EVANS SYSTEMS INC, 10-K405, 1999-01-13

EVANS SYSTEMS INC
10-K405, 1999-01-13
PETROLEUM BULK STATIONS & TERMINALS

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AS FILED WITH THE SECURITIES EXCHANGE COMMISSION OF JANUARY 13, 1999

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended SEPTEMBER 30, 1998
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-21956

EVANS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

TEXAS 74-1613155
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) (Identification number)

720 AVENUE F NORTH, BAY CITY, TEXAS 77414 (409) 245-2424
(Address including zip code and telephone number, including area code, of
registrant's principal executive offices)

JERRIEL L. EVANS, SR., PRESIDENT
Mailing Address: P.O. Box 2480, Bay City, Texas 77404-2480 (409) 245-2424
Physical Address: 720 Avenue F North, Bay City, Texas 77414 (409) 245-2424
(Name, address, including zip code, and telephone number, including area
code, of agent for service)

Securities registered pursuant to Section 12(b) of the Act:
None.

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

Securities registered pursuant to Section 12(g) of the Act: None

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.01 per share NASDAQ-NMS Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

On January 12, 1999, the aggregate market value of the Registrant's voting stock
held by non-affiliates was approximately $26,800,000.

On January 12, 1999, there were 3,545,709 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE. Certain portions of the Registrant's
definitive proxy statement to be filed not later than January 28, 1999, pursuant
to Regulation 14A are incorporated by reference in items 9 through 12 of this
Annual Report on Form 10-K

<PAGE>
PART I

This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. Investors are
cautioned that all forward-looking statements involve risks and uncertainty,
including without limitation, the ability of the Company to successfully
implement its turnaround strategy, changes in costs of raw materials, labor, and
employee benefits, as well as general market conditions, competition and
pricing. Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Annual Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as representation by the Company or any other person that
the objectives and plans of the Company will be achieved. In assessing
forward-looking statements included herein, readers are urged to carefully read
those statements. When used in the Annual Report on Form 10-K, the words
"estimate," "anticipate," "expect," "believe," and similar expressions are
intended to be forward-looking statements.

ITEM 1. BUSINESS

Evans Systems, Inc. ("ESI"), through its wholly-owned subsidiaries, collectively
referred to herein as the "Company", is a vertically integrated company which
has historically been engaged in the following business segments:

o petroleum marketing;
o convenience store operations; and
o environmental remediation services.
o packaging and marketing of automotive after-market chemical products

The Company began in 1968 with a single gasoline station in Bay City, Texas,
emphasizing service and careful attention to customers' preferences and needs.
The Company has expanded over the years, and now distributes the products of
seven major oil companies, and operates a chain of convenience stores throughout
southeast Texas and southern Louisiana.

After sustaining losses during 1997, in early fiscal 1998 the management of ESI
developed and began to implement its turnaround strategy. Among other things,
the strategy included a decision to refocus the Company on its "core" business
segments: petroleum marketing and convenience store operations. Within these
"core" segments, the Company sold or closed lower-volume outlets. The Company
also took actions, including the elimination of nonessential corporate staff, to
reduce overhead expenses. See "Petroleum Marketing" and "Convenience Store"
segment discussions, below.

In February 1998, ESI discontinued operations in the packaging and marketing of
automotive after-market chemical products, previously operated through its
wholly-owned subsidiary, ChemWay Systems, Inc. ("ChemWay"). ChemWay's financial
results have been reclassified as a "discontinued operation" for financial
reporting purposes. In December 1998, the Company sold ChemWay in a
stock-for-stock transaction to Synaptix Systems Corporation, which has
subsequently received permission from its shareholders to change its name to
Affiliated Resources Corporation ("Affiliated"). See "ChemWay" below.

Operating results for each of the Company's segments follow (in thousands):

YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- --------------

PETROLEUM MARKETING(1)
Revenue ....................... $ 70,467 $ 98,376 $ 91,374
Operating Income (Loss) ....... (2,888) (1,369) 644

CONVENIENCE STORES
Revenue ....................... $ 32,495 $ 38,300 $ 39,602
Operating Income (Loss) ....... (670) (1,208) 171

EDCO ENVIRONMENTAL
Revenue ....................... $ 1,152 $ 1,320 $ 2,031
Operating Loss ................ (81) (399) (456)

Page 2
<PAGE>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- --------------
TOTAL CONTINUING OPERATIONS
Revenue ......................... $ 104,114 $ 137,996 $ 133,007
Operating Income (Loss) ......... (3,639) (2,976) 359

CHEMWAY
Revenue ......................... $ 2,268 $ 10,967 $ 25,773
Operating Income (Loss) ......... (925) (1,831) 2,179

TOTAL
Revenue ......................... $ 106,382 $ 148,963 $ 158,780
Operating Income (Loss) ......... (4,564) (4,807) 2,538

(1) Includes administrative expenses of the parent company.

PETROLEUM MARKETING

The following table sets forth the revenues of the Petroleum Marketing segment
(in thousands):

FISCAL YEAR ENDED
SEPTEMBER 30
---------------------------------
1998 1997 1996
------- ------- -------
Refined petroleum product sales ...... $68,998 $96,714 $89,717
Non-petroleum product sales .......... 1,469 1,662 1,657
------- ------- -------
Total Sales .......................... $70,467 $98,376 $91,374

The Petroleum Marketing segment's revenues are primarily derived from the sale
of motor fuels to the public through retail outlets:

o Gasoline retail facilities with Company-supplied equipment
consisting of pumps, lights, canopies and in many cases underground
storage tanks, at independently owned convenience stores. Under the
terms of the Company's agreements with such independent store
operators ("Special Purpose Leases"), the Company receives 40
percent or 50 percent of the gasoline gross profit, depending upon
who owns the underground gasoline equipment.

o Independently owned gasoline stations and convenience stores ("Open
Dealers") to which the Company provides major oil company brand
names, credit card processing and signs and, without further
investment, receives its customary markup on fuel deliveries.

The Petroleum Marketing segment also supplies lubricants, tires and accessories
to commercial and industrial customers.

The Petroleum Marketing segment distributes to its motor fuel customers both
directly from refinery racks, and through the Company's bulk plant facilities.
The Company also has a 110,000 barrel terminal facility, located in Bay City,
Texas, from which it has historically distributed motor fuels to the southeast
Texas market. During the first fiscal quarter of 1998, the Company's supply
agreement with the primary fuel supplier to the Bay City terminal facility was
terminated. The loss of the fuel supply agreement had an adverse effect upon the
Petroleum Marketing segment's performance during 1998: the Company was unable to
sell fuels through its exchange agreements with other major oil companies. The
Company is presently negotiating with another supplier, however there can be no
assurance whether or when the terminal facility will be supplied with fuel.

Page 3
<PAGE>
facilities. As of September 30, 1998, the Company sold its investment at 23 of
the lower-volume Special Purpose Lease accounts, and has subsequently sold the
equipment at seven additional sites. Additionally, the Company has discontinued
the delivery of motor fuels, and has removed the underground storage tanks at 16
Special Purpose Lease sites. The Special Purpose Lease locations where the
Company sold its investment in equipment are now served by the Company as Open
Dealers. See "Environmental Issues," below. The Company estimates that it will
spend approximately $237,000 in the year ended September 30, 1999 to comply with
the December 22, 1998 environmental standards.

The effect of the conversion of Special Purpose Lease customers into Open
Dealers is to increase the Company's sales revenues with reduced gross margin,
working capital requirements, and capital investment, resulting in an improved
return on investment. Since the Company's margins on Open Dealer accounts are
contractually fixed, however, the Petroleum Marketing Segment's gross margins
may be less volatile in the future, as a larger percentage of the segment's
business will be at fixed margins.

CONVENIENCE STORES

The following table sets forth the revenues of the Convenience Store segment
(in thousands):

FISCAL YEAR ENDED
SEPTEMBER 30
-------------------------------
1998 1997 1996
------- ------- -------
Refined petroleum product sales ............ $18,162 $22,525 $22,993
Merchandise sales .......................... 13,509 15,089 15,996
Other income ............................... 824 686 613
------- ------- -------
Total Sales ................................ $32,495 $38,300 $39,602

Number of operating stores at year-end ..... 27 33 40

At September 30, 1998, the Company operated one full-service station without a
convenience store and 26 convenience stores, featuring self-service motor fuels
and a variety of food and non-food merchandise. Eight of the Company's
convenience stores are co-branded with a nationally recognized fast food
franchised or licensed food service operation.

The Company's stores are located in smaller communities throughout the gulf
coast region of Texas and Louisiana.

During fiscal 1998, the Company discontinued operations at six underperforming
convenience stores, and sold the equipment and business to independent
convenience store operators. In each of these transactions, the Company retained
the wholesale gasoline business, through an Open Dealer contract.

EDCO ENVIRONMENTAL

EDCO Environmental provides environmental assessment and remediation services
for the petroleum distribution industry in the southeast Texas market area. EDCO
Environmental currently focuses its efforts on the following activities:

Underground storage tank ("UST") removal UST regulator upgrades
Site assessments for regulatory agencies UST repairs and maintenance
Site clean up reimbursement

EDCO Environmental has provided environmental remediation services to
approximately 100 customers ranging from gasoline stations, convenience stores,
public utilities, banks, major oil companies, large industrial corporations,
various small local enterprises and a variety of governmental institutions and
enterprises. The environmental protection business is primarily the result of
government mandate. In the mid-1980's, the EPA initiated a program for the
management of USTs throughout the U.S.

The EPA now requires stage II vapor recovery improvements at fuel facilities
rather than through on-board canisters in new motor vehicles. The deadline for
compliance with the new UST improvement guidelines was December 1998.

Page 4
<PAGE>
A number of states, including Texas, have established remediation funds to
assist owners/operators in the clean-up of leaking USTs. In Texas, this was
accomplished through the Groundwater Protection Act ("GPA"), which became
effective on September 1, 1989. The GPA, as amended, provides clean-up funds for
eligible expenses, less applicable deductibles. The fund is continually financed
by a tax assessed on motor fuels sold in the state. Financing programs secured
by assignments of rights to reimbursement by the Texas Natural Resource
Conservation Commission ("TNRCC") can be obtained for leaking petroleum storage
tank sites impacted by releases from USTs. For locations where contamination
already exists, the UST owner/operator must comply with TNRCC clean-up
regulations or risk fines of up to $10,000 per day and disqualification from the
benefits and funding of the GPA.

The TNRCC is continuing to provide reimbursements for clean-up of contaminated
locations.

CHEMWAY

ChemWay previously packaged aerosol and liquid chemical products for the
aftermarket automotive industry. In February 1998, the Company suspended
production and, in March 1998, announced plans to sell its investment in
ChemWay. In October 1998, the Company entered into an agreement to sell ChemWay
to Affiliated. The agreement provides, among other things, that the Company will
receive 1,500,000 shares of Affiliated common stock in exchange for all of the
outstanding shares of ChemWay. The number of shares received as the purchase
price of ChemWay is subject to upward adjustment if the stock price of the
Affiliated common stock declines at the 12 month anniversary of the closing, up
to a maximum of 1,000,000 additional shares. The Affiliated common stock is
currently quoted on the Nasdaq Over-the-Counter Bulletin Board. The sale of
ChemWay to Affiliated was closed on December 30, 1998.

