Korea and Hong Kong. ABC had no formal arrangements with
either the Hong Kong or Korean manufacturer. ABC also had a written agreement
with a United States company (ICX) for the manufacture of dedicated remote
control units. In addition, the ABC distributed fiber optic transmitters and
receivers manufactured by a third party in Austin, Texas under an informal
arrangement with ABC. The currency in which products were acquired from foreign
manufacturers was denominated in U.S. dollars.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company owns no real property. The Company leases 11,188 square
feet of space for its executive offices, for its Miami laboratory facility, and
for its Miami operating division. The lease is for a period of five years from
February 1995 and provides for annual rentals of $128,662, subject to
adjustment. The Company leases additional office space at five locations in
Florida from non-affiliated third parties. None of the leases is of a material
amount, nor would the Company be materially and adversely affected if it were
necessary to relocate any of its offices. The Company believes that its
facilities are adequate for its current operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any litigation which is not incidental to
its business and operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended March 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the SmallCap Market(R) of the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
under the symbol ECOS. The quotations set forth below are inter-dealer
quotations obtained from NASDAQ, do not reflect retail mark-ups, mark-downs or
commissions, and do not necessarily represent actual transactions. For ease of
presentation, all of these quotations have been adjusted for the one-for- four
reverse stock split effective
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December 29, 1995. The Company's Common Stock also began trading under the
symbol EVE April 20, 1995 on the Freiverhehr (over-the-counter market) of the
Berlin Stock Exchange, Berlin Germany.
During the period from August 23, 1995 to December 26, 1995, the
Company's Common Stock did not trade on the NASDAQ SmallCap Market(R).
QUARTER ENDED HIGH BID LOW BID
------------- -------- -------
FISCAL 1996:
March 31, 1996 $ 0.625 $ 0.25
December 31, 1995 $ 0.625 $ 0.385
September 30, 1995 $ 1.125 $ 0.25
June 30, 1995 $ 4.875 $ 0.875
FISCAL 1995:
March 31, 1995 $ 3.00 $ 1.6252
December 31, 1994 $ 6.133 $ 3.1108
September 30, 1994 $ 7.00 $ 3.75
June 30, 1994 $ 6.00 $ 3.00
The Company had 291 shareholders of record as of June 18, 1996 and
believes there are approximately an additional 1,100 beneficial holders of its
securities who hold such shares in "street" or nominee name.
DIVIDENDS
The Company has not declared or paid any cash dividends on its Common
Stock, and presently has no plans to do so.
The Company's current policy is to retain all earnings, if any, for
business use. The payment of cash dividends, if any, will be at the discretion
of the Board of Directors and will depend upon earnings, financial requirements
of the Company and such other factors as the Board of Directors may deem
relevant. Payment of dividends on Common Stock is subject to prior payment of
accrued and unpaid dividends on outstanding shares of Preferred Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLANS OF OPERATIONS.
RESULTS OF OPERATIONS
On April 3, 1996, the Company disposed of the operating assets and
ceased operations of ABC. Therefore, for all periods presented in this Form
10-KSB, the results of ABC have been shown as discontinued operations.
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FISCAL 96 COMPARED TO FISCAL 95
During the fiscal year ended March 31, 1996 ("Fiscal 96"), the Company
experienced a net loss of $2,051,365 as compared to a loss of $4,732,301 for the
fiscal year ended March 31, 1995 ("Fiscal 95"). The losses, which began in late
1993 and continued through March 31, 1996 are largely attributable to losses
from the Company's former wet chemistry laboratory operations, losses from
unprofitable offices, large increases in corporate overhead, and a general lack
of sustained revenue growth. During Fiscal 1996, the Company utilized
substantially all of its existing commercial lines of credit to finance its
continued losses. Subsequent to March 31, 1996, the Company: settled its dispute
with the Internal Revenue Service; executed a Composition Agreement with certain
of its trade creditors; sold the operating assets of the Cable Products
Division; completed a Regulation S stock offering, acquired American Remedial
Technologies, Inc; and repaid its secured line of credit. These issues are
discussed in greater detail below.
The Company took certain significant cost saving actions during Fiscal
96 and Fiscal 95 and continues to do so, including significant labor reductions,
restructuring of underperforming offices, closing of unprofitable offices, the
sale of the unprofitable wet chemistry laboratories, reductions of corporate
overhead and other measures. Although these cost savings measures have not yet
returned the Company to profitability, management believes that the Company can
return to sustained and profitable revenue growth, although no assurances can be
given. While management continues to evaluate any additional cost saving
measures, increased focus is on new marketing efforts to generate sustained
revenue growth from existing offices. The Company has increased its marketing
and sales staff, created new marketing programs and added additional marketing
resources. In connection with the new marketing focus to increase revenue, the
Company has broadened its service areas offered to clients. Appropriate
additional senior professional staff have been added to give the Company the
expertise needed to compete in these new services areas.
The Company's revenue decreased from $9,276,301 for Fiscal 95 to
$5,721,221 for Fiscal 96, a decrease of $3,555,080 or 38.3% However as a result
of divesture of the wet chemistry laboratories, Fiscal 96 does not include any
laboratory revenue, which for Fiscal 95 was $2,452,933. In addition, during
Fiscal 96, the Company closed its Yonkers, New York office. As a result Fiscal
96 includes only $198,303 of revenue from this office as compared to $1,253,701
for Fiscal 95. Therefore, total comparable revenue decreased only $46,749 from
$5,569,667 for Fiscal 95 to $5,522,918 for Fiscal 96. Pricing for the Company's
services has not increased, and in many cases, due to competitive situations,
has decreased, compared to the comparable period in Fiscal 95.
Direct costs were $3,297,111 for Fiscal 96, representing a decrease of
$2,994,697 or 47.6% from Fiscal 95. However, Fiscal 96 does not contain any
laboratory direct costs, which in Fiscal 95 were $1,457,997. Direct costs
related to consulting services decreased by $1,536,700 or 31.8% from $4,833,811
in Fiscal 95. Direct costs consist of all professional and technical labor,
employee benefit costs together with other expenses directly related to the
production of revenue on a project. Other direct costs include sub-contractors,
suppliers and other revenue generating expenses.
The Company's gross margin was 42.4% and 32.2% for Fiscal 96 and Fiscal
95, respectively. This increase in gross margin is directly attributable to the
divestiture of the wet chemistry laboratories, the closing of unprofitable
offices and other cost saving measures, including layoffs. In addition, better
utilization of billable staff significantly contributed to the overall reduction
of direct expenses. The
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Company continues to review the current size and composition of its labor force
together with all expenditures.
General, administrative and other costs were $4,678,967 for Fiscal 96,
a decrease of $3,135,969 or 40.1% from Fiscal 95. Fiscal 96 and Fiscal 95
include various non-recurring expenses totalling $1,325,987 and $1,933,183,
respectively. Additionally, Fiscal 96 includes expenses of $143,340 for offices
that have been closed, compared to $998,806 in Fiscal 95. Comparable general,
administrative and other costs were $3,209,640 for Fiscal 96, a decrease of
$1,673,307 or 34.3% from Fiscal 95 expenses of $4,882,947. Penalties and
interest accrued to the Internal Revenue Service were approximately $59,000 for
Fiscal 96 compared to $377,000 for Fiscal 95, a decrease of $318,000 or 84.4%.
The balance of the decrease in expenses is a result of the cost savings measures
that have been implemented and in particular, the elimination of various staff
positions.
In Fiscal 96, the Company paid a $151,766 finder's fee in connection
with a Regulation S offering of the Company's preferred stock. The cashier's
check in payment of the Regulation S offering was not honored by the bank, which
denied its validity. The preferred stock certificate issued in this transaction
was recovered and the Regulation S offering was voided. Although, the Company
demanded repayment of the finder's fee it has not been returned, and in Fiscal
96 the Company expensed the full amount of the finder's fee.
In May 1995, the Company divested itself of the laboratory operations
of the Consulting Division. The purchaser bought all the assets and assumed
essentially all operating liabilities of the laboratory operations. The Company
had, since March 1995, been planning to sell or liquidate its laboratory
operations and therefore provided for a reserve of $1,030,736 in Fiscal 95. The
purchaser was to provide the Company with free lab services valued at $100,000
and remit, out of the purchased receivables, $143,000 to the Company's secured
creditor to reduce the Company's outstanding loan. During Fiscal 96, the
purchaser provided the Company with free laboratory services valued at $62,147
and remitted $40,907 to reduce the Company's outstanding loan. Subsequently, the
purchaser filed for protection under Chapter 11 of the United States Bankruptcy
Code. While the Company continues to pursue all legal rights and attempts to
enforce its secured position it has provided an additional loss reserve of
$198,997 in Fiscal 96.
During Fiscal 96, the Company reviewed the collectability of
receivables due under the FIPT. As a result of this review, the Company took
reserves for potential unallowed claims, present value discounts on long term
receivables, and actual denials aggregating $345,706. In connection with the
closing of the Company's Yonkers, New York office all tangible and intangible
assets related to this office were either fully reserved or written-off
resulting in a non-recurring expense of $629,518 during Fiscal 96.
The operating loss for Fiscal 96 was $2,254,857 a decrease of
$2,575,586 or 53.3% from the Fiscal 95 operating loss of $4,830,443. During
Fiscal 96, due to the extensive use of the Company's lines of credit and the
additional funding of receivables due under the FIPT, the Company incurred
$246,122 of interest expense as compared to $139,777 in Fiscal 95, an increase
of $106,345 or 76.1%. Interest income increased $42,351 from $16,083 for Fiscal
95 to $58,434 for Fiscal 96. The increase was due to the amortization of the
present value discount for receivables due under the FIPT.
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The loss before income taxes and discontinued operations of $2,368,808
for Fiscal 96 was $2,594,502, or 52.3%, less then the $4,963,310 loss for Fiscal
95 and can be broken down as follows:
FISCAL 96 FISCAL 95
------------ -----------
Income (loss) from
operating offices(1) $ 774,977 $ (231,988)
Corporate overhead (1,891,235) (2,798,139)
---------- ----------
(1,116,258) (3,030,127)
Non recurring expenses (1,325,987) (1,933,183)
---------- ----------
Loss before income taxes
and discontinued operations $(2,442,245) $(4,963,310)
========== ==========
- - --------
(1) Includes income from continuing and closed offices.
During Fiscal 96, the operating offices generated a $774,977 profit, an
increase of $1,006,965 or 434.1% over the net loss generated in Fiscal 95. Of
this increase, the closing of unprofitable operations accounted for $504,499 and
improvements in the results from continuing offices accounted for $502,466. The
$906,904 or 32.4% savings in corporate overhead resulted from management's
previously described cost saving programs.
Income from discontinued operations increased by $159,871 to $390,880
in Fiscal 96 from $231,009 in Fiscal 95. Revenue from discontinued operations
increased by $1,614,873 to $5,515,622 in Fiscal 96. Gross margin remained
decreased from 27.2% in Fiscal 95 to 23.1% in Fiscal 96. The increase in net
income from discontinued operations was attributable to revenue growth. The net
loss of $2,051,365 for Fiscal 96 was $2,680,936 or 56.7% less than the
$4,732,301 loss in Fiscal 95.
FISCAL 95 COMPARED TO FISCAL 94
The Company generated total revenues for Fiscal 95 of $9,276,301, as
compared to $6,728,495 for the year ended March 31, 1994 ("Fiscal 94")
representing an increase of $2,547,806 or approximately 37.9%. Some of this
increase is attributed to the acquisition of ECI in October 1993. The
acquisition enhanced the ability of the Consulting Division to market new
consulting and laboratory services to new and current clients in additional and
existing geographical areas. Because the Company allocated certain of its
contracts and workload from existing offices to acquired offices, a comparison
of increases in revenue among existing and acquired offices is not believed by
management to be meaningful. The ECI acquisition did not result in any
geographical overlap between existing and newly acquired offices and enabled the
Company to expand its geographical base outside the State of Florida, where
previously 100% of revenue was generated.
Substantially all revenue growth in Fiscal 95 over Fiscal 1994 was
attributable to increased number and size of contracts. Laboratory revenue
nominally remained flat between Fiscal 95 and 94, but since the mid-Fiscal 94
ECI acquisition added a new laboratory, laboratory revenue should have shown an
increase. However, pricing for laboratory services had decreased. This inability
to increase or maintain laboratory revenue as well as high labor and
administrative costs of maintaining a laboratory led to the laboratory
divestiture decision.
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Direct costs were $6,291,808 for Fiscal 95, representing an increase
of $1,910,542 or 43.6% over Fiscal 94. Direct costs consist of all professional
and technical labor, employee benefit costs together with other expenses
directly related to the production of revenue on a project. Other direct costs
include sub-contractors, supplies and other revenue generating expenses. The
increase in direct labor and benefit expenses is directly related to the
increase in the level of activity and increase in revenue generated.
Subcontractor expenses increased from Fiscal 94 to Fiscal 95 due to the
different nature of new services performed. Specifically, the Under Ground
Storage Tanks and Hazardous Materials practices utilize subcontractors to
perform general contacting services that the Company did not perform in Fiscal
94. For Fiscal 95 sub-contractor expenses were approximately $1,715,000 as
compared to approximately $852,000 in Fiscal 94, an increase of $863,000 or
101.3%.
Fiscal 95 gross margin was $2,984,493, or 32.2%, compared to
$2,347,228, or 34.9%, for Fiscal 94. Gross margin in dollar terms increased
$637,265; however the gross margin percentage decreased 2.7% due to
inefficiencies inherit in the hiring and training of new personnel and the
increase in supervisory staff which were not fully offset by an increase in
revenue.
General, administrative and other costs for Fiscals 95 and 94 were
$7,814,936 and $2,859,431, respectively, representing an increase of $4,955,505,
or 173.3%. During Fiscal 95, the Company wrote off $113,794 of costs and fees
associated with attempted investments and acquisitions. In addition, in Fiscal
95, the Company established a $423,424 reserve for potentially uncollectible
administrative fees and expenses claimed in Enviropact, Inc.'s bankruptcy
proceedings. As part of its periodic review of goodwill, in Fiscal 95 the
Company wrote off goodwill in the amount $365,229. In connection with the May
1995 divestiture of its laboratory operations, in Fiscal 95 the Company
established a $1,030,736 revaluation reserve.
The balance of the increase in general, administrative and other costs
of $3,022,322 is attributable to numerous factors. General and administrative
costs increased, as compared to the prior year, due to the mid-Fiscal 94
acquisition of ECI, increased administrative costs associated with the
laboratories and other operating costs. Senior administrative and marketing
staff were also added during Fiscal 95 in order to staff the newly acquired
offices and in order to accommodate proposed future expansion plans.
Depreciation and amortization increased by $223,260 or 84.8% to $486,530 in
Fiscal 95. Penalties and other expenses accrued to the Internal Revenue Service
were $377,350 in Fiscal 95 as compared to $45,801 in Fiscal 94, an increase of
$331,549 or 723.9%.
During Fiscal 95, due to the extensive use of the Company's lines of
credit, the Company incurred $123,694 of interest expense as compared to $20,005
in Fiscal 94, an increase of $103,689 or 518.3%.
Although the Company's total revenues increased, as described above,
due to increased costs, particularly general, administrative and other operating
costs, the Company's loss before income taxes and discontinued operations
increased $4,430,370 or 831.3% from $532,940 in Fiscal 94 to $4,963,310 in
Fiscal 95. Income from discontinued operations increased by $79,446 to
$231,009 in Fiscal 95 from $151,563 in Fiscal 94.
Net loss of $4,732,301 for Fiscal 95 was a $4,350,924 increase over the
Fiscal 94 loss of $381,377.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio decreased slightly to .54 at March
31, 1996 from .55 at March 31, 1995. The decrease is primarily attributable to
the significant losses, the use of working capital to fund said losses and the
Company's drawing down on its lines of credit. As of March 31, 1996, the Company
had a net working capital deficit of $2,206,090, an increase in the deficit of
$65,095 from net working capital deficit of $2,140,995 as of March 31, 1995.
Net cash decreased during Fiscal 96 by $122,622 compared to a decrease
during Fiscal 95 of $21,722. Cash used by continuing operations was $1,059,102
and $744,402, respectively, in Fiscals 96 and 95. Cash provided by discontinued
operations was $41,794 and $176,036, respectively in Fiscals 96 and 95. The net
cash used by operating activities in Fiscal 96 of $1,017,308 utilized
significantly all the Company's lines of credit and working capital. During
Fiscal 96, the Company's lines of credit were drawn down to provide capital to
fund operations. Due to the continuing operational cash drain in Fiscal 96, the
Company reduced cash used for investing activities. Purchases of equipment were
reduced from Fiscal 95 by $283,337 to $54,754 in Fiscal 96. Management believes
that in the year ending March 31, 1997, it must slightly increase equipment
purchases to remain competitive in the marketplace. However, it does not foresee
increasing expenditures to the previous level of Fiscal 95.
On July 8, 1996, the Company completed a Regulation S stock offering.
The offering involved a sale of 9,000,000 shares of Common Stock at an offering
price of $.90 per share generating gross proceeds to the Company of $8,100,000.
The offshore placement agent (the "Placement Agent") handling the offering
entered into an agency agreement which provided for a cash management and
selling fee aggregating $607,500, or 7.5% of the gross proceeds. In addition,
the Placement Agent received broker warrants to purchase 630,000 shares of
Common Stock, exercisable at $1.00 per share until July 8, 1998 and was
reimbursed for out of pocket expenses of approximately $140,000. Thus, net cash
proceeds to the Company in connection with this offering were approximately
$7,352,500.
On July 8, 1996, the Company acquired all the outstanding stock of
American Remedial Technologies, Inc. ("ART"). ART operates a soil remediation
facility in Lynwood, California. This facility is the only currently licensed
fixed base facility for thermal soil remediation in Los Angeles County,
California. The acquisition of ART will involve the Company in thermal
remediation, a natural outgrowth of its current environmental consulting and
remediation activities. The purchase price of ART consisted of cash payment of
$6,000,000, the issuance of 3,000,000 shares of unregistered Common Stock and
the issuance of 1,000,000 shares of Series B Preferred Stock. The Series B
Preferred Stock is convertible, commencing after March 31, 1997, subject to an
earn-out formula, up to a maximum of 10,000,000 shares of Common Stock.
In July 1994, the Company established a $2,500,000 subordinated line
of credit with Strategica Capital Corporation ("Strategica"). This line of
credit bore interest at 15% and was secured by a first lien on all the assets of
the Company, including its subsidiaries. At March 31, 1996, the Company was not
in compliance with certain of the covenants of the Strategica line of credit.
The covenants contained provisions regarding certain operating ratios, solvency
ratios, material adverse changes, and other matters. On July 12, 1996, the
Company repaid the outstanding loan balance under the Strategica line of credit.
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In June 1996, the Consulting Division and the IRS completed an Offer in
Compromise Agreement settling all outstanding issues and disputes. In connection
with the settlement the Consulting Division paid the IRS an aggregate of
$350,000 and agreed to waive certain net operating tax loss carryforwards. The
net operating loss carryforwards waived would have been available to offset
future taxable income. As a direct result of this settlement, in June 1996, the
Company recorded a gain of approximately $950,000, net of professional fees and
costs. The Company, including the Consulting Division, has no other outstanding
disputes with the IRS or delinquent payroll taxes.
In April 1996, ABC Cable Products, Inc., a wholly owned subsidiary,
ceased operation and disposed of all of its operating assets for an aggregate
of $1,550,000 in cash and a promissory note and the assumption of $595,049 of
liabilities. In April 1996, the Company recorded a gain of $510,961, net of
costs associated with the transaction, on the sale of its Cable Products
Division. ABC received at closing $550,000 cash and a promissory note in the
amount of $1,000,000. The note, which is fully collateralized by certain
irrevocable letters of credit, has payment dates of July 1, 1996 ($500,000),
March 5, 1997 ($250,000) and September 5, 1997 ($250,000). The September 5, 1997
payment will automatically accelerate if certain of the underlying letters of
credit are not renewed. The July 1, 1996 payment was received on time and was
used to reduce the then outstanding balance of the Strategica line of credit.
In April 1996, the Company executed a Composition Agreement with
certain of its trade creditors. The Company, due to its limited cash flow
situation, began negotiating with these creditors in September 1995. These
creditors formed an Informal Creditors Committee, who hired both legal and
accounting professionals. Negotiations were finalized in April 1996, with over
75% of the creditors accepting a payout of $.20 for each $1.00 of their allowed
claim. The payout was made in April 1996 from funds that the Company had
previously put into escrow. In April 1996, the Company recorded a benefit, net
of expenses, of approximately $313,000 related to these completed vendor
settlements.
In May 1995, the Company divested itself of the wet chemistry
laboratory operations of the Consulting Division. The Company still has certain
contingent obligations regarding its former laboratories' leases and loans which
aggregate approximately $20,000.
During Fiscal 96 and Fiscal 95 the Company issued 89,000 and 19,186
shares of Common Stock, respectively, in payment of $40,500 and $72,001 for
services rendered.
The Company continues to review all current operations and assets for
potential reorganizations, sale or liquidation in order to raise additional
capital or lower costs.
In addition to the Strategica line of credit, in June 1994, the Company
entered into a consulting agreement with Strategica to provide certain advisory
services. Fees due under the consulting agreement, which expires in June 1999
are payable at the Company's option at either $8,000 per month or $4,000 and
13,334 shares of Common Stock per month. In Fiscal 96, the Company issued an
aggregate 80,000 shares to Strategica in lieu of full cash payments. In
addition, Strategica was issued warrants to purchase 175,000 shares of Common
Stock and warrants to purchase 761,731 shares of Series A Preferred Stock. The
Series A Preferred Stock is convertible into 2,285,193 shares of Common Stock.
The Common Stock warrants are exercisable at $2.70 per share until the year
1999, subject to certain extension provisions. The Series A Preferred Stock
warrants are exercisable at a floating ten day trailing average of bid and ask
prices for the Company's Common Stock up to a
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maximum of $2.70 per share of Common Stock until the year 1999, subject to
certain extension provisions.
The Company sold receivables, which for financial reporting purposes
has been reported as a borrowing transaction, aggregating $866,205, eligible for
reimbursement under the FIPT. Under two similar master funding and
indemnification agreements, Sirrom Resource Funding, L.L.C. and its affiliates
("Sirrom") have lent $347,489 to the Company via the funding of eligible
receivables. The agreements provide that in the event Sirrom is not reimbursed
within 24 months of an advance, the Company is obligated to repurchase the
receivable. This obligation is presented as a note payable in the accompanying
financial statements. Sirrom agreed to provide advances, from time to time, of
up to $650,000 through March 1997. As of March 31, 1996, the Company had
approximately $235,000 of available credit under such agreements. The Company
maintains a cash escrow for the benefit of Sirrom in the event of a
reimbursement shortfall. If the shortfall exceeds the escrow amount, the Company
must pay Sirrom within 15 days of notification.
The Company also entered into subcontractor finance agreements with
Environmental Corporation of America, Inc. ("ECA") and Tier Environmental
Services, Inc. ("Tier"). Under these agreements ECA and Tier have funded
$380,753 and $137,963, respectively of receivables eligible for reimbursement
under the FIPT. Under these agreements, the Company must prepay interest for 12
months based on the published prime rate at the time of funding. Also, at the
time of funding the Company must prepay additional interest at a rate of 5% to a
reserve account for months 13 through 18. If reimbursement from the FIPT takes
more than 18 months, then interest must be prepaid on a quarterly basis at the
rate of prime plus 3%. The Company is liable to ECA and Tier for any
reimbursement denials. The Company must pay any denied reimbursements within 10
days of notification.
The Company continues to monitor the recent governmental activities in
Florida with respect to changes in the FIPT, see, "Item 1 Description of
Business - Governmental Regulation", above. In Fiscal 96 and 95 approximately 5%
and 7%, respectively, of the Company's business was related to the FIPT. As of
March 31, 1996, the Company had claims submitted and pending submission to the
FIPT totaling, net of reserves, $700,969 and $131,953, respectively.
During Fiscal 96, the Company utilized significantly all of its current
lines of credit, including most of the credit available under the master funding
and indemnification agreement and substantially all of its subordinated line of
credit. These lines were utilized to finance the operational losses and fund the
FIPT receivables. As of March 31, 1996, the Company had approximately no
additional availability under its lines of credit. Availability under the
Company's Strategica line of credit is based upon eligibility and other
conditions of the Company's accounts receivable. As of March 31, 1996, the
Company had approximately $235,000 of available credit under its funding
agreements for receivables under the FIPT.
In October 1994, the Company completed a placement of its shares under
Regulation S. Pursuant to the placement, the Company issued 750,000 shares of
common stock in exchange for notes receivable in the amount of $2,250,000. As of
March 31, 1995 no funds had been paid on the notes receivable. Accordingly, as
of March 31, 1995, the Company recorded the issuance of the 750,000 shares at no
value and excluded the shares from earnings per share calculations. In August
1995, in connection with a settlement of the notes receivable, the Company
agreed to revise the purchase price
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per share of the stock sold from $3.00 to approximately $.96 and reduce the
number of shares purchased to 625,000. In addition, the Company issued, at a
price of $1.91 per unit, 249,745 units pursuant to Regulation S, each unit
consisting of one share of Series A Preferred Stock and 2.5 shares of Common
Stock. Prior to March 31, 1996, all of the Series A Preferred Stock had been
converted into Common Stock. The overall effect of this settlement is that the
Company issued 1,998,597 shares of Common Stock at a purchase price of $976,500
or approximately $.49 per share. The Company incurred costs and fees totalling
approximately $351,000 in association with these series of transactions.
The Company received a portion of the proceeds in the form of
marketable securities and other assets. During the year ended March 31, 1996,
the Company sold a portion of the marketable securities and generated net cash
proceeds of $150,000.
Other than previously discussed above, the Company has no material
commitments for capital expenditures.
Subsequent to March 31, 1996, the Company sold the operating assets of
the Cable Products Division, executed a Composition Agreement with certain of
its trade creditors and settled its delinquent payroll taxes matter with the
IRS. In addition, the Company completed a Regulation S stock offering. A
substantial portion of the net proceeds from the stock offering were used to
acquire all of the outstanding stock of ART and repay the outstanding balance of
the Strategica line of credit. The Company intends to fund its current
operations from a combination of cash on hand, cash generated from operations, a
potential sale of new equity, new lines of credit or other sources of debt
funding. Although these sources of capital are expected to fund the Company's
current operations through March 31, 1997 unless the Company returns to
profitability, or develops these additional equity or debt sources of financing,
there would be a material adverse effect on the financial condition, operations
and business prospects of the Company. The Company has no arrangements in place
for such new equity or debt sources of financing, and no assurance can be given
that such financing will be available at all or on terms acceptable to the
Company.
ITEM 7. FINANCIAL STATEMENTS.
The Company's audited consolidated financial statements immediately
follow the signature page to this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
-21-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Company as of July 12, 1996
are as follows:
<TABLE>
<CAPTION>
IN OFFICE
NAME AGE POSITION(S) SINCE
- - -------------------- --- ---------------------------------- ---------
<S> <C> <C> <C>
Dr. Charles C. Evans 39 Chairman of the Board of Directors 1993
Enrique A. Tomeu 41 President, Chief Executive Officer 1996
and Director
Scott E. Salpeter 37 Vice President, Treasurer, Chief 1993
Financial Officer and Director
Kelly Evans 35 Secretary, Chief Administrative 1993
Officer and Director
Leon S. Eplan 67 Director 1993
Richard D. Salpeter 59 Director 1993
Wendell R. Anderson 63 Director 1994
</TABLE>
As indicated below, the following have been nominated to become an
executive officer and Series B Preferred Stock directors of the Company
effective July 16, 1996:
NAME AGE POSITION
- - ------------------------- --- ------------------
David C. Langle 46 Chief Financial Officer
Enrique J. Tomeu, Sr. 63 Director
John B. McCracken 50 Director
Tony Contreras 45 Director
Robert J. Underbrink 35 Director
Carlos M. Vergara 34 Director
-22-
<PAGE>
BUSINESS EXPERIENCE:
DR. CHARLES C. EVANS joined the Company as Chairman of the Board of
Directors in January 1993. Until March 1995, Dr. Evans served as the President
and Chief Executive Officer of the Company, and also as the President of Evans
Environmental. Since 1986 and until March 1995 Dr. Evans had been continuously
employed as President of one or more of Evans Environmental's subsidiaries.
ENRIQUE A. TOMEU became a member of the board in July 1996, at which
time he was elected President and Chief Executive Officer. Mr. Tomeu was the
sole owner and founder of ART and has over 15 years of experience in
construction and environmental industries. Since July 1991 he has owned and been
a principal of several construction, fertilizer, chemical manufacturing,
entertainment, and agribusiness companies located principally in Florida and
South America. Mr. Tomeu attended the University of Florida and General Motors
Institute.
SCOTT E. SALPETER became a member of the Board in January 1993, at
which time he was elected Treasurer and Chief Financial Officer. He became Vice
President in September 1993. Mr. Salpeter also serves on the Board's
Compensation Committee. From 1989 through 1992, Mr. Salpeter was the chief
financial officer of Alco International Group, Inc., a public company then
primarily engaged in marine transportation. From 1988 through 1991, he was the
company secretary of Keller Industries Limited, a public company engaged in the
business of pipeline rehabilitation. Mr. Salpeter also serves as a business
consultant to various other companies, a business in which he has been engaged
since 1987. Mr. Salpeter was an officer of Nova Distributing Co., Inc. ("Nova"),
a paper goods and chemical distributor, beginning in November 1990. In June
1992, Nova filed a petition for relief under the federal bankruptcy laws, and
the proceeding was converted to a liquidation proceeding under Chapter 7 of the
Bankruptcy Code in March 1993.
KELLY EVANS is the Secretary, Chief Administrative Officer and a
director of the Company. She has served as Secretary and Chief Administrative
Officer since January 26, 1993, and as a director since April 1993. Ms. Evans
has been employed as the Chief Administrative Officer of Evans Environmental on
a full-time basis since 1987. Ms. Evans also serves as the Chairperson of the
Compensation Committee of the Board of Directors.
LEON S. EPLAN has been a member of the Board since April 1993. Mr.
Eplan also serves on the Audit Committee of the Board of Directors. In addition,
he has been the Commissioner of Planning and Development of the City of Atlanta
since October 1991, and currently is assisting it in its preparations for the
1996 Summer Olympic Games. In addition, Mr. Eplan is a part-time professor at
the Graduate School of Planning at the Georgia Institute of Technology. For over
13 years prior to October 1991, Mr. Eplan had been employed by Leon S. Eplan &
Associates, an urban planning consulting firm of which he was the principal.
RICHARD D. SALPETER was appointed to the Board in January 1993. Mr.
Salpeter also serves on the Compensation and Audit Committees of the Board of
Directors. Mr. Salpeter has been the president and a director of Joshua
Management, Inc., a management consulting firm, from 1987 until June 30, 1995
and was the president and a director of Nova from November 1990 until March
1993. In June 1992, Nova filed a petition for relief under the federal
bankruptcy laws, and the proceeding was converted to a liquidation proceeding
under Chapter 7 of the Bankruptcy Code in March 1993.
-23-
<PAGE>
WENDELL R. ANDERSON was appointed to the Board in 1994. He has been Of
Counsel to the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd., based in
Minnesota, since 1979. He also serves as a director of the following public
companies: Fingerhut Corp. (since 1991), National City Bank Corporation (since
1981) and Super Mail International (since 1994).
DAVID C. LANGLE has 16 years of experience in Public and Private
Accounting and Business Management. Prior to his employment with American
Remedial, Mr. Langle served in various senior management capacities as Vice
President, Chief Financial Officer and Director for two Florida based Nasdaq
listed public companies, Solar Financial Services, Inc. (1993 to 1995) and
Frenchtex, Inc. (1991 to 1993). During Mr. Langle's tenure at Frenchtex, he also
served as Financial Director and Acting General Manager of the Company's
European manufacturing subsidiary. From 1982 to 1991, Mr. Langle was employed by
the Miami office of Spicer & Oppenheim, CPA's, an international accounting and
consulting firm where he completed his tenure as an Audit Partner. His
educational background includes a BS in Accounting and Business Administration
from the University of Illinois at Chicago and he maintains professional
registration as a Certified Public Accountant in the State of Florida
ENRIQUE J. TOMEU (SENIOR) has owned and operated fertilizer and
chemical plants for over 35 years. He is currently a principal in several
fertilizer trading and plant operations in four countries in North and South
America. Mr. Tomeu has built six fertilizer bulk blending plants. He founded,
operated and sold companies in the agri-business, trucking and mining
industries, in the last four decades. Mr. Tomeu has served on the Board of
Directors of Flagship Bank and Suburban Bank Shares.
JOHN B. MCCRACKEN is a graduate of Tufts University and of Vanderbilt
University School of Law. He is a member of the Florida Bar and a partner in the
law firm of Jones, Foster, Johnston & Stubbs, P.A. in West Palm Beach, Florida.
His areas of practice are corporate, real estate, and estate planning. Mr.
McCracken has served as president of the Palm Beach County Bar Association and
as president of the Young Lawyers Section of the Palm Beach County Bar
Association. He has also twice served as chairman of the Florida Bar Grievance
(disciplinary) Committee and as a member of the Board of Governors of the Young
Lawyers Section of the Florida Bar. He has served as commissioner of the Port of
Palm Beach, chairman of the Young Friends of St. Mary's Hospital, and as Senior
Warden of Holy Trinity Episcopal Church.
TONY CONTRERAS joined Sugar Cane Growers Cooperative of Florida in 1984
and is currently the Vice President of Marketing and Legislative Affairs. Prior
to joining the cooperative, Mr. Contreras spent 11 years in the sugar division
of Gulf Western Industries, Inc. Mr. Contreras is also on the Board of Directors
and the Executive Committee of Florida Sugar Marketing & Terminal Assn. He is
past president and currently a Director of the Florida Molasses Exchange, Inc.
Mr. Contreras is a past director of the Florida Sugar Cane League. Mr. Contreras
is a graduate of the University of Miami where he obtained his Bachelor's degree
in Business Administration. He has a Masters' degree in International Marketing
from Thunderbird Graduate School of International Management at Glendale,
Arizona.
ROBERT J. UNDERBRINK is general manager of King Ranch-Florida, an
agribusiness division of King Ranch, Kingsville, Texas. Mr. Underbrink started
with King Ranch in 1984 and was promoted to general manager of the operation in
1987. King Ranch grows sugar cane and grows and markets sod at the Florida firm,
and Mr. Underbrink directs and manages all activities of the operation. Mr.
Underbrink also manages and
-24-
<PAGE>
directs the operations of W Citrus Limited Partnership which owns citrus groves
located in various areas in Florida. Mr. Underbrink earned a Bachelor of Science
degree in Agricultural Business from Texas A & I University, Kingsville, Texas.
Mr. Underbrink serves on the Board of Directors of Sugar Cane Growers
Cooperative of Florida and is Treasurer of the Florida Rice Council, Inc.
CARLOS M. VERGARA graduated with a degree in Political Science from the
American College in Paris. He is currently the President of Gargrove, Inc.,
Chairman of the Board of Kakaho Corporation, and majority stockholder in a 1300
acre citrus grove located in Vero Beach, Florida. Mr. Vergara is a partner in
Sovereign Capital Group, Coral Gables, Florida a registered SEC investment
advisory company. Previously he was Executive Vice President of Totalbank
Leasing Corp., of Miami Florida.
Directors are elected annually at the Company's annual shareholders'
meeting. Each director of the Company serves until his successor is elected and
qualified or until the earlier of death, resignation, removal or
disqualification of the director. The officers are elected annually by the
directors.
Dr. Charles C. Evans and Kelly Evans are brother and sister. Richard
D. Salpeter and Scott E. Salpeter are father and son, respectively. Enrique A.
Tomeu and Enrique J. Tomeu, Sr. are father and son. Enrique A. Tomeu, Carlos
Vergara and Tony Contreras are brothers-in-law. Carlos Vergara and Tony
Contreras are the son-in-laws of Enrique J. Tomeu, Sr. Other than the foregoing,
there are no family relationships between or among any of the directors or
executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee, of
which Mr. Richard Salpeter, Mr. Scott Salpeter and Ms. Kelly Evans are members.
The functions of the Compensation Committee are to review and approve annual
salaries and bonuses for all executive officers and review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefit plans or changes thereto, including the granting of stock options
pursuant to the Company's stock option plans. The chairman of the Compensation
Committee is Ms. Kelly Evans. The Board of Directors has also established an
Audit Committee of which Mr. Richard Salpeter and Mr. Leon S. Eplan are members.
The functions of the Audit Committee are to oversee the Company's Chief
Financial Officer, meet periodically with the Company's outside auditors, and
generally be responsible for the Company's financial and accounting policies.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who beneficially own
more than 10% of the Company's Common Stock, to file forms of securities
ownership and changes in such ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% beneficial
owners also are required by rules promulgated by the SEC to furnish the Company
with copies of all Section 16(a) forms they file. The Company does not know of
any such forms were required to be filed during or for the year ended March 31,
1996 except that Dr. Charles Evans, Scott Salpeter, Kelly Evans, Richard
Salpeter, Leon Eplan and Wendell Anderson did not file any Forms 4 or Forms 5
with respect to 2,500, 3,750, 5,000, 5,000, 3,750 and 2,500 options,
respectively, which they received during Fiscal 96.
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<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information about the compensation paid
or accrued by the Company during the fiscal years ended March 31, 1996, 1995 and
1994 to the Company's Chief Executive Officer, the only employee whose aggregate
compensation exceeded $100,000 for the fiscal year ended March 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
--------------------------- ---------------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- - ----------------------------- ---- -------- ----- ---------------------
<S> <C> <C> <C> <C>
John C. "Jack" Reynolds, 1996 $164,500 $0 200,000
Interim President and Chief 1995 $7,000 $0 31,250
Executive Officer(1) 1994 $0 $0 0
</TABLE>
- - --------
(1) John C. "Jack" Reynolds was employed as Interim President through July
11, 1996 pursuant to a consulting arrangement with Quintero. None of
the above compensation was paid to Mr. Reynolds. All compensation
payments and option issuances were made to directly Quintero. Mr.
Reynolds is not a shareholder, officer or director of Quintero.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the 1996 fiscal year for the person named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN OR BASE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR PRICE ($/SH) DATE
- - -------------------------- --------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
John C. "Jack" Reynolds (1) 200,000 63% $0.29-$0.31 Sept 13, 1997
- - --------
</TABLE>
(1) John C. "Jack" Reynolds was employed as Interim President through July
11, 1996 pursuant to a consulting arrangement with Quintero. None of
the above options were issued to Mr. Reynolds, but were issued directly
to Quintero. Mr. Reynolds is not a shareholder, officer or director of
Quintero.
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<PAGE>
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the value of
unexercised stock options at the end of the 1996 fiscal year for the person
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT FISCAL
ACQUIRED ON VALUE FISCAL YEAR END YEAR END ($)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ------------------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John C. "Jack" Reynolds(1) 0 0 231,250 / 0 $77,469 / $0
</TABLE>
- - --------
(1) John C. "Jack" Reynolds was employed as Interim President through
July 11, 1996 pursuant to a consulting arrangement with Quintero.
None of the above options were issued to Mr. Reynolds, but were issued
directly to Quintero. Mr. Reynolds is not a shareholder, officer or
director of Quintero.
COMPENSATION ARRANGEMENTS
EMPLOYMENT AGREEMENT
Enrique A. Tomeu is employed as the Chief Executive Officer and
President of Evans Environmental pursuant to a four year employment agreement
dated as of July 8, 1996. As compensation thereunder, Mr. Tomeu is entitled to
receive an annual salary of $150,000; a luxury automobile; a $900 per month
non-accountable expense allowance; an expense account for business travel and
other expenses; six weeks' paid vacation annually; health insurance for himself
and his family; and a $3,000,000 life insurance policy on his life payable to
his designees. In addition, Mr. Tomeu may be entitled to a bonus based on the
performance of the Company, at the discretion of the Board of Directors. Upon
termination of his employment with the Company by virtue of his involuntary
resignation, permanent disability (as defined in the agreement) or dismissal for
other than cause (as defined in the agreement), Mr. Tomeu is entitled to convert
any Series B Convertible Preferred Stock which he then may own to Common Stock
as though the applicable earnouts had been earned. As a part of his employment
agreement, Mr. Tomeu has agreed not to compete with the Company's business for a
period of one year following his voluntary resignation or the termination of his
employment for cause.
Effective July 3, 1996, Dr. Evans has been employed by the Company
pursuant to a new three year employment agreement and a new three year
consulting agreement. The new employment agreement provides for an annual salary
of $24,000; a $500 auto allowance; an expense account for business travel and
other expenses; and eight weeks' paid vacation annually. The consulting
agreement provides for annual fees of $50,000 and an expense account for
business travel and other expenses. In addition, Dr. Evans may be entitled to a
bonus based on the performance of the Company at the discretion of the Board of
Directors. Dr. Evans has agreed not to compete with the Company's business for a
period of one year following his voluntary resignation or the termination of his
employment with the Company for cause.
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<PAGE>
John C. "Jack" Reynolds was employed as Interim President through July
11, 1996 pursuant to a consulting arrangement with Quintero. In consideration
for these services, Quintero received a weekly payment of $3,500 and options to
purchase 31,250 shares of Common Stock, to be awarded in advance each quarter.
In addition, Quintero was reimbursed for all reasonable and necessary
out-of-pocket expenses. The Agreement has been cancelled effective July 28,
1996. Mr. Reynolds is not a shareholder, officer or director of Quintero.
COMPENSATION OF DIRECTORS
Each director who is not an executive officer or employee of the
Company is entitled to a fee of $500 per meeting. Further, for serving on the
Board of Directors, directors received mandatory stock option grants under the
1993 Stock Option Plan and are entitled to additional compensation duly
authorized by the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of July 12,
1996, regarding the Company's Common Stock and Series B Convertible Preferred
Stock owned of record or beneficially by (i) each stockholder who is known by
the Company to beneficially own in excess of 5% of the outstanding shares of
Common Stock or Series B Convertible Preferred Stock, (ii) each director and
executive officer (iii) each person nominated to become a director or executive
officer and (iv) all directors, executive officers, and nominees as a group.
Except as otherwise indicated, each stockholder listed below has sole voting and
investment power with respect to shares beneficially owned by such person.
In accordance with Rule 13d-3, promulgated under the Exchange Act,
shares that are not outstanding but that are issuable upon exercise of
outstanding options, warrants, rights or conversion privileges within 60 days or
are otherwise required by Rule 13d-3 to be included have been deemed to be
outstanding for the purpose of computing the percentage of outstanding shares
owned by the person owning such right, but have not been deemed outstanding for
the purpose of computing the percentage for any other person. As of July 12,
1996, there were 16,740,126 and 1,000,000 shares of Common Stock and Series B
Convertible Preferred Stock issued and outstanding, respectively.
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<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
-------------------- -------------------
AMOUNT AND NATURE OF % OF AMOUNT AND NATURE OF % OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS BENEFICIAL OWNERSHIP CLASS
- - ------------------------------- -------------------- ------- -------------------- ------
<S> <C> <C> <C> <C>
Enrique A. Tomeu (1) 8,233,650 35.68% 633,365 63.34%
1000 Southern Blvd., Ste 300
West Palm Beach, Florida 33405
Michael Klein (1) 3,585,723 14.15% 275,880 27.59%
100 Shoreline Highway, Ste A190
Mill Valley, California 94941
Strategica Capital Corporation (2) 2,540,196 18.39% -- --
1221 Brickell Avenue, Ste 2600
Miami, Florida 33131
Charles C. Evans (3) 726,042 4.16% -- --
99 S.E. 5th St., 4th Flr.
Miami, Florida 33131
Richard D. Salpeter (4) 422,049 2.46% -- --
99 S.E. 5th St., 4th Flr.
Miami, Florida 33131
Kelly Evans (5) 253,293 * -- --
99 S.E. 5th St., 4th Flr.
Miami, Florida 33131
Scott E. Salpeter (6) 144,355 * -- --
99 S.E. 5th St., 4th Flr.
Miami, Florida 33131
Leon S. Eplan (7) 37,500 * -- --
55 Trinity Ave., S.W., Suite 1450
Atlanta, GA 30335
Wendell R. Anderson, Esq. (8) 30,000 * -- --
720 Baker Building
Minneapolis, MN 55403
Robert J. Underbrink (9) 10,508 * -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
Tony Contreras (10) 8,325 * -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
David C. Langle -- -- -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF % OF AMOUNT AND NATURE OF % OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS BENEFICIAL OWNERSHIP CLASS
- - ------------------------------- -------------------- ------- -------------------- ------
<S> <C> <C> <C> <C>
Enrique J. Tomeu, Sr. -- -- -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
John B. McCracken, Esq. -- -- -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
Carlos M. Vergara -- -- -- --
1000 Southern Blvd., Ste. 300
West Palm Beach, Florida 33405
All Directors, Executive Officers 9,865,722 41.63% 633,365 63.34%
and nominees as a Group
(13 persons) (11)
</TABLE>
- - ------------------------------
* Less than 1%.
(1) Includes conversion of Preferred Stock.
(2) Includes (i) 175,500 shares of Common Stock issuable under currently
exercisable warrants granted to a predecessor corporation and (ii)
761,731 shares of Series A Convertible Preferred Stock issuable under
currently exercisable warrants. The shares of Series A Convertible
Preferred Stock are convertible into 2,285,193 shares of Common Stock.
(3) Includes options to purchase 11,200 shares of Common Stock.
(4) Includes 9,330 shares of Common Stock owned of record by Joshua
Management, Inc., a corporation of which Mr. Salpeter is a principal
and options to purchase 317,083 shares of Common Stock owned of record
by Mr. Salpeter. Does not include 18,660 shares of Common Stock owned
of record by Mr. Salpeter's wife, as to which shares Mr. Salpeter
disclaims beneficial ownership.
(5) Includes options to purchase 217,500 shares of Common Stock. Does not
include 2,241 shares of Common Stock owned of record by Ms. Evans'
husband, as to which shares Ms. Evans disclaims beneficial ownership.
(6) Includes 9,330 shares of Common Stock owned of record by Joshua
Management, Inc., a corporation of which Mr. Salpeter is a principal,
and options to purchase 13,750 shares of Common Stock owned of record
by Mr. Salpeter.
(7) Includes options to purchase 37,500 shares of Common Stock.
(8) Includes options to purchase 30,000 shares of Common Stock.
-30-
<PAGE>
(9) These shares of Common Stock are held jointly with Mr. Underbrink's
wife.
(10) Does not include 5,370 shares of Common Stock owned of record by
Mr. Contreras' wife as to which shares Mr. Contreras disclaims
beneficial ownership.
(11) Includes options to purchase 627,033 shares of Common Stock and
conversion of 909,245 shares of Preferred Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Part I, "Item 1. Description of Business - Business Development."
for a description of the consulting arrangement between the Company and
Quintero, of which John C. "Jack" Reynolds, the Company's former Interim
President, was an employee.
In July 1995, the Company borrowed $85,000 from the spouse of the
Chairman of the Board of Directors. The note, which as of March 31, 1996 and
July 12, 1996 remained outstanding, is due upon demand and bears interest at 12%
per annum. The Chairman disclaims any beneficial interest in the loan. The
highest balance due under the note during the year ended March 31, 1996 and the
balance outstanding on March 31, 1996 was $85,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
3(i) Restated Articles of Incorporation, as amended
3(ii) Bylaws
4.1 Warrant Agreement dated July 11, 1994 between the Company and
Strategica Group, Inc. incorporated by reference from Exhibit 4.1 of
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1995 dated February 12, 1996.
4.2 Warrant Agreement dated July 11, 1994 between the Company and
Strategica Capital Corporation incorporated by reference from Exhibit
4.1 of Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995 dated February 12, 1996.
4.3 Warrant Agreement dated April 4, 1995 between the Company and
Strategica Capital Corporation incorporated by reference from Exhibit
4.1 of Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995 dated February 12, 1996.
4.4 Additional Warrant Agreement dated April 4, 1995 between the Company
and Strategica Capital Corporation incorporated by reference from
Exhibit 4.1 of Registrant's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1995 dated February 12, 1996.
4.5 Amendment to Warrant Agreement between the Company and Strategica
Capital Corporation dated April 4, 1995 incorporated by reference from
Exhibit 4.1 of Registrant's Quarterly Report on Form 10-QSB for the
quarter ended December 31, 1995 dated February 12, 1996.
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<PAGE>
4.6 Amendment to Warrant Agreement between the Company and Strategica
Group, Inc. dated April 4, 1995 incorporated by reference from Exhibit
4.1 of Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995 dated February 12, 1996.
4.7 Warrant Agreement dated July 8, 1996 between the Company and Clubb
Capital Ltd.
4.8 Warrant Agreement dated July 8, 1996 between the Company and Karl
Spoddig.
Items 10.1, 10.2, 10.3, and 10.4 are the Company's executive
compensation plans and arrangements.
10.1 Employment Agreement between Evans Environmental Corporation and
Charles Evans dated June 26, 1992 incorporated by reference from
Exhibit 10.19 of Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1993 dated July 14, 1993.
10.2 Consulting Agreement between the Company and R.G. Quintero & Co. dated
March 14, 1995 incorporated by reference from Exhibit 10.2 of
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1995 dated August 18, 1995.
10.3 Evans Environmental Corporation 1993 Stock Option Plan incorporated by
reference from Exhibit 10.3 of Registrant's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1995 dated August 18, 1995.
10.4 Employment Agreement between Evans Environmental Corporation and
Enrique A. Tomeu dated July 8, 1996.
10.5 Amended and Restated Share Exchange Agreement between the Company and
Sector Investments, Inc. dated October 29, 1993 incorporated by
reference from Exhibit 10.3 of Registrant's Form SB-2, No. 33-85072,
dated October 13, 1994.
10.6 Restated and Amended Stock Purchase and Settlement Agreement between
the Company and GGL Industries, Inc., Enviropact Consultants, Inc.,
Sector Investments, Inc. and Enviropact, Inc. dated October 29, 1993
incorporated by reference from Exhibit 10.4 of Registrant's Form SB-2,
No. 33-85072, dated October 13, 1994.
10.7 Licensing Agreement between BioSystems Technology, Inc. and the
Company dated June 14, 1994 incorporated by reference from Exhibit 10.7
of the Registrant's Form SB-2, No. 33-85072, dated October 13, 1994.
10.8 Advisory Agreement between the Company and Strategica Group, Inc.
dated June 16, 1994 incorporated by reference from Exhibit 10.8 of the
Registrant's Form SB-2, No. 33-85072, dated October 13, 1994.
10.9 Master Funding and Indemnification Agreement between the Company and
Sirrom Resources Group, Inc. dated August 1, 1994 incorporated by
reference from Exhibit 10.9 of the Registrant's Form SB-2, No.
33-85072, dated October 13, 1994.
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<PAGE>
10.10 Credit Agreement, dated as of July 11, 1994 incorporated by reference
from Exhibit 10.4 of the Registrant's Form 10-KSB for the fiscal year
ended March 31, 1994, dated July 14, 1994.
10.11 Amendment to Advisory Agreement between the Company and Strategica
Group, Inc. dated April 4, 1995 incorporated by reference from Exhibit
10.12 of Registrant's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1995 dated August 18, 1995.
10.12 Agreement by and between Evans BioSystems Corporation and PDG Delaware,
Inc. dated as of November 8, 1994 incorporated by reference from
Exhibit 10.13 of Registrant's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1995 dated August 18, 1995.
10.13 Stock Sale Agreement between the Company and Enrique A. Tomeu dated
March 15, 1996, as amended.
10.14 Agency Agreement between the Company and Clubb Capital Ltd dated
July 8, 1996.
10.15 Asset Purchase Agreement between the Company, ABC Cable Products, Inc.
and ICX International, Inc. dated April 3, 1996.
10.16 Promissory Note between the Company and Lisa L. Robbins dated May 1,
1995.
21 Subsidiaries of the Company.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EVANS ENVIRONMENTAL CORPORATION
By: /s/ CHARLES C. EVANS
----------------------------
Charles C. Evans, Chairman
Date: July 12, 1996
In accordance with the requirements of the Exchange Act, this report
has been signed below by the following persons on behalf of the registrant on
the dates indicated.
SIGNATURE TITLE DATE
- - ------------------------ -------------------------- ---------------
/s/ ENRIQUE A. TOMEU President, Chief Executive July 12, 1996
- - ------------------------ Officer and Director
Enrique A. Tomeu (Principal Executive
Officer)
/S/ SCOTT E. SALPETER Vice president, Treasurer, July 12, 1996
- - ----------------------- Chief Financial Officer and
Scott E. Salpeter Director (Principal
Accounting Officer)
/S/ KELLY EVANS Secretary, Chief July 12, 1996
- - ----------------------- Administrative Officer and
Kelly Evans Director
/S/ CHARLES C. EVANS Director July 12, 1996
- - -----------------------
Dr. Charles C. Evans
/S/ RICHARD D. SALPETER Director July 12, 1996
- - -----------------------
Richard D. Salpeter
/S/ LEON S. EPLAN Director July 12, 1996
- - -----------------------
Leon S. Eplan
/S/WENDELL R. ANDERSON Director July 12, 1996
- - -----------------------
Wendell R. Anderson
-34-
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
------------------------
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
as of March 31, 1996
and for the years ended March 31, 1996 and 1995
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
---------
PAGES
-----
Report of Independent Accountants F-1
Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Cash Flows F-4 to F-5
Consolidated Statements of Stockholders'
Equity (Deficit) F-6
Notes to Consolidated Financial Statements F-7 to F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------
To the Shareholders and Board of Directors
Evans Environmental Corporation
We have audited the accompanying consolidated balance sheet of Evans
Environmental Corporation and subsidiaries (the "Company") as of March 31, 1996
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the two years in the period ended March 31,
1996. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Evans
Environmental Corporation and subsidiaries as of March 31, 1996 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended March 31, 1996 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 23 to
the consolidated financial statements, the Company has suffered significant
losses for the years ended March 31, 1996 and 1995, and at March 31, 1996, it
had both a working capital and net capital deficiency. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 23. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Coopers & Lybrand L.L.P.