EMPLOYEE RELATIONS

The Company employs 304 people, none of whom are represented by any collective
bargaining organizations. The Company has had no work stoppages, slow downs or
strikes. On July 1, 1997, the Company implemented an employee directed 401K
plan.

Management considers its employee relations to be satisfactory.

COMPETITION

All of the Company's business segments operate in a highly competitive
environment. The Company competes on the basis of price, service, and quality.
In addition, each of the respective business systems faces special competitive
factors. In all phases of operations, the Company encounters strong competition
from a number of companies, including some companies with significantly greater
resources than the Company. Many of these larger competitors possess and employ
financial and personnel resources substantially in excess of those which are
available to the Company. The Company's Petroleum Marketing division also
competes with integrated oil companies which, in some cases, own or control a
majority of their Petroleum Marketing facilities. These major oil companies may
offer their products to the Company's competitors on more favorable terms than
those available to the Company from its suppliers. A significant number of
companies, including integrated oil companies and petroleum products
distribution companies, distribute petroleum products through a larger number of
facilities than the Company.

The Company, however, is one of the leading independent suppliers of refined
petroleum products within a 250 mile radius surrounding Houston, Texas and
Southwest Louisiana. Being a multi-brand distributor gives the Company a
competitive advantage of flexibility in placing the proper brand for the
location. The Company sells to the smaller retail consumer and to the high
volume industrial customer. The Company markets approximately 20% of its volume
to the greater Houston metropolitan area where major oil companies are the
primary existing competitors. On occasion, the major oil companies cut prices to
increase their market position.

The convenience store industry is a retail service-oriented industry. It is
distinguished from other retail businesses by its emphasis on location and
convenience rather than price, and a commitment to customers who need to
purchase items quickly at extended hours. Convenience stores feature a wide
variety of items including groceries, dairy products, tobacco products,
beverages, and health and beauty aids. Many sell petroleum on a self-service
basis. Stores are generally designed with ample customer parking and quick
checkout procedures to maximize convenience as well as encourage impulse buying
of high margin items.

The convenience store industry is highly competitive, fragmented, and
regionalized. It is characterized by a few large companies and many small
independent companies. Several competitors are substantially larger and have
greater resources than the Company. The Company's primary competitors include
Diamond Shamrock, RaceTrac, Thomas Petroleum, and E-Z Mart. The Company also
competes with other convenience stores, small supermarkets, grocery stores, and
major and independent gasoline distributors who

Page 5
<PAGE>
have converted units to convenience stores.

The Company also encounters competition in attempting to acquire sites for new
stores and existing groups of convenience stores. The Company's continued growth
in this business depends upon its ability to identify acquisition candidates
that can be obtained and operated profitably and to find suitable locations for
new stores.

EDCO Environmental is a full service environmental company. In the past, the
remediation industry was not highly competitive, but increasingly companies are
entering the environmental business. Management of EDCO Environmental
anticipates that the business will become increasingly competitive in the years
ahead.

The remediation industry is characterized by a few large companies, some medium
sized companies such as EDCO Environmental, and many small independent
companies. Some competitors are larger and have greater resources than EDCO
Environmental. EDCO Environmental competes primarily with engineering firms and
private contractors in addition to other environmental remediation companies.

The continued growth in the remediation service is dependent upon market
penetration, customer base, government regulations, funding, and legislative
changes. EDCO Environmental's growth in underground storage tank upgrading
depends upon its ability to work efficiently, meet price competition, and will
be adversely affected by restrictions upon reimbursements by the Texas Natural
Resource Conservation Commission (See "Business", "EDCO Environmental Systems,
Inc.").

ITEM 2. PROPERTIES

The Company has extensive real estate interests in Texas and Louisiana. The
Company owns 20 convenience stores with gasoline installations in Texas and
Louisiana, and rents or leases another 28 convenience stores under varying
terms.

The Company's general offices are located in a 10,300 square foot, free-standing
building located on a 15-acre tract with 400 feet of frontage along Highway 60
North in Bay City, Texas. EDCO Environmental's facilities include a 19,200
square foot shop, fabrication, and maintenance building adjacent to the
administration building.

Additional office and administrative operations (5,985 square feet) and 7,490
square foot warehouse together with 14,784 square feet of additional warehouse
buildings, are located on 3 acres of land approximately 1/2 mile north of the
general offices on Highway 60. Bulk storage equipment, including 14 fuel storage
tanks and 20 lube oil and antifreeze tanks, are located adjacent to the
warehouses

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to litigation, primarily as a result of customer claims,
in the ordinary conduct of its operations. In the opinion of management, there
are no legal proceedings which, by themselves or in the aggregate could be
expected to have a material adverse effect on the consolidated financial
position of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

STOCK INFORMATION

Traded On the National Market System -- The Company's Common Stock, $.01 par
value, is listed on the NASDAQ exchange under the Symbol "EVSI." At September
30, 1998, there were approximately 1,350 shareholders of record. The Company has
not paid any cash dividends, and the Company currently has no plans to adopt a
regular cash dividend.

On January 20, 1997, the Company paid a 5% stock dividend to shareholders of
record on December 31, 1996. In lieu of the issuance of fractional shares,
$148.31 of cash was paid.

Page 6
<PAGE>
The high and low price range for the last two years, based on the closing sales
price as reported by NASDAQ, which has not been adjusted for the stock dividend
noted above, is listed below:

DATES HIGH LOW
- ----- ---- ------
October 1, 1996 through December 31, 1996 ................. 6 4 1/32
January 1, 1997 through March 31, 1997 .................... 5 3/4 3 7/8
April 1, 1997 through June 30, 1997 ....................... 4 1/4 3 1/8
July 1, 1997 through September 30, 1997 ................... 3 3/4 2 3/8
October 1, 1997 through December 31, 1997 ................. 2 3/4 1 1/8
January 1, 1998 through March 31, 1998 .................... 1 3/4 15/16
April 1, 1998 through June 30, 1998 ....................... 3 7/8 7/8
July 1, 1998 through September 30, 1998 ................... 5 7/8 3 3/8

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data which should be
read in conjunction with the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein. Amounts are in thousands, except per-share data.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------------------------------------
INCOME STATEMENT DATA: 1998 1997 1996 1995 1994
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Revenues ................................ $ 104,114 $ 137,996 $ 133,007 $ 135,342 100,108
Gross Profit ............................ 14,157 15,444 17,266 17,345 13,341
Operating Income (Loss) ................. (3,639) (2,976) 359 226 935
Income (Loss) from Continuing Operations (3,336) (2,993) (185) (110) 1,064
Net Income (Loss) ....................... (4,164) (4,339) 1,119 335 740
Basic Income (loss) from continuing
operations per common share(1)........... (1.07) (.97) (.06) (.04) .35
Basic earnings (loss) per common share(1) (1.34) (1.41) .37 .11 .24
Basic weighted average number of common
shares outstanding(1).................... 3,116 3,075 3,010 3,026 3,069
Diluted earnings (loss) from continuing
operations per common share(1)........... (1.07) (.97) (.06) (.04) .34
Diluted earnings (loss) per common share(1) (1.34) (1.41) .37 .11 .23
Weighted average number of common and
common equivalent shares outstanding(1).. 3,116 3,075 3,010 3,026 3,152

</TABLE>

(1) Adjusted for 5% stock dividend as discussed in Item 5, Market for the
Registrant's Common Equity and Related Stockholder Matters.

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets .......................... $ 9,980 $ 14,962 $ 18,726 $ 21,566 $ 18,250
Current Liabilities ..................... 8,737 16,654 9,724 16,698 11,938
Current Ratio ........................... 1.14:1 .90:1 1.93:1 1.29:1 1.53:1
Total Assets ............................ 33,188 38,004 41,073 40,609 33,164
Long-Term Debt .......................... 11,151 5,401 10,400 4,663 2,168
Total Stockholders' Equity .............. 13,300 15,949 19,748 18,534 18,327

</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the historical financial
statements and notes thereto appearing elsewhere in this document.

Page 7
<PAGE>
RESULTS OF OPERATIONS

1998 COMPARED WITH 1997

In February 1998, ESI discontinued operations in the packaging and marketing of
automotive after-market chemical products, previously operated through its
wholly-owned subsidiary, ChemWay Systems, Inc. ("ChemWay"). In December 1998,
the Company sold ChemWay to Affiliated in a stock-for-stock transaction. See
"ChemWay" below. In exchange for the common stock of ChemWay, Inc., the Company
received 1,500,000 shares of Affiliated common stock; the number of shares of
Affiliated common stock could be subject to a "make whole" provision whereby the
Company could receive up to an additional 1,000,000 shares of Affiliated common
stock should the market value of such stock be below $6 million at the one year
anniversary of the closing of the transaction Management estimates the Company
will record a gain on the disposition of ChemWay of approximately $1,000,000,
net of income taxes.

Consolidated sales revenues from continuing operations declined to $104,114,000
in 1998, from $137,996,000 in 1997, a decline of $33,882,000 or approximately
24.5%. During 1998, the Company implemented its turnaround strategy to
rationalize its base of stores and customers, which resulted in sales declines
in each of the Company's business segments. Sales revenues also declined as a
result of the lower overall pricing levels for petroleum products which
prevailed during 1998, as compared with 1997. Additionally, sales of fuels
through the Company's terminal facility declined $8,568,000 during 1998 as a
result of the termination of the Company's supply agreement for such facility.
See segment discussions, below.

Gross profit in 1998 was $14,157,000 as compared with $15,444,000 in 1997, a
decline of $1,287,000 or approximately 8.3%. Gross profit expressed as a
percentage of sales ("Gross Margin"), however, increased to approximately 13.6%
of sales in 1998 as compared with approximately 11.2% of sales in 1997. The
improved Gross Margin is principally attributable to the closing of unprofitable
stores and improved management of the Company's daily pricing of fuels.

Operating expenses in 1998 were $17,796,000, as compared with $18,420,000 in
1997, a decrease of $624,000 or approximately 3.4%. Operating expenses in 1998
include a noncash charge of $1,133,000 in compensation expense, as a result of
the application of APB25 with respect to certain incentive stock options which
had previously been awarded to employees, see Note 7 of Notes to Consolidated
Financial Statements included herein. Fiscal 1997 included a provision for loss
on marketable securities of $497,000 and a write-down of other assets of
approximately $818,000. The decline in operating expenses in 1998, as compared
with 1997, is primarily due to the closing of underperforming convenience
stores, and to an overall staff reduction.

Consolidated operating losses from continuing operations increased $663,000;
operating losses on continuing operations were $3,639,000 in 1998 as compared
with $2,976,000 in 1997. As noted above, fiscal 1998 results include a non-cash
charge of $1,133,000 pursuant to the application of APB25 with respect to
certain incentive stock options which had previously been awarded to employees,
see Note 7 of Notes to Consolidated Financial Statements included herein.
Adjusted for the effect of the noncash compensation expense charge, operating
losses from continuing operations declined $470,000. The Convenience Store
segment and EDCO Environmental segment improved during 1998, however the
improvement was offset by higher losses in the Petroleum Marketing segment, due
to reduced sales revenues, the $1,133,000 non-cash compensation expense charge,
the effect of which was partially offset by an improved Gross Margin.

The Company incurred net losses of $4,164,000 and $4,339,000 for fiscal years
ended September 30, 1998 and September 30, 1997, respectively. Losses from
continuing operations were $3,336,000 and $2,993,000 in fiscal years 1998 and
1997, respectively. As described above, the net loss for 1998 included a
non-cash charge of $1,133,000.