Miami, Florida
June 4, 1996
except for Note 22 as for which the date is July 12, 1996
F-1
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996
---------
(Unaudited)
Pro Forma
See Note 22
ASSETS
Current assets:
Cash $ 178,121 $ 340,486
Restricted cash 154,749 36,654
Marketable securities 75,000 75,000
Accounts receivable, net of allowance
of $97,000 792,929 792,929
Note receivable - 750,000
Net assets of discontinued operations 1,037,971 -
Prepaid expenses & other 354,974 215,243
----------- -----------
Total current assets 2,593,744 2,210,312
Amounts due under
state reimbursement program 832,922 832,922
Property & equipment, net 573,813 573,813
Goodwill, net of amortization of $449,000 946,554 946,554
Long term note receivable - 250,000
Other assets 298,859 298,859
----------- -----------
Total assets $ 5,245,892 $ 5,112,460
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,861,425 $ 1,339,070
Accrued expenses 604,459 276,077
Delinquent payroll taxes 1,051,688 -
Related party note payable 85,000 85,000
Current portion of
capital lease obligations 15,983 15,983
Current portion of notes payable 1,181,279 1,181,279
----------- -----------
Total current liabilities 4,799,834 2,897,409
----------- -----------
Notes payable 873,113 873,113
Commitments & contingencies
(Notes 9, 10 & 22) - -
----------- -----------
Stockholders' equity (deficit):
Series A Preferred stock:
$.001 par value, 5,000,000 authorized,
none issued - -
Common stock:
$.012 par value, 25,000,000 authorized,
4,590,126 issued and outstanding 55,082 55,082
Additional paid in capital 6,635,498 6,635,498
Accumulated deficit (7,117,635) (5,348,642)
----------- -----------
Total stockholders' equity (deficit) (427,055) 1,341,938
----------- -----------
Total liabilities &
stockholders' equity (deficit) $ 5,245,892 $ 5,112,460
=========== ===========
The accompanying notes are an integral part
of these financial statements
F-2
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996 AND 1995
---------
1996 1995
----------- -----------
Revenue:
Consulting services $ 5,721,221 $ 6,823,368
Laboratory services - 2,452,933
----------- -----------
Total revenue 5,721,221 9,276,301
----------- -----------
Direct costs & expenses:
Direct labor & employee
benefit costs 1,990,786 3,421,194
Other direct costs & expenses 1,306,325 2,870,614
----------- -----------
Total direct costs & expenses 3,297,111 6,291,808
----------- -----------
Gross profit 2,424,110 2,984,493
----------- -----------
Other costs and expenses:
General, administrative &
other operating costs 3,352,980 5,881,753
Write down for closed offices 629,518 -
Provision for potential loss on
state reimbursement program 345,706 -
Loss on disposal of laboratory assets 198,997 1,030,736
Fraud loss 151,766 -
Provision for potential loss on
Enviropact claim - 423,424
Goodwill impairment - 365,229
Investment write-off - 113,794
----------- -----------
Total operating and other
costs & expenses 4,678,967 7,814,936
----------- -----------
Operating loss (2,254,857) (4,830,443)
----------- -----------
Other income (expense):
Interest income 58,434 16,083
Interest expense (246,122) (139,777)
Gain (loss) from equipment sales 300 (9,173)
----------- -----------
Other expense, net (187,388) (132,867)
----------- -----------
Loss before income taxes (2,442,245) (4,963,310)
Provision for income taxes - -
----------- -----------
Other costs & expenses:
Loss from continuing operations (2,442,245) (4,963,310)
Income from discontinued operations
of ABC Cable Products, Inc.,
net of $0 taxes 390,880 231,009
----------- -----------
Net loss $(2,051,365) $(4,732,301)
=========== ===========
(Loss) income per share from:
Continuing operations $ (.60) $ (1.99)
Discontinued operations .10 .09
----------- -----------
$ (.50) $ (1.90)
=========== ===========
The accompanying notes are an integral part
of these financial statements
F-3
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996 AND 1995
---------
1996 1995
----------- ------------
Operating activities:
Net loss $(2,051,365) $(4,732,301)
Adjustments to reconcile net loss to
net cash used by continuing operations:
Depreciation & amortization 311,378 486,530
Increase in deferred income taxes - 6,498
(Gain) loss on sale of equipment (300) 9,173
Services paid with common stock 40,500 72,001
Non-cash expenses 9,563 -
Provision for potential loss on
state reimbursement program 293,869 -
Write down for closed offices 526,278 -
Discontinued operations (390,880) (231,009)
Loss on disposal of laboratory assets - 1,030,736
Provision for potential loss on
Enviropact claim - 423,424
Goodwill impairment - 365,229
Changes in operating assets & liabilities:
Accounts receivable 520,962 669,841
Income tax refund - 110,345
Prepaid expenses & other (37,651) (126,329)
Amounts due under state
reimbursement program (131,703) (995,088)
Other assets 1,256 -
Accounts payable 266,043 919,121
Accrued expenses (399,876) 553,034
Payroll taxes (17,176) 694,393
----------- -----------
Net cash provided (used) by
operating activities of:
Continuing operations (1,059,102) (744,402)
Discontinued operations 41,794 176,036
----------- -----------
Net cash used by operating activities (1,017,308) (568,366)
----------- -----------
Investing activities:
Restricted cash (113,020) (41,729)
Sales of marketable securities 150,000 -
Purchases of equipment (54,754) (338,091)
Payments for acquisition, including
acquisition costs - (159,043)
Proceeds from sale of equipment 300 5,875
----------- -----------
Net cash used by investing activities (17,474) (532,988)
----------- -----------
The accompanying notes are an integral part
of these financial statements
F-4
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED MARCH 31, 1996 AND 1995
---------
1996 1995
----------- -----------
Financing activities:
Original issuance of stock $ 476,500 $ -
Costs associated with issuance
of stock (125,546) (225,780)
Increase in notes payable 619,518 1,764,420
Increase in related party note payable 85,000 -
Payments on notes payable (125,338) (268,906)
Payments on capital lease obligations (17,974) (190,102)
----------- -----------
Net cash provided by financing activities 912,160 1,079,632
----------- -----------
Net decrease in cash (122,622) (21,722)
Cash, beginning of period 300,743 322,465
----------- -----------
Cash, end of period $ 178,121 $ 300,743
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest $ 295,394 $ 123,058
=========== ===========
Income taxes $ 6,403 $ 1,868
=========== ===========
During the year ended March 31, 1995, capital lease obligations of $71,365 were
incurred when the Company entered into leases for new equipment. For additional
information see Note 9.
See Notes 1, 2 & 13 for certain non-cash acquisition and other transactions.
The accompanying notes are an integral part
of these financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIT)
YEARS ENDED MARCH 31, 1996 AND 1995
---------
SHARES OF SERIES A ADDITIONAL
SHARES OF SERIES A PREFERRED COMMON PAID IN ACCUMULATED
COMMON PREFERRED STOCK STOCK CAPITAL (DEFICIT) TOTAL
---------- --------- --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance April 1, 1994 1,043,217 - $ - $ 12,518 $4,521,387 $ (333,969) $4,199,936
Issuance of stock in
settlement of obligation
to purchase Enviropact
Consultants, Inc. 275,000 - - 3,300 1,415,700 - 1,419,000
Additional issuance for
acquisition of CBLX 1,165,000 - - 13,980 (13,980) - -
Issuance of stock for
services 19,186 - - 231 71,770 - 72,001
Issuance of stock 750,000 - - 9,000 (9,000) - -
Costs associated with
issuance of stock - - - - (225,780) - (225,780)
Net loss - - - - - (4,732,301) (4,732,301)
---------- ---------- ---------- ---------- ---------- ----------- ----------
Balance March 31, 1995 3,252,403 - - 39,029 5,760,097 (5,066,270) 732,856
Issuance of stock 499,362 249,745 250 5,992 970,258 - 976,500
Costs associated with
issuance of stock - - - - (125,546) - (125,546)
Conversion of preferred 749,235 (249,745) (250) 8,991 (8,741) - -
Issuance of stock for
services 89,000 - - 1,068 39,432 - 40,500
Rounding for stock split 126 - - 2 (2) - -
Net loss - - - - - (2,051,365) (2,051,365)
---------- ---------- ---------- ---------- ---------- ----------- ----------
Balance March 31, 1996 4,590,126 - $ - $ 55,082 $6,635,498 $(7,117,635) $ (427,055)
========== ========== ========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-6
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------
1. BUSINESS AND ORGANIZATION
BUSINESS
The Company is engaged, through its wholly-owned subsidiaries, in environmental
consulting and other environmental related services (the "Consulting Division").
Until April 3, 1996, the Company was also engaged in the production and sale of
cable products (the "Cable Products Division"). See Notes 3 & 22, Significant
Accounting Policies and Subsequent Events, respectively.
ORGANIZATION
On January 18, 1993, Evans Environmental Corporation, Inc. ("Evans
Environmental") became a wholly-owned subsidiary of Evans Environmental
Corporation (the "Company"), formerly CBLX Holdings, Inc., pursuant to a share
exchange agreement, between the former shareholders of Evans Environmental and
the Company, ("the Exchange Agreement"), whereby the former Evans Environmental
shareholders received 335,000 shares of the Company's common stock for all of
the issued and outstanding common stock of Evans Environmental. As provided for
in the Exchange Agreement, as amended, the Evans Environmental shareholders
received, in April 1994, an additional 1,165,000 shares of the Company's stock.
2. ACQUISITION
On October 29, 1993, the Company entered into an Amended and Restated Share
Exchange Agreement (the "Sector Agreement") with Sector Investments, Inc.
("Sector"), pursuant to which the Company acquired 100% of the capital stock
("ECI Shares") of Enviropact Consultants, Inc. ("ECI"). ECI was formed by
Enviropact, Inc. (the "Debtor"), which had filed a petition pursuant to Title
11, as amended, of the United States Code. Effective October 29, 1993, with the
approval of the United States Bankruptcy Court, ECI acquired certain assets of
the Debtor.
In consideration for the ECI Shares, the Company issued 225,000 shares (the
"Shares") of its Common Stock (the "ECI Acquisition"), which number of shares
may increase or decrease by up to 25,000 based on certain conditions. In
addition, the Company issued 50,000 shares of Common Stock to a consultant who
facilitated the ECI Acquisition.
F-7
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
2. ACQUISITION (CONTINUED)
Effective October 29, 1993, pursuant to the Sector Agreement and the purchase of
a secured loan, in which the Company had participated, that had funded the
ongoing operations of the Debtor during its bankruptcy, the Company had complete
management and financial responsibility and control over the activities of ECI
by virtue of: Company employees being elected to ECI's board of directors and as
executive officers; and purchasing the Secured Loan. Accordingly, the
transactions were treated as an acquisition, utilizing purchase accounting, with
an obligation to issue the Shares in connection therewith. The investment in ECI
of approximately $2,756,000, consisting of the Shares and other cash and
non-cash consideration, was allocated to assets and liabilities of ECI based on
their estimated fair value as of October 29, 1993, the date of acquisition. The
cost in excess of net assets acquired was approximately $1,765,000 and is being
amortized on a straight-line basis over 14 years. See Note 3, Significant
Accounting Policies, for a further discussion of goodwill.
On April 12, 1994, the Company's shareholders approved the ECI Acquisition and
subsequently, the Company issued the Shares in exchange for the ECI Shares.
3. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND EQUIVALENTS
The Company classifies as cash and equivalents all highly liquid investments
which present insignificant risk of changes in value and have maturities at the
date of purchase of three months or less. The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts.
F-8
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES
The Company can classify investments into one of three categories: held to
maturity, available for sale, or trading. Debt securities held with a positive
intent and ability to hold to maturity are classified as held to maturity and
reported at cost. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either held
to maturity securities or trading securities are classified as
available-for-sale and reported at fair value with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders'
equity. As of March 31, 1996, the Company has classified as available for sale
investments with an original cost of $75,000, which approximates fair value.
PROPERTY & EQUIPMENT
Property & equipment are recorded at cost and are depreciated using the straight
line method over the estimated useful lives of the assets for financial
reporting purposes and using accelerated methods for income tax reporting
purposes. Amortization of assets recorded under capital leases is included in
depreciation expense.
Maintenance and repairs are charged to expense when incurred; betterments are
capitalized. Upon retirement or sale, the cost of the assets and the related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is included in the determination of net income or loss.
GOODWILL
Goodwill represents the excess of cost over the fair value of assets acquired
and is mainly amortized on a straight line basis over fourteen years.
The Company quarterly reviews the carrying value of goodwill in relation to
current and expected operating results of the businesses which benefit therefrom
in order to assess whether there has been a permanent impairment of goodwill.
In connection with its periodic review, the Consulting Division's closing of
certain offices and its disposition of certain operations, the Company wrote off
an aggregate $452,737 (included in the write down for closed offices) and
$889,449 ($524,220 has been included in the loss on disposal of laboratory
assets) of goodwill in the years ended March 31, 1996 and 1995, respectively.
F-9
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Service revenue is recognized as services are performed.
INCOME TAXES
The Company utilizes the liability method of accounting for deferred income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of asset
and liabilities using tax rates in effect for the year in which the differences
are expected to reverse.
PER SHARE DATA
Per share data is based on the weighted average number of shares of common stock
of 4,102,577 and 2,493,062 for the years ended March 31, 1996 and 1995,
respectively. Common stock equivalents have not been included in the weighted
average number of shares as they are anti-dilutive for all periods presented.
The 750,000 shares originally issued in October 1994, have not been included in
the calculation of the weighted average number of shares until June 1995, when
the Company received consideration for their issuance.
On December 27, 1995 the shareholders of the Company approved a one-for-four
reverse split of common stock effective December 29, 1995. Unless otherwise
noted, all share and per share data of the Company included in the accompanying
financial statements and notes thereto have been adjusted to give effect to this
reverse stock split.
CHANGE IN ACCOUNTING STANDARDS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," is effective for fiscal years beginning
after December 15, 1995. This statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The impact of this pronouncement, if any, on the financial
statements of the Company has not been determined.
F-10
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CHANGE IN ACCOUNTING STANDARDS (CONTINUED)
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for fiscal
years beginning after December 15, 1995. This pronouncement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. It encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. Companies
that choose not to adopt the new fair value accounting rules will be required to
disclose pro forma net income and earnings per share under the new method. The
Company anticipates adopting the disclosure provisions of SFAS No. 123, although
the impact of such disclosure has not been determined.
DISCONTINUED OPERATIONS
During April 1996, ABC Cable Products, Inc., a wholly-owned subsidiary, ceased
operations and disposed of all of its operating assets. As such, the Company has
treated the Cable Products Division as discontinued operations for all periods
presented. See Note 22, Subsequent Events.
CUSTOMERS AND CLIENT BASE
The majority of the Consulting Division's customers are located in the State of
Florida. None of the Companies' customers represent ten percent (10%) or more of
total revenues in the periods presented. Concentration of credit risk with
respect to trade receivables are generally limited due to the large number of
clients comprising the Company's client base and their diverse industries.
However, as of March 31, 1996, the Company had $832,922 of long term receivables
outstanding under the State of Florida Inland Protection Trust Fund program (the
"FIPT"). The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific clients, historical trends, and
other information. See Note 17, State Reimbursement Program.
PRESENTATION
Certain amounts previously reported have been reclassified to conform to the
1996 financial statement presentation.
F-11
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
4. RESTRICTED CASH
The Company established an escrow account pursuant to master funding and
indemnification agreements to fund reimbursement receivables from the State of
Florida under the FIPT. See Note 8, Notes Payable.
The Company established an escrow account pursuant to a composition agreement
with certain of its creditors. See Note 22, Subsequent Events.
5. PROPERTY & EQUIPMENT
Property & equipment at March 31, 1996 consists of the following:
Machinery & equipment $ 408,174
Automobiles 152,101
Furniture & fixtures 525,396
Leasehold improvements 29,717
----------
1,115,388
Less accumulated depreciation & amortization (541,575)
-----------
$ 573,813
==========
Depreciation and amortization of property & equipment amounted to $178,374 and
$304,123 for the years ended March 31, 1996 and 1995, respectively. The Company
leased certain equipment under capital lease agreements which expire over a one
year period. Equipment under capital lease agreements, included in property &
equipment totalled $21,804 at March 31, 1996. There is no accumulated
amortization related to this equipment at March 31, 1996.
6. ACCRUED EXPENSES
Accrued expenses at March 31, 1996 consist of the following:
Accrued compensation & employee benefits $ 153,976
Payroll tax penalties & interest 329,450
Other 121,033
-----------
$ 604,459
===========
7. DELINQUENT PAYROLL TAXES
During the year ended March 31, 1995, the Consulting Division became delinquent
in certain of its payroll tax deposits. As of March 31, 1996, the Company had
accrued approximately $1,381,000 to the Internal Revenue Service (the "IRS") for
delinquent payroll taxes, interest and penalties. During the year ended March
31, 1996, the Company, including the Consulting Division made all required
payroll tax deposits.
On June 28, 1996, the Consulting Division and the IRS completed an Offer in
Compromise Agreement. See Note 22, Subsequent Events.
F-12
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
8. NOTES PAYABLE
Notes payable at March 31, 1996 consist of the following:
Note payable, Ford Motor Credit Company,
collateralized by property and equipment,
payable in monthly installments of $489,
through 1997, including interest at 12.7% $ 7,572
Various notes payable, Sun Trust, collateralized
by property and equipment, payable in monthly
installments ranging from $288 to $511, through 1997,
including interest ranging from 6% to 7.3% 40,740
Master funding and indemnification agreements, Sirrom
Resource Funding, L.L.C., collateralized by specific
receivables in connection with the FIPT, with interest
at 2% over prime, through 1997 347,489
Subcontractor finance agreements with recourse,
Environmental Corporation of America, Inc., collateralized
by specific receivables in connection with the FIPT, with
interest at 8.25%-8.75% per annum for 12 months, 10% per
annum for the following 6 months and 3% over prime
thereafter. The notes will be deemed paid upon the lenders
receipt of funds from the FIPT. 380,753
Subcontractor finance agreements with recourse, Tier
Environmental Services, Inc., collateralized by specific
receivables in connection with the FIPT, with interest at
8.50%-8.75%. The notes will be deemed paid upon the lenders
receipt of funds from the FIPT. 137,963
Revolving line of credit, Strategica Capital
Corporation, collateralized by all assets
of the Company, with interest at 15%,
expires July 11, 1996. See Note 22,
Subsequent Events 1,139,875
-----------
2,054,392
Less current portion 1,181,279
-----------
$ 873,113
===========
Aggregate maturities of notes payable as of March 31, 1996 are as follows:
YEAR ENDING MARCH 31,
- - ---------------------
1997 $ 1,181,279
1998 873,113
-----------
$ 2,054,392
===========
F-13
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
8. NOTES PAYABLE (CONTINUED)
At March 31, 1996, the Company was not in compliance with certain of the
covenants of the Strategica Capital Corporation ("Strategica") line of credit.
The covenants contain provisions regarding certain operating ratios, solvency
ratios, material adverse changes, and other matters. At maturity on July 12,
1996 the Company repaid the Strategica line of credit. See Note 22, Subsequent
Events.
The Company sold receivables, which for financial reporting purposes has been
reported as a borrowing transaction, aggregating $866,205, eligible for
reimbursement under the FIPT. Under two similar master funding and
indemnification agreements, Sirrom Resource Funding, L.L.C. and its affiliates
("Sirrom") have lent $347,489 to the Company via the funding of eligible
receivables. The agreements provide that in the event Sirrom is not reimbursed
within 24 months of an advance, the Company is obligated to repurchase the
receivable. This obligation is presented as a note payable in the accompanying
financial statements. Sirrom agreed to provide advances, from time to time, of
up to $650,000 through March 1997. As of March 31, 1996, the Company had
approximately $235,000 of available credit under such agreements. The Company
maintains a cash escrow for the benefit of Sirrom in the event of a
reimbursement shortfall. If the shortfall exceeds the escrow amount, the Company
must pay Sirrom within 15 days of notification.
The Company also entered into subcontractor finance agreements with
Environmental Corporation of America, Inc. ("ECA") and Tier Environmental
Services, Inc. ("Tier"). Under these agreements ECA and Tier have funded
$380,753 and $137,963, respectively of receivables eligible for reimbursement
under the FIPT. Under these agreements, the Company must prepay interest for 12
months based on the published prime rate at the time of funding. Also, at the
time of funding the Company must prepay additional interest at a rate of 5% to a
reserve account for months 13 through 18. If reimbursement from the FIPT takes
more than 18 months, then interest must be prepaid on a quarterly basis at the
rate of prime plus 3%. The Company is liable to ECA and Tier for any
reimbursement denials. The Company must pay any denied reimbursements within 10
days of notification. See Note 17, State Reimbursement Program.
F-14
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
9. CAPITAL LEASE OBLIGATIONS
Minimum annual capitalized lease payments at March 31, 1996 are as follows:
YEAR ENDING MARCH 31,
---------------------
1997 $ 15,983
-----------
Total minimum lease payments 15,983
Less amount representing interest 2,381
-----------
Present value of current minimum lease payments $ 13,602
===========
10. COMMITMENTS & CONTINGENCIES
The Company leases office space under operating leases which expire on various
dates through the year 2000. Many of these lease agreements contain options for
renewal and annual rent increases.
Minimum annual lease payments at March 31, 1996, are as follows:
YEAR ENDING MARCH 31,
- - ---------------------
1997 $ 185,204
1998 165,883
1999 167,294
2000 110,447
-----------
Minimum lease payments $ 628,828
===========
Total rental expense incurred was $305,211 and $370,847 for the years ended
March 31, 1996 and 1995, respectively.
11. RELATED PARTIES
In July 1995, the Company borrowed $85,000 from the spouse of the Chairman of
the Board of Directors. The note is due upon demand and bears interest at 12%
per annum. The Chairman disclaims any beneficial interest in the loan.
Two of the Company's minority shareholders, James S. Cassel and Marwin S. Cassel
(son and father), President of James S. Cassel, P.A., and Marwin S. Cassel,
P.A., respectively, both professional associations are affiliated with the law
firm of Broad and Cassel. During the years ended March 31, 1996 and 1995, the
Company incurred legal fees to Broad and Cassel of approximately $40,000 and
$300,000, respectively. At March 31, 1996, the Company was indebted to Broad &
Cassel in the amount of approximately $293,000, which is included in accounts
payable in the accompanying balance sheet.
F-15
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
12. INCOME TAXES
As discussed in Note 3, the Company utilizes the liability method of accounting
for deferred income taxes. There was no provision for income taxes due to
operating losses. The significant components of the deferred taxes as of March
31, 1996 were as follows:
Deferred tax assets:
Bad debt reserves $ 36,500
Other reserves 401,000
Revaluation of assets 430,000
Accrued expenses 40,000
Federal net operating losses carryforward 2,385,000
----------
3,292,500
Valuation allowance (3,213,300)
----------
79,200
Deferred tax liabilities:
Property and equipment 52,000
Prepaid expenses 27,200
----------
79,200
----------
$ -
==========
The Company experienced a change in ownership, as defined by Internal Revenue
Code Section 382, related to the acquisitions of CBLX Holdings, Inc. and Geos,
Inc. in March 1993 and June 1992, respectively. The changes in ownership
resulted in annual limitations on the amount of net operating losses that can be
utilized which were incurred prior to such ownership changes. In addition,
because these losses were generated during a separate return year, the loss can
be utilized only to the extent that these companies generate taxable income.
At March 31, 1996, the Company had available approximately $1,979,000 of
pre-change net operating losses which are allowable after application of the
Section 382 limitation, as well as post change net operating losses of
approximately $4,700,000. These net operating losses begin to expire in the year
2006. As a result of the settlement reached with the IRS regarding delinquent
payroll taxes, these net operating losses will be materially reduced. See Note
2, Subsequent Evants.
The Company provides a valuation allowance against deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. Due to the payroll tax issue
discussed in Notes 7 and 22 and the history of operating losses, it is
managements' belief that it is more likely than not that the deferred tax asset
will not be realized; and accordingly, the Company has established a valuation
allowance against deferred tax assets of $3,213,300 at March 31, 1996. The
change in the valuation allowance relates principally to the current year net
operating loss.
F-16
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
13. STOCKHOLDERS' DEFICIT
COMMON STOCK
During the years ended March 31, 1996 and 1995 the Company issued 89,000 and
19,186 shares of common stock, respectively, in payment of $40,500 and $72,001
for services rendered.
In October 1994, the Company completed a placement under Regulation S under the
Securities Act of 1933. Pursuant to the placement, the Company issued 750,000
shares of common stock in exchange for notes receivable in the amount of
$2,250,000. As of March 31, 1995 no funds had been paid on the notes receivable.
Accordingly, as of March 31, 1995, the Company recorded the issuance of the
750,000 shares at no value and excluded the shares from earnings per share
calculations.
In August 1995, in connection with a settlement of the notes receivable, the
Company agreed to revise the purchase price per share of the stock sold from
$3.00 to approximately $.96 and reduce the number of shares purchased to
625,000. In addition, the Company issued, at a price of $1.91 per unit, 249,745
units pursuant to Regulation S, each unit consisting of one share of Series A
preferred stock (see Preferred Stock, below) and 2.5 shares of common stock.
Prior to March 31, 1996, all of the preferred stock had been converted into
common stock. The overall effect of this settlement is that the Company issued
1,998,597 shares of common stock at a purchase price of $976,500 or
approximately $.49 per share. The Company incurred costs and fees totalling
approximately $351,000 in association with these series of transactions.
The Company received a portion of the proceeds in the form of marketable
securities and other assets. During the year ended March 31, 1996, the Company
sold a portion of the marketable securities and generated net cash proceeds of
$150,000.
SERIES A PREFERRED STOCK
The Series A Convertible Preferred Stock, $.001 par value per share (the
"Preferred Stock"), none outstanding, is entitled to receive cumulative
preferential dividends at the rate of $.0512 per share, per annum, payable
either in cash or in common stock of the Company. Each share of the Preferred
Stock is convertible into 3 shares of the Company's common stock. The Preferred
Stock contains certain liquidation rights in the event of any liquidation,
dissolution or winding up of the Company. The liquidation value is $.64 per
share of Preferred Stock, plus any accrued and unpaid dividends. The Company may
redeem the Preferred Stock at a price of $.64 per share of Preferred Stock, in
whole or in part, at any time commencing two years after its issuance.
F-17
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
14. WARRANTS AND OPTIONS
Warrants and options outstanding to purchase common stock of the Company at
March 31, 1996 consist of the following:
EXPIR- COMMON
ISSUE ATION EXERCISE STOCK
DATE DATE PRICE ISSUABLE
------ ------ -------- --------
Issued in connection with:
Consulting agreement Jun 93 Jun 98 $10.50 75,000
Line of credit Jul 94 Jan 02 $2.70 175,000
Management agreement Mar 95 Sep 97 $0.29 31,250
Line of credit and
consulting agreement Apr 95 Jan 02 (1) 2,285,193
Consulting agreement Apr 95 Apr 96 $2.00 37,500
Management agreement Jun 95 Sep 97 $0.29 31,250
Consulting agreement Jun 95 Jun 98 $0.29 6,250
Stock issuance Jul 95 Jul 96 $0.75 625,000
Management agreement Sep 95 Sep 97 $0.29 31,250
Consulting agreement Nov 95 Nov 98 $0.29 15,000
Management agreement Nov 95 Sep 97 $0.29 75,000
Management agreement Dec 95 Sep 97 $0.29 31,250
Consulting agreement Dec 95 Dec 96 $1.00 50,000
Management agreement Mar 96 Sep 97 $0.31 31,250
---------
3,500,193
=========
(1) Warrants are to purchase 761,731 shares of Series A preferred stock. The
Series A preferred stock are convertible into 2,285,193 shares of common stock.
The exercise price is constantly reset to the 10 day prior trading average price
of the Company's common stock up to a maximum exercise price of $2.70 for each
share of underlying common stock.
15. EMPLOYEE BENEFIT PLANS
SAVINGS AND INVESTMENT PLAN
The Company adopted a defined contribution profit sharing plan (401(k) Plan)
known as the "Evans Environmental Corporation Savings and Investment Plan."
Matching contributions of approximately $30,000 and $50,000 were approved for
the 1996 and 1995 plan years, respectively, by the Company's Board of Directors.
F-18
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
15. EMPLOYEE BENEFIT PLANS (CONTINUED)
STOCK OPTION PLAN
The Company has a stock option plan (the "1993 Stock Option Plan") under which
the Compensation Committee of the Board of Directors has the authority to
grant incentive stock options and non-qualified stock options to employees
(including directors and executive officers) of the Company or its
subsidiaries. The following table presents information on the 1993 Stock
Option Plan:
TOTAL VESTED PRICE
OPTIONS OPTIONS RANGE
------- ------- -----
Options outstanding
at April 1, 1994 78,058 35,741 $8.00-$23.28
Granted 22,600 - $1.92-$6.40
Options which vested - 28,846 $1.92-$6.40
Exercised - - -
Cancelled or expired (16,375) (5,404) $3.52-$9.76
------- -------
Options outstanding
at March 31, 1995 84,283 59,183 $1.92-$23.28
Granted 109,333 - $0.29-$3.52
Options which vested - 54,533 $0.29
Exercised - - -
Cancelled or expired (106,258) (58,058) $1.92-$23.28
------- ------
Options outstanding
at March 31, 1996 87,358 55,658 $0.29-$9.75
====== ======
OTHER STOCK OPTIONS
Outside of the 1993 Stock Option Plan, the Company has also issued an
aggregate 8,125 options to certain senior and middle management at an exercise
price of $0.88 per share. All said options, which are fully vested, expire in
June 1998.
16. WRITE DOWN FOR CLOSED OFFICES
During the year ended March 31, 1996, the Company closed its Yonkers, New York
office and wrote down an aggregate $629,518 in connection with the closing.
The write down included:
Write down of:
Goodwill $ 452,738
Property & equipment, net 73,540
Deposits 9,167
Reserve for:
Accounts receivable 63,483
Expenses 30,590
---------
$ 629,518
=========
F-19
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
17. STATE REIMBURSEMENT PROGRAM
The Company continues to monitor governmental activities in Florida with
respect to changes in the FIPT, which provides for the remediation of
contamination related to the storage of petroleum and petroleum products. The
State of Florida ceased the processing of applications for new work under the
Petroleum Contamination Reimbursement Program under the FIPT with limited
exceptions for certain active sites. In its place, the State of Florida has
implemented, under the FIPT, a prioritized Petroleum Cleanup Program based
upon pre-approved scope of work and costs. In Fiscal 1996 and 1995
approximately 5% and 7%, respectively, of the Company's business was related
to the FIPT.
As of March 31, 1996, the Company had claims submitted and pending submission
to the FIPT, under the prior program, totaling, net of reserves, $700,969 and
$131,953, respectively. The submitted claims have been financed under certain
master funding and subcontractor finance agreements. See Note 8, Notes
Payable.
During the year ended March 31, 1996, the Company provided reserves for
potential unallowed claims, present value discounts on long term receivables,
and actual denials aggregating $345,706.