PETROLEUM MARKETING SEGMENT

Petroleum Marketing segment's sales revenues declined $27,909,000 to $70,467,000
in 1998, as compared with $98,376,000 in 1997, a decline of approximately 28%.
Fuel sales in gallons was 67,609,000 in 1998, as compared with 88,448,000
gallons in 1997, a decrease of approximately 24%. The Petroleum Marketing
segment distributes to its motor fuel customers both directly from refinery
racks, and through the Company's bulk plant facilities. The Company, through its
wholly-owned subsidiary Way Energy Systems, Inc.

Page 8
<PAGE>
("Way Energy") also has a 110,000 barrel terminal facility, located in Bay City,
Texas, from which it has historically distributed motor fuels to the southeast
Texas market. During the first quarter of 1998, the Company's supply agreement
with the primary fuel supplier to the Bay City terminal facility was terminated.
The loss of the fuel supply agreement had an adverse effect upon the Petroleum
Marketing segment's performance during 1998: the Company was unable to sell
fuels through its exchange agreements with other major oil companies. Way
Energy's sales during 1998 were $3,826,000 as compared with $12,394,000 in 1997,
a decline of $8,568,000 or approximately 69%. The Company is presently
negotiating with another supplier, however there can be no assurance whether or
when the terminal facility will be supplied with fuel.

Under regulations issued by the U.S. Environmental Protection Agency ("EPA"),
all underground storage tanks in the State of Texas were required to meet
certain standards of protection as of December 22, 1998. During 1998, the
Company evaluated the revenues generated by its Special Purpose Lease accounts,
and determined that it could not justify further investment at approximately 46
of such locations. Accordingly, management decided to either sell or close those
identified lower-volume Special Purpose Lease facilities. As of September 30,
1998, the Company sold its investment at 23 of the lower-volume Special Purpose
Lease accounts, and has subsequently sold the equipment at seven additional
sites. Additionally, the Company has discontinued the delivery of motor fuels,
and has removed the underground storage tanks at 16 Special Purpose Lease sites.
The Special Purpose Lease locations where the Company sold its investment in
equipment are now served by the Company as Open Dealers. See "Environmental
Issues," in Section 1, Business, included herein.

The effect of the conversion of Special Purpose Lease customers into Open
Dealers is to increase the Company's sales revenues with reduced Gross Margins,
working capital requirements, and reduced capital investment, resulting in
improved return on investment. Since the Company's margins on Open Dealer
accounts are contractually fixed, however, the Petroleum Marketing Segment's
gross margins may be less volatile in the future, as a larger percentage of the
segment's business will be at fixed margins.

Gross profit in the Petroleum Marketing Segment was $6,696,000 in 1998, as
compared with $7,676,000 in 1997, a decline of $980,000 or approximately 12.8%.
Gross Margin, however, improved in 1998, to approximately 9.5% of sales as
compared with approximately 7.8% in 1997. The improvement in Gross Margin is
principally attributable to a higher gross profit earned per gallon, divided by
the lower selling prices which prevailed during 1998, as compared with 1997.
Gross profit per gallon sold increased in 1998, to approximately $0.099, as
compared to $0.087 in 1997, due to improved management of the Company's daily
pricing of fuels.

Operating expenses in the Petroleum Marketing Segment were $9,546,000 in 1998,
as compared with $9,045,000 in 1997, an increase of $501,000 or approximately
5.5%. Included in 1998, however, is a noncash charge of $1,133,000 for
compensation expenses resulting from the issuing of incentive stock options to
employees, see Note 7 to the Consolidated Financial Statements included herein.
Operating expenses, adjusted for the non-cash charge discussed above, declined
$632,000 in 1998, as compared with 1997, reflecting management's cost reduction
programs implemented during 1998. Note that the operating expenses of the parent
company are included within the Petroleum Marketing segment results.

Operating loss of the Petroleum Marketing Segment increased to $2,888,000 in
1998 as compared with 1,369,000 in 1997. The increased loss is primarily due to
the lower sales revenues and resultant gross profit, and to the $1,133,000
non-cash charge for compensation expenses pursuant to employee incentive stock
options, See Note 7 to the Consolidated Financial Statements, included herein.

CONVENIENCE STORE SEGMENT

Sales in the Convenience Store segment were $32,495,000 in 1998, as compared
with $38,300,000 in 1997, a decline of approximately 15%. During 1998, however,
the company closed and sold 6 underperforming stores, and has subsequently sold
an additional store during December 1998. Fuel sales in 1998 were $18,057,000 as
compared with $22,525,000 in 1997; fuel sales in gallons also declined in 1998,
to 17,000,000 gallons as compared with 18,459,000 gallons in 1997. The decrease
in fuel sales revenues is due to the lower retail selling prices for fuels which
prevailed during 1998, and to fewer operating stores during the current year.
Merchandise sales decreased $2,487,000 to $13,509,000 as compared with
$15,089,000 in 1997. The decline in merchandise sales is primarily due to fewer
operating stores during 1998.

Gross profit declined to $6,834,000 in 1998 as compared with $7,402,000 in 1997.
Gross Margin in the Convenience Store segment improved during 1998, however, to
approximately 21.0% as compared with approximately 19.3% in 1997. Merchandise
Gross Margin was comparable in the two years, at approximately 30.5% and 30.4%
during 1998 and 1997, respectively. Fuel Gross Margin, however, improved to
approximately 10.0% during 1998, as compared with approximately 9.4% during
1997.

Page 9
<PAGE>
The improvement in overall Gross Margin is partially due to the fact that
merchandise sales represented a higher percentage of the stores' total sales
during 1998 than in 1997; merchandise sales were approximately 41.6% of total
sales during 1998 as compared with approximately 39% during 1997. In addition to
closing 6 underperforming stores during 1998, the Company began pricing its fuel
more aggressively in order to maintain customer traffic, and generate additional
higher-margin merchandise sales.

Operating expenses during 1998 in the Convenience Store segment was $7,542,000
as compared with $8,610,000 in 1997, a decrease of $1,068,000 or approximately
12.4%. The decline in operating expenses is principally attributable to the
closing of 6 underperforming stores during 1998, and to an overall reduction in
staff during 1998.

The Convenience Store segment incurred an operating loss of $670,000 in 1998, as
compared with a loss of $1,208,000 in 1997. The reduced loss is due to reduced
operating expenses during the current year, partially offset by reduced sales
and resulting gross profits.

EDCO ENVIRONMENTAL

The management of EDCO Environmental has focused its attention on increasing
sales of environmental services, and reducing operating expenses. Sales were
$1,152,000 in 1998, as compared with $1,320,000 in 1997, a decrease of $168,000
or approximately 12.7%. Gross profit was $627,000 in 1998, an increase of
$261,000 from 1997. Gross Margin improved to approximately 54.4% of sales in
1998, as compared with approximately 27.7% of sales during 1997. The improved
Gross Margin is primarily attributable to management's decision to discontinue
low-margin construction operations at year-end 1997.

Operating expenses at EDCO Environmental decreased $57,000 in 1998, to $708,000
as compared with $765,000 in 1997, a decrease of approximately 7.5%. The
decrease is due to increased management emphasis on expense control, and staff
reductions.

EDCO Environmental incurred an operating loss of $81,000 in 1998, as compared
with an operating loss of $399,000 in 1997. The improvement is due to the higher
Gross Margin and reduced operating expenses during 1998.

CHEMWAY

Production activities at the ChemWay facility ceased in February 1998, and the
ChemWay segment was classified as a discontinued operation as of March 31, 1998.
Sales in the ChemWay segment were $2,268,000 in 1998, as compared with
$10,967,000 in 1997, a decline of $8,699,000 or approximately 79.3%. Gross
Margin in the ChemWay facility was approximately 3.1% of sales during 1998, as
compared with approximately 9.8% in 1997. During 1998, the Company liquidated
much of ChemWay's inventories, sometimes at prices at or below cost. Operating
expenses at ChemWay were $1,744,000 in 1998, as compared with $2,909,000 in
1997, reflecting the cessation of production activities in February 1998.
Operating losses at ChemWay were $925,000 in 1998 as compared with $1,831,000 in
1997, reflecting the reductions in operating expenses during the current fiscal
year, partially offset by lower sales and reduced Gross Margins.

1997 COMPARED WITH 1996

The Company's after-tax profits (losses) for the years ended 1997 and 1996,
respectively were ($4,339,000) and $1,119,000. Losses from continuing operations
were $2,993,000 and $185,000 in the years ended 1997 and 1996, respectively.
Management attributes the after-tax profit decrease of $5,458,000 in 1997 as
compared with 1996 mainly to the ChemWay sector, which lost $1,346,000 in 1997,
as compared with an after tax profit of $1,304,000 in 1996. The increased loss
from continuing operations during 1997 is mainly attributable to decreased Gross
Margins and an increase in expenses, partially offset by increased revenues.
Included in the 1997 loss was a security trading loss of $497,000 and other
asset write-downs of approximately $818,000. The Company's revenues from
continuing operations for 1997 increased $4,989,000 or approximately 3.8% to
$137,996,000 as compared with $133,007,000 in 1996. Fuel sales gallonage
increased to 106,907,000 gallons compared to 105,357,000 in 1996; a 1,550,000
(1.5%) increase. The Company's gross profit for 1997 was $15,444,000, or
approximately 11.2% of sales as compared to $17,266,000 or approximately 13.0%
of sales in 1996. Management attributes the decline in profit margins to
competitive pricing in the Petroleum Marketing and EDCO Environmental segments.

Operating expenses increased $1,513,000 in 1997 to $18,420,000 as compared with
$16,907,000 in 1996. Expressed as a percentage of sales, operating expenses were
approximately 13.3% of sales in 1997 as compared with approximately 12.7% in
1996. The increase is primarily attributable to higher depreciation and
amortization expenses in 1997, resulting from the purchase and installation of
the Company's new computer hardware and software, and to increased employment
expenses in the Petroleum Marketing and Convenience Store segments.

Page 10
<PAGE>
PETROLEUM MARKETING

The Petroleum Marketing segment had sales of $98,376,000 in 1997 compared to
$91,374,000 in 1996, a $7,002,000 (7.7%) increase. Fuel sales gallonage
increased to 88,448,000 gallons compared to 85,845,000 in 1996, a 2,603,000
(3.0%) increase. Gross profits for 1997 and 1996 were $7,676,000 and $8,810,000,
respectively. Gross profit margins decreased to 7.8% compared to 9.6% in 1996.
Operating expenses increased $879,000 in 1997. Operating expenses were 9.1% of
revenues in 1997, and 8.9% in 1996 primarily due to the transfer of EDCO
Environmental's service department into Petroleum Marketing and the related
increase in employment expenses, a $111,000 increase in allowance for doubtful
accounts in general and administrative expenses and a $100,000 write-down in
software costs. ESI, the parent company, is included in the Petroleum Marketing
results. Operating income (loss) decreased to ($1,369,000) compared to $644,000
in 1996.

CONVENIENCE STORES

The Convenience Store segment had sales of $38,300,000 in 1997 compared to
$39,602,000 in 1996; a $1,302,000 (3.3%) decrease. Fuel sales decreased to
$22,525,000 in 1997 compared to $22,993,000 in 1996; a $468,000 (2.0%) decrease.
Fuel sales gallonage decreased to 18,459,000 gallons compared to 19,512,000 in
1996; a 1,053,000 (5.4%) decrease. Merchandise sales decreased to $15,089,000 in
1997 compared to $15,996,000 and other income increased to $686,000 compared to
$613,000. Management attributes the declines to operating 6 fewer stores for
part of 1997. Gross profit margins decreased to 19.3% in 1997 compared to 20.0%
in 1996. Gross profit margins on fuel sales decreased to 9.4% compared to 10.6%;
merchandise margins decreased to 30.4% compared to 30.6% in 1996.

Operating expenses increased $837,000 in 1997. Operating expenses were 22.5% of
revenues in 1997 and 19.6% in 1996. Increases in operating expenses were
centered in employment $202,000, other operating $407,000, and general
administration $113,000. The Convenience Store segment incurred an operating
loss of $1,208,000, as compared to an
operating profit of $171,000 in 1996.

EDCO ENVIRONMENTAL

EDCO Environmental sales were $1,320,000 in 1997 compared to $2,031,000 in 1996;
a $711,000 (35.0%) decrease. Gross profit for 1997 and 1996 was $366,000 and
$510,000, respectively. Gross profit margins increased to 27.7% compared to
25.1% in 1996. Operating expenses decreased $201,000 in 1997 compared to 1996.
The $201,000 decrease was mainly attributable to the transfer of EDCO's service
department to Petroleum Marketing offset by asset write-downs of approximately
$209,000. Operating loss was $399,000 compared to $456,000 in 1996.

CHEMWAY

ChemWay had sales of $10,967,000 in 1997 compared to $25,773,000 in 1996; a
$14,806,000 (57.4%) decrease. The decrease was mainly attributable to a decrease
in R-12 sales of $12,269,000. Gross profit for 1997 and 1996 was $1,078,000 and
$4,422,000, respectively. Gross profit margins declined to 9.8% in 1997 compared
to 17.2% in 1996. Management attributes the decline in gross profit margins to
the loss of sales of R-12. Operating expenses increased $667,000 in 1997
compared to 1996. Included in these increases were asset, inventory, and
accounts receivable write-downs of approximately $398,000. Operating income
(loss) decreased to ($1,831,000) compared to $2,179,000 in 1996.

CAPITAL RESOURCES AND LIQUIDITY

Certain of the Company's notes payable to banks require maintenance of financial
covenants, including current ratio, debt to equity ratio, a minimum level of
tangible net worth, and fixed charge coverage ratios, all as defined within the
respective loan agreements. The Company has been in default of certain of these
covenants since September 30, 1997. Additionally, the determination of the
amount of funding available under the Company's revolving credit facility with
one bank is determined by a borrowing base calculation, based upon levels of
accounts receivable and inventory. Amounts outstanding under such revolving
credit facility have exceeded the amounts available pursuant to the borrowing
base calculation.

The Company had negotiated standstill agreements with the two bank lenders with
whom the Company had outstanding covenant defaults, pursuant to which the banks
agreed not to accelerate the maturities of such loans in return for additional
collateral and consideration by the Company. The present standstill agreements
expired at October 31, 1998.

Page 11
<PAGE>
On January 13, 1999, the company received a commitment letter from one of its
present bank lenders (the "Refinancing"), pursuant to which the bank would (i)
waive all previous covenant defaults; (ii) extend the maturity of its loan
balance to January 31, 2001; and (iii) assume the amounts outstanding under the
other bank lender's loans under their current terms and conditions. Under the
proposed terms of the Refinancing, such bank lender would receive a first lien
position on certain of the assets of the Company. The Refinancing would contain
certain financial covenant obligations, including minimum net worth, minimum
earnings before interest, taxes and depreciation, working capital ratio and
fixed charge coverage ratio. Management believes the Company will be able to
comply with the proposed financial covenants during the foreseeable future,
however there can be no assurance that the Company will be able to do so.

Cash and cash equivalents were $831,000 and $1,297,000 at September 30, 1998 and
1997, respectively. The Company had net working capital of $1,243,000, as
compared with a deficit of $1,692,000 at September 30, 1997. The working capital
deficit in 1997 is due to the reclassification of substantially all of the
Company's outstanding debt as a current liability, as a result of the financial
covenant defaults discussed above.

Cash used by operating activities was $590,000 in the year ended September 30,
1998, as compared with cash used by operating activities of $1,398,000 in the
previous fiscal year. The improvement in cash from operating activities is
primarily due to the improved working capital utilization during the current
fiscal year; the Company's investment in net working capital declined $2,635,000
during the year ended September 30, 1998. Net loss, net of the noncash charge
for stock option compensation expense, declined from $4,339,000 in 1997 to
$2,763,000 in 1998.

The Company identified certain nonessential assets which it sold during the year
ended September 30, 1998; assets disposed of during the current fiscal year
included nonperforming convenience stores, the Company's investment in certain
of its Special Purpose Lease locations, and assets utilized in the Company's
propane business. The Company received proceeds of $1,610,000 from the sale of
such assets during 1998. Cash provided by investing activities was $158,000 in
1998, as compared with $747,000 cash used by investing activities during 1997.

In December 1998, the Company completed the sale of its ChemWay subsidiary, in a
stock-for-stock exchange with Affiliated. Although the Company did not receive
any cash consideration in the transaction, Affiliated agreed to repay
outstanding trade credit liabilities of ChemWay of approximately $2,100,000.

YEAR 2000

As many computer systems and other equipment with embedded chips or processors
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or systems failures causing disruptions in their
business operations. This is commonly known as the Year 2000 ("Y2K") issue. The
Y2K issue can arise at any point in the Company's supply, processing,
distribution and financial systems.

The Company is in the process of implementing a Y2K readiness program with the
objective of having all of the Company's significant Business Systems
functioning properly with respect to the Y2K before January 1, 2000.

The first component of the Y2K readiness program is to identify the internal
Business Systems of the Company that are susceptible to system failures or
processing errors as a result of the Y2K issue. This effort is substantially
complete; management believes it has identified the Business Systems that may
require remediation or replacement. Management is presently assessing the
priority of each Business System remediation or replacement project.

The second component of the Y2K readiness program involves the actual
remediation and replacement of Business Systems. The Company is primarily
utilizing internal resources to complete this project. The Company's objective
is to complete substantially all remediation and replacement of internal
Business Systems by September 1999.

As part of the Y2K readiness program, significant service providers, vendors,
suppliers, customers and governmental entities ("Key Business Partners") that
are believed to be critical to business operations after January 1, 2000 are
bing identified and steps are being undertaken in an attempt to reasonably
ascertain their stage of Y2K readiness.

The Company utilizes a limited number of Business Systems in the conduct of its
operations, however due to the significant number of Key Business Partners, the
Company presently believes that it may experience some disruption in its
business due to the Y2K problem.

Page 12
<PAGE>
More specifically, the Company could be materially adversely affected if
utilities, private businesses and governmental entities with which it does
business or that provide essential services are not Y2K ready. The possible
consequences of the Company or Key Business Partners not being fully Y2K
compliant by January 1, 2000 include, among other things, delays in the delivery
of products, delays in the receipt of supplies, invoice and collection errors,
and inventory and supply obsolescence. Consequently, the business and results of
operations of the Company could be materially adversely affected by a temporary
inability of the Company to conduct its business in the ordinary course for a
period of time after January 1, 2000. However, the Company believes that its Y2K
readiness program, including the contingency planning discussed below, should
significantly reduce the adverse effect any such disruptions may have.

Concurrently with the Y2K readiness measures described above, the Company is
developing contingency plans intended to mitigate the possible disruption in
business operations that may result from the Y2K issue. Contingency plans may
include stockpiling supplies, increasing inventory levels, and securing
alternate sources of supply. Once developed, contingency plans and related cost
estimates will be continually refined as additional information becomes
available.

Since much of the Company's cost of its Y2K readiness program has been internal
resources, who are also involved in other duties related to the Company's
ongoing operations, the cost of the Y2K readiness program is not known, however
the Company does not believe that such costs are material. The costs are being
expressed as they are incurred, and are being funded through operating cash
flow. The costs associated with the replacement of computer systems, hardware or
equipment, if necessary, substantially all of which would be capitalized, is not
presently available.

The Company's Y2K readiness program is an ongoing process; the estimated
completion dates and costs of the Y2K readiness program is subject to change.

THE ESTIMATES AND CONCLUSIONS HEREIN CONTAIN FORWARD-LOOKING STATEMENTS AND ARE
BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS TO COMPLETING THE
PLAN INCLUDE THE AVAILABILITY OF RESOURCES, OUR ABILITY TO DISCOVER AND CORRECT
THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON SPECIFIC FACILITIES, AND THE ABILITY OF KEY BUSINESS PARTNERS TO BRING
THEIR SYSTEMS INTO YEAR 2000 COMPLIANCE.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company included in this annual
report on Form 10-K are listed under Item 14, Exhibits, Financial Statement
Schedules and Reports on Form 8-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEMS 10 AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND
EXECUTIVE COMPENSATION

As permitted by General Instruction G, the information called for by these items
with respect to the Company's directors and executive compensation is
incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A not later than January 28, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A not later than January 28, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Page 13
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following financial statements, schedules and exhibits are filed as
part of this report:

(1) and (2) Financial Statements and Financial Statement Schedules.
See Index to Consolidated Financial Statements on Page F-1.

(3) Exhibits.
See Index to Exhibits on sequential page 16

(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended
September 30, 1998.

Page 14
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

EVANS SYSTEMS, INC.

/s/ J.L. EVANS, SR.
Jerriel L. Evans, Sr.
Chairman of the Board and Chief
Executive Officer

January 13, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date(s) indicated:

<TABLE>
<CAPTION>
<S> <C>
/s/ J.L. EVANS, SR. /s/ RICHARD A. GOEGGEL
Jerriel L. Evans, Sr., January 13, 1999 Richard A. Goeggel, January 13, 1999
Chairman of the Board and Chief Executive Officer Chief Financial Officer and Director

/s/ RICHARD B. DIX /s/ MAYBELL H. EVANS
Richard B. Dix, January 13, 1999 Maybell H. Evans, January 13, 1999
Executive Vice President Secretary and Director

/s/ DARLENE E. JONES /s/ CHARLES N. WAY
Darlene E. Jones, January 13, 1999 Charles N. Way, January 13, 1999
Treasurer and Director Corporate Controller and Director

/s/ CARL W. SCHAFER /s/ PETER J. LOSAVIO
Carl W. Schafer, January 13, 1999 Peter J. Losavio, Jr., January 13, 1999
Director Director