18. LOSS ON DISPOSAL OF LABORATORY ASSETS
In May 1995, the Company divested itself of the wet chemistry laboratory
operations of the Consulting Division. The purchaser bought all the assets and
essentially all operating liabilities of the laboratory operations. The
Company had, since March 1995, been planning to sell or liquidate its
laboratory operations and therefore provided for a reserve of $1,030,736 in
the year ended March 31, 1995. The purchaser was to provide the Company with
free lab services valued at $100,000 and remit, out of the purchased
receivables, $143,000 to the Company's secured creditor to reduce the
Company's outstanding loan. During the year ended March 31, 1996, the
purchaser provided the Company with free laboratory services valued at $62,147
and remitted $40,907 to reduce the Company's outstanding loan. Subsequently,
the purchaser filed for protection under Chapter 11 of the United States
Bankruptcy Code. While the Company continues to pursue all legal rights and
attempts to enforce its secured position it has provided an additional loss
reserve of $198,997 in the year ended March 31, 1996.
F-20
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
19. FRAUD LOSS
In June 1995, the Company received a bank cashier's check, drawn on a national
commercial bank, for payment on a Regulation S offering of the Company's
preferred stock. The Company gave this cashier's check to the Internal Revenue
Service in payment of payroll tax obligations. See Note 7, Delinquent Payroll
Taxes, and Note 22, Subsequent Events. The cashier's check was not honored by
the bank, which denied its validity. A fee of $151,766 was paid to finders in
this transaction. The Company demanded repayment of the fee and continues to
discuss all possible courses of action with the Internal Revenue Service,
various law enforcement agencies, its attorneys and advisers. The preferred
stock certificate issued in this transaction was recovered and the Regulation
S offering was voided.
Although, the Company demanded repayment of the finder's fee it has not been
returned, and in the year ended March 31, 1996, the Company expensed the full
amount of the finder's fee.
20. PROVISION FOR POTENTIAL LOSS ON ENVIROPACT CLAIM
Prior to the acquisition of ECI, the Company provided management services for
the Debtor. The Company provided said services under the provisions of a
formal management agreement with the Debtor, and approved by the United States
Bankruptcy Court. The fees receivable, which were fully provided for during
the year ended March 31, 1995, are a priority administrative claim of the
Debtor. As of March 31, 1996, the claim had still not been settled nor paid.
21. INVESTMENT WRITE-OFF
During the year ended March 31, 1995, the Company incurred costs associated
with various attempts to acquire certain companies. All costs in connection
with these unrealized attempts were written off during the year ended March
31, 1995.
22. SUBSEQUENT EVENTS
SALE OF CABLE PRODUCTS DIVISION
On April 3, 1996, ABC Cable Products, Inc., a wholly-owned subsidiary, ceased
operations and sold all of its operating assets for an aggregate of $550,000
in cash and a promissory note in the amount of $1,000,000. In addition, at
closing, the purchaser assumed certain liabilities of ABC aggregating
$595,049. The promissory note, which is fully collateralized by certain
irrevocable letters of credit, has payment dates of July 1, 1996 ($500,000),
March 5, 1997 ($250,000) and September 5, 1997 ($250,000). The September 5,
1997 payment will automatically accelerate if certain of the underlying
letters of credit are not renewed. The July 1996 payment was received in a
timely manner.
F-21
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
22. SUBSEQUENT EVENTS (CONTINUED)
SALE OF CABLE PRODUCTS DIVISION (CONTINUED)
In April 1996, the Company recorded a gain of $510,961, net of costs
associated with the transaction, on the sale of its Cable Products Division.
For all years presented, the Company has shown the results of the Cable
Products Division separately as discontinued operations in the consolidated
financial statements. Summarized results of the Cable Products Division for
the years ended March 31, 1996 and 1995 were as follows:
1996 1995
---------- ----------
Revenues $5,515,622 $3,900,749
Cost of Goods Sold 4,241,030 2,838,966
---------- ----------
Gross Margin $1,274,592 $1,061,783
========== ==========
In addition, as of March 31, 1996, the Company has presented the assets and
liabilities of the Cable Products Division as a net amount pending subsequent
sale. The major components of the net assets of discontinued operations as of
March 31, 1996 were as follows:
Restricted cash $ 100,000
Accounts receivable, net 805,717
Inventory 482,208
Prepaid expenses 122,676
Property & equipment, net 96,629
Other 25,790
----------
1,633,020
Accounts payable & accrued liabilities (582,085)
Capital lease obligations (12,964)
----------
(595,049)
----------
Net assets of discontinued operations $1,037,971
==========
VENDOR SETTLEMENTS
During April 1996, the Company executed a Composition Agreement with certain
of its trade creditors. The Company, due to its limited cash flow situation,
began negotiating with these creditors in September 1995. These creditors
formed an Informal Creditors Committee, who hired both legal and accounting
professionals. Negotiations were finalized in April 1996, with over 75% of the
creditors accepting a payout of $.20 for each $1.00 of their allowed claim.
The payout was made in April 1996 from funds that the Company had previously
put into escrow. The Company continues to negotiate with the creditors who
rejected the Company's offer. In April 1996, the Company recorded a benefit,
net of expenses, of approximately $313,000 related to completed vendor
settlements.
F-22
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
22. SUBSEQUENT EVENTS (CONTINUED)
SETTLEMENT OF DELINQUENT PAYROLL TAXES
On June 28, 1996, the Consulting Division and the IRS completed an Offer in
Compromise Agreement settling all outstanding issues and disputes. In
connection with the settlement the Consulting Division paid the IRS an
aggregate of $350,000 and agreed to waive certain net operating tax loss
carryforwards. The net operating loss carryforwards waived would have been
available to offset future taxable income. As a direct result of this
settlement, in June 1996, the Company recorded a gain of approximately
$950,000, net of professional fees and costs. The Company, including the
Consulting Division, has no other outstanding disputes with the IRS or
delinquent payroll taxes.
PRO FORMA
The accompanying unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1996 is presented as if the transactions described above had been
consummated as of that date. A summary of the financial effects of the
transactions are as follows:
Gain from:
Sale of Cable Products Division $ 510,961
Vendor settlements 312,338
IRS settlement 945,694
----------
Reduction in Accumulated Deficit $1,768,993
==========
STRATEGICA LOAN REPAYMENT
On July 12, 1996, the Company repaid the outstanding loan balance under the
Strategica line of credit.
REGULATION S OFFERING
On July 8, 1996, the Company completed a Regulation S stock offering. The
offering involved a sale of 9,000,000 shares of Common Stock at an offering
price of $.90 per share generating gross proceeds to the Company of
$8,100,000. The offshore placement agent (the "Placement Agent") handling the
offering entered into an agency agreement which provided for a cash management
and selling fee aggregating $607,500, or 7.5% of the gross proceeds. In
addition, the Placement Agent received broker warrants to purchase 630,000
shares of Common Stock, exercisable at $1.00 per share until July 8, 1998 and
was reimbursed for out of pocket expenses of approximately $140,000. Thus, net
cash proceeds to the Company in connection with this offering were
approximately $7,352,500.
F-23
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
---------
22. SUBSEQUENT EVENTS (CONTINUED)
ACQUISITION OF AMERICAN REMEDIAL TECHNOLOGIES
On July 8, 1996, the Company acquired all the outstanding stock of American
Remedial Technologies, Inc. ("ART"). ART operates a soil remediation facility
in Lynwood, California. This facility is the only currently licensed fixed
base facility for thermal soil remediation in Los Angeles County, California.
The acquisition of ART will involve the Company in thermal remediation, a
natural outgrowth of its current environmental consulting and remediation
activities.
The purchase price of ART consisted of a cash payment of $6,000,000, the
issuance of 3,000,000 shares of unregistered Common Stock and the issuance of
1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock is
convertible, subject to an earn-out formula, up to a maximum of 10,000,000
shares of Common Stock. Furthermore, Mr. Enrique A. Tomeu, the current ART
President, has become the Chief Executive Officer of the Company.
The Series B Convertible Preferred Stock, $.001 par value per share (the
"Series B"), is not entitled to receive any dividends. The Series B has a
liquidation value of $.75 per share. The holders of the Series B are entitled
to elect six members to the Company's Board of Directors.
23. GOING CONCERN CONSIDERATION
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as going concern. The Company has suffered
significant net losses for the years ended March 31, 1996 and 1995 and at
March 31, 1996 its current liabilities exceeded its current assets. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. As discussed in Note 22, subsequent to March 31, 1996,
management sold the operating assets of the Cable Products Division, executed
a Composition Agreement with certain of its trade creditors and settled its
delinquent payroll tax matter with the IRS. In addition, management completed
a Regulation S stock offering on July 8, 1996. A substantial portion of the
net proceeds from the stock offering were used by the Company to acquire all
of the outstanding stock of ART and repay the outstanding balance of the
Strategica line of credit. The acquisition of ART will involve the Company in
thermal remediation, a natural outgrowth of its current environmental
consulting and remediation activities. Management is also continuing to
evaluate the need for future cost saving measures.
In the absence of obtaining profitable operations or obtaining additional debt
or equity financing the Company may not have sufficient funds to continue
operations in 1997.
F-24
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LEGISLATION OF
ANY STATE OF THE UNITED STATES. THIS SECURITY MAY NOT BE EXERCISED IN THE UNITED
STATES OR BY OR ON BEHALF OF A U.S. PERSON, AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED IN
THE UNITED STATES, UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE ACT AND THE
SECURITIES LEGISLATION OF ALL APPLICABLE STATES OF THE UNITED STATES OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND
"U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE ACT.
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
EVANS ENVIRONMENTAL CORPORATION
Exercisable Commencing
JULY 8, 1996
VOID AFTER
JULY 8, 1998
THIS CERTIFIES that, for value received, Clubb Capital
Ltd. (the "Warrantholder"), is entitled, subject to the terms and conditions set
forth in these Warrants, to purchase from EVANS ENVIRONMENTAL CORPORATION, a
Colorado corporation (the "Company"), up to 504,000 fully paid and
non-assessable shares of common stock of the Company (individually, a "Share"
and collectively, the "Shares"), at any time commencing July 8, 1996 and
continuing up to 5:00 p.m. (Miami time) on July 8, 1998 (the "Expiry Time") on
payment of US$1.00 per Share. The exercise price payable hereunder from time to
time shall be herein referred to as the "Exercise Price". The number of Shares
which the Warrantholder is entitled to acquire upon exercise of the Warrants and
the Exercise Price are subject to adjustment as hereafter provided. Except as
provided herein, these Warrants shall not entitle the holder hereof to any
rights as a shareholder of the Company, including, without limitation, voting
rights.
1. EXERCISE OF WARRANTS
(a) ELECTION TO PURCHASE. These Warrants may be exercised by
the Warrantholder in whole or in part and in accordance
with the provisions hereof by delivery of an election to
purchase (the "Election to Purchase") in a form
substantially the same as that attached hereto as Annex
"1", properly completed and executed, together with payment
of the Exercise Price, by certified cheque or
<PAGE>
bank draft, for the number of Shares specified in the
Election to Purchase at the principal office of the Company
at 99 Southeast Fifth Street, Fourth Floor, Miami, Florida,
U.S.A. 33131 or such other address in the United States as
may be notified in writing by the Company (the "Company
Office").
(b) EXERCISE. The Company shall, as promptly as practicable
after it receives a duly executed Election to Purchase and
the Exercise Price for the number of Shares specified in
the Election to Purchase (the "Exercise Date"), issue that
number of Shares specified in the Election to Purchase as
fully paid and non- assessable shares of common stock. Such
duly executed Election to Purchase shall constitute the
Warrantholder's acknowledgement of and undertaking to
comply to the reasonable satisfaction of the Company and
its counsel, with all applicable laws, rules, regulations
and policies of every stock exchange or similar market upon
which the common stock of the Company may from time to time
be listed, quoted or traded, and any other applicable
regulatory authorities.
(c) STOCK CERTIFICATES. As promptly as practicable after
the Exercise Date, the Company shall issue and deliver to
the Warrantholder, registered in such name or names as the
Warrantholder may direct or if no such direction has been
given, in the name of the Warrantholder, a certificate or
certificates for the number of Shares specified in the
Election to Purchase. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the
close of business on the Exercise Date, and at such time
the rights of the Warrantholder with respect to the number
of the Warrants which have been exercised as such shall
cease, and the person or persons in whose name or names any
certificate or certificates for Shares shall then be
issuable upon such exercise shall be deemed to have become
the holder or holders of the Shares represented thereby.
(d) FRACTIONAL SHARES. No fractional Shares shall be issued
upon exercise of these Warrants and no payments or
adjustment shall be made upon any exercise on account of
any cash dividends on the Shares issued upon such exercise.
If any fractional interest in a Share would, except for the
provisions of the first sentence of this section 1(d), be
deliverable upon the exercise of these Warrants, the number
of Shares to be issued to the Warrantholder upon the
exercise of these Warrants shall be rounded up to the next
whole number.
(e) CORPORATE CHANGES. If the Company shall be a party to
any reorganization, merger, dissolution or sale of all or
substantially all of its assets, whether or not the Company
is the surviving entity, these Warrants shall be adjusted
so as to apply to the securities to which the holder of
that number of Shares of the Company subject to the number
of unexercised Warrants would have been entitled by reason
of such reorganization, merger, dissolution or sale of all
or substantially all of its assets (the "Event"), and the
Exercise Price shall be adjusted to be the amount
determined by multiplying the Exercise Price in effect
immediately prior to the Event by the number of Shares
subject to the number of unexercised Warrants immediately
prior to the Event, and dividing the product thereof by the
number of securities to which the holder of that
<PAGE>
number of Shares subject to the number of unexercised
Warrants would have been entitled by reason of such Event.
(f) SUBDIVISION OR CONSOLIDATION OF COMMON STOCK
(i) In the event the Company shall subdivide its
outstanding shares of common stock into a greater
number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be
proportionately reduced, and conversely, in the
event the outstanding shares of common stock of
the Company shall be consolidated into a smaller
number of shares, the Exercise Price in effect
immediately prior to such consolidation shall be
proportionately increased.
(ii) Upon each adjustment of the Exercise Price as
provided herein, the Warrantholder shall
thereafter be entitled to acquire, at the
Exercise Price resulting from such adjustment,
the number of Shares (calculated to the nearest
tenth of a share) obtained by multiplying the
Exercise Price in effect immediately prior to
such adjustment by the number of shares of common
stock which may be acquired hereunder immediately
prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such
adjustment.
(g) CHANGE OR RECLASSIFICATION OF COMMON STOCK. In the event
the Company shall change or reclassify its outstanding
shares of common stock into a different class of
securities, the Warrants shall be adjusted as follows so as
to apply to the successor class of securities:
(i) the number of the successor class of securities
which the Warrantholder shall be entitled to
acquire shall be that number of the successor
class of securities which a holder of that number
of Shares subject to the number of unexercised
Warrants immediately prior to the change or
reclassification would have been entitled to by
reason of such change or reclassification; and
(ii) the Exercise Price shall be determined by
multiplying the Exercise Price in effect
immediately prior to the change or
reclassification by the number of Shares subject
to the number of unexercised Warrants immediately
prior to the change or reclassification, and
dividing the product thereof by the number of
Shares determined in paragraph 1(g)(i) hereof.
(h) OFFERING TO SHAREHOLDERS. If and whenever at any time
prior to the Expiry Time the Company shall fix a record
date or if a date is otherwise established (any such date
being hereinafter referred to in this subsection 1(h) as
the "record date") for the issuance of rights, options or
warrants to all or substantially all the holders of the
outstanding shares of common stock of the Company entitling
them, for a period expiring not more than 45 days after
such record date, to subscribe for or purchase shares of
common stock of the Company or securities convertible into
or exchangeable for such shares at a price per share or, as
the case may be, having a conversion or exchange price
<PAGE>
per share, less than 95% of the Fair Market Value (as
hereinafter defined) on such record date, the Exercise
Price shall be adjusted immediately after such record date
so that it shall equal the price determined by multiplying
the Exercise Price in effect on such record date by a
fraction, of which the numerator shall be the total number
of shares of common stock outstanding on such record date
plus a number equal to the number arrived at by dividing
the aggregate price of the total number of additional
shares of common stock offered for subscription or purchase
or, as the case may be, the aggregate conversion or
exchange price of the convertible or exchangeable
securities so offered, by the Fair Market Value, and of
which the denominator shall be the total number of shares
of common stock outstanding on such record date plus the
total number of additional shares of common stock so
offered (or into which the convertible or exchangeable
securities so offered are convertible or exchangeable);
shares of common stock owned by or held for the account of
the Company or any subsidiary of the Company shall be
deemed not to be outstanding for the purpose of any such
computation; such adjustment shall be made successively
whenever such a record date is fixed; to the extent that
any rights or warrants are not so issued or any such rights
or warrants are not exercised prior to the expiration
thereof, the Exercise Price shall then be readjusted to the
Exercise Price which would then be in effect if such record
date had not been fixed or to the Exercise Price which
would then be in effect based upon the number of shares of
common stock or conversion or exchange rights contained in
convertible or exchangeable securities actually issued upon
the exercise of such rights or warrants, as the case may
be.
(i) ADDITIONAL SUBSCRIPTIONS. If at any time the Company grants
to its shareholders the right to subscribe for and purchase
PRO RATA additional securities of the Company (other than
securities described in paragraph 1(h) hereof) or of any
other corporation or entity, there shall be no adjustments
made to the number of Shares or other securities subject to
the Warrants in consequence thereof and the Warrants shall
remain unaffected.
(j) CARRY OVER OF ADJUSTMENTS. No adjustment of the Exercise
Price shall be made if the amount of such adjustment shall
be less than 1% of the Exercise Price in effect immediately
prior to the event giving rise to the adjustment, provided,
however, that in such case any adjustment that would
otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least 1%
per Share.
(k) NOTICE OF ADJUSTMENT. Upon any adjustment of the number
of Shares and upon any adjustment of the Exercise Price,
then and in each such case the Company shall give written
notice thereof to the Warrantholder, which notice shall
state the Exercise Price and the number of Shares or other
securities subject to the number of unexercised Warrants
resulting from such adjustment, and shall set forth in
reasonable detail the method of calculation and the facts
upon which such calculation is based. Upon the request of
the Warrantholder there shall be transmitted promptly to
the Warrantholder a statement of the firm of independent
chartered accountants retained to audit the financial
<PAGE>
statements of the Company to the effect that such firm
concurs in the Company's calculation of the change.
(l) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon its
common stock;
(ii) the Company shall offer for subscription PRO
RATA to the holders of its common stock any
additional stock of any class or other rights;
(iii) there shall be any capital reorganisation or
reclassification of the capital stock of the
Company, or consolidation, amalgamation or merger
of the Company with, or sale of all or
substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then, in any one or more of such cases, the Company shall
give to the Warrantholder (A) at least 20 days' prior
written notice of the date on which a record date shall be
established for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any
such reorganisation, reclassification, consolidation,
merger, amalgamation, sale, dissolution, liquidation or
winding-up and (B) in the case of any such reorganisation,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, at least 20 days' prior written
notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause shall also
specify (A) in the case of any such dividend, distribution
or subscription rights, the date on which the holders of
common stock shall be entitled thereto, and (B) the date on
which the holders of common stock are to be entitled to
exchange their common stock for securities or other
property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation,
sale, dissolution, liquidation or winding-up, as the case
may be.
(m) STOCK TO BE AVAILABLE. The Company will at all times keep
available out of its authorized common stock, solely for
the purpose of issue upon the exercise of the Warrants,
such number of shares of common stock as shall then be
issuable upon the exercise of all outstanding Warrants. The
Company covenants and agrees that all shares of common
stock which shall be so issuable will, upon issuance, be
duly authorized and issued, fully paid and non-assessable.
The Company will take all such action as may be necessary
to assure that all such shares of common stock may be so
issued without violation of any applicable requirements of
any exchange or similar market upon which the common stock
of the Company may be listed or quoted or in respect of
which the common stock is qualified for unlisted trading
privileges. The Company will take all such action as is
within its power to assure that all such shares of common
stock will be so issued without violation of any applicable
law and shall make any required disclosure to the U.S.
Securities and Exchange Commission and any other State of
the United States in which
<PAGE>
disclosure is required in order to permit the free resale
of such shares in the United States, subject to the 40 day
hold period imposed by Regulation S under the Securities
Act of 1933, as amended.
(n) ISSUE TAX. The issuance of certificates for Shares upon the
exercise of these Warrants shall be made without charge to
the Warrantholder for any issuance tax in respect thereto,
provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in
a name other than that of the Warrantholder.
(o) LISTING. The Company will, at its expense and as
expeditiously as possible, use its best efforts to cause
all Shares issuable upon the exercise of these Warrants to
be duly listed or quoted on the NASDAQ Small Cap Market and
the Freiverkehr Market in the Berlin Stock Exchange (and
any other stock exchange upon which the Shares may then be
listed) prior to the issuance of such shares.
(p) FAIR MARKET VALUE. For the purposes of any computation
hereunder, the "Fair Market Value" at any date shall be the
weighted average sale price per share for the common stock
of the Company for any 20 consecutive trading days
(selected by the Company) commencing not more than 25
trading days before such date on the NASDAQ Small Cap
Market (or, if the NASDAQ Small Cap Market is not then the
principal stock exchange or market in which the common
stock is traded, on such principal exchange), or, if the
stock in respect of which a determination of Fair Market
Value is being made is not listed on any stock exchange or
traded on any similar market, the Fair Market Value shall
be determined by the directors acting reasonably, which
determination shall be conclusive. The weighted average
sale price shall be determined by dividing the aggregate
sale price of all such stock sold on the said exchange
during the said 20 consecutive trading days by the total
number of shares of such stock so sold.
2. REPLACEMENT
Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation or this Warrant Certificate and, if
requested by the Company, upon delivery of a bond of indemnity satisfactory to
the Company (or, in the case of mutilation, upon surrender of this Warrant
Certificate), the Company will issue to the Warrantholder replacement Warrant
Certificates (containing the same terms and conditions as this Warrant
Certificate).
3. EXPIRY DATE
These Warrants shall expire and all rights to purchase
Shares hereunder shall cease and become null and void at 5:00 p.m. (Miami time)
on July 8, 1998 or upon the happening of certain events as herein provided.
<PAGE>
4. COVENANT
So long as these Warrants remain outstanding the Company
covenants that it shall use its best efforts do or cause to be done all things
necessary to maintain its status as a public reporting company not in default
under the U.S. Securities Exchange Act of 1934.
5. INABILITY TO DELIVER SHARES
Notwithstanding any other provision hereof, if for any
reason, other than the failure or default of the Warrantholder, the Company is
unable to issue and deliver the Shares or other securities as contemplated
herein to the Warrantholder upon the proper exercise by the Warrantholder of the
Warrants to purchase any of the Shares covered by these Warrants, the Company
may pay, at its option and in complete satisfaction of its obligations
hereunder, to the Warrantholder, in cash, an amount equal to the difference
between the Exercise Price and the Fair Market Value of such Shares or other
securities on the Exercise Date.
6. ASSIGNMENT
The Warrantholder and the Company acknowledge and agree
that these Warrants may be assigned or transferred by the Warrantholder at its
option. Upon any such assignment or transfer, the Warrantholder shall furnish
the Company with such information regarding the transferee as the Company may
reasonably require to register these Warrants in the name of the transferee.
7. GOVERNING LAW
The laws of the State of Colorado shall govern these
Warrants.
8. SUCCESSORS
These Warrants shall enure to the benefit of and shall
be binding upon the Warrantholder and the Company and their respective
successors.
IN WITNESS WHEREOF the Company has caused these Warrants
to be signed by its duly authorised officers and its corporate seal hereto
affixed.
DATED July 8, 1996.
EVANS ENVIRONMENTAL CORPORATION
By: /s/ CHARLES C. EVANS
----------------------------
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LEGISLATION OF
ANY STATE OF THE UNITED STATES. THIS SECURITY MAY NOT BE EXERCISED IN THE UNITED
STATES OR BY OR ON BEHALF OF A U.S. PERSON, AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED IN
THE UNITED STATES, UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE ACT AND THE
SECURITIES LEGISLATION OF ALL APPLICABLE STATES OF THE UNITED STATES OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED STATES" AND
"U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE ACT.
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
EVANS ENVIRONMENTAL CORPORATION
Exercisable Commencing
JULY 8, 1996
VOID AFTER
JULY 8, 1998
THIS CERTIFIES that, for value received, Karl-Heinz
Spoddig (the "Warrantholder"), is entitled, subject to the terms and conditions
set forth in these Warrants, to purchase from EVANS ENVIRONMENTAL CORPORATION, a
Colorado corporation (the "Company"), up to 126,000 fully paid and
non-assessable shares of common stock of the Company (individually, a "Share"
and collectively, the "Shares"), at any time commencing July 8, 1996 and
continuing up to 5:00 p.m. (Miami time) on July 8, 1998 (the "Expiry Time") on
payment of US$1.00 per Share. The exercise price payable hereunder from time to
time shall be herein referred to as the "Exercise Price". The number of Shares
which the Warrantholder is entitled to acquire upon exercise of the Warrants and
the Exercise Price are subject to adjustment as hereafter provided. Except as
provided herein, these Warrants shall not entitle the holder hereof to any
rights as a shareholder of the Company, including, without limitation, voting
rights.
1. EXERCISE OF WARRANTS
(a) ELECTION TO PURCHASE. These Warrants may be exercised by
the Warrantholder in whole or in part and in accordance
with the provisions hereof by delivery of an election to
purchase (the "Election to Purchase") in a form
substantially the same as that attached hereto as Annex
"1", properly completed and executed, together with payment
of the Exercise Price, by certified cheque or
<PAGE>
bank draft, for the number of Shares specified in the
Election to Purchase at the principal office of the Company
at 99 Southeast Fifth Street, Fourth Floor, Miami, Florida,
U.S.A. 33131 or such other address in the United States as
may be notified in writing by the Company (the "Company
Office").
(b) EXERCISE. The Company shall, as promptly as practicable
after it receives a duly executed Election to Purchase and
the Exercise Price for the number of Shares specified in
the Election to Purchase (the "Exercise Date"), issue that
number of Shares specified in the Election to Purchase as
fully paid and non- assessable shares of common stock. Such
duly executed Election to Purchase shall constitute the
Warrantholder's acknowledgement of and undertaking to
comply to the reasonable satisfaction of the Company and
its counsel, with all applicable laws, rules, regulations
and policies of every stock exchange or similar market upon
which the common stock of the Company may from time to time
be listed, quoted or traded, and any other applicable
regulatory authorities.
(c) STOCK CERTIFICATES. As promptly as practicable after the
Exercise Date, the Company shall issue and deliver to the
Warrantholder, registered in such name or names as the
Warrantholder may direct or if no such direction has been
given, in the name of the Warrantholder, a certificate or
certificates for the number of Shares specified in the
Election to Purchase. To the extent permitted by law, such
exercise shall be deemed to have been effected as of the
close of business on the Exercise Date, and at such time
the rights of the Warrantholder with respect to the number
of the Warrants which have been exercised as such shall
cease, and the person or persons in whose name or names any
certificate or certificates for Shares shall then be
issuable upon such exercise shall be deemed to have become
the holder or holders of the Shares represented thereby.
(d) FRACTIONAL SHARES. No fractional Shares shall be issued
upon exercise of these Warrants and no payments or
adjustment shall be made upon any exercise on account of
any cash dividends on the Shares issued upon such exercise.
If any fractional interest in a Share would, except for the
provisions of the first sentence of this section 1(d), be
deliverable upon the exercise of these Warrants, the number
of Shares to be issued to the Warrantholder upon the
exercise of these Warrants shall be rounded up to the next
whole number.
(e) CORPORATE CHANGES. If the Company shall be a party to
any reorganization, merger, dissolution or sale of all or
substantially all of its assets, whether or not the Company
is the surviving entity, these Warrants shall be adjusted
so as to apply to the securities to which the holder of
that number of Shares of the Company subject to the number
of unexercised Warrants would have been entitled by reason
of such reorganization, merger, dissolution or sale of all
or substantially all of its assets (the "Event"), and the
Exercise Price shall be adjusted to be the amount
determined by multiplying the Exercise Price in effect
immediately prior to the Event by the number of Shares
subject to the number of unexercised Warrants immediately
prior to the Event, and dividing the product thereof by the
number of securities to which the holder of that
<PAGE>
number of Shares subject to the number of unexercised
Warrants would have been entitled by reason of such Event.
(f) SUBDIVISION OR CONSOLIDATION OF COMMON STOCK
(i) In the event the Company shall subdivide its
outstanding shares of common stock into a greater
number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be
proportionately reduced, and conversely, in the
event the outstanding shares of common stock of
the Company shall be consolidated into a smaller
number of shares, the Exercise Price in effect
immediately prior to such consolidation shall be
proportionately increased.