/s/ JULIE H. EDWARDS
Julie H. Edwards, January 13, 1999
Director

</TABLE>

Page 15
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of the Company filed with the Texas
Secretary of State on October 22, 19681. Filed with May 11, 1993
filing of Form S-1 Registration #33-62684.
3.2 Certificate of Amendment to Articles of Incorporation of Evans
Systems, Inc., filed with the Texas Secretary of State on September
21, 19921. Filed with May 11, 1993 filing of Form S-1 Registration
#33- 62684.
3.3 Certificate of Amendment of Articles of Incorporation of Evans
Systems, Inc., filed with the Texas Secretary of State on April 9,
1993. Filed with May 11, 1993 filing of Form S-1 Registration
#33-62684.
3.4 By-Laws of the Company. Filed with May 11, 1993 filing of Form S-1
Registration #33-62684.
10.1 Phillips "66" Marketing Agreement dated October 21, 1986. Filed with
May 11, 1993 filing of Form S-1 Registration #33-62684.
10.2 Amoco Lubricants Distributor Agreement dated June 21, 1990 and
Schedule dated January 2, 1992. Filed with May 11, 1993 filing of Form
S-1 Registration #33-62684.
10.3 Diamond Shamrock Storage Lease dated July 12, 1985. Filed with May 11,
1993 filing of Form S-1 Registration #33-62684.
10.4 Star Enterprise "Texaco" Marketing Agreement effective July 1, 1993.
Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
10.5 Shell Lubricants Reseller Agreement effective January 1, 1992. Filed
with May 11, 1993 filing of Form S-1 Registration #33-62684.
10.6 Texaco Lubricants agreement effective July 1, 1990. Filed with May 11,
1993 filing of Form S-1 Registration #33-62684.
10.7 Conoco Jobber Franchise Agreement effective April 1, 1990. Filed with
May 11, 1993 filing of Form S- 1 Registration #33-62684.
10.8 Mobil Marine Distributor Agreement effective June 3, 1992. Filed with
May 11, 1993 filing of Form S-1 Registration #33-62684.
10.9 Form of Series B Warrants to Purchase Common Stock of Registrant.
Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
10.10 Coastal Refinery & Marketing, Inc. Facilities Access Agreement,
effective September 5, 1989. Filed with May 11, 1993 filing of Form
S-1 Registration #33-62684.
10.11 FINA Lubricants Marketing Agreement dated February 1, 1989. Filed with
May 11, 1993 filing of Form S-1 Registration #33-62684.
10.12 Texaco Terminating Agreement dated April 30, 1986. Filed with May 11,
1993 filing of Form S-1 Registration #33-62684.
10.13 Citgo Petroleum Distributor Franchise Agreement effective August 1,
1992. Filed with May 11, 1993 filing of Form S-1 Registration
#33-62684.
10.14 Incentive Stock Option Plan. Filed with May 11, 1993 filing of Form
S-1 Registration #33-62684.
10.15 Form of Incentive Stock Option Agreement. Filed with May 11, 1993
filing of Form S-1 Registration #33-62684.
10.16 Summary Plan Description of E.S.O.P. Filed with May 11, 1993 filing of
Form S-1 Registration #33- 62684.
10.17 Employment Contract with Bill R. Kincer, incorporated by reference
from Exhibit 10.28 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1994.
10.18 Pruett Petroleum, Inc. and Koonce Petroleum Company, Inc. agreement
dated October 4, 1994, incorporated by reference from Exhibit 10.29 to
the Company's Annual Report on Form 10-K for the year ended September
30, 1994.
*10.19 Employment Agreement with Richard A. Goeggel, effective June 16, 1998.
*10.20 Employment Agreement with Richard B. Dix, effective April 16, 1998.
*10.21 Employment Agreement with J.L. Evans, Sr., effective April 6, 1998.
*10.22 Stock Purchase Agreement dated as of October 30, 1998 by and among the
Company, Synaptix Systems Corporation, a Colorado corporation, d.b.a.
Affiliated Resources Corporation, and Way Energy, Inc., a Delaware
corporation.

</TABLE>

Page 16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ---------------------------------------------------------------------------------------------
<S> <C>
*10.23 Amendment No. 1 to Stock Purchase Agreement, dated December 39, 1998
by and among the Company, Synaptix Systems Corporation, a Colorado
corporation, d.b.a. Affiliated Resources Corporation, and Way Energy,
Inc., a Delaware corporation.
*22.0 Subsidiaries of Registrant
*23.0 Consent to the incorporation by reference in the Company's
Registration Statements on Forms S-3 and S- 8 of the report of
PricewaterhouseCoopers LLP included herein.
</TABLE>

* Filed herewith.

Page 17
<PAGE>
EVANS SYSTEMS, INC.
FORM 10-K
INDEX TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------

Report of Independent Accountants....................................... F-2

Consolidated Balance Sheet at September 30, 1998 and 1997............... F-3

Consolidated Statement of Operations for the Years Ended
September 30, 1998, 1997 and 1996..................................... F-4

Consolidated Statement of Cash Flows for the Years Ended
September 30, 1998, 1997 and 1996..................................... F-5

Consolidated Statement of Stockholders' Equity for the
Years Ended September 30, 1998, 1997 and 1996......................... F-6

Notes to Consolidated Financial Statements.............................. F-7

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Evans Systems, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and stockholders' equity
present fairly, in all material respects, the financial position of Evans
Systems, Inc. and its subsidiaries at September 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1998, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Houston, Texas
January 13, 1999

F-2
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998 AND 1997
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
-------- --------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents .................................. $ 831 $ 1,297
Trade receivables, net of allowance for doubtful receivables
of $264,000 and $340,000, respectively ................... 2,796 4,584
Inventory .................................................. 3,714 7,962
Income taxes receivable .................................... 128 310
Prepaid expenses and other current assets .................. 775 618
Deferred income taxes ...................................... 78 191
Current assets of ChemWay .................................. 1,658
-------- --------
Total current assets .................................... 9,980 14,962
Property and equipment, net ................................... 17,231 21,610
Other assets .................................................. 837 1,035
Deferred income taxes ......................................... 1,750 397
Noncurrent assets of ChemWay .................................. 3,390
-------- --------
Total assets ............................................ $ 33,188 $ 38,004
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses ...................... $ 4,939 $ 8,817
Current portion of long-term debt .......................... 1,698 7,837
Current liabilities of ChemWay ............................. 2,100
-------- --------
Total current liabilities ............................... 8,737 16,654
Long-term debt ................................................ 11,151 5,401
-------- --------
Total liabilities ....................................... 19,888 22,055
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 15,000,000 shares
authorized, 3,268,298 and 3,163,573 shares issued,
respectively ............................................. 33 32
Additional paid-in capital ................................. 13,811 12,297
Retained earnings (deficit) ................................ (110) 4,054
Treasury stock, 72,589 shares, at cost ..................... (434) (434)
-------- --------
Total stockholders' equity .............................. 13,300 15,949
-------- --------
Total liabilities and stockholders' equity .............. $ 33,188 $ 38,004
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Refined product sales (including consumer
excise and state fuel taxes of $20,000, $20,391
and $17,514, respectively) .................... $ 87,822 $ 119,364 $ 112,790
Other sales and services ........................ 16,292 18,632 20,217
--------- --------- ---------
Total revenue ................................ 104,114 137,996 133,007
Cost of sales ...................................... 89,957 122,552 115,741
--------- --------- ---------
Gross profit ....................................... 14,157 15,444 17,266
--------- --------- ---------
Operating expenses:
Employment expenses ............................. 8,881 8,961 8,844
Other operating expenses ........................ 3,932 3,886 3,505
Other general and administrative expenses ....... 3,088 3,636 3,074
Depreciation and amortization ................... 1,895 1,937 1,484
--------- --------- ---------
Total operating expenses ..................... 17,796 18,420 16,907
--------- --------- ---------
Operating income (loss) ............................ (3,639) (2,976) 359
--------- --------- ---------
Other income (expense):
Gain on sale of assets .......................... 160 17 125
Interest income ................................. 22 82 165
Interest expense ................................ (1,312) (922) (830)
Other ........................................... (489) (104)
--------- --------- ---------
Total other income (expense) ................. (1,130) (1,312) (644)
--------- --------- ---------
Loss from continuing operations before benefit
from income taxes ................................ (4,769) (4,288) (285)
Benefit from income taxes .......................... (1,433) (1,295) (100)
--------- --------- ---------
Loss from continuing operations .................... (3,336) (2,993) (185)
Income (loss) from discontinued operations of
ChemWay to March 31, 1998, less
applicable income taxes (Note 2) ................. (828) (1,346) 1,304
--------- --------- ---------
Net income (loss) .................................. $ (4,164) $ (4,339) $ 1,119
--------- --------- ---------

Basic and diluted earnings (loss) per common share:
Loss per common share from continuing
operations .................................... $ (1.07) $ (0.97) $ (0.06)
Discontinued operations ......................... (0.27) (0.44) 0.43
--------- --------- ---------
Earnings (loss) per common share ................ $ (1.34) $ (1.41) $ 0.37
--------- --------- ---------
Basic and diluted weighted average common
shares outstanding ............................ 3,116 3,075 3,010
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:-
Net income (loss) .................................. $(4,164) $(4,339) $ 1,119
Adjustments:
Depreciation and amortization ..................... 2,105 2,129 1,627
Stock option compensation expense ................. 1,401
Deferred operating loss of ChemWay ................ (414)
Gain on sale of assets ............................ (160) (17) (125)
Deferred income taxes ............................. (2,165) (1,806) 479
Loss on marketable securities ..................... 498 106
Changes in assets and liabilities:
Receivables ..................................... 1,771 576 1,207
Inventory ....................................... 3,060 220 (32)
Prepaid expenses and other ...................... (187) 359 432
Accounts payable and accrued expenses ........... (2,019) 1,255 (3,688)
Income taxes receivable/payable ................. 182 (273) 55
------- ------- -------
Net cash provided (used) by operating activities (590) (1,398) 1,180
------- ------- -------
Cash flows from investing activities:
Capital expenditures ............................... (1,407) (3,052) (3,712)
Proceeds from sale of marketable equity securities . 1,454 346
Proceeds from sale of property and equipment ....... 1,610 667 460
Other .............................................. (45) 184 (246)
------- ------- -------
Net cash provided (used) by investing activities 158 (747) (3,152)
------- ------- -------
Cash flows from financing activities:
New borrowings ..................................... 1,715 3,962 8,515
Reduction of long-term debt ........................ (1,863) (3,478) (7,364)
Net proceeds from stock issuance ................... 114 165 70
------- ------- -------
Net cash provided (used) by financing activities (34) 649 1,221
------- ------- -------
Net decrease in cash and cash equivalents ............. (466) (1,496) (751)
Cash and cash equivalents, beginning of year .......... 1,297 2,793 3,544
------- ------- -------
Cash and cash equivalents, end of year ................ $ 831 $ 1,297 $ 2,793
------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid for interest ............................. $ 1,169 $ 1,178 $ 997
Cash paid for taxes ................................ $ 58

Supplemental disclosure of noncash transactions:
Acquisition of property by capital lease and
issuance of debt ................................. $ 209 $ 1,308
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS)
COMMON STOCK ADDITIONAL RETAINED UNREALIZED
------------------------ PAID-IN EARNINGS LOSS ON TREASURY
SHARES AMOUNT CAPITAL (DEFICIT) SECURITIES STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - September 30, 1995 ... 2,934,205 $ 29 $ 11,381 $ 7,958 $ (400) $ (434) $ 18,534

Decrease in marketable equity
security valuation allowance . 25 25
Warrants exercised by
employees and stock award .... 23,500 1 69 70
Net income for 1996 ............ 1,119 1,119
5% common stock dividend ....... 147,885 1 683 (684)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance - September 30, 1996 ... 3,105,590 31 12,133 8,393 (375) (434) 19,748

Warrants exercised by employees 57,983 1 164 165
Decrease in marketable equity
securities valuation allowance 375 375
Net loss for 1997 .............. (4,339) (4,339)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance - September 30, 1997 ... 3,163,573 32 12,297 4,054 (434) 15,949

Warrants exercised ............. 104,725 1 152 153
Compensation expense recog-
nized in connection with
options granted .............. 1,362 1,362
Net loss for 1998 .............. (4,164) (4,164)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance - September 30, 1998 ... 3,268,298 $ 33 $ 13,811 $ (110) $ -- $ (434) $ 13,300
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------
1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS OPERATIONS
Evans Systems, Inc. and its subsidiaries (the Company) are engaged in
petroleum marketing, convenience store operations and environmental
remediation services.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Evans
Systems, Inc. and its subsidiaries. All significant intercompany
transactions have been eliminated.

CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less
to be cash equivalents. Cash and cash equivalents are stated at cost which
approximates fair market value.

INVENTORIES
Substantially all inventories are products held for sale. Inventories of
oil and grease, automotive/chemical products, tire and automotive
accessories and convenience store products utilize the first-in, first-out
(FIFO) method of accounting and are stated at the lower of cost or market.
Gas and diesel fuels inventory is valued using the last-in, first-out
(LIFO) method which resulted in inventory being $100,000 and $189,000 less
at September 30, 1998 and 1997, respectively, than it would have been if
the FIFO method had been used.

PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated utilizing the
straight-line method of computing depreciation over their estimated useful
lives. The cost of assets retired and the related accumulated depreciation
are removed from the accounts and any gain or loss is included in the
results of operations when incurred. Repairs and maintenance are charged
to expense as incurred. Expenditures for major additions and replacements
which extend the lives of assets are capitalized and depreciated over
their estimated useful lives. The Company depreciates assets over the
following estimated useful lives:

Buildings and plant 15-39 years
Leasehold improvements Life of lease, up to 39 years
Equipment 15 years
Transportation equipment 5 years
Office equipment 5-7 years

IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the realizability of its long-lived
assets and evaluates such assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future
cash flows, undiscounted and without interest charges, are less than the
carrying amount.

F-7
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------
STOCK-BASED COMPENSATION PLANS
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its plans.

INCOME TAXES
The Company and its subsidiaries file a consolidated federal income tax
return.

The Company recognizes income tax expense based on the liability method of
accounting for income taxes. Deferred tax assets and liabilities are
recognized for the income tax effect of temporary differences between the
tax basis of assets and liabilities and their carrying values for
financial reporting purposes. Deferred tax expense or benefit is the
result of changes in the deferred tax assets and liabilities during the
period.

EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128) during the first quarter of 1998. SFAS 128
requires the Company to report both basic earnings per share, which is
based on the weighted average number of common shares outstanding, and
diluted earnings per share, which is based on the weighted average number
of common shares as well as all potentially dilutive common shares
outstanding. Stock options and warrants are the only potentially dilutive
shares the Company has outstanding for the periods presented. All prior
years' earnings per share data in the accompanying consolidated financial
statements have been restated to reflect the provisions of SFAS 128. Stock
options and warrants were not included in the computation of diluted loss
per common share for 1998, 1997 and 1996 since they would have resulted in
an antidilutive effect on loss from continuing operations.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has various financial instruments, including cash, trade
receivables, accounts payable, accrued expenses, revolving credit
facilities and notes payable. The carrying values of cash, trade
receivables, accounts payable, accrued expenses and notes payable
approximates current fair value. Revolving credit facilities are at
variable market rates.

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 at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Management believes that the estimates are reasonable.

CONCENTRATIONS OF CREDIT RISK
The Company performs periodic evaluations of the relative credit standing
of the financial institutions and investment funds which are considered in
the Company's investment strategy. As of the date of the financial
statements, the Company has no concentration of customers engaged in
similar activities for which a failure to perform up to the terms of their
obligations due to shared activities, regions or economic characteristics
would result in a material credit risk to the Company. Management believes
that its credit and

F-8
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------
collection policies mitigate the potential effect of a concentration of
credit risk in its accounts receivable.

RECLASSIFICATIONS
The accompanying consolidated financial statements include
reclassifications from financial statements issued in previous years
primarily as a result of presenting the historical results of operations
of ChemWay Systems, Inc. (ChemWay), a wholly-owned subsidiary of the
Company, as discontinued operations.

2. DISCONTINUED OPERATION

In February 1998, the Company suspended the production activities of its
ChemWay operation which was engaged in the packaging and marketing of
automotive after-market chemical products. In March 1998, the Company made
the decision to sell ChemWay and recorded an estimated loss on disposal of
$705,000 (net of applicable income tax benefit of $395,000) which included
a provision for losses of $200,000 during the phase-out period. The
results of operations of ChemWay have been classified as discontinued
operations and prior periods have been restated. Summary operating results
are as follows:

YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997 1996
-------- -------- --------
Revenues ................................ $ 2,268 $ 10,967 $ 25,773
Earnings (loss) from operations ......... (925) (1,831) 2,179
Income tax expense (benefit) ............ (351) (743) 700
Income (loss) from discontinued operation (828) (1,346) 1,304

On December 30, 1998, the Company completed the sale of ChemWay to
Affiliated Resources Corporation (Affiliated). The Company received 1.5
million shares of common stock of Affiliated in exchange for all the
outstanding common stock of ChemWay. The Company may receive up to an
additional one million shares of common stock of Affiliated one year after
the closing date if the average closing price of Affiliated common stock
falls below certain amounts as defined in the purchase agreement. The
Company will record a gain on the sale, net of income taxes, of
approximately $1 million in the first quarter of 1999. As a result of the
sale, the loss on disposal and the related provision for losses during the
phase-out period recorded in the second and third quarters of 1998 were
reversed during the fourth quarter of 1998.

F-9
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30 (in
thousands):

1998 1997
------- -------
Land ................................................... $ 2,698 $ 2,950
Buildings .............................................. 6,275 6,809
Leasehold improvements ................................. 766 935
Equipment .............................................. 15,166 18,470
Transportation equipment ............................... 2,533 2,895
Office equipment ....................................... 2,292 2,955
------- -------
29,730 35,014
Less - accumulated depreciation and amortization ....... 12,499 13,404
------- -------
Property and equipment, net ............................ $17,231 $21,610
------- -------

4. LONG-TERM DEBT

Long-term debt is summarized as follows at September 30 (in thousands):

1998 1997
------- -------
Notes payable to banks, at prime to prime plus 3%,
payable to 2003, secured by property and equipment,
accounts receivable, inventory, cash surrender value
of life insurance and common stock of subsidiaries ....... $11,089 $11,135
Capital lease liability .................................... 956 1,209
Notes payable, 7.2% to 11.5%, payable to 2005, secured
by property, equipment, improvements, inventory,
accounts receivable and cash surrender value of life
insurance ................................................ 464 625
Other ...................................................... 340 269
------- -------
12,849 13,238
Less - current maturities .................................. 1,698 7,837
------- -------
Total ................................................ $11,151 $ 5,401
------- -------

Certain of the Company's notes payable to banks require maintenance of
financial covenants, including current, debt to equity, tangible net worth
and debt service coverage ratios. At September 30, 1998, the Company was
in violation of substantially all of these covenants. In addition, the
Company was out of compliance with the borrowing base limits with one
bank.
F-10
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

On January 13, 1999, the Company received a commitment letter from one of
its present bank lenders, pursuant to which the bank would (i) waive all
previous covenant defaults; (ii) extend the maturity of its loan balance
to January 31, 2001; and (iii) assume the amounts outstanding under the
other bank lender's loans under their current terms and conditions. Under
the proposed term of the refinancing, such bank lender would receive a
first-lien position on all of the assets of the Company. The refinancing
would contain certain financial covenant obligations, including minimum
net worth, minimum earnings before interest, taxes and depreciation,
working capital ratio and fixed charge coverage ratio. Management intends
to replace the Company's existing loan agreement with this lender with the
new commitment and believes the Company will be able to comply with the
proposed financial covenants during the next year.

The Company is prohibited by its bank agreement from payment of any cash
dividends and from obtaining additional debt without the bank's consent.

The Company's capital lease liability relates to the lease of the
Company's information system and trucks which were capitalized using
effective interest rates of 9.3% and 9%, respectively. At September 30,
1998 and 1997, the gross amount of assets recorded under capital leases
was $1,436,000 and the related accumulated amortization was $658,000 and
$299,000, respectively. Total future capital lease payments are $1,105,000
and include unearned interest of $145,000.

As of September 30, 1998 (after consideration of the debt refinancing
described above), principal maturities of long-term debt are as follows
(in thousands):

1999 .................................................. $ 1,698
2000 .................................................. 2,973
2001 .................................................. 7,008
2002 .................................................. 328
2003 .................................................. 201
Thereafter ............................................ 641
-------
Total ............................................ $12,849
-------

F-11
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

5. INCOME TAXES

The provision for (benefit from) income taxes consists of the following
(in thousands):

YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1998 1997 1996
------- ------- -------
Current:
Federal .................. $ 43 $ (201) $ (25)
State .................... 108 (31) 146
------- ------- -------
151 (232) 121
------- ------- -------
Deferred:
Federal .................. (1,696) (1,628) 421
State .................... (239) (178) 58
------- ------- -------
(1,935) (1,806) 479
------- ------- -------
Total ................. $(1,784) $(2,038) $ 600
------- ------- -------

The difference between income taxes at the statutory federal and effective
income tax rates is as follows (in thousands):

YEAR ENDED SEPTEMBER 30,
-----------------------------
1998 1997 1996
------- ------- -------
Taxes computed by applying
federal statutory rate ....................... $(2,022) $(2,169) $ 584
State taxes, net of federal benefit ............ (120) (137) 135
Stock option compensation expense............... 518
Change in deferred tax asset valuation allowance (209) 231
Other, net ..................................... 49 37 (119)
------- ------- -------
Total .................................... $(1,784) $(2,038) $ 600
------- ------- -------

Income taxes are attributable to the following (in thousands):

YEAR ENDED SEPTEMBER 30,
-------------------------------------
1998 1997 1996
------- ------- -------
Continuing operations ............. $(1,433) $(1,295) $ (100)
Discontinued operations ........... (351) (743) 700
------- ------- -------
Total ....................... $(1,784) $(2,038) $ 600
------- ------- -------

F-12
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

Deferred tax assets (liabilities) are comprised of the following (in
thousands)
SEPTEMBER 30,
------------------
1998 1997
------- -------
Deferred tax liabilities:
Book/tax depreciation differences ..................... $(2,391) $(2,446)
Other ................................................. (16) (37)
------- -------
Total .............................................. (2,407) (2,483)
------- -------
Deferred tax assets:
Net operating loss carryforward ....................... 3,363 2,296
Alternative minimum tax credit ........................ 444 454
Net capital loss carryforwards ........................ 211 205
Allowance for doubtful receivables .................... 139 167
Expense accruals ...................................... 103
Investment tax credit ................................. 26 26
Section 263A inventory adjustment ..................... 16 38
Other ................................................. 62 13
------- -------
Total .............................................. 4,261 3,302
------- -------
Investment tax credit (and, in 1997, net capital loss
carryforward) valuation allowance ...................... (26) (231)
------- -------
Net deferred tax assets .................................. $ 1,828 $ 588
------- -------

At September 30, 1998, the Company had regular tax net operating loss
carryforwards from continuing operations of $9,205,000 available for
federal income tax purposes which expire through 2018.

At September 30, 1998, ChemWay had regular net operating loss
carryforwards of $3,211,000 available for federal income tax purposes and
net deferred tax assets of $925,000.