(ii) Upon each adjustment of the Exercise Price as
provided herein, the Warrantholder shall
thereafter be entitled to acquire, at the
Exercise Price resulting from such adjustment,
the number of Shares (calculated to the nearest
tenth of a share) obtained by multiplying the
Exercise Price in effect immediately prior to
such adjustment by the number of shares of common
stock which may be acquired hereunder immediately
prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such
adjustment.
(g) CHANGE OR RECLASSIFICATION OF COMMON STOCK. In the event
the Company shall change or reclassify its outstanding
shares of common stock into a different class of
securities, the Warrants shall be adjusted as follows so as
to apply to the successor class of securities:
(i) the number of the successor class of securities
which the Warrantholder shall be entitled to
acquire shall be that number of the successor
class of securities which a holder of that number
of Shares subject to the number of unexercised
Warrants immediately prior to the change or
reclassification would have been entitled to by
reason of such change or reclassification; and
(ii) the Exercise Price shall be determined by
multiplying the Exercise Price in effect
immediately prior to the change or
reclassification by the number of Shares subject
to the number of unexercised Warrants immediately
prior to the change or reclassification, and
dividing the product thereof by the number of
Shares determined in paragraph 1(g)(i) hereof.
(h) OFFERING TO SHAREHOLDERS. If and whenever at any time
prior to the Expiry Time the Company shall fix a record
date or if a date is otherwise established (any such date
being hereinafter referred to in this subsection 1(h) as
the "record date") for the issuance of rights, options or
warrants to all or substantially all the holders of the
outstanding shares of common stock of the Company entitling
them, for a period expiring not more than 45 days after
such record date, to subscribe for or purchase shares of
common stock of the Company or securities convertible into
or exchangeable for such shares at a
<PAGE>
price per share or, as the case may be, having a conversion
or exchange price per share, less than 95% of the Fair
Market Value (as hereinafter defined) on such record date,
the Exercise Price shall be adjusted immediately after such
record date so that it shall equal the price determined by
multiplying the Exercise Price in effect on such record
date by a fraction, of which the numerator shall be the
total number of shares of common stock outstanding on such
record date plus a number equal to the number arrived at by
dividing the aggregate price of the total number of
additional shares of common stock offered for subscription
or purchase or, as the case may be, the aggregate
conversion or exchange price of the convertible or
exchangeable securities so offered, by the Fair Market
Value, and of which the denominator shall be the total
number of shares of common stock outstanding on such record
date plus the total number of additional shares of common
stock so offered (or into which the convertible or
exchangeable securities so offered are convertible or
exchangeable); shares of common stock owned by or held for
the account of the Company or any subsidiary of the Company
shall be deemed not to be outstanding for the purpose of
any such computation; such adjustment shall be made
successively whenever such a record date is fixed; to the
extent that any rights or warrants are not so issued or any
such rights or warrants are not exercised prior to the
expiration thereof, the Exercise Price shall then be
readjusted to the Exercise Price which would then be in
effect if such record date had not been fixed or to the
Exercise Price which would then be in effect based upon the
number of shares of common stock or conversion or exchange
rights contained in convertible or exchangeable securities
actually issued upon the exercise of such rights or
warrants, as the case may be.
(i) ADDITIONAL SUBSCRIPTIONS. If at any time the Company grants
to its shareholders the right to subscribe for and purchase
PRO RATA additional securities of the Company (other than
securities described in paragraph 1(h) hereof) or of any
other corporation or entity, there shall be no adjustments
made to the number of Shares or other securities subject to
the Warrants in consequence thereof and the Warrants shall
remain unaffected.
(j) CARRY OVER OF ADJUSTMENTS. No adjustment of the Exercise
Price shall be made if the amount of such adjustment shall
be less than 1% of the Exercise Price in effect immediately
prior to the event giving rise to the adjustment, provided,
however, that in such case any adjustment that would
otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least 1%
per Share.
(k) NOTICE OF ADJUSTMENT. Upon any adjustment of the number
of Shares and upon any adjustment of the Exercise Price,
then and in each such case the Company shall give written
notice thereof to the Warrantholder, which notice shall
state the Exercise Price and the number of Shares or other
securities subject to the number of unexercised Warrants
resulting from such adjustment, and shall set forth in
reasonable detail the method of calculation and the facts
upon which such calculation is based. Upon the request of
the Warrantholder there shall be transmitted promptly to
the Warrantholder a statement of the
<PAGE>
firm of independent chartered accountants retained to audit
the financial statements of the Company to the effect that
such firm concurs in the Company's calculation of the
change.
(l) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon its
common stock;
(ii) the Company shall offer for subscription PRO
RATA to the holders of its common stock any
additional stock of any class or other rights;
(iii) there shall be any capital reorganisation or
reclassification of the capital stock of the
Company, or consolidation, amalgamation or merger
of the Company with, or sale of all or
substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then, in any one or more of such cases, the Company shall
give to the Warrantholder (A) at least 20 days' prior
written notice of the date on which a record date shall be
established for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any
such reorganisation, reclassification, consolidation,
merger, amalgamation, sale, dissolution, liquidation or
winding-up and (B) in the case of any such reorganisation,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, at least 20 days' prior written
notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause shall also
specify (A) in the case of any such dividend, distribution
or subscription rights, the date on which the holders of
common stock shall be entitled thereto, and (B) the date on
which the holders of common stock are to be entitled to
exchange their common stock for securities or other
property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation,
sale, dissolution, liquidation or winding-up, as the case
may be.
(m) STOCK TO BE AVAILABLE. The Company will at all times
keep available out of its authorized common stock, solely
for the purpose of issue upon the exercise of the Warrants,
such number of shares of common stock as shall then be
issuable upon the exercise of all outstanding Warrants. The
Company covenants and agrees that all shares of common
stock which shall be so issuable will, upon issuance, be
duly authorized and issued, fully paid and non-assessable.
The Company will take all such action as may be necessary
to assure that all such shares of common stock may be so
issued without violation of any applicable requirements of
any exchange or similar market upon which the common stock
of the Company may be listed or quoted or in respect of
which the common stock is qualified for unlisted trading
privileges. The Company will take all such action as is
within its power to assure that all such shares of common
stock will be so issued without violation of any
<PAGE>
applicable law and shall make any required disclosure to
the U.S. Securities and Exchange Commission and any other
State of the United States in which disclosure is required
in order to permit the free resale of such shares in the
United States, subject to the 40 day hold period imposed by
Regulation S under the Securities Act of 1933, as amended.
(n) ISSUE TAX. The issuance of certificates for Shares upon the
exercise of these Warrants shall be made without charge to
the Warrantholder for any issuance tax in respect thereto,
provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in
a name other than that of the Warrantholder.
(o) LISTING. The Company will, at its expense and as
expeditiously as possible, use its best efforts to cause
all Shares issuable upon the exercise of these Warrants to
be duly listed or quoted on the NASDAQ Small Cap Market and
the Freiverkehr Market in the Berlin Stock Exchange (and
any other stock exchange upon which the Shares may then be
listed) prior to the issuance of such shares.
(p) FAIR MARKET VALUE. For the purposes of any computation
hereunder, the "Fair Market Value" at any date shall be the
weighted average sale price per share for the common stock
of the Company for any 20 consecutive trading days
(selected by the Company) commencing not more than 25
trading days before such date on the NASDAQ Small Cap
Market (or, if the NASDAQ Small Cap Market is not then the
principal stock exchange or market in which the common
stock is traded, on such principal exchange), or, if the
stock in respect of which a determination of Fair Market
Value is being made is not listed on any stock exchange or
traded on any similar market, the Fair Market Value shall
be determined by the directors acting reasonably, which
determination shall be conclusive. The weighted average
sale price shall be determined by dividing the aggregate
sale price of all such stock sold on the said exchange
during the said 20 consecutive trading days by the total
number of shares of such stock so sold.
2. REPLACEMENT
Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation or this Warrant Certificate and, if
requested by the Company, upon delivery of a bond of indemnity satisfactory to
the Company (or, in the case of mutilation, upon surrender of this Warrant
Certificate), the Company will issue to the Warrantholder replacement Warrant
Certificates (containing the same terms and conditions as this Warrant
Certificate).
3. EXPIRY DATE
These Warrants shall expire and all rights to purchase
Shares hereunder shall cease and become null and void at 5:00 p.m. (Miami time)
on July 8, 1998 or upon the happening of certain events as herein provided.
<PAGE>
4. COVENANT
So long as these Warrants remain outstanding the Company
covenants that it shall use its best efforts do or cause to be done all things
necessary to maintain its status as a public reporting company not in default
under the U.S. Securities Exchange Act of 1934.
5. INABILITY TO DELIVER SHARES
Notwithstanding any other provision hereof, if for any
reason, other than the failure or default of the Warrantholder, the Company is
unable to issue and deliver the Shares or other securities as contemplated
herein to the Warrantholder upon the proper exercise by the Warrantholder of the
Warrants to purchase any of the Shares covered by these Warrants, the Company
may pay, at its option and in complete satisfaction of its obligations
hereunder, to the Warrantholder, in cash, an amount equal to the difference
between the Exercise Price and the Fair Market Value of such Shares or other
securities on the Exercise Date.
6. ASSIGNMENT
The Warrantholder and the Company acknowledge and agree
that these Warrants may be assigned or transferred by the Warrantholder at its
option. Upon any such assignment or transfer, the Warrantholder shall furnish
the Company with such information regarding the transferee as the Company may
reasonably require to register these Warrants in the name of the transferee.
7. GOVERNING LAW
The laws of the State of Colorado shall govern these
Warrants.
8. SUCCESSORS
These Warrants shall enure to the benefit of and shall
be binding upon the Warrantholder and the Company and their respective
successors.
IN WITNESS WHEREOF the Company has caused these Warrants
to be signed by its duly authorised officers and its corporate seal hereto
affixed.
DATED July 9, 1996.
EVANS ENVIRONMENTAL CORPORATION
By:/s/ CHARLES C. EVANS
------------------------------
Charles C. Evans
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into this 8th
day of July, 1996, by and between EVANS ENVIRONMENTAL CORPORATION, a Colorado
corporation, the address of which is Fourth Floor, 99 S.E. 5th Street, Miami, FL
33131 ("Employer"), and ENRIQUE A. TOMEU, whose address is Suite 300, 1000
Southern Boulevard, West Palm Beach, FL 33405 ("Employee").
FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and the
reciprocal covenants of the parties which are set forth in this Agreement, the
Employer and the Employee agree as follows:
I. EMPLOYER'S EMPLOYMENT OF EMPLOYEE; EMPLOYEE'S
ACCEPTANCE OF EMPLOYMENT AND AGREEMENT TO PERFORM.
1.1 Commencing as of July 8, 1996 (the "Effective Date of this
Agreement") and for a four (4) year period thereafter to July 8, 2000, and
subject to the provisions of Section 3.2 of this Agreement, the Employer employs
the Employee to perform the Duties, as that
term is defined in Section 1.6 of this Agreement.
1.2 The Employee has accepted the Employer's offer of employment. The
Employee agrees to perform the Duties for the benefit of the Employer, the Board
of Directors of the Employer, and for all of the shareholders of the Employer.
The Employer employs the Employee and the Employee agrees so to be employed so
that the Employee will perform the work and responsibilities, which are
collectively defined as the Duties, and which are defined in section 1.6 hereof.
1.3 The Employee shall report solely to the Board of Directors of the
Employer, which has the sole and exclusive authority to act on behalf of the
Employer under this Agreement.
1.4 Upon execution of this Agreement by both the Employer and the
Employee, the Employee shall: assume the title and responsibilities of President
and Chief Executive Officer of Employer and each of Employer's subsidiaries,
including American Remedial Technologies, Inc., a Florida corporation ("ART"),
which, concurrently herewith, has become a wholly owned subsidiary and a
separate operating division of the Employer. Employee shall also serve as a
Director of each wholly-owned subsidiary, including ART.
1.5 Employee shall become a Director of the Employer if appointed to
the Board of Directors by the holders of the Employer's Series B Convertible
Preferred Stock ("Series
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B Stock"). Thereafter, as long as he is an employee of the Employer, he shall be
nominated to be a Director representing the Employer's Series B Stock at each
shareholders' meeting at which Directors of the Employer are to be elected. As
long as this Agreement is in effect, the Employer will cause Employee to become
and remain Chief Executive Officer and President of Employer and all the
subsidiaries of the Employer.
1.6 The Duties which the Employee agrees to perform, and which the
Employer agrees to delegate to the Employee for his performance, consist of:
(a) Throughout the term of this Agreement, the Employee
shall be responsible for over-all management,
operational planning and strategic planning
responsibilities of Employer.
(b) The Employee shall hold himself available to attend
conferences or meetings at the offices of Employer
or elsewhere.
(c) The Employee shall perform all responsibilities set
forth in Section 1.4 and in Section 1.5 of the
Agreement in a manner which complies with all legal,
ethical and moral standards that are imposed on the
Employer by applicable law, governmental or
quasi-governmental regulation, or by contracts to
which the Employer is a party.
1.7 The Employee shall perform such other responsibilities that are
not enumerated as Duties as the Board of Directors of the Employer may, from
time to time, require of him, provided such other responsibilities are
consistent with this Agreement.
1.8 During the period cf his employment hereunder and except for
illness or time expended by Employee on businesses he owned or operated as of
the Effective Date of this Agreement, reasonable vacation periods and reasonable
leaves of absence, the Employee shall devote his business time, attention, skill
and efforts to the faithful performance of his duties hereunder.
1.9 In performing the Duties, the Employee shall have the discretion
to allocate his own time.
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II. COMPENSATION TO THE EMPLOYEE.
2.1 In consideration for performing the Duties, the Employer shall
cause to be paid to the Employee an annual salary of $150,000 for each and every
year of the four (4) year term of this Agreement. Such salary shall be paid to
the Employee biweekly.
2.2 The salary which the Employer agrees to pay the Employee in
exchange for his performance of the Duties as provided in section 2.1 is not in
lieu of any other compensation, dividends, stock bonuses, incentives or other
prerequisites which the Board of Directors of the Employer may elect to afford
the Employee or, to afford to employees, directors or shareholders of the
Employer.
2.3 In addition to the compensation to be paid to the Employee under
Section 2.l hereof and in addition to any dividends, stock bonuses and
incentives which might be paid or awarded to the Employee, the Employer shall
afford the employee the following:
(a) Provision of a luxury-priced automobile, together
with maintenance, fuel, insurance, etc., and a
cellular telephone;
(b) An expense allowance of $900 per month for which the
Employee shall not be obligated to account to the
Employer;
(c) An appropriate and customary expense allowance for
those matters for which the Employee will account to
the Employer including, but not limited to, travel
expenses;
(d) Six (6) weeks paid vacation;
(f) Health insurance for Employee and the members of his
family; and
(g) $3,000,000 life insurance on Employee's life payable
to Employee's designees. The Employer has the right
to purchase additional insurance insuring the life
of the Employee.
III. TERM OF THIS AGREEMENT
3.1 The term of this Agreement and the Employer's and the Employee's
respective obligations which are owed to the other hereunder shall be four (4)
years, unless earlier terminated in accordance with Section 3.2 hereof.
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3.2 Nothing contained in this Agreement shall limit the discretion
of the Board of Directors of the Employer to terminate this Agreement and the
Employee's employment by the Employer for cause. Both the Employer and the
Employee agree that the Employee shall be deemed to give the Employer cause for
termination if any of the following events occur:
(a) Fraud, dishonesty, malfeasance or acts of gross
negligence in the course of employment which are
materially injurious to the Employer;
(b) Willful misrepresentation to shareholders or the
Board of Directors of the Employer and which is
materially injurious to the Employer;
(c) Willful failure, without reasonable justification and
after notice, to comply with a reasonable written
order of the Board of Directors of the Employer that
is consistent with this Agreement;
(d) A willful and material breach of this Agreement; or
(e) Conviction from any crime involving moral turpitude
which results in material injury to the Employer.
IV. LIQUIDATED DAMAGES UPON TERMINATION OR RESIGNATION.
4.1 In the event the Employee ceases to be employed at the Employer,
as that term is defined in Section 4.2(a) of the Agreement, Employee shall be
entitled to convert any Series B Convertible Preferred Stock which he may then
own to common stock as though the applicable EBIT, as defined by the Statement
of Designations, Powers, Preferences and Rights of Series B Convertible
Preferred Stock, has been earned.
4.2 For purposes of this Agreement, the Employee shall cease to be
employed when any of the following occur: (a) he is terminated by the Board of
Directors of Employer without "cause" as that is defined in Section 3.2 hereof;
or (b) he involuntarily tenders his resignation; or (c) he becomes Permanently
Disabled, as such term is defined in Section 4.4 hereof.
4.3 The term "Permanently Disabled" shall mean: (a) a determination
that the Employee is Permanently disabled under the terms of any disability
insurance policy maintained by the Employer or ART; or (b) if the Employer does
not maintain such insurance, the inability of the Employee to perform the Duties
by reason of illness, accident or other incapacity for any period of six months,
whether consecutive, or nonconsecutive, in any period of twelve months;
provided, however, that the existence of the Employee's
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incapacity has been confirmed by a licensed physician. In connection therewith,
the Employee agrees to submit to examinations by such a physician,
VI INFORMATION.
5.1 Without the prior written consent of the Employer or as required
law, the Employee will not, at any time, either during or after his employment
by the Employer, directly or indirectly divulge or disclose to any person, firm,
association, or employer, or use for his own benefit, gain, or others, any
plans, products, data, results of tests and data, customer lists, or any other
trade secret 'or confidential materials or like information of the Employer
including (but not by way of limitation) any and all information and
instructions, technical or otherwise, prepared or issued for the use of the
Employer (collectively, the, "Confidential Information") it being the intent of
the Employer, with which intent the Employee hereby agrees to restrict him from
dissemination or using any like information that is unpublished or not readily
available to the general public.
5.2 Upon the termination of his employment by the Employer, the
Employee will immediately deliver to the Employer all lists, books, records,
data, and other information (including all copies) of every kind relating to or
connected with the Employer and its
activities, business, and customers.
VI. NON-COMPETITION.
6.1 In the event, the Employee voluntarily terminates employment or
Employee is terminated for cause, the Employee shall not compete and Section VI
hereof shall be applicable. In addition, for a period of one year after the
expiration of this Agreement, the Employee shall not compete and Section VI
hereof shall be applicable.
6.2 In the event the Employee is terminated without cause, Section
VI hereof shall not be applicable,
6.3 Except as provided in Paragraph 6.4 below, for one (1) year after
expiration of this Agreement, Employee will not, whether individually or as a
member of a partnership or as an officer, director, investor, stockholder,
creditor, employee or consultant of a corporation or of any other person,
limited liability company, partnership or other entity, engage or seek to engage
in a business the same as or similar to the Employer's consolidated business in
the same market that the Employer or any of its affiliated entities is
operating. The ownership by Employee of 1% or less of the outstanding stock of
any corporation engaged in any such competitive business, but whose stock is
listed on a national securities exchange or is a NASDAQ listed stock, shall not
be deemed by itself to be a violation by
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Employee of this Paragraph 6.3. In the event that for any reason there should be
a determination by a court of competent jurisdiction that the provisions of this
Paragraph 6.3 are too broad or unreasonable or unenforceable as such, then such
provisions shall be deemed modified and fully enforceable as so modified to the
extent that such a court would find them fair, reasonable and enforceable under
the circumstances.
6.4 Employee shall be permitted to hold not more than 52% of the
capital stock of Terrac Technologies, Inc., a Florida corporation ("Terrac"),
for not longer than one (1) year after the date hereof; providing, however,
that, during the term of this Agreement and for one (1) year after termination
as provided in Paragraph 6.1, Employee shall not participate in bids on or
solicit work in competition with the Employer or its affiliates. Employee shall
negotiate to sell his stock in Terrac or cause Terrac to agree to be acquired by
Employer, and, if neither is accomplished within one (1) year of the Effective
Date of this Agreement, Employee shall place his stock in Terrac into a blind
trust and shall play no role in the management of Terrac.
6.5 For a period from the Effective Date of this Agreement until six
(6) months from the date of his termination of employment with the Employer for
any reason, Employee shall not, directly or indirectly:
(a) induce or attempt to induce away or aid, assist or
abet any other party or person in inducing or attempting to induce away any
person from his or her employment with the Employer, or
(b) hire or attempt to hire any former employee of the
Employer within one year after the termination for any reason of such employee's
employment with the Employer,
or
(c) take away or attempt to take away or aid, assist or
abet any other party or person in taking away or attempting to take away any
customers of the Employer who were such customers at the date of Employee's
termination of employment, or
(d) in any form, copy, duplicate, or otherwise compile
any list of past, present, or potential customers of the Employer except on an
as-needed basis while employed by the Employer and upon termination of
Employee's employment with the Employer for any reason Employee shall
immediately return all such lists, and all copies, duplicates, and compilations
thereof to the Employer.
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VII. VIOLATIONS OF COVENANTS, ETC.
The Employee agrees and acknowledges that the services to be rendered
by him hereunder are of a special and original character that gives them unique
value, that the provisions of Sections VI and VII are, in view of the nature of
the business of the Employer, reasonable and necessary to protect the legitimate
interests of the Employer, that his violation of any of the covenants or
agreements hereof would cause irreparable injury to the Employer, that the
remedy at law for any violation or threatened violation thereof would be
inadequate and that the Employer shall be entitled to temporary and permanent
injunctive or other equitable relief as it may deem appropriate without the
accounting of all earnings, profits, and other benefits arising from any such
violation which rights shall be cumulative and in addition to any other rights
or remedies available to the Employer. The Employee hereby agrees that in the
event of any such violation, the Employer shall be entitled to commence an
action for any such preliminary and permanent injunctive relief and other
equitable relief.
VIII. CHANGE OF CONTROL.
8.1 In the event of a change of control of the Employer and a
simultaneous or subsequent termination or "deemed termination" (as hereinafter
defined) of the Employee occurring within twelve (12) months after the change of
control (other than for cause or by reason of death or disability), the Employee
shall be entitled to a severance payment equal to 299% of the Employee's "base
amount" of compensation, as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Such severance payment shall be
in addition to any amount otherwise owed to the Employee pursuant to this
Agreement except to the extent such amount would be disallowed as a deduction to
the Employer pursuant to Section 280G(a) of the Code.
8.2 For purposes of this Agreement, a deemed termination means (a)
any material adverse change in the nature or scope of the Employee's powers,
functions, duties or responsibilities or (b) any material adverse change in the
compensation, benefits or other prerequisites which had previously been provided
to the Employee.
8.3 Upon the occurrence of any of the foregoing events of
termination, the Employee may send written notice to the Employer at any time
within 30 days of such event of termination stating that he deems himself
terminated for purposes of this paragraph, whereupon the Employer shall deliver
the severance payment to the Employee within ten (10) days of its receipt of his
notice. In the event that such severance payment amount is not timely paid in
full, the Employee may take any legal action necessary to enforce his rights
hereunder, and the Employer shall be obligated to reimburse the Employee for all
costs incurred in taking such action, including reasonable attorneys' fees.
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IX. MISCELLANEOUS
9.1 NOTICES. Any notice, payment, demand, offer or communication
required or permitted to be given by any provision of this Agreement shall be
deemed to have been delivered and given for all purposes: (a) if the same is
delivered personally; or (ii) whether or not the same is actually received, if
sent for registered or certified mail, postage and charges prepaid, addressed to
the parties, as indicated on page 1 of the Agreement.
9.2 SEVERABILITY. Every provision of this Agreement is severable. If
any term or provision is held to be illegal or invalid for any reason, such
illegality or invalidity shall, not affect the validity of the remainder of this
Agreement or any other provision.
9.3 FLORIDA LAW. The laws of Florida shall govern the validity of
this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties.
9.4 BINDING EFFECT. Each and every covenant, term, provision and
agreement contained in this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the respective parties.
9.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with respect to matters set forth in this Agreement and
supersedes any prior understanding or agreement, oral or written, with respect
thereto.
9.6 ASSIGNMENT. This Agreement may not be assigned by either party
hereto, provided, however, that the Employer may assign this Agreement in
connection with a merger or consolidation involving the Employer or ART, or a
sale of substantially all of their assets to the surviving corporation or
purchaser, so long as such assignee assumes the
Employer's obligations hereunder.
9.7 DISPUTES. Any dispute, controversy or claim arising out of or
relating to this Agreement shall be solely settled by an arbitrator in the State
of Florida, jointly designated by one arbitrator selected by the Employer and
one arbitrator selected by the Employee. If the two arbitrators fail to
designate an arbitrator, the arbitrator shall be selected by the American
Arbitration Association. The decision of the arbitrator shall be final and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof.
9.8 AMENDMENT. This Agreement may not be changed orally but only by
an agreement in writing signed by both parties
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9.9 WAIVER. The failure of either party to insist, upon performance
of the terms or conditions of this Agreement, shall not be construed as a waiver
or a relinquishment of any right granted hereunder or of the future performance
of any such term covenant or condition.
9.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement this date
first aforesaid.
EMPLOYER:
EVANS ENVIRONMENTAL CORPORATION
ATTEST:
By /s/ CHARLES C. EVANS
-------------------------------
/s/ KELLY EVANS Its Chairman
- - ----------------------------- -------------------------------
Kelly Evans, Secretary
EMPLOYEE:
/s/ ENRIQUE A. TOMEU
----------------------------------
Enrique A. Tomeu
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STOCK SALE AGREEMENT
AGREEMENT made March ___, 1996, between ENRIQUE A. TOMEU (the
"Seller"), and EVANS ENVIRONMENTAL CORPORATION, a Colorado corporation (the
"Buyer").
The parties have reached an understanding with respect to the sale and
purchase of all the outstanding corporate shares of AMERICAN REMEDIAL
TECHNOLOGIES, INC., a Florida corporation (the "Company").
It is therefore agreed:
1. SALE OF CORPORATE SHARES.
a. At Closing, the Seller shall sell to the Buyer, for a cash
purchase price of $6,000,000.00 plus other consideration set forth hereafter,
1,000,000 shares, or all of the issued and outstanding Common Stock of the
Company (the "Shares"), and the Buyer shall purchase the Shares from the Seller
on the terms set forth herein.
b. The following shall be satisfied at or prior to Closing. If
the cash purchase price is used to satisfy such items, the proceeds to Seller
shall be decreased accordingly:
(i) At Closing, notes of Company presently
outstanding to Adela M. Tomeu in the face amount of $510,000.00 shall, if
outstanding, be paid and satisfied.
(ii) At Closing, notes of Company presently
outstanding to Carlos Vergara in the face amount of $100,000.00 shall, if
outstanding, be paid and satisfied.
(iii) At Closing, notes of Company outstanding
to Sirrom Capital Corporation in the face amount of $2,000,000.00 shall, if
outstanding, be paid and satisfied.
(iv) At Closing warrants of Company outstanding
to Sirrom Capital Corporation and Adela M. Tomeu shall, if outstanding, be paid
and cancelled.
c. At Closing, Buyer shall also deliver to Seller:
(i) 3,000,000 shares of its Common Stock, par
value $.012, which stock shall be lettered stock as further described in Section
11.
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(ii) 1,000,000 shares of Buyer's Series "B"
Convertible Preferred Stock, par value $.01, which stock shall be lettered stock
with the preferences and limitations described in Paragraph 11.
2. CLOSING. The Closing of the sale shall take place at Seller's
attorneys' offices at 11:00 am., on April 30, 1996. At the Closing, Seller shall
deliver to the Buyer, free and clear of all encumbrances, certificates for the
Shares which he is required to sell in negotiable form, with all requisite
transfer stamps attached. Upon such delivery, the Buyer shall deliver to Seller
a bank cashier's check payable to the order of Seller for the cash purchase
price or shall deliver the same by bank-to-bank wire transfer, shall pay the
creditors described in Paragraph 1 by bank-to-bank wire transfer and shall
deliver its Common and Series "B" Convertible Preferred Stock.
3. SELLER'S REPRESENTATIONS AND WARRANTIES. The Seller represents
and warrants as follows: (in the event that parties other than Enrique A. Tomeu
deliver stock hereunder, such parties shall not enter into these representations
and warranties, but shall otherwise agree to the terms and conditions of this
Agreement):
a. ORGANIZATION AND STANDING OF COMPANY. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida. Copies of the Company's Certificate of
Incorporation, and all amendments thereof to date, certified by the Secretary of
State of Florida and of the Company's By-Laws as amended to date have been
delivered to the Buyer and are complete and correct as of the date of this
agreement. The Company is duly licensed or qualified and in good standing as a
foreign corporation in California which, is the only state where the character
of the properties owned by the Company, or the nature of the business transacted
by it, make such license or qualification necessary.
b. SUBSIDIARIES. The Company has no subsidiaries.
c. CAPITALIZATION. The aggregate number of shares which the
Company is authorized to issue is 10,000,000 common shares, of which 1,000,000
Shares are issued and presently outstanding. All such issued Shares have been
validly issued and are fully paid and nonassessable. The Company has no
outstanding subscriptions, contracts, options, warrants, or other obligations to
issue, sell, or otherwise dispose of, or to purchase, redeem or otherwise
acquire any of its Shares, except warrants outstanding to Adela M. Tomeu and
Sirrom Capital Corporation, which warrants are to be purchased by Seller at or
prior to Closing for cancellation.
d. SHARE OWNERSHIP. Seller represents and warrants that he is
the owner
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of the Shares and that, upon Closing, $1,000,000.00 will be paid by Seller to
Seller's creditor, Sam Klein, who, as of the date of this agreement, holds a
security interest in the Shares. Seller represents that the Shares will then be
free and clear of any encumbrances. Seller has full right and authority to
transfer the Shares to Buyer, and there are no other shares of the Company owned
or claimed by any other person or entity.
e. FINANCIAL STATEMENTS. The Seller has delivered, or will
deliver within 10 days, to the Buyer copies of the following financial
statements, all of which are true and complete and have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the period indicated: (1) unaudited complete financial statements
including balance sheets of the Company for the 7 months ended January 31, 1996
(the "Financial Statements"), which present a true and complete statement, as of
its date, of the Company's condition, financial and otherwise; and (2) audited
statements by Lopez Levi & Associates, P.A., of the Company's results of
operations and cash flows from inception, August 23, 1994, to and including June
30, 1995, which accurately present the results of the Company's operations for
the period indicated. Both audited and unaudited statements shall be to Section
S-X standards. Company has filed all tax returns when due and has paid all taxes
due according to such returns, copies of which are attached as Composite Exhibit
"C".
f. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the Company's Balance Sheet, as of January 31,
1996, the Company had no material liabilities of any nature, whether accrued,
absolute, contingent, or otherwise, including, without limitation, tax
liabilities due or to become due, and whether incurred in respect of or measured
by the Company's income for any period prior to January 31, 1996, or arising out
of transactions entered into, or any state of facts existing, prior thereto.
Seller represents and warrants that, as of January 31, 1996, there are no
material liabilities of any nature or in any amount not fully reflected or
reserved against in the Balance Sheet.
g. ABSENCE OF CERTAIN CHANGES. Since January 31, 1996, there
has not been (1) any material change in the Company's financial condition,
assets, liabilities, or business, other than changes in the ordinary course of
business, none of which has been materially adverse and an additional working
capital loan from Adela M. Tomeu of $150,000.00 on February 7, 1996; (2) any
damage, destruction, or loss, whether or not covered by insurance, materially
and adversely affecting the Company's properties or business; (3) any
declaration, or setting aside, or payment of any dividend or other distribution
in respect of the Company's Shares, or any direct or indirect redemption,
purchase, or other acquisition of any of such Shares, (4) any increase in the
compensation payable or to become payable by the Company to any of its officers,
employees, or agents, or any bonus payment or arrangement made to or with any of
them; or (5) any strike, work
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stoppage, or any event or condition of any character, materially and adversely
affecting the Company's business or prospects.
h. TITLE TO PROPERTIES. The Company has good and marketable
title to a limited amount of personal properties and assets, including those
reflected in the Balance Sheet (except as since sold or otherwise disposed of in
the ordinary course of business), subject to no security interests, mortgage,
pledge, lien, encumbrance, or charge, except those shown on the Balance Sheet
(with respect to which no default exists), and except for minor imperfections of
title and encumbrances, if any, which are not substantial in amount, do not
materially detract from the marketability or the value of the properties subject
thereto, or materially impair the Company's operations, or have arisen only in
the ordinary course of business.
i. CONDITION OF BUILDINGS AND EQUIPMENT. All Company buildings,
equipment, and leased property are in good operating condition and repair, and
to the best of Seller's knowledge are in conformity with all applicable
ordinances and regulations, and building, zoning, and other laws.
j. ACCOUNTS RECEIVABLE. To Seller's knowledge, the accounts
receivable as reflected in the Balance Sheet, subject to normal reserves for bad
debts, are collectible in the ordinary course.
k. DIRECTORS AND OFFICERS; COMPENSATION; BANKS. Attached
hereto as Exhibit "B" are true and complete lists, as of the date of this
agreement, showing: (1) the names of all the Company's directors and officers,
including employment contracts, if any; (2) the names of all persons whose
compensation from the Company for the year 1995 equaled or exceeded $75,000.00
on an annual basis, together with a statement of the full amount paid or payable
to each such person for services rendered or to be rendered in 1996, and the
basis therefor; and (3) the name of each bank in which the Company has an
account, or safe deposit box, and the names of all persons authorized to draw
thereon, or to have access thereto.
l. LITIGATION. There is no litigation or proceeding pending,
or to the Seller's knowledge threatened, against or relating to the Company, its
properties, or business, nor does the Seller know or have reasonable grounds to
know of any basis for any such action, or of any governmental investigation
relative to the Company, its properties, or business.
m. LEASES, CONTRACTS, AND LICENSES. Seller represents and
warrants that the transfer of the Shares in accordance with the terms of this
agreement will not constitute a
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prohibited assignment or transfer of any of its licenses, leases, or contracts,
and that all of the foregoing will remain in full force and effect without
acceleration as a result of this transaction.
n. DISCLOSURE. No representation or warranty by the Seller in
this agreement, nor any statement or certificate furnished or to be furnished to
the Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
o. OPERATIONS. Company has obtained all permits, licenses and
other authorizations which are required in connection with the conduct of the
business under all applicable laws, rules or regulations relating to the
processing, distribution, use, treatment, storage, disposal, transport or
handling of polluted soils, contaminants, or wastes. Company is, to the best of
Seller's knowledge, in compliance in the conduct of the business with all terms
and conditions of such permits, licenses and authorizations, and is also in
compliance with other limitations and restrictions of such applicable laws,
rules or regulations and of O.S.H.A. Company has operated as a Subchapter S
Tax-Option Corporation, but shall, prior to Closing, elect Subchapter C
Corporation status.
p. SURVIVAL. All representations and warranties of Seller
shall survive the Closing for one (1) year.
4. BUYER'S REPRESENTATIONS AND WARRANTIES.
a. ORGANIZATION AND STANDING OF COMPANY. Buyer is a duly
organized and validly existing corporation in good standing under the laws of
the State of Colorado, and has the power and lawful authority to own its
properties and to transact the business in which it is currently engaged. Buyer
is the sole owner of all of the issued and authorized stock of the subsidiary
corporations listed on Exhibit "D" all of which are qualified to do business in
the jurisdictions in which they do business.
b. AUTHORITY. Buyer has full power to enter into this Agreement
and to carry out itsligations hereunder. The execution and delivery of this
agreement and the exhibits hereto and the consummation of the transactions
contemplated hereby will, by Closing, be duly and validly authorized by its
Board of Directors. No other acts or proceedings on the part of Buyer will be
necessary to authorize this Agreement or the transactions contemplated hereby,
and this Agreement and the exhibits hereto constitute valid and legally binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, except as limited by applicable bankruptcy, insolvency,
reorganization,
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moratorium or other laws of general application relating to creditors' rights or
by the application of equitable principles when equitable remedies are sought.
c. COMPLIANCE. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by Buyer with any of the provisions thereof, will, except with
respect to Buyer's secured lender:
(i) iolate or conflict with or result in a
breach of any provisions of or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under any of the
terms, conditions or provisions of the Articles of Incorporation or By-Laws of
Buyer or any note, bond, mortgage, indenture, deed of trust, license, agreement
or other instrument or obligation to which it or any subsidiary is a party or by
which they or any of their properties or assets may be bound or affected; or
(ii) violate any order, writ, injunction or decree
or any statute, rule or regulation applicable to Buyer or any of its properties
or assets.
d. PERMITS. No permits, approvals, consents, satisfaction of
waiting periods, or waivers thereof of agencies of any jurisdiction or
governmental body or of any other person whatsoever (except with respect to
Buyer's secured lender,) related exclusively to Buyer are necessary to allow
Buyer to consummate the transactions contemplated in this Agreement in
compliance with and not in breach of all applicable laws, rules, regulations,
orders or governmental or other agency directives, or the provisions of any
contract binding upon Buyer.
e. SEC REPORTS. The Buyer has filed all required forms, reports
and documents with the SEC since January, 1995 (collectively, the "SEC
Reports"), each of which has complied in all material respects with all
applicable requirements of the securities Act and the Exchange Act. None of the
SEC Reports, including, without limitation, any financial statements or
schedules included therein, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Buyer included in
its Annual Reports on Form 10-KSB for each of the two fiscal years ended March
31, 1994, and March 31, 1995, and its Quarterly Reports on Form 10-QSB for its
fiscal quarters ended June 30, 1995, September 30, 1995, and December 31, 1995,
fairly present, in conformity with generally- accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto),
the financial position of the Buyer as of the dates thereof, and its results of
operation and changes in financial position for the periods then ended (subject
to normal
6
<PAGE>
year-end adjustments in the case of any unaudited interim financial statements).
f. SEC COMPLIANCE. Any proxy or similar material distributed
to the Buyer's stockholders in connection with this transaction, including any
amendments or supplements thereto (the "Proxy Statement"), will comply in all
material respects with applicable federal securities laws, except that no
representation is made by the Buyer with respect to information supplied by
Seller in writing for inclusion in the Proxy Statement. As soon as practicable
after the date hereof, the Buyer shall promptly and properly prepare and file
any other filings required under the Exchange Act, the Securities Act or any
other federal or state securities laws relating to the offer, the sale and the
transactions contemplated herein ("Other Filings"). None of the information
supplied by the Buyer in writing for inclusion in the Proxy Statement or any
other filings and any amendments thereto to be filed with the SEC in connection
with the transactions contemplated by this Agreement will, at the respective
time that the Proxy Statement and other filings or any amendments or supplements
thereto are filed with the SEC, at the time that an amendment thereto is mailed
to the Buyer's stockholders, at the time of the Stockholders' Meeting or at the
Effective Time, contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
g. STOCK AUTHORIZATION. Buyer's Common Stock and Series "B"
Convertible Preferred Stock ("the Convertible Stock") delivered to Seller at
Closing have been validly authorized and issued pursuant to Colorado and federal
law and the same are enforceable in accordance with their terms and the
preferences and limitations set forth in Paragraph 11.
h. CONVERTIBLE STOCK. The Seller shall be issued 1,000,000 of
the Buyer's Series "B" Convertible Preferred Stock, which stock shall provide
the following preferences and limitations:
(i) Each share of the Convertible Stock shall
convert into ten (10) shares of the Common Stock of Buyer within four (4) years
after Closing or shall expire and be canceled.
(ii) The Convertible Stock shall convert upon the
Company and its subsidiaries earning EBIT (Earnings Before Debt Interest and
Income and Franchise Taxes), after Closing as follows. Each year after Closing,
upon the Company earning $1,000,000.00 of EBIT, 150,000 shares of the
Convertible Stock shall convert into 1,500,000 shares of Buyer's Common Stock.
Any such EBIT in excess of $1,000,000 in a year after Closing shall render
additional Convertible Stock convertible into Common Stock at a rate of one (1)
7
<PAGE>
share of Convertible Stock into ten (10) shares of Common Stock for each $10.00
in EBIT in excess of $1,000,000.00 up to a total conversion of an additional
100,000 shares of Convertible Stock for an additional 1,000,000 shares of
Buyer's Common Stock in any one year.
(iii) In the event EBIT of the Company reaches
$3,000,000.00 during any one year, an additional 250,000 shares of Convertible
Stock held by Seller, or the remaining Convertible Stock held by Seller,
whichever is less, shall convert to up to an additional 2,500,000 shares of
Buyer's Common Stock.
(iv) EBIT shall be determined by reference to the
Company and its subsidiaries, and any EBIT which is not utilized during any
given year for conversion of Convertible Stock may be carried forward to the
next year or years.
(v) Until all of the Series "B" Convertible
Preferred Stock is converted or expires, the holders of such stock shall elect
the majority, presently six (6) of the eleven (11) Directors of Buyer.
(vi) No dividend shall be payable on the Common
Stock of the Company as long as the Series "B" Convertible Preferred Stock is
outstanding.
i. SURVIVAL. All representations and warranties of Buyer shall
survive Closing by one (1) year.
5. ACCESS AND INFORMATION. The Seller shall cause the Company to
give to the Buyer and the Buyer shall give to the Seller and to their counsel,
accountants, engineers, and other representatives full access, during normal
business hours, to all of the Company's and the Buyer's properties, books,
contracts, commitments, and records, and each shall furnish the other with all
such information concerning the Company's and the Buyer's affairs as the Buyer
or the Seller may reasonably request.
6. CONDUCT OF BUSINESS PENDING CLOSING. The Seller covenants that,
pending the Closing:
a. The Company's business will be conducted only in the
ordinary course.
b. No change will be made in the Company's Articles of
Incorporation or Bylaws, except as may be first approved in writing by the
Buyer.
8
<PAGE>
c. No change will be made in the Company's authorized or issued
capital stock or Warrants (without Buyer's written consent).
d. No dividend or other distribution or payment will be
declared or made in respect of the Company's capital stock or Warrants.
e. No increase will be made in the compensation payable or to
become payable by the Company to any officer, employee, or agent, nor will any
bonus payment or arrangement or other benefits be paid by the Company to or with
any officer, employee, or agent.
f. Without Buyer's prior written consent, Company will not
enter into any contract or commitment extending beyond December 31, 1996, or
which will involve payment by the Company of more than $50,000.00.
g. No change will be made affecting the personnel, compensation
payments, or banking or safe deposit arrangements referred to in Paragraph 3,
without the Buyer's prior written approval.
h. Except as otherwise requested by the Buyer, the Seller will
cause the Company to use its best efforts (without making any commitment on the
Buyer's behalf) to preserve the Company's business organization intact; to keep
available to the Company the services of its present officers and employees; and
to preserve for the Company the goodwill of its suppliers, customers, and others
having business relations with the Company.
i. Except in the ordinary course of business, no contract right
of the Company will be waived without Buyer's consent.
j. No uninsured material physical damage for loss will occur to
the assets or business of the Company.
k. No obligations except current liabilities under contracts
entered into in the ordinary course of business will be incurred, without
Buyer's written approval.
7. COMPANY PERSONNEL. At the Closing, the Seller shall enter into an
Employment Agreement with Buyer to appoint Seller as a Director of Buyer and
each of its subsidiaries and as its Chief Executive Officer and for Seller to
hold such position for each subsidiary of Buyer.
9
<PAGE>
8. CONDUCT OF BUSINESS AFTER CLOSING. After Closing, Buyer
represents and warrants that it shall cause the Company not to, directly or
indirectly, pay consideration of any kind to Buyer or for Buyer's account until
all personal guarantees of Company debt or agreements (except the real property
lease of the Company's principal facility in Lynwood, California) by Seller or
corporations affiliated with Company which have guaranteed Company debt, have
been released. This paragraph may be waived in writing by Seller or his legal
representative.
9. CONDITIONS PRECEDENT.
a. All obligations of the Buyer under this agreement are, at
its option, subject to the fulfillment, prior to or at the Closing, of each of
the following conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE AT
CLOSING. The Seller's representations and warranties contained in this agreement
shall be true at the time of Closing as though such representations and
warranties were made at Closing.
(ii) PERFORMANCE. The Seller shall have performed
and complied with all agreements and conditions required by this agreement to be
performed or complied with by him prior to or at the Closing.
(iii) MATERIAL CHANGES. Company has conducted the
business only in the ordinary course, has filed all income and sales tax
returns, if any, which are due, together with proof of required payments, and
there has not been any material adverse change in the financial condition,
assets, liabilities, business affairs, or prospects or properties of Seller.
(iv) COMPLIANCE WITH LAW. Company shall not be
conducting or carrying on its business or affairs in violation of any federal,
state, or local law, statute, ordinance, rule, regulation or court or
administrative order or process, including, without limiting the foregoing, all
O.S.H.A. requirements.
(v) APPROVAL OF SALE. No permits, approvals,
consents, or waivers of agencies of any jurisdiction or governmental body are
necessary to allow Seller to consummate the transactions contemplated in this
Agreement, and Seller is in compliance with and not in breach of all applicable
laws, rules, and regulations or the provisions of any contract or obligation
binding upon Seller.
(vi) ERISA MATTERS. There are no employee benefit
plans or labor
10
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agreements or other similar arrangements to which Company is a party or by which
it is bound, such as (a) any profit-sharing, deferred compensation, bonus,
pension, severance, welfare or incentive plan, agreement or arrangement, (b) any
plan, agreement or arrangement providing for "fringe benefits" or prerequisite
to employees or agents, (c) any employment agreement, oral or written, or (d)
any other "employee benefit plan" (within the meaning of Section 3(3) of the
Employment retirement Income Security Act of 1974, as amended ("ERISA").
(vii) OPINION OF COMPANY'S COUNSEL. The Seller
shall have delivered to the Buyer an opinion of the Company's counsel dated the
Closing date, that the Company's corporate existence, good standing (together
with certification thereof by the Secretary of State of the State of Florida),
and authorized and issued stock are as stated in this Agreement, that the
Company has good and marketable title to its personal property and assets, and
that, except as may be specified by such counsel, they do not know or have any
reasonable grounds to know of any litigation, proceeding, or governmental
investigation pending or threatened against, or relating to, the Company, its
properties, or business.
(viii) BUYER'S CONDITIONS. Buyer shall have:
(a) Buyer shall have:
(i) settled its outstanding
dispute with the United States Internal Revenue Service respecting delinquent
payroll tax deposits from the year ended March 31, 1995 with terms agreeable to
Seller;
(ii) obtained third party
financing necessary to consummate this Agreement;
(iii) completed its due diligence
and review of Company's assets and business; and
(iv) obtained approval of its
secured lender to consummate this agreement.
b. All obligations of the Seller under this agreement are at
his option, subject to the fulfillment, prior to or at Closing, of each of the
following conditions:
(i) REPRESENTATIONS AND WARRANTIES TRUE AT
CLOSING. The Buyer's representations and warranties contained in this agreement
shall be true at the time of Closing as though such representations and
warranties were made at Closing.
11
<PAGE>
(ii) PERFORMANCE. The Buyer shall have performed
and complied with all agreements and conditions required by this agreement to be
performed or complied with by it prior to or at the Closing.
(iii) OPINION OF BUYER'S COUNSEL. The Buyer shall
have delivered to the Seller an opinion of its counsel dated the Closing date,
that its corporate existence is in good standing, that they do not know or have
any reasonable grounds to know of any litigation, proceeding, or governmental
investigation pending or threatened against, or relating to it, its properties,
or business and that the Common Stock and Series "B" Convertible Preferred Stock
have been properly authorized and issued to Seller in compliance with applicable
Colorado and federal law and that the same are enforceable in accordance with
their terms and the preferences and limitation set forth in Paragraph 11.
(iv) SATISFACTION OF CERTAIN OBLIGATIONS. The
cash purchase price shall have been paid, the Company's creditors, Sirrom
Capital Corporation, Adela M. Tomeu and Carlos Vergara, shall have been
satisfied, and each and every personal guarantee or undertaking of Seller and
corporations affiliated with the Company, on behalf of the Company, except that
certain real property Lease as tenant of the Company's facilities in Lynwood,
California, (which Buyer and Company warrant they will use their best efforts to
release and discharge Seller from as soon as practicable) shall have been
released and discharged.
(v) SECURED LENDER. Seller shall have agreed
upon (or waived) terms acceptable to him with Buyer's secured lender.
10. BROKERAGE/CONSULTING. The Seller and Buyer represent and warrant
that all negotiations relative to this agreement have been carried on by them
without the intervention of any person, except Charles Anthony Ramos (and
Stanton Leigh Group, his agent) who is Seller's representative and who Seller
alone shall be responsible to compensate at Closing. The Seller and Buyer shall
indemnify and hold each other harmless against and in respect of any other claim
for brokerage or other commissions relative to this agreement, or to the
transactions contemplated hereby, and also in respect of all expenses of any
character incurred by the Seller in connection with this agreement or such
transactions.
11. PURCHASE FOR INVESTMENT. The Buyer represents that its purchase
of Company's stock hereunder is being made for investment and with no present
intention of resale. The Seller represents that his purchases of common and
preferred stock hereunder are being made for investment, and with no present
intention of resale. All stock certificates representing the shares of Buyer's
stock acquired under this agreement shall be endorsed with the following
restrictive legend:
12
<PAGE>
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, and said Shares
may not be offered or sold and no transfer will then be made
by the Company or its transferee except in compliance with the
Securities Act of 1933 and the rules and regulations
promulgated thereunder.
12. NATURE AND SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION. All
statements contained in any certificate or other instrument delivered pursuant
hereto, or in connection with the transactions contemplated hereby, shall be
deemed representations and warranties hereunder. Buyer and Seller each agree to
indemnify and save the other harmless, including reasonable attorneys' fees and
court costs actually incurred, for damages resulting from a breach of
representations and warranties hereunder.
13. BENEFIT. This agreement shall be binding upon, and inure to the
benefit of, the successors, assigns and respective legal representatives of the
Seller, and the successors and assigns of the Buyer.
14. CONSTRUCTION. This agreement is being delivered and is intended
to be performed in the State of Florida and shall be construed and enforced in
accordance with the laws of that state.
15. VENUE. Buyer acknowledges that it is a Colorado corporation with
its principal office in Dade County, Florida, that it has and will continue
to develop a substantial and continuing relationship with Seller at his
principal offices in Palm Beach County, Florida, where the Company's Florida
office and its financial operations are conducted and supervised. Accordingly,
any litigation arising out of or related to this Agreement or any breach hereof
shall be instituted in a court of competent jurisdiction in Palm Beach County or
Dade County, Florida.
16. NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed, first class postage prepaid, to Seller, at Suite 300, 1000
Southern Boulevard, West Palm Beach, Florida 33405, or at such other address as
he may have furnished to the Buyer in writing, or, if to the Buyer, at Fourth
Floor, 99 S.E. Fifth Street, Miami, FL 33131.
17. SEVERABILITY. If any provision of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable
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<PAGE>
law or regulation, such provision shall be inapplicable and deemed omitted to
the extent so contrary, prohibited or invalid, but the remainder hereof shall
not be invalidated thereby and shall be given full force and effect so far as
possible. If any provision of this Agreement may be construed in two or more
ways, one of which would render the provision invalid or otherwise voidable or
unenforceable and another of which would render the provision valid and
enforceable, such provision shall have the meaning which renders it valid and
enforceable
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Confirmation of execution
by telex or by telecopy or telefax of a facsimile signature page shall be
binding upon any party so confirming..
IN WITNESS WHEREOF the parties have duly executed this agreement.
SELLER: BUYER:
EVANS ENVIRONMENTAL
CORPORATION
/S/ ENRIQUE A. TOMEU By /s/ SCOTT SALPETER
- - ----------------------------- ---------------------------
Enrique A. Tomeu Scott Salpeter
Date: March 12, 1996 Date: March 14, 1996
ATTEST:
CONSENT: /s/ KELLY EVANS
------------------------------
Kelly Evans, Secretary
AMERICAN REMEDIAL
TECHNOLOGIES, INC.
By /s/ ENRIQUE A. TOMEU
------------------------
Enrique A. Tomeu, President
Date: March 12, 1996
ATTEST:
/s/ GLORIA ALONSO
- - -------------------------------
Gloria Alonso, Secretary
14
<PAGE>
FIRST AMENDMENT TO STOCK SALE AGREEMENT
THIS FIRST AMENDMENT dated the 30th day of April, 1996, amends the
Stock Sale Agreement (the "Agreement") by and between ENRIQUE A. TOMEU and EVANS
ENVIRONMENTAL CORPORATION, a Colorado corporation, dated March 12, 1996.
1. The first sentence of Paragraph 2 o the Agreement is hereby amended
to read in its entirety as follows:
"The Closing of the sale shall take place at Seller's
attorneys' offices at 11:00 a.m., on or before
June 15, 1996."
2. Paragraph 4 (v) is hereby amended to read in its entirety as follows:
"Until all of the Series "B" Convertible Preferred
Stock Is converted or expires, the holders of such
stock shall elect six of the members of the Board of
Directors of Buyer."
3. In all other respects the Stock Sale Agreement is hereby ratified,
affirmed, and approved and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered the First Amendment to the Stock Sale Agreement.
BUYER:
EVANS ENVIRONMENTAL
CORPORATION
By: /S/ CHARLES C. EVANS
------------------------
Its: CHAIRMAN OF THE BOARD
SELLER:
/S/ ENRIQUE A TOMEU
-------------------
ENRIQUE A. TOMEU
<PAGE>
SECOND AMENDMENT TO STOCK SALE AGREEMENT
THIS SECOND AMENDMENT dated the 12th day of June, 1996, amends the
Stock Sale Agreement (the "Agreement") by and between ENRIQUE A. TOMEU and EVANS
ENVIRONMENTAL CORPORATION, a Colorado corporation, dated March 12, 1996, as
first amended on April 30,1 996.
1. The first sentence of Paragraph 2 of the Agreement is hereby amended
to read in its entirety as follows:
The Closing of the sale shall take place at Seller's
attorneys' offices at 11:00 a.m., on or before June
30, 1996."
2. In all other respects the Stock Sale Agreement is hereby ratified,
affirmed, and approved and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Second Amendment to the Stock Sale Agreement.
BUYER:
EVANS ENVIRONMENTAL
CORPORATION
By: /S/ CHARLES C. EVANS
---------------------------
Its: CHAIRMAN OF THE BOARD
SELLER:
/S/ ENRIQUE A TOMEU
--------------------
ENRIQUE A. TOMEU
<PAGE>
THIRD AMENDMENT TO STOCK SALE AGREEMENT
This THIRD AMENDMENT dated the 1st day of July 1996, amends the Stock
Sale Agreement (the "Agreement") by and between ENRIQUE A. TOMEU and EVANS
ENVIRONMENTAL CORPORATION, a Colorado corporation, dated March 14, 1996, as
previously amended on April 30,1 996 and June 12, 1996.
1. The first sentence of Paragraph 2 of the Agreement is hereby amended
to read in its entirety as follows:
"The Closing of the sale shall take place at
Seller's attorneys' offices at 11:00 a.m.,
on or before July 15,1996."
2. In all other respects the Stock Sale Agreement is hereby ratified,
affirmed, and approved and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Third Amendment to the Stock Sale Agreement.
BUYER:
EVANS ENVIRONMENTAL
CORPORATION
By: /S/ CHARLES C. EVANS
-----------------------
Its: CHAIRMAN OF THE BOARD
SELLER:
/S/ ENRIQUE A TOMEU
--------------------
ENRIQUE A. TOMEU
AGENCY AGREEMENT
July 8, 1996
Evans Environmental Corporation
Fourth Floor
99 Southeast Fifth Street
Miami, Florida 33131 U.S.A.
ATTENTION: DR. CHARLES EVANS
Dear Sirs:
RE: EURO-EQUITY OFFERING
Clubb Capital Ltd. (the "Agent") understands that Evans
Environmental Corporation (the "Corporation") is a corporation incorporated
under the laws of the State of Colorado and that the Corporation proposes to
create, issue and sell 9,000,000 shares of common stock (the "Shares") or such
other number of shares as may be agreed by the Corporation and the Agent at a
price (the "Issue Price") of US$0.90 per Share. The offering of the Shares (the
"Offering") shall be made on the basis of public documents issued by the
Corporation, a confidential information memorandum dated April, 1996 (the
"Memorandum") and other offering documents agreed by the Corporation and the
Agent.
1. APPOINTMENT
The Corporation hereby appoints the Agent as its exclusive agent
for a period ending July 31, 1996 and the Agent accepts the appointment and
agrees to act as the exclusive agent of the Corporation to offer the Shares for
sale on a "best efforts" basis, subject to the terms and conditions and in
reliance upon the representations, warranties and covenants of the Corporation
set out in this Agreement. The Agent shall be entitled to retain as sub-agents
other registered investment dealers or brokers selected by it to participate in
the soliciting of offers to purchase the Shares. The fees payable to such
sub-agents shall be for the account of the Agent.
2. SALES RESTRICTIONS
The Agent represents and agrees that it will comply with the
restrictions on offers and sales of the Shares set out in Schedule "A" hereto,
as well as the other provisions thereof, all of which are hereby incorporated by
reference herein and form a part hereof.