Changes in the Company's ownership, as defined under Section 382 of the
Internal Revenue Code, could result in certain limitations on the annual
amount of net operating losses that may be utilized.

F-13
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

6. OPERATING LEASES

The Company leases 27 convenience store locations and 5 other facilities
under operating lease agreements with varying lives and terms. Three of
these leases are with related parties (see Note 8). At September 30, 1998,
the scheduled future minimum lease payments required under the terms of
the operating leases in effect are (in thousands):

YEAR ENDED SEPTEMBER 30,

1999 ................................................... $ 491
2000 ................................................... 407
2001 ................................................... 330
2002 ................................................... 228
2003 ................................................... 166
Thereafter ............................................. 284
------
Total ............................................ $1,906
------

In addition, the Company rents 10 convenience store locations and other
facilities on a month-to-month basis from various parties, including 5
from a related party (see Note 8). Rent paid for these facilities totaled
$75,600, $180,000 and $174,000 for the years ended September 30, 1998,
1997 and 1996.

The Company has 12 subleases. Minimum rentals to be received in the future
under noncancelable subleases totaled $572,400 as of September 30, 1998.

7. COMMON STOCK

On December 16, 1996, the Company declared a five percent stock dividend
to stockholders of record on December 31, 1996 which was paid on January
20, 1997. All earnings per share information included in the accompanying
financial statements has been adjusted to give retroactive effect to the
stock dividend for all periods presented. Additionally, all share
information shown below has been adjusted to give retroactive effect to
the stock dividend.

In August 1992, the Company issued warrants to purchase 141,750 shares of
the Company's common stock at an exercise price of $2.86 per share. In
1997 and 1996, 57,938 and 24,150 of such warrants were exercised. In June
1997, the Company extended the expiration date of the remaining warrants
to August 1, 2002 and recorded compensation expense of $38,000.

In December 1994 and May 1995, the Company issued warrants to purchase
262,500 shares of the Company's common stock at an exercise price of $4.76
per share. Of these warrants, 52,500 expired in May 1997. The remaining
warrants expire in 1999.

In May 1998, the Company issued warrants to purchase 100,000 shares of the
Company's common stock at an exercise price of $1.00 per share in exchange
for certain consulting

F-14
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

services and recorded compensation expense of $38,500. The warrants were
exercised in July 1998.

The following common stock purchase warrants are outstanding as of
September 30, 1998:

WARRANT NUMBER OF EXPIRATION
PRICE WARRANTS DATE
---------- ------------ -----------------
$ 16.50 126,000 July 15, 1999
2.86 54,937 August 1, 2002
7.62 7,875 December 29, 2002
------------
188,812
------------

In November 1992, the Company adopted the Evans Systems, Inc. Incentive
Stock Option Plan. Up to 420,000 shares of the Company's common stock may
be purchased under the plan. The Company's Board of Directors may issue
options to one or more persons who are full-time employees of the Company
and/or its subsidiaries. Options granted under the plan must be granted
within ten years from the date of the plan. Under the plan, no eligible
employee shall be granted options during any one calendar year to the
extent that the fair market value of such shares (determined at the time
the option is granted) exceeds $100,000. If an employee, who is granted
options under the plan, owns more than 10% of the outstanding voting stock
of the Company, the options expire five years from the date of grant;
otherwise, the expiration date is ten years from the date of grant. The
options are nontransferable except upon death of the optionee. The option
price of the stock shall not be less than the fair market value of the
stock on the date of the grant, except in the case of an employee owning
more than 10% of the outstanding voting stock when the exercise price
shall be 110% of the fair market value of the stock at the date of grant.

In December 1994, the Company adopted the ESI Stock Benefit Plan. Up to
420,000 shares of the Company's common stock may be purchased or granted
under the plan, and provision has been made for automatic increases in
such amount of shares in the event the number of common shares issued by
the Company increases to specified levels. An option granted under the
plan by the Board of Directors to a key employee may be an incentive stock
option or a nonqualified option and may be accompanied by stock
appreciation rights or limited rights. Incentive stock options must be
granted at an exercise price of not less than 100% of the then fair market
value of the stock. Nonqualified stock options must be granted at an
exercise price of not less than 90% of the then fair market value of the
stock. All options shall expire upon termination of employment or within
five or ten years of the date of grant. Nonemployee directors shall be
automatically granted nonqualified options to purchase 2,500 shares of
common stock annually. Vesting is to be determined by the Board of
Directors.

In August 1995, the Company granted contingent stock awards to two
individuals. The individuals were granted an aggregate of 105,000 shares
of restricted common stock

F-15
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

which vest in fiscal 1998, 1997 and 1996, subject to achievements of
certain profitability levels. The grants will be canceled if such
provisions are not met. In 1998, 1997 and 1996, such provisions were not
met and all grants were canceled.

In June 1996, an officer of the Company was awarded 525 shares of
restricted common stock.

In May and December 1997, the Company granted certain employees options to
purchase an aggregate of 330,600 shares of common stock at exercise prices
ranging from $1.31 to $4.00. The options vest upon the Company's common
stock reaching a market value of $6.50 per share for five consecutive days
as specified in the agreements. The grants would be canceled if such
provisions were not met. The provisions were met in November 1998. The
Company recorded compensation expense of $1,133,000 and $229,000 for
continuing and discontinued operations, respectively, in the fourth
quarter of 1998 for the difference in the exercise prices of the options
and the market price of the Company's stock at September 30, 1998.

A summary of the option activity under the various plans follows:

WEIGHTED-
NUMBER OF AVERAGE
SHARES OPTION PRICE
--------- ------------
Outstanding at September 30, 1995 .................. 268,275 $ 6.04

Granted in 1996 .................................... 98,700 5.53
Expired in 1996 .................................... (194,933) 5.81
---------
Outstanding at September 30, 1996 .................. 172,042 6.01

Granted in 1997 .................................... 55,714 3.35
Expired in 1997 .................................... (138,550) 5.32
---------
Outstanding at September 30, 1997 .................. 89,206 5.42

Granted in 1998 .................................... 403,800 1.67
Expired in 1998 .................................... (54,149) 5.00
---------
Outstanding at September 30, 1998 .................. 438,857
---------

The weighted average fair value at date of grant for options granted
during 1998, 1997 and 1996 was $1.78, $1.89 and $3.31 per option,
respectively.

As of September 30, 1998, 438,857 options were outstanding with exercise
prices ranging from $1.25 to $5.70, a weighted average remaining
contractual life of 7.5 years and a weighted average option price of
$1.43. Of these options outstanding, 25,757 were

F-16
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

exercisable with a weighted average option price of $3.93 and 18,857
shares were not registered under a plan.

The Company applies APB 25 and related interpretations in accounting for
its plans. The following unaudited pro forma data is calculated as if
compensation cost for the Company's stock option plans were determined
based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation":

YEAR ENDED
SEPTEMBER 30,
-----------------------
1998 1997
--------- ---------
Net loss:
As reported ..................................... $ (4,164) $ (4,339)
Pro forma ....................................... (3,133) (4,396)
Basic and diluted loss per share:
As reported ..................................... $ (1.34) $ (1.41)
Pro forma ....................................... (1.01) (1.43)

The fair value of the options granted is estimated using the Black-Scholes
option-pricing model with the following assumptions for 1998: no dividend
yield, volatility of 40%, risk-free interest rate of 5.5 - 5.7% and an
expected life of five years. For 1997, the following assumptions were
used: no dividend yield, volatility of 50 - 52%, risk-free interest rate
of 6.4% and an expected life of five years.

8. RELATED PARTY TRANSACTIONS

During 1998 the Company leased three convenience store locations from the
majority shareholder of the Company. One ten-year lease commenced in June
1987 with monthly lease payments of $2,500 and allows for one five-year
automatic renewal at the Company's option. One ten year lease commenced in
December 1995 with monthly lease payments of $1,800 and allows for two
five-year automatic renewals at the Company's option. The other location
was sold by the majority shareholder in December 1998. The amounts paid
under these leases were $76,800 for the year ended September 30, 1998 and
$73,000 for the years ended September 30, 1997 and 1996. Future minimum
lease commitments as of September 30, 1998 are $51,200.

As of September 30, 1998, the Company rents, on a month-to-month basis,
five convenience store locations from the majority shareholder.
Previously, the Company rented additional locations which were sold by the
shareholder to unrelated parties. The total month-to-month rent paid for
the year ended September 30, 1998 was $34,800 and $104,000 for the years
ended September 30, 1997 and 1996. All five locations were sold by the
shareholder to unrelated parties subsequent to September 30, 1998.

F-17
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

Other current assets include a note receivable from a former director
which was refinanced from an earlier note and is due in quarterly
instalments. The note receivable is secured by 13,567 shares of the
Company's common stock. The balance of the note receivable was
approximately $111,000 at September 30, 1998 and 1997. Interest accrues at
8.5%. The note was repaid in December 1998.

From time to time, the Company makes advances to individuals who are
shareholders, directors, officers and/or employees. Such advances are
usually unsecured and accrue interest at 9%. There were no advances
outstanding at September 30, 1998 and 1997.

9. CONTINGENT LIABILITIES

From time to time the Company exchanges refined products with suppliers by
agreeing to purchase or sell refined products at a future date. Such
activity could adversely affect the results of operations and financial
condition of the Company if the market prices of such products were to
fluctuate significantly. As of September 30, 1998, management believes the
Company had no material risk related to such activities.

The Company is subject to litigation, primarily as a result of customer
claims, in the ordinary conduct of its operations. As of September 30,
1998, the Company had no knowledge of any legal proceedings which, by
themselves or in the aggregate, could be expected to have a material
adverse effect on the Company.

10. EMPLOYEE BENEFIT PLANS

The Company established a defined contribution benefit plan, the ESI
Employee Retirement Plan, effective July 1, 1997. Employees become
eligible for participation in the plan upon attaining the age of 21 and
completion of 12 consecutive months of employment and 1,000 hours or more
of service. The Company contributes an amount equal to 50% of employee
voluntary contributions up to a maximum of 5% of the employee's
compensation. Such contributions may be made in the common stock of the
Company. The Company recorded contributions to the plan of $45,000 and
$40,000 during fiscal 1998 and 1997, respectively.

In 1992, the Company adopted an employee stock ownership plan to provide
retirement benefits to eligible employees. The Company recorded
contributions to the plan of $21,000, $40,000 and $117,000 during fiscal
1998, 1997 and 1996, respectively. Effective December 31, 1998, the
employee stock ownership plan was merged into the ESI Employee Retirement
Plan.