<PAGE>
Page 2
3. CASH FEE/BROKER WARRANTS
In consideration of the services rendered and to be rendered by
the Agent in acting as agent of the Corporation to offer for sale, on a best
efforts basis, the Shares, the Corporation agrees:
(a) to pay to the Agent on the Closing Date (as defined in
section 4 hereof) a cash management fee equal to 2.5% of
the gross proceeds of the Shares (the "Management Fee") and
an additional cash selling fee equal to 5% of the gross
proceeds of the Shares (the "Selling Fee"). The Management
Fee and the Selling Fee together are referred to herein as
the "Cash Fee"; and
(b) to issue to the Agent on the Closing Date for no additional
consideration warrants (the "Broker Warrants") to purchase
an aggregate number of shares of Common Stock of the
Corporation equal to 7% of the number of Shares sold on the
Closing Date, such Broker Warrants to be exercisable at any
time up to and including two years after the Closing Date
at an exercise price of US$1.00 per Share and to be in form
attached hereto as Schedule "B".
4. CLOSING
The closing of the purchase and sale of the Shares shall be
completed at the offices of counsel to the Corporation at 10.00 a.m. (Miami
time) (the "Closing Time") on July 8, 1996 or such other time or such other date
as the Corporation and Agent may agree (the "Closing Date") but in any event no
later than July 31, 1996.
On or prior to the Closing Date the Agent shall provide to the
Corporation subscription agreements from each purchaser (a "Purchaser") in the
form attached hereto as Schedule "C" (the "Subscription Agreements"). At the
Closing Time on the Closing Date, upon satisfaction of the conditions provided
hereunder, the Agent shall pay, or cause the payment of, the net purchase price
of the Shares sold by the Agent in same day funds by wire transfer to such U.S.
dollar account as may be designated by the Corporation, or otherwise as may be
agreed with the Corporation, such net purchase price to be equal to the
aggregate Issue Price of the Shares sold by the Agent less the Cash Fee and the
amount in reimbursement of expenses referred to in section 8. Such payment and
delivery shall be made against:
(a) delivery of Share Certificates registered in such name or
names as are provided for in the Subscription Agreements;
and
(b) delivery to the Agent of the Broker Warrants and copies of
the certificates, opinions and other documents contemplated
hereby.
5. REPRESENTATIONS AND WARRANTIES
The Corporation represents and warrants to the Agent as of the
date hereof and as of the Closing Date, which representations and warranties
shall survive the closing of the Offering for a period of two years, that:
<PAGE>
Page 3
(a) each of the Corporation and its subsidiaries, including,
without limitation, Evans Environmental & Geological Science &
Management Inc. ("EEG"), Evans Management, Inc. and Evans
Environmental Corp. (the "Subsidiaries"),has been duly
incorporated and organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction
of its incorporation, with corporate power and authority to own,
lease and operate its properties and assets and conduct its
business. The Corporation is the sole owner of all of the issued
and authorized stock of the Subsidiaries. The Corporation and
each of its Subsidiaries is current with all material filings
required to be made under any of the laws of the United States
of America (or the states thereof) or under any other
jurisdictions in which it exists or carries on any material
business, except where the absence of such power and authority
would not result in an adverse material change to it, and the
Corporation and each of its Subsidiaries has all necessary
licenses, leases, permits, authorizations and other approvals
necessary to permit it to conduct its business, except where the
failure to make any filing or obtain any license, lease, permit,
authorization or other approval would not result in a material
adverse change to it;
(b) the Corporation is a "reporting issuer" under the Securities
Exchange Act of 1934 as amended (the"Exchange Act") and has
filed all required forms, reports and documents with the U.S.
Securities and Exchange Commission (the "SEC") since January,
1995 (collectively the "SEC Reports"), each of which has
complied in all material respects with all applicable
requirements of the U.S. Securities Act of 1933 as amended (the
"Securities Act") and the Exchange Act except that the reports
on Form 10-KSB for the year-end March 31, 1995 and on Form
10-QSB for the quarter ended June 30, 1995 were filed late. None
of the SEC Reports, including, without limitation, any financial
statements or schedules included therein, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The common stock of the
Corporation is listed or quoted for trading only on the NASDAQ
Small Cap Market and the Freiverkehr Market in the Berlin Stock
Exchange. The Corporation is current with all material filings
to be made under the regulations of the NASDAQ Small Cap Market
and the Freiverkehr Market in the Berlin Stock Exchange;
(c) the audited consolidated financial statements and unaudited
consolidated interim financial statements of the Corporation
included in its Annual Reports on Form 10-KSB for each of the
two fiscal years ended March 31, 1994 and March 31, 1995, the
unaudited consolidated financial statements for the fiscal year
ended March 31, 1996 attached hereto as Schedule "D", and its
Quarterly Reports on Form 10-QSB for its fiscal quarters ended
June 30, 1995, September 30, 1995, and December 31, 1995, fairly
present, in conformity with generally-accepted U.S. accounting
principles applied on a consistent basis (except as may be
indicated in the notes thereto), the financial position of the
Corporation as of the dates thereof, and its results of
operation and changes in financial position for the periods then
ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements). Since March 31, 1996,
there has been no material adverse change in the business,
affairs or financial or other condition or
<PAGE>
Page 4
prospects of the Corporation or any of its Subsidiaries. It is
also noted that ABC Cable Products, Inc. was sold on April 3,
1996;
(d) the Corporation has all requisite power and authority to carry
out its obligations under this Agreement, the Subscription
Agreements, and the Broker Warrants;
(e) this Agreement has been, and each of the Subscription
Agreements and the Broker Warrants will be at each Closing Date,
duly authorized, executed and delivered by the Corporation and
constitutes or will constitute on the Closing Date, a valid and
legally binding obligation of the Corporation enforceable in
accordance with its terms except that (i) the enforcement
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally, (ii) rights of
indemnity thereunder may be limited under applicable law, and
(iii) equitable remedies, including, without limitation,
specific performance and injunctive relief, may be granted only
in the discretion of a court of competent jurisdiction;
(f) the Shares are or on the Closing Date will be duly and validly
authorized and, when issued and delivered against payment
therefor, will be duly and validly issued, fully paid and
non-assessable;
(g) Upon the issuance thereof, the Broker Warrants will be duly
and validly created and issued;
(h) the Corporation has or on the Closing Date will keep a
sufficient number of authorised shares of its common stock
unissued as may be required to be issued pursuant to the
exercise of the Broker Warrants and, when issued and delivered
upon exercise of the Broker Warrants in accordance with their
terms, such shares will be duly and validly issued as fully paid
and non-assessable shares in the capital of the Corporation;
(i) neither the Corporation nor any of its Subsidiaries is or on
the Closing Date will be: (i) in breach or violation of any of
the terms or provisions of, or in default under, this Agreement,
the Broker Warrants, any note, indenture, mortgage, deed of
trust, loan agreement, license or other agreement (written or
oral) or instrument to which the Corporation or such Subsidiary
is a party or by which the Corporation or such Subsidiary is
bound or to which any of the property or assets of the
Corporation or such Subsidiary is subject, which breach or
violation or the consequences thereof would result in an adverse
material change to the Corporation and its Subsidiaries taken as
a whole except for defaults under its line of credit with
Strategica Capital Corporation ("Strategica"); or (ii) in
violation of the provisions of its articles, by-laws or its
resolutions or any statute or any other rule or regulation of
any court or governmental agency or body having jurisdiction
over the Corporation or such Subsidiary or any of their
respective properties which violation or the consequences
thereof would result in a material adverse change to the
Corporation and its Subsidiaries taken as a whole;
(j) the issue and sale of the Shares and the issue of the Broker
Warrants by the Corporation and the performance and consummation
of the transactions contemplated herein will not as of the
Closing Date conflict with or result in a
<PAGE>
Page 5
breach or violation of any of the terms or provisions of, or
constitute a default under, any note, indenture, mortgage, deed
of trust, loan agreement, license or other agreement (written or
oral) or instrument to which the Corporation or any of its
Subsidiaries is bound or to which any of the property or assets
of the Corporation or any of its Subsidiaries is subject, which
breach or violation or the consequences thereof would result in
a material adverse change to the Corporation and its
Subsidiaries taken as a whole, nor will any such action conflict
with or result in any violation of the provisions of the
articles, by-laws, other constating documents or resolutions of
the Corporation or any of Subsidiaries or, assuming compliance
by the Agent with the agreements and obligations set forth in
section 2 hereof and in Schedule "A" attached hereto, any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Corporation or any of its Subsidiaries or any of its or their
respective properties which violation or the consequences
thereof would result in a material adverse change to the
Corporation and its Subsidiaries taken as a whole;
(k) there is no adverse claim, action, proceeding or investigation
pending or, to the knowledge of the Corporation, threatened,
which questions the validity of the issuance or sale of the
Shares or the Broker Warrants, or the validity of any action
taken or to be taken by the Corporation in connection with this
Agreement, or which might result in any material adverse change
in the financial condition, results of operations, business or
prospects of the Corporation or any of its subsidiaries;
(l) the authorized capital of the Corporation consists of
25,000,000 shares of common stock, par value US$0.012, 1,200,000
shares of Series A preferred stock and 1,000,000 shares of
Series B preferred stock, of which, as of the date hereof, there
are 4,740,126 shares of common stock and no shares of Series A
or Series B preferred stock issued and outstanding as fully paid
and non-assessable stock of the Corporation and as of the
Closing Date, there will be 7,740,126 shares of common stock, no
shares of Series A preferred stock and 1,000,000 shares of
Series B preferred stock issued and outstanding as fully paid
and non- assessable stock of the Corporation;
(m) except as set forth in Schedule "E" hereto, no person holds
any securities convertible or exchangeable into shares of common
stock or any other securities of the Corporation or has any
agreement, warrant, option, right or privilege being or capable
of becoming an agreement, warrant, option, right or privilege
(whether pre-emptive or contractual) for the purchase,
subscription or issuance of any unissued securities of the
Corporation, unissued securities convertible or exchangeable
into any securities of the Corporation or unissued warrants of
the Corporation or any of the Subsidiaries, except pursuant
hereto, and no person has or will have any right to be issued
any of the unissued securities of the Corporation as a result of
the Offering;
(n) to the best of its knowledge, information and belief based upon
a certificate of a responsible officer of American Remedial
Technologies, Inc. ("ART"), ART has acquired the mobile
desorption unit which is the subject of the equipment purchase
agreement dated the 20th of March, 1996 between ART and CVD
Financial
<PAGE>
Page 6
Corporation (the "Purchase Agreement") for the purchase price of
US$600,000 and otherwise substantially on the terms set forth in
the Purchase Agreement;
(o) except for this Agreement, the Subscription Agreements and the
Broker Warrants or except as set out in Schedule "F" to this
Agreement or disclosed in the financial statements referred to
in paragraph (c) of this Section 5, neither the Corporation nor
any of its Subsidiaries is, or at the Closing Date will be, a
party to or bound by any material agreement, obligation or
commitment, including, without limitation, the following:
(i) other than in the ordinary course of business,
any employment agreement, bonus, deferred
compensation, pension, profit sharing, stock
option, phantom stock plan, employee stock
purchase plan, management, consulting or any
other similar agreement or commitment;
(ii) any agreement or commitment relating to the borrowing of
money or relating to capital expenditures;
(iii)any loan or advance to, or investment in, any other person
or any agreement or commitment relating to the making of
any such loan, advance or investment, other than as
disclosed in the financial statements referred to in
paragraph (c) of this section 5;
(iv) any bonds, debentures, mortgages, notes or other similar
indebtedness or liabilities whatsoever or any agreement to
create or issue any bonds, debentures, mortgages, notes or
other similar indebtedness;
(v) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any
other person (other than the endorsement of
negotiable instruments for collection in the
ordinary course of business);
(vi) except in respect of the acquisition of ART, any agreement
or commitment entered into in the ordinary course of the
business involving an amount of more than US$50,000;
(vii) any agreement or commitment not entered into
in the ordinary course of business;
(viii) other than in the ordinary course of business,
any agreement or arrangement with any person with
whom the Corporation (or its present or former
directors, officers and employees) does not deal
at arm's length; and
(p) Corporate Stock Transfer is the duly appointed registrar and
transfer agent for the shares of common stock of the Corporation
at its principal offices in Denver, Colorado.
<PAGE>
Page 7
6. CLOSING CONDITIONS FOR THE BENEFIT OF THE AGENT
The obligations of the Agent hereunder are subject to the
satisfaction, on or before the Closing Time on the Closing Date, of the
following conditions:
(a) the Corporation shall have complied with all of its obligations
hereunder, and the representations and warranties of the
Corporation contained herein shall be true and correct in all
material respects on and as of the Closing Date as if made on
and as of the Closing Date, and the Agent shall have received on
the Closing Date a certificate, dated as of the Closing Date and
signed by one or more executive officers or directors of the
Corporation on behalf of the Corporation and not in his or their
personal capacity, to the foregoing effect;
(b) the Corporation shall have prior to or contemporaneously with
the Closing Time (i) completed its acquisition of all of the
issued and outstanding shares of ART on a basis satisfactory to
the Agent and (ii) settled with the Internal Revenue Service
(the "IRS") the dispute over breaches by Evans of U.S. federal
income tax legislation pertaining to payroll tax payments to the
IRS, on terms no less favourable to the Corporation than those
set forth in the offers in compromise attached as Schedule "G"
to this Agreement;
(c) the Agent shall have received on and as of the Closing Date the
favourable opinion of counsel for the Corporation on such
matters as the Agent may reasonably request, including:
(i) the Corporation is validly existing under the
laws of the State of Colorado and has the
corporate power and authority to create, issue
and sell the Shares and to carry out its
obligations under this Agreement, the
Subscription Agreements, and the Broker Warrants;
(ii) as to the Corporation's authorized and issued share
capital;
(iii)the Corporation does not have outstanding any securities
convertible or exchangeable into shares of common stock or
Series A preferred stock or any other securities of the
Corporation and there is no agreement, warrant, option,
right or privilege being or capable of becoming an
agreement, warrant, option, right or privilege (whether
pre-emptive or contractual) for the purchase, subscription
or issuance of any unissued securities of the Corporation,
unissued securities convertible or exchangeable into any
securities of the Corporation or unissued warrants of the
Corporation or any of the Subsidiaries, except as set forth
in Schedule "E" of this Agreement or pursuant to the
Offering, and no person has or will have any right to be
issued any of the unissued securities of the Corporation as
a result of the Offering;
(iv) the Corporation is a public reporting company under the
U.S. Securities Exchange Act of 1934;
<PAGE>
Page 8
(v) each of this Agreement, the Subscription
Agreements and the Broker Warrants has been duly
authorized, executed and delivered by the
Corporation and is a legal, valid and binding
obligation of the Corporation enforceable against
it in accordance with its terms;
(vi) all necessary corporate action has been taken by the
Corporation to authorize the creation, issue, offering and
sale of an aggregate of up to the relevant number of Shares
and Broker Warrants, and as of the Closing Date the
Corporation had sufficient authorized but unissued shares
of its common stock as may be required to be issued to the
Agent as holder of the Broker Warrants upon exercise of
such Broker Warrants and payment of the exercise price
provided therein;
(vii) the execution and delivery of this Agreement,
the Subscription Agreements and the Broker
Warrants and the completion of the transactions
contemplated thereby and the creation, issuance
and sale of the Shares and the Broker Warrants
and the issue of the shares of common stock
issuable upon the exercise of the Broker Warrants
do not conflict with or result in any violation
of any provisions of the articles of
incorporation or by-laws of the Corporation;
(viii) the Shares have been duly and validly issued by
the Corporation and are outstanding as fully paid
and non-assessable;
(ix) the Broker Warrants have been duly and validly created and
issued by the Corporation and have the attributes and
characteristics contemplated by this Agreement;
(x) the certificates representing the shares of
common stock of the Corporation comply with the
requirements of the laws of Colorado and such
certificates have been duly and properly approved
by the directors of the Corporation;
(xi) all required documents have been filed with the NASDAQ
Small Cap Market and the Freiverkehr Market in the Berlin
Stock Exchange with respect to the listing or quoting for
trading of the Shares and of the shares of common stock
issuable upon the exercise of the Broker Warrants, subject
only to the filing of required documents which cannot
reasonably or timely be filed prior to the Closing Time;
and
(xii) assuming compliance with the terms of this
Agreement, no consent, approval, authorization,
order, registration, filing or qualification of
or with any governmental authority of the United
States of America (or any state thereof) or U.S.
stock exchange or trading system is required for
(i) the valid authorization, issue, sale and
delivery of the Shares or the Broker Warrants or
the issuance of shares of common stock of the
Corporation upon the exercise of the Broker
Warrants or the consummation by the Corporation
of the transactions contemplated by this
Agreement, and (ii) further assuming compliance
by the seller with the terms set forth in the
Subscription Agreement and the
<PAGE>
Page 9
Memorandum regarding resale of securities in a
Regulation S transaction, the resale in the
United States of the Shares or the shares of
common stock issuable upon exercise of the Broker
Warrants.
In giving the opinions contemplated above, counsel for the
Corporation shall be entitled to rely, where appropriate, upon
opinions of local counsel satisfactory to the Agent and, as to
matters of fact, to rely upon the representations and warranties
of Purchasers contained in the executed Subscription Agreements,
a certificate of fact of the Corporation signed by its officers
in a position to have knowledge of such facts and their accuracy
and certificates of such public officials and other persons as
are necessary or desirable, and may qualify its opinions with
respect to (1) bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of
creditors' rights generally, (2) limitations on the availability
of equitable remedies such as specific performance, (3)
enforcement of rights of indemnity, (4) securities fraud, and
(5) other reasonable and standard opinion qualifications;
(d) all required documents shall have been filed with the NASDAQ
Small Cap Market and the Freiverkehr Market in the Berlin Stock
Exchange with respect to the listing or quoting for trading of
the Shares and of the shares of common stock issuable upon the
exercise of the Broker Warrants, subject only to the filing of
required documents which cannot reasonably be filed prior to the
Closing Time;
(e) the Agent shall have received executed copies of the
Subscription Agreements;
(f) the Agent shall have received such other agreements,
representation and warranty letters or certificates, opinions
or documents as the Agent may reasonably request; and
(g) the fulfilment, to the reasonable satisfaction of counsel for
the Agent, of all legal requirements to permit the offer and
sale of the Shares and the distribution of the Broker Warrants.
The foregoing conditions are inserted for the benefit of the Agent and may be
waived by the Agent, in whole or in part.
Notwithstanding anything contained in this Agreement, the Agent
may by notice to the Corporation terminate this Agreement at any time before the
Time of Closing on the Closing Date if, in the opinion of the Agent, there shall
have been such a change in national or international financial, political or
economic conditions or currency exchange rates or exchange controls as would in
its view be likely to prejudice materially the success of the offering and
distribution of the Shares or dealings in the shares of common stock of the
Corporation in the secondary market or if the Agent is not satisfied with the
results of its due diligence review of the Corporation and, upon notice being
given, the parties to this Agreement shall (except for the liability of the
Corporation in relation to expenses as provided in section 8 and except for any
liability arising before or in relation to such termination) be released and
discharged from their respective obligations under this Agreement.
<PAGE>
Page 10
7. COVENANTS OF THE CORPORATION
The Corporation hereby covenants that it:
(a) will file all required documents with the NASDAQ Small Cap
Market and the Freiverkehr Market in the Berlin Stock Exchange
with respect to the listing or quoting for trading of the Shares
and the shares issuable upon the exercise of the Broker Warrants
and will use its reasonable best efforts to maintain the listing
or quoting for trading of the shares of common stock on the
NASDAQ Small Cap Market and the Freiverkehr Market in the Berlin
Stock Exchange, and the Corporation's status as a reporting
issuer under the Exchange Act;
(b) will permit the Agent and its counsel to conduct all due
diligence which the Agent may reasonably require;
(c) has not engaged and will not engage in any directed selling
efforts with respect to the Shares and it has complied and will
comply with the offering restrictions of Regulation S under the
Securities Act; and
(d) will use the net proceeds of the Offering, estimated to be
US$7,400,000, as follows:
(i) as to US$6,000,000, to fund the purchase by the
Corporation of all of the issued and
outstanding stock of ART;
(ii) as to US$650,000 which shall be paid by the Corporation to
Adorno & Zeder, P.A. on the Closing Date and held in trust,
to pay down in its entirety the line of credit outstanding
with Strategica on July 12, 1996, the date such line of
credit is due, written confirmation of which shall be
furnished to the Agent forthwith after payment to
Strategica is made; and
(iii)as to the balance of approximately US$750,000, for
working capital.
8. EXPENSES
In further consideration of the agreement with the Agent herein
contained, the Corporation covenants (a) to pay, regardless of whether the
Offering is completed, all expenses incurred by the Corporation in connection
with the offering of the Shares, including without limitation the costs and
filing fees with respect to the distribution of the Shares, the cost of printing
the Share certificates, the cost of registration, countersignature and delivery
of the Share certificates, listing fees, the fees and expenses of the
Corporation's transfer agent, auditors, counsel and local counsel, if any, and
(b) to reimburse the Agent for the reasonable out-of-pocket expenses incurred by
the Agent in connection with the issue and sale of the Shares hereunder,
together with any applicable tax thereon, including reasonable fees and expenses
of counsel to the Agent (to a maximum of US$100,000), any experts retained by
the Agent, and expenses incurred by the Agent in connection with travel and the
holding of road shows, with expenses incurred to each Closing Date to be
reimbursed at the Closing Time on such Date and expenses incurred thereafter to
be reimbursed forthwith following the
<PAGE>
Page 11
delivery to the Corporation of accounts in respect thereof. The Agent
acknowledges receipt of the sum of US$50,000 as an advance against such
expenses.
9. INDEMNITY OF THE CORPORATION
(a) The Corporation agrees to indemnify and hold harmless the Agent and any
director, officer, employee, solicitor and agent thereof (for purposes of this
section an "indemnified party"), from and against any and all losses, claims,
damages and liabilities arising out of or in relation to or in connection with
(i) this Agreement including, without limitation, any breach or non-compliance
by the Corporation of or with any of its representations, warranties or
covenants herein, (ii) any misrepresentation contained in the Memorandum or any
other offering materials approved in accordance with this Agreement or any of
the SEC Reports, or (iii) the issuance, offer or sale of the Shares, provided
that the Corporation shall not be liable under this section to the extent that
any such loss, claim, liability or damage arises out of or is based upon a
breach by the Agent of the obligations and agreements set forth in section 2
hereof and in Schedule "A" attached hereto.
(b) In case any proceeding (including any governmental investigation) shall be
instituted involving any indemnified party in respect of which indemnity may be
sought pursuant to the preceding paragraph, such party shall promptly notify the
Corporation in writing, and the Corporation, upon the request of such party,
shall retain counsel reasonably satisfactory to such party to represent such
party and any others the Corporation may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such proceeding.
(c) In any such proceeding, such party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such party unless (i) the Corporation and such party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include the Corporation and such
party and representation of both parties by the same counsel is not appropriate
as a result of differing interests between them. The Corporation shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment or
determination in respect of which the indemnity referred to in this section 9 is
claimed, the Corporation agrees to indemnify such party from and against any
loss or liability by reason of such settlement, judgment or determination.
(d) The Agent agrees to hold the benefit of the indemnity of the Corporation
herein provided in trust for any other indemnified party.
10. NOTICES, ETC.
All notices hereunder may be hand delivered or given by
telecopier or any other means of instantaneous written communication (with a
confirmation copy sent by courier) to such respective party hereto as follows
(or at such other address as may hereafter be communicated by either party
hereto to the other party):
<PAGE>
Page 12
If to the Agent:
Clubb Capital Ltd.
4th Floor
17 Waterloo Place
London SW1Y 4AR
England
Attention: Joerg Gruber
Telephone: 44-171-930-5930
Telecopier: 44-171-930-2233
With a copy to:
Blake, Cassels & Graydon
27 Austin Friars
London EC2N 2QQ
England
Attention: David Glennie/John Kolada
Telephone: 44-171-374-2334
Telecopier: 44-171-638-3342
If to the Corporation:
Evans Environmental Corporation
Fourth Floor
99 Southeast Fifth Street
Miami, Florida 33131
U.S.A.
Attention: Charles Evans and Richard Salpeter
Telephone: 305-374-8300
Telecopier: 305-374-7555
With a copy to:
Adorno & Zeder, P.A.
Suite 1600
2601 South Bayshore Drive
Miami, Florida 33133
U.S.A.
Attention: Richard Spector
Telephone: (305) 860-7230
Telecopier: (305) 858-4777
<PAGE>
Page 13
11. COUNTERPARTS
This Agreement may be signed and delivered in counterparts, and
by facsimile, with the same effect as if the signatures thereto and hereto were
upon the same instrument and delivered in person.
12. SURVIVAL
All representations, covenants, undertakings and indemnities
herein will survive the Closing Dates and the completion of the transactions
contemplated hereby for a period of two years following the last Closing Date
and shall apply regardless of any investigation made by or on behalf of any
indemnified party.
13. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of New York, and the courts of New York shall have non-exclusive
jurisdiction to entertain any action in respect of this Agreement.
14. TIME
Time is of the essence of this Agreement.
Yours sincerely,
CLUBB CAPITAL LTD.
By: /s/ N.A. NICHLOSS
-------------------
Accepted and agreed as of July 08, 1996.
EVANS ENVIRONMENTAL CORPORATION
By: /s/ CHARLES C. EVANS
- - ------------------------
ASSET PURCHASE AGREEMENT
This Agreement is entered into as of March 31, 1996, by and among ICX
International, Inc., a Colorado corporation (the "Buyer" or "ICX"), Evans
Environmental Corporation, a Colorado corporation ("Evans") and ABC Cable
Products, Inc., a Colorado corporation (the "Company"). The Buyer, ICX, the
Company and Evans are sometimes referred to collectively herein as the
"Parties."
RECITALS
A. The Company is involved in the business of selling various
accessories for televisions and cable services (the "Business"). The Company is
a wholly-owned subsidiary of Evans.
B. The Buyer desires to purchase from the Company, and the
Company desires to sell to the Buyer, certain of the property and assets of the
Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Company, and
the Company agrees to sell, transfer, convey, and deliver to the Buyer at the
Closing (as defined in Section 2(d)) all of the following:
(a) CERTAIN ASSETS. The tangible assets set forth on
Schedule 1(a-1) hereof and the prepaid expenses set forth on Schedule 1(a-2)
hereof (collectively, the "Tangible Assets").
(b) PERSONAL PROPERTY LEASES. Leases of machinery,
equipment, vehicles, furniture and other personal property leased by the Company
listed on Schedule 1(b) (the "Personal Property Leases").
(c) CONTRACTS. All the Company's right in, to and under all
contracts, purchase orders, distribution rights and sales orders of the Company
set forth on Schedule 1(c) (the "Contracts," and together with the Personal
Property Leases, the "Assumed Contracts").
(d) INVENTORY. All Company inventories as of the Closing
(including all such in-transit), together with related packaging materials set
forth on Schedule 1(d) (the "Inventory").
(e) ACCOUNTS RECEIVABLE. All Company trade and
supplier accounts receivable as of the Closing set forth on Schedule 1(e) (the
"Accounts Receivable").
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<PAGE>
(f) RECORDS AND FILES. Originals and copies of all records,
files, invoices, customer lists, specifications, accounting records, business
records, operating data and other data of the Company relating to the product
distribution rights to be transferred by Company to Buyer hereunder the Assumed
Liabilities (as defined below) or the Acquired Assets (as defined below).
(g) LITERATURE. All sales literature, promotional literature,
promotional displays, catalogs and similar materials of Company relating to the
distribution rights to be transferred by Company to Buyer hereunder, the Assumed
Liabilities or the Acquired Assets.
(h) LICENSES; PERMITS. All licenses, permits and approvals of
the Company to the extent necessary for the Buyer to operate the Business
following Closing; PROVIDED, HOWEVER, Buyer shall not be responsible for
obtaining any licenses, permits and approvals not assignable under their terms
to the Buyer by the Company.
(i) CERTIFICATE OF DEPOSIT. A certificate of deposit
in the amount of $100,000.00 deposited with First Interstate Bank (the
"Certificate of Deposit").
(j) GENERAL INTANGIBLES. All prepaid items (including, but not
limited to, any unamortized or unexpended portion of all lease deposits relating
to any of the Personal Property Leases or Assumed Contracts, but excluding
prepaid insurance premiums), all causes of action relating to the Acquired
Assets or Assumed Liabilities arising out of occurrences before or after the
Closing, and other intangible rights and assets, including, without limitation,
customer lists, goodwill, distribution rights, and Intellectual Property (as
defined in Section 3(h)).
The assets set forth above, including those assets to be delivered
following Closing, as provided herein, shall be hereinafter referred to
collectively as the "Acquired Assets." The Acquired Assets are the only assets
being purchased by Buyer hereunder. Buyer will not purchase or accept any assets
other than the Acquired Assets.
2. PURCHASE PRICE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING.
(a) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all the Assumed Contracts, purchase orders from the Company's customers in
the Ordinary Course of Business (as defined below), orders for inventories
issued to Company's suppliers in the Ordinary Course of Business, and assumption
of accounts payable as set forth on Schedule 2(a-1) hereof, accrued liabilities
as set forth on Schedule 2(a-2) hereof, and certain debt as set forth on
Schedule 2(a-3) hereof, in the total amount of $595,048.98, a substantial part
of which are payable to ICX; provided, however, that Buyer will not assume any
obligations to deliver products or services with respect to which any payment
has been made prior to the Closing Date (the "Assumed Liabilities"). The Buyer
will not assume or have any responsibility, however, with respect to any other
Liability (as defined below) of the Company not included within the definition
of Assumed Liabilities. "Liability" shall mean and include any direct or
indirect indemnities, guarantee, endorsement, claim, loss, damage, deficiency,
cost, expense, obligation or responsibility, fixed or unfixed, known or unknown,
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<PAGE>
asserted or unasserted, liquidated or unliquidated, secured or unsecured.
"Ordinary Course of Business" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).
(b) PURCHASE PRICE. As consideration for the Acquired
Assets, the Buyer will assume the Assumed Liabilities and will pay to the
Company, pursuant to the terms and provisions of this Agreement and subject to
adjustment after Buyer's due diligence in an amount equal to the sum of
$2,145,048.98 (the "Purchase Price").
(c) PAYMENT OF PURCHASE PRICE. Payment of the Purchase
Price is to be made as follows:
(i) At Closing, cash in the amount of Five
Hundred Fifty Thousand Dollars
($550,000.00);
(ii) Assumption by the Buyer of Five Hundred
Ninety Five Thousand Forty Eight and
98/100ths Dollars ($595,048.98) in Assumed
Liabilities;
(iii) The sum of One Million Dollars
($1,000,000.00) will be paid by the Buyer
to the Company in accordance with the terms
of a promissory note in the form attached
hereto as Exhibit A (the "Note"), which
Note shall be secured by Letters of Credit
as set forth in the Note.
(d) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Messner Pavek & Reeves, LLC, in Denver, Colorado, commencing at 9:30 a.m.
local time on April 3, 1996 (the "Closing Date"). The value of the Acquired
Assets and Assumed Liabilities will be determined as of 11:59 p.m., MST, March
31, 1996.
(e) DELIVERIES AT THE CLOSING. At the Closing, (i) the Company
will deliver to the Buyer the various certificates, instruments, and documents
referred to in ss. 6(a) below; (ii) the Buyer will deliver to the Company the
various certificates, instruments, and documents referred to in ss. 6(b) below;
(iii) such other instruments of sale, transfer, conveyance, and assignment as
the Buyer may request; and (iv) the Buyer will deliver to the Company the
consideration specified in ss. 2(c) above.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EVANS.
The Company and Evans represent and warrant to the Buyer and ICX that
the statements contained in this ss. 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss. 3).
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(a) ORGANIZATION OF THE COMPANY. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado. Evans is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Colorado.
(b) AUTHORIZATION OF TRANSACTION. The Company and
Evans have full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform their respective
obligations hereunder. Without limiting the generality of the foregoing, the
board of directors of the Company and the stockholder of the Company have duly
authorized the execution, delivery, and performance of this Agreement by the
Company. This Agreement constitutes the valid and legally binding obligation of
the Company, enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Except as set forth in Schedule 3(c),
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby (including the assignments and
assumptions referred to in ss. 2 above), will (i) violate any restriction of any
government agency or court to which the Company, Evans, or any of Evans'
Subsidiaries (as defined below) is subject or any provision of the charter or
bylaws of the Company, Evans or any of Evans' Subsidiaries, or (ii) have any
impact upon any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below), or other arrangement to
which the Company, Evans, or any of Evans' Subsidiaries is a party or to which
any of its assets is subject. Neither the Company, Evans, nor any of Evans'
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in ss. 2
above). "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge or other lien, other than (a) mechanic's, materialman's and
similar liens, (b) liens for taxes not yet due and payable, (c) liens arising
under worker's compensation, unemployment insurance, Social Security,
retirement, and similar legislation, (d) liens arising in connection with sales
of foreign receivables, (e) liens on goods in transit incurred pursuant to
documentary letters of credit, (f) purchase money liens and liens securing
rental payments under capital lease arrangements, and (g) other liens arising in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
(d) SUBSIDIARIES. The Company has no Subsidiaries.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of directors.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit E are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal year ended March
31, 1995 (the "Most Recent Fiscal Year End") for Evans and its Subsidiaries, and
(ii) unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the eleven (11) months ended February 29,
1996, (the "Most Recent Fiscal
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Month End") for the Company. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such period;
PROVIDED, HOWEVER, that the interim Financial Statements are subject to normal
year-end adjustments and lack footnotes and other presentation items.
(f) EVENTS SUBSEQUENT TO MOST RECENT FISCAL MONTH END. Since
the Most Recent Fiscal Month End, there has not been (i) any material adverse
change in the financial condition of the Company or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business the primary purpose or effect of which has been to generate or preserve
cash.
(g) TAX MATTERS.
(i) The Company has filed all tax returns that it
was required to file, and has paid all taxes shown thereon as owing.
Neither the Company, Evans, nor any of Evans' Subsidiaries, is subject
to any tax liability for which Buyer may become liable.
(ii) The Company has provided the Buyer with a list
of all tax returns filed with respect to the Company and Evans for
taxable periods ended on or after March 31, 1993, which list indicates
those tax returns that have been audited, and indicates those tax
returns that currently are the subject of audit. The Company has
delivered to the Buyer correct and complete copies of all federal Tax
Returns since March 31, 1994. There are no examination reports or
statements of deficiencies assessed against or agreed to by the Company
or Evans.
(iii) Neither the Company nor Evans has waived any
statute of limitations in respect of taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(iv) The Company is not a party to any tax
allocation or sharing agreement.
(h) INTELLECTUAL PROPERTY. The Company owns or has the right
to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses of the
Company as presently conducted. "Intellectual Property" means all (a) patents,
patent applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, trade dress, logos, trade names, and corporate names
and registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data, and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial marketing, and business data, pricing and cost
information, business
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<PAGE>
and marketing plans, and customer and supplier lists and information, (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
(i) REAL PROPERTY LEASES. Set forth on Schedule 3(i) is every
lease or sublease concerning real property to which the Company is a party. The
Company has delivered to the Buyer correct and complete copies of all such
leases and subleases. Each such lease and sublease is legal, valid, binding,
enforceable, and in full force and effect.
(j) CONTRACTS. Except as set forth on Schedule 3(j), the
Company has no contracts, agreements, or other written arrangements that either
(i) involve a sum greater than $1,000.00 or (ii) are in the nature of a
collective bargaining agreement, employment agreement, or severance agreement
with any of its directors, officers, and employees.
(k) POWERS OF ATTORNEY. There are no outstanding
powers of attorney executed on behalf of the Company.
(l) LITIGATION. The Company (i) is not subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge and (ii)
is not a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction.
(m) EMPLOYEE BENEFITS.
(i) DELIVERY OF DOCUMENTS. The Company has provided
the Buyer with a true and correct copy of each employee benefit plan,
fund, program, contract, policy or arrangement covering or benefitting
employees of the Company ("Company Employees"), including, but not
limited to, all "Employee Benefit Plans" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended,
("ERISA"), and specifically including each retirement, pension, profit
sharing, stock bonus, savings, thrift, bonus, medical, health,
hospitalization, welfare, life insurance, disability, accident
insurance, group insurance, sick pay, holiday and vacation programs,
executive or deferred compensation plans or contracts, stock purchase,
stock option or stock appreciation rights, plans or arrangements,
employment or consulting contracts and severance agreements or plans
(the "Employee Benefit Plans"). The Company has also provided the
Buyer, to the extent applicable to the particular Employee Benefit
Plan, the following information: A copy of the annual report (Form 5500
series) filed for the last three years, a copy of the summary plan
description, summary annual report, summary of material modifications
and all material employee manuals or communications filed or
distributed with respect to the Employee Benefit Plan during the last
three years, a copy of any insurance contract or trust agreement
through which the Employee Benefit Plan is funded, the most recent IRS
determination letter issued with respect to the Plan, and notice of any
material adverse change occurring with respect to any Employee Benefit
Plan since the date of the most recently completed and filed annual
report.
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<PAGE>
(ii) TITLE IV OF ERISA. Company does not
maintain or contribute to, and has never maintained or contributed, an
Employee Benefit Plan that is subject to Title IV of ERISA.
(iii) MULTI-EMPLOYER PLANS. Company does
not contribute and has never contributed (or been obligated to
contribute) to a multi-employer plan as defined in Section 4001(a)(13)
of ERISA.
(iv) CONTROLLED GROUP STATUS. Company is
not, and never has been, a member of (i) a controlled group of
corporations; (ii) a group of trades or business under control; or
(iii) an affiliated service group, within the meaning of Sections
414(b), (c), or (m) of ERISA, respectively.
(v) SEVERANCE AND POST-RETIREMENT BENEFITS. Neither
Company, Evans, nor any of Evans' Subsidiaries, nor any Employee
Benefit Plan maintained or contributed to by any of the foregoing
provides or has any obligation to provide (or contribute toward the
cost of) post-retirement welfare benefits with respect to current or
former employees of Company or any other entity, including, without
limitation, post-retirement medical, dental, life insurance, severance
or any other similar benefit, whether provided on an insured or
self-insured basis.
(vi) COBRA. Company has complied with
the continuation coverage requirements of Section 601 through 608 of
ERISA, and the requirements of any similar State law regarding
continued insurance coverage, and Company has incurred no liability
with respect to its failure to offer or provide continued coverage in
accordance with the foregoing requirements, nor is there any suit or
action pending or threatened with respect to such requirements.
(n) LEGAL COMPLIANCE. The Company, Evans, and Evans'
Subsidiaries have, to the best of their knowledge, complied with all laws
(including rules and regulations thereunder) of federal, state, local, and
foreign governments (and all agencies thereof).
(o) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY.
Evans, the stockholder of the Company, does not own any material property or
right, tangible or intangible, which is used in the business of the Company.
(p) BROKERS' FEES. The Company has no liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated. The Company does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(q) CONTRACTS SUBJECT TO RENEGOTIATION. No Assumed
Contract is subject to renegotiation.
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<PAGE>
(r) BURDENSOME OR RESTRICTIVE AGREEMENTS. Company is not a
party to nor is it bound by any agreement, deed, lease or other instrument which
would adversely affect or impair the operation of the Acquired Assets. Without
limiting the generality of the foregoing, Company is not a party to nor is it
bound by any agreement requiring Company to assign any interest in any trade
secret or proprietary information relating to the Acquired Assets, or which
would prohibit or restrict Buyer from competing in any geographical area or
soliciting customers or otherwise restricting it from carrying on a business
utilizing the Acquired Assets.
(s) OTHER MATERIAL CONTRACTS. Company has no lease,
license, contract or commitment which constitutes or will constitute an Assumed
Contract except as explicitly described in Schedules 1(b) or 1(c).
(t) NO DEFAULT. Except as set forth on Schedule 3(t), Company
is not in default under any lease, contract or commitment, nor has any event or
omission occurred which through the passage of time or the giving of notice, or
both, would constitute a default thereunder or cause the acceleration of the
Company's obligations or result in the creation of any Lien (as defined in
Section 3(y) below) on any of the Acquired Assets. No third party is in default
under any lease, contract or commitment which would affect an Assumed Contract,
nor has any event or omission occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination, thereof.
(u) INVENTORY. Except as set forth in Schedule 1(d) and except
for such inventory which is in transit in the Ordinary Course of Business, all
inventory of Company which is included among the Acquired Assets is located on
premises owned or leased by Company as reflected in this Agreement.
(v) ABSENCE OF CERTAIN CHANGES. Since the date of the
Most Recent Fiscal Year End there has not been:
(i) NO ADVERSE CHANGE. Any adverse change in the
Acquired Assets or Assumed Liabilities;
(ii) NO DAMAGE. Any loss, damage or
destruction, whether covered by insurance or not, affecting the
Acquired Assets;
(iii) NO COMMITMENTS. Any commitment or
transaction by Company (including, without limitation, any borrowing
or capital expenditure) other than in the Ordinary Course of
Business;
(iv) NO DISPOSITION OF PROPERTY. Any
sale, lease or other transfer or disposition of any properties or
assets of Company set forth on the financial statements for the Most
Recent Fiscal Year End except for the sale of inventory items in the
Ordinary Course of Business;
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<PAGE>
(v) NO INDEBTEDNESS. Any indebtedness for
borrowed money incurred, assumed or guaranteed by Company of the nature
which would be required to be paid at the Closing pursuant to Section
2(c) hereof;
(vi) NO LIENS. Any Security Interest
made on any of the Acquired Assets;
(vii) NO AMENDMENT OF CONTRACTS. Any
entering into, amendment or termination by Company of any Assumed
Contract, or any waiver of material rights thereunder, other than in
the Ordinary Course of Business;
(viii) CREDIT. Any grant of credit to any
customer of the products for which distribution rights are being
transferred by Company to Buyer hereunder on terms or in amounts more
favorable than those which have been extended to such customer in the
past, any other change in the terms of any credit heretofore extended,
or any other change of Company's policies or practices with respect to
the granting of credit; or
(ix) NO UNUSUAL EVENTS. Any other event
or condition relating to the Acquired Assets or the Assumed Liabilities
not in the Ordinary Course of Business of Company.
(w) ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent specifically disclosed in the Most Recent Fiscal Month End balance sheet,
Company does not have any Liabilities other than commercial liabilities and
obligations incurred in the Ordinary Course of Business and consistent with past
practice and none of which has or will have an adverse effect on the Acquired
Assets. Neither Company nor Evans has knowledge of any basis for the assertion
against Company of any Liability which would have an adverse effect on the
Acquired Assets, and to the best of their knowledge, there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise which
may give rise to such Liabilities, except commercial liabilities and obligations
incurred in the ordinary course of Company's business and consistent with past
practice.
(x) COMPLIANCE WITH LAWS AND ORDERS.
(i) COMPLIANCE. Company (including each and all of
its operations, practices, properties and assets) is, to the best of
its knowledge, in compliance with all applicable statute, law,
ordinance, rule or regulation (collectively, "Laws") and any order,
writ, injunction, judgment, plan or decree (collectively, "Orders") of
any court, arbitrator, department, commission, board, bureau, agency,
authority, instrumentality or other body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities"),
which directly or indirectly relate to the Acquired Assets or the
Assumed Liabilities, including, without limitation, those applicable to
trade practices, competition and pricing, product warranties, zoning,
building and sanitation, product advertising and the Environmental Laws
(as hereinafter defined). Company has not received notice of any
violation or alleged violation of, and is subject to no Liability for
past or continuing
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violation of, any Laws or Orders which, directly or indirectly relate
to the Acquired Assets or the Assumed Liabilities. All reports and
returns required to be filed by Company with any Government Entity
relating to the Acquired Assets or the Assumed Liabilities have been
filed, and were accurate and complete when filed. Without limiting the
generality of the foregoing, the operation of Company's business
relating to the Acquired Assets as it is now conducted does not in any
manner constitute a nuisance or other tortious interference with the
rights of any person or persons in such a manner as to give rise to or
constitute the grounds for a suit, action, claim or demand by any such
person or persons seeking compensation or damages or seeking to
restrain, enjoin or otherwise prohibit any aspect of the conduct of
such business or the manner in which it is now conducted.
(ii) LICENSES AND PERMITS. Company has,
to the best of its knowledge, all licenses, permits, approvals,
authorizations and consents of all Government Entities and all
certification organizations required for the conduct of the business
relating to the Acquired Assets (as presently conducted and as proposed
to be conducted). All such licenses, permits, approvals, authorizations
and consents, are in full force and effect and all permits or licenses
relating to any leased or owned motor vehicles transferred hereunder
are assignable to Buyer in accordance with the terms hereof. Company
(including its operations, properties and assets) is and has been in
compliance with all such permits and licenses, approvals,
authorizations and consents.
(y) TITLE TO AND CONDITION OF ACQUIRED ASSETS.
(i) MARKETABLE TITLE. At the Closing, Company
will have and Buyer will receive good and marketable title to all the
Acquired Assets, free and clear of all mortgages, liens (statutory or
otherwise), security interests, claims, pledges, licenses, equities,
options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens"). None of the Acquired Assets are subject to any
restrictions with respect to the transferability thereof. Company has
complete and unrestricted power and right to sell, assign, convey and
deliver the Acquired Assets to Buyer as contemplated hereby.
(ii) CONDITION. The Company is selling the
tangible assets constituting the Acquired Assets "as is" without
representation or warranty of any kind other than the representation
set forth in subpart (i) of this subsection 3(y).
(z) INSURANCE.
(i) The Company has provided the Buyer with a
complete and accurate list and description of all policies of fire,
liability, product liability, workers compensation, health and other
forms of insurance presently in effect with respect to the business and
properties of Company, true and correct copies of which have heretofore
been delivered to Buyer. This list includes, without limitation, the
carrier, the description of coverage, the
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limits of coverage, retention or deductible amounts, amount of annual
premiums, date of expiration and the date through which premiums have
been paid with respect to each such policy, and any pending claims. All
such policies are valid, outstanding and enforceable policies and
provide insurance coverage for the properties, assets and operations of
Company, of the kinds, in the amounts and against the risks customarily
maintained by organizations similarly situated. No notice of
cancellation or termination has been received with respect to any such
policy, and neither Company nor any Shareholder has knowledge of any
act or omission of Company which could result in cancellation of any
such policy prior to its scheduled expiration date. Such policies are
sufficient in all material respects for compliance by Company with all
requirements of law and with the requirements of all material contracts
to which Company is a party.
(ii) Buyer acknowledges that the policies described
in Section (i), above, are not being transferred to Buyer by Company
and that Company has no obligation or duty to transfer such policies.
(aa) CONTRACTS AND COMMITMENTS.
(i) PERSONAL PROPERTY LEASES. Except as set forth
in Schedule 1(b), Company has no leases of personal property.
(ii) PURCHASE COMMITMENTS. Company has
no purchase commitments for inventory items or supplies which
constitute Acquired Assets hereunder that, together with amounts on
hand, constitute in excess of one (1) months normal usage, or which are
at an excessive price.
(iii) SALES COMMITMENTS. Except as set
forth in Schedule 3(aa), Company has no sales contracts or commitments
to customers which constitute or will constitute Assumed Contracts and
which aggregate in excess of $10,000.00 to any one customer (or group
of Evans' affiliated customers). Company has no sales contracts or
commitments which constitute or will constitute Assumed Contracts
except those made in the Ordinary Course of Business, at arm's length,
and no such contracts or commitments are for a sales price which would
result in a loss to the Company.
(iv) COLLECTIVE BARGAINING AGREEMENTS.
Company is not a party to any collective bargaining agreements with any
unions, guilds, shop committees or other collective bargaining groups.
(v) LOAN AGREEMENTS. Company is not obligated under
any loan agreement, promissory note, letter of credit, or other
evidence of indebtedness as a signatory, guarantor or otherwise of a
nature which would require repayment by Buyer.
(bb) DISCLOSURE. No representation or warranty by
Company or Evans in this
Agreement, nor any statement, certificate, schedule, document or
exhibit hereto furnished or to be
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furnished by or on behalf of Company or Evans pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of fact or omits or shall omit a fact necessary to make the
statements contained therein not misleading. All statements and information
contained in any certificate, instrument, or document delivered by or on behalf
of Company or Evans shall be deemed representations and warranties by the
Company and Evans. Buyer recognizes that the representations and warranties made
by the Company and Evans in this Agreement are representations and warranties of
the applicable party only.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Company that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4).
(a) ORGANIZATION OF THE BUYER. The Buyer is a
corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of Colorado.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. Those agents of Buyer executing
this Agreement and the documents referred to herein have full power and
authority to do so.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any statue, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of its charter or bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject. The Buyer does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
governmental or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(d) BROKERS' FEES. The Buyer has no liability or
obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this
Agreement for which the Company could become liable or obligated.
The Buyer does not have any
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liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(e) LEASE ASSIGNMENTS. Buyer shall use its best
efforts to obtain the consents and assignments required under the Personal
Property Leases to allow the Personal Property Leases to be assigned by Company
to Buyer.
5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 6 below).
(b) NOTICES AND CONSENTS. The Company will give any notices
to third parties, and the Company will use its best efforts to obtain any third
party consents, that the Buyer may request in connection with the matters
pertaining to the Company. Each of the parties will take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
(c) OPERATION OF BUSINESS. The Company will not engage in any
practice, take any action, embark on any course of inaction, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Company will not engage in any practice, take
any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business the primary purpose or effect of which
will be to generate or preserve cash.
(d) FULL ACCESS. The Company will permit representatives of
the Buyer to have full access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the Company, to all
premises, properties, books, records, contracts, tax records, and documents of
or pertaining to the Company.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 3 above shall be true and correct in all material respects
at and as of the Closing Date;
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(ii) the Company shall have performed and complied
with all of its covenants hereunder in all material respects through
the Closing;
(iii) there shall not be any judgment, order, decree,
stipulation, injunction, or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement;
(iv) the Company shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 6(a)(i)-(iii) is satisfied in all respects; and
(v) The relevant parties shall have entered into the
following documents and the same shall be in full force and effect
(collectively, the "Closing Documents"):
(vi) Assignments of the Assumed Contracts to Buyer;
(vii) Transfer, conveyance or assignment or other
documents conveying the Acquired Assets not conveyed by the foregoing
documents;
(viii) An indemnification agreement in the form
attached hereto as Exhibit B;
(ix) The Buyer shall have received an opinion of an
attorney licensed to practice law in the State of Colorado with respect
to the matters set forth in Exhibit C attached hereto, addressed to the
Buyer and dated as of the Closing Date; and
(x) All actions to be taken by the Company in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents
required to affect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 4 above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing, including delivery of the Note (together with the letters of
credit securing the payments specified in the Note) and the cash
portion, by certified funds or wire transfer, of the Purchase Price at
Closing;
-14-
<PAGE>
(iii) there shall not be any judgment, order, decree,
stipulation, injunction, or charge in effect preventing consummation of
any of the transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Company a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all respects;
(v) the Company shall have received an opinion of an
attorney licensed to practice law in the State of Colorado with respect
to the matters set forth in Exhibit D attached hereto, addressed to the
Company and dated as of the Closing Date;
(vi) the Buyer shall have delivered to the Company a
written release of all trade and supplier accounts payable to which the
Company is obligated;
(vii) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Company;
(viii) an indemnification agreement in the form
attached hereto as Exhibit B.
The Company may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. MISCELLANEOUS.
(a) SURVIVAL. All of the representations, warranties
and covenants of the Parties contained in this Agreement shall survive until
October 1, 1997.
(b) POST-CLOSING COVENANTS. Following Closing, each of
the Parties will use its best efforts to cooperate with any other Party
concerning dissemination of information and further documentation to any
regulatory, governmental or judiciary authority.
(c) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; PROVIDED, HOWEVER, that
any Party may make any public disclosure it believes in good faith is required
by the law or regulation (in which case the disclosing Party will advise the
other Party prior to making the disclosure).
(d) NO THIRD PARTY BENEFICIARIES. This Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
-15-
<PAGE>
(e) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitute the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(f) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; PROVIDED, HOWEVER, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more Affiliate and
(ii) designate one or more Affiliate to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain liable and
responsible for the performance of all of its obligations hereunder).
"Affiliate," whether an individual, corporation, partnership or other entity,
shall mean such other entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the entity specified.
(g) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(h) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(i) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO THE COMPANY:
Norman Frank
c/o Evans Environmental Corp.
99 S.E. 5th Street
Miami, FL 33131
IF TO EVANS: COPY TO:
Scott E. Salpeter Richard Spector, Esq.
c/o Evans Environmental Corp. Adorno & Zeder
99 S.E. 5th Street 2601 South Bayshore Dr.
Miami, FL 33131 Miami, FL 33133
-16-
<PAGE>
IF TO THE BUYER: COPY TO:
ICX International, Inc. Bryant S. "Corky" Messner, Esq.
7975 S. Eudora Cir. Messner Pavek & Reeves, LLC
Littleton, CO 80122 600 17th Street, Suite 2100-S
Attn: Dennis R. Carson Denver, CO 80202
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, ordinary mail, or electronic mail), but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the individual for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(j) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Colorado.
(k) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Company. The Company may consent to any such amendment at any
time prior to the Closing with the prior authorization of its board of
directors; PROVIDED, HOWEVER, that any amendment effected after the Company
Stockholders have approved this Agreement will be subject to the restrictions
contained in the Colorado Corporation Code. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, wither
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(l) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
-17-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
April 3, 1996.
ICX INTERNATIONAL, INC., a
Colorado corporation
By:/S/ HAROLD BJORKLAND
----------------------
Title:/S/ PRESIDENT
EVANS ENVIRONMENTAL CORPORATION, a
Colorado corporation
By:/S/ SCOTT E. SALPETER
--------------------------
Title:VICE-PRESIDENT
ABC CABLE PRODUCTS, INC., a
Colorado corporation
By:/S/ CRAIG SKEPPSTROM
----------------------------
Title:PRESIDENT
-18-
PROMISSORY NOTE
Amount $85,000.00 Dated: May 1 , 1995
Miami, Florida
Evans Environmental Corporation ("Maker"), a Colorado corporation,
promises to pay to Lisa L. Robbins ("Payee"), on demand, the principal sum of
Eighty Five Thousand Dollars ($85,000) together with interest thereon on the
unpaid principal balance at a rate equal to twelve percent (12%) per annum from
the date hereof until such principal has been paid in full.
Interest on the outstanding principal owing hereunder shall be
payable on the first day of each and every month, commencing May 1, 1995. In the
event of default under this Note, the outstanding principal hereunder shall,
immediately upon such default, bear interest at the rate of eighteen (18%)
percent per annum until fully repaid.
All payments of interest and principal are payable to Payee at 514
Riviera Drive, Tampa, Florida 33606, or at such other place as the Payee may
designate in writing. Such payments shall be made in lawful money of the United
States of America.
This Note is prepayable in whole or in part without penalty. No such
prepayment shall delay or excuse the next payment of interest owing hereunder
nor delay the Payee's right to demand payment in full at any time. All such
prepayments shall be applied first against the payment of all interest accrued
to the date of such prepayment, and then against the principal due hereunder.
If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, Maker agrees to pay all costs of collection and litigation,
together with reasonable attorney's fees. This Note is governed by the laws of
the State of Florida.
Maker expressly waives protest, demand, presentment and notice of
dishonor.
IN WITNESS WHEREOF, the undersigned Maker has duly executed this Note
as of the day and year above first written.
EVANS ENVIRONMENTAL CORP. (SEAL)
Attest By: /s/ SCOTT SALPETER
------------------------- -------------------------------
------------------------- -------------------------------
Its Its CFO/VP
---------------------- ----------------------------
Exhibit 21
SUBSIDIARIES OF THE COMPANY
Evans Environmental Corporation, Florida
Evans Environmental & Geological Science and Management, Inc., Florida
American Remedial Technologies, Inc., Florida
Evans Management Co, Inc., Florida
Evans Habitat Restoration, Inc., Florida
Evans BioSystems, Inc., Florida
Geos, Inc., Florida
Enviropact Consultants, Inc., Florida
PTV Corp., Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 178,121
<SECURITIES> 75,000
<RECEIVABLES> 889,929
<ALLOWANCES> 97,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,593,744
<PP&E> 573,813
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,245,892
<CURRENT-LIABILITIES> 4,799,834
<BONDS> 0
0
0
<COMMON> 55,082
<OTHER-SE> 6,635,498
<TOTAL-LIABILITY-AND-EQUITY> 5,245,892
<SALES> 5,721,221
<TOTAL-REVENUES> 5,721,221
<CGS> 3,297,111
<TOTAL-COSTS> 7,976,078
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246,122
<INCOME-PRETAX> (2,442,245)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,442,245)
<DISCONTINUED> 390,880
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,051,365)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> 0
</TABLE>