F-18
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

11. SEGMENT REPORTING

The Company is primarily engaged in the following industry segments:
marketing and distribution of wholesale petroleum products; retail
convenience store and gasoline station operations; and providing
environmental remediation services and installing and maintaining
underground storage tanks (EDCO Environ). Information concerning the
Company's business activities is summarized as follows (in thousands):

<TABLE>
<CAPTION>
PROPERTY
EARNINGS DEPRECIATION AND IDENTI-
(LOSS) FROM AND EQUIPMENT FIABLE
YEAR ENDED REVENUES OPERATIONS AMORTIZATION ADDITIONS ASSETS
--------- ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1998
Petroleum marketing $ 70,467 $ (2,888) $ 1,318 $ 687 $ 24,211
Convenience stores 32,495 (670) 465 1,229 7,666
EDCO Environ ...... 1,152 (81) 112 5 1,170
--------- ----------- ------------ --------- ---------
$ 104,114 $ (3,639) $ 1,895 $ 1,921 $ 33,047
--------- ----------- ------------ --------- ---------
SEPTEMBER 30, 1997
Petroleum marketing $ 98,376 $ (1,369) $ 1,379 $ 1,559 $ 19,643
Convenience stores 38,300 (1,208) 393 903 8,324
EDCO Environ ...... 1,320 (399) 165 3 1,277
--------- ----------- ------------ --------- ---------
$ 137,996 $ (2,976) $ 1,937 $ 2,465 $ 29,244
--------- ----------- ------------ --------- ---------
SEPTEMBER 30, 1996
Petroleum marketing $ 91,374 $ 644 $ 956 $ 3,067 $ 22,872
Convenience stores 39,602 171 408 1,059 8,912
EDCO Environ ...... 2,031 (456) 120 214 957
--------- ----------- ------------ --------- ---------
$ 133,007 $ 359 $ 1,484 $ 4,340 $ 32,741
--------- ----------- ------------ --------- ---------
</TABLE>
Earnings (loss) from operations by segment represent revenues less
operating costs, expenses and depreciation. Identifiable assets are
primarily cash, accounts receivable, inventory, property, equipment and
cash value of life insurance. All sales by the Company occur in the United
States.

During each of the years ended September 30, 1998, 1997 and 1996, no
single customer represented 10% or more of the Company's revenues.

F-19
<PAGE>
EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

Unaudited quarterly data is summarized as follows:

YEAR ENDED SEPTEMBER 30, 1998
---------------------------------------------
Q1 Q2 Q3 Q4
-------- -------- -------- --------
Revenue ........................ $ 28,769 $ 24,600 $ 26,453 $ 24,292
Gross profit ................... 3,826 4,146 3,464 2,721
Operating income (loss) (2) .... (495) 82 (309) (2,917)
Loss from continuing
operations ................... (560) (47) (214) (2,515)
Net loss (1) ................... (945) (1,195) (456) (1,568)
Basic and diluted loss per
common share:
Loss per common share
from continuing operations (0.18) (0.02) (0.07) (0.80)
Net loss per common share ... (0.31) (0.39) (0.15) (0.49)

YEAR ENDED SEPTEMBER 30, 1997
---------------------------------------------
Q1 Q2 Q3 Q4
-------- -------- -------- --------
Revenue ........................ $ 36,064 $ 31,794 $ 34,873 $ 35,265
Gross profit ................... 4,351 3,973 4,216 2,904
Operating income (loss) ........ 25 (375) (274) (2,352)
Loss from continuing
operations ................... (402) (402) (250) (1,939)
Net loss ....................... (775) (433) (533) (2,598)
Basic and diluted loss per
common share:
Loss per common share
from continuing operations (0.13) (0.13) (0.08) (0.63)
Net loss per common share ... (0.26) (0.14) (0.17) (0.84)

(1) The second quarter of 1998 included an estimated loss, net of
applicable taxes of $705,000, for the disposal of the ChemWay
operation. The third quarter of 1998 includes an operating loss from
ChemWay of $242,000. These estimated losses were reversed in the
fourth quarter of 1998 as ChemWay was sold in December 1998 at a gain
(Note 2).

(2) The fourth quarter of 1998 included $1,133,000 in compensation
expense for performance-based stock options charged to continuing
operations (Note 7).

F-20
<PAGE>

EXHIBIT 10.19

EMPLOYMENT AGREEMENT

AGREEMENT made as of this 22nd day of June, 1998, by and between EVANS SYSTEMS,
INC., a Texas corporation with its principal office at 720 Avenue F North, P.O.
Box 2480, Bay City, Texas 77414 (the "Corporation"), and RICHARD A. GEOGGEL,
residing at 15719 Mesa Gardens, Houston, Texas 77095 ("Executive").

W I T N E S S E T H :

WHEREAS, the Corporation desires to appoint the Executive as the Chief
Financial Officer as of June 16, 1998;

WHEREAS, Executive and the Corporation desire to enter into a new
employment agreement June 22, 1998;

WHEREAS, the Corporation desires to employ Executive, and Executive is
willing to undertake such employment, upon the terms and subject to the
conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Corporation hereby employs Executive as its Vice
President and Chief Financial Officer, to perform the duties and
responsibilities incident to such offices, subject at all times to the control
and direction of the Board of Directors of the Corporation (the "Board of
Directors").

2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. Executive hereby accepts such
employment and agrees that throughout the Term (as hereinafter defined), he will
devote his full time, attention, knowledge and skills, faithfully, diligently
and to the best of his ability, in furtherance of the business of the
Corporation, and will perform the duties assigned to him pursuant to Section 1
hereof, subject, at all times, to the direction and control of the Board of
Directors. As the Vice President and Chief Financial Officer, Executive shall
perform such specific duties and shall exercise such specific authority as may
be assigned to Executive from time to time by the Board of Directors. Executive
shall at all times be subject to, observe and carry out such rules, regulations,
policies, directions and restrictions as the Corporation shall from time to time
establish. During the Term, Executive shall not, without the written approval of
the Board of Directors first had and obtained in each instance, directly or
indirectly, accept employment or compensation from, or perform services of any
nature for, any business enterprise other than the Corporation and its
subsidiaries. During the Term, Executive shall not be entitled to additional
compensation for rendering employment services to subsidiaries of the Company or
for serving in any office of the Corporation or any of its subsidiaries to which
he is elected or appointed.

3. TERM. Except as otherwise provided herein, Executive's employment hereunder
shall be for a term commencing as of June 16, 1998 and shall continue through
June 15, 2000 (the "Initial

Page 1 of 7
<PAGE>
Term"), which may be renewed for such one (1) year
periods as the Corporation and Executive may mutually agree during the ninety
(90) day period immediately prior to the expiration of the Initial Term or any
renewal thereof (the Initial Term and any such renewal thereof are hereinafter
collectively referred to as the "Term").

4. COMPENSATION. Commencing as of June 16, 1998, the Corporation shall pay to
Executive and the Employee shall accept as his entire compensation for his
services hereunder the following, which shall be subject to withholding and
other employment taxes imposed by applicable law:

(a) The Corporation shall pay Executive a base salary ("Base Salary") at
the rate of one hundred twenty thousand ($120,000) dollars per year for the
first year of his employment. For each year thereafter while this Agreement
remains in effect, the Base Salary will be increased by such higher amount as
shall be determined by the Board of Directors. The Base Salary shall be payable
in equal monthly installments.

5. STOCK OPTIONS. The Corporation is granting to Executive on the date hereof,
the following options: (i) a five-year option (the "Firm Option") to purchase
50,000 shares of Common Stock of the Corporation, $.01 par value (the "Common
Stock") at an exercise price of $3.31 per share, which shall be exercisable as
to 30,000 Common Shares from and after the first anniversary of the date of
grant, as to an additional 20,000 Common Shares from and after the second
anniversary of the date of grant. Value means the closing price of the shares of
Common Stock on the U.S. national securities exchange on which the shares of
Common Stock are listed (if the shares are so listed) or on the NASDAQ National
Market or Small Cap Market (if the Common Shares are regularly quoted on the
NASDAQ National Market or Small Cap Market), or, if not so listed or regularly
quoted or if there is no such closing price, the mean between the closing bid
and asked prices of the shares of Common Stock in the over-the-counter market or
on such exchange or on NASDAQ, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Corporation. On the date hereof, the shares of Common Stock are listed
and traded on the NASDAQ National Market. Notwithstanding the foregoing, the
exercise of the Firm Option is contingent upon the Corporation filing an S-8
Registration with the Securities and Exchange Commission and approval of the
registration in accordance with the NASDAQ marketplace rules.

In the event of a Change of Control (as such term is hereinafter defined),
the Firm Option shall become exercisable in full (without regard to the terms
under which they were originally granted; provided that stockholder approval of
such option has been previously obtained). In the case of a Change of Control in
which the shares of Common Stock are not valued, E.G., the replacement of a
majority of the Board of Directors, the Trading Price Option shall become
exercisable in full.

6. ADDITIONAL BENEFITS. (a) In addition to such Base Salary, Executive (and his
family) shall be entitled to participate, to the extent he is (and they are)
eligible under the terms and conditions thereof, in any profit-sharing, pension,
retirement, hospitalization, insurance, disability, medical service, stock
option, bonus or other employee benefit plan generally available to the
executive officers of the Corporation that may be in effect from time to time
during the Term, as well as any

Page 2 of 7
<PAGE>
discretionary bonus pool of the Corporation. The
Corporation shall be under no obligation to institute or continue the existence
of any such employee benefit plan.

7. REIMBURSEMENT OF EXPENSES. The Corporation shall reimburse Executive in
accordance with applicable policies of the Corporation for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder and the business of the Corporation, upon the submission to the
Corporation of appropriate receipts or vouchers.

8. FACILITIES AND PERSONNEL. Executive shall be provided a private office,
secretarial services and such other facilities, supplies, personnel and services
as shall be required or reasonably requested for the performance of his duties
hereunder.

9. VACATION. Executive shall be entitled to two (2) weeks' paid vacation in
respect of each twelve (12) month period during the Term, such vacation to be
taken at times mutually agreeable to Executive and the Board of Directors.
Unused vacation shall be carried over to the subsequent twelve (12) month period
and may not be carried over beyond the next twelve (12) month period.

10. D & O INSURANCE COVERAGE. The Corporation shall use its best efforts to
obtain and maintain, at the Corporation's cost and expense, directors' and
officers' liability insurance coverage for the directors and officers of the
Corporation, including Executive. Nothing herein shall be deemed to require the
Corporation to provide such coverage for Executive if it is not then providing
such coverage generally to its directors and officers.

11. RESTRICTIVE COVENANT. In consideration of the Corporation's entering into
this Agreement, Executive agrees that during the period of his employment
hereunder, he will not (i) directly or indirectly own, manage, operate, join,
control, participate in, invest in, or otherwise be connected with, in any
manner, whether as an officer, director, employee, partner, investor or
otherwise, any business entity that is engaged in the business of operating
convenience stores, marketing and distributing petroleum products, or providing
environmental remediation services or any other business which the Corporation
is then engaged during such period, (ii) for himself or on behalf of any other
person, partnership, corporation or entity, call on any customer of the
Corporation for the purpose of soliciting, diverting or taking away any customer
from the Corporation, or (iii) induce, influence, or seek to induce or
influence, any person engaged as an employee, representative, agent, independent
contractor or otherwise by the Corporation, to terminate his or her relationship
with the Corporation. Nothing herein contained shall be deemed to prohibit
Executive from investing his funds in securities of an issuer if the securities
of such issuer are listed for trading on a national securities exchange or are
traded in the over-the-counter market and Executive's holdings therein represent
less than 2% of the total number of shares or principal amount of the securities
of such issuer outstanding.

Page 3 of 7
<PAGE>
discretion of such court, remain in full force and effect and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties hereto, modified, amended and limited to the extent necessary to
render the same valid and enforceable.

12. CONFIDENTIAL INFORMATION. Executive shall hold in a fiduciary capacity for
the benefit of the Corporation all information, knowledge and data relating to
or concerned with its operations, sales, business and affairs, and he shall not,
at any time for a period of two (2) years after termination of his employment
hereunder, use, disclose or divulge any such information, knowledge or data to
any person, firm or corporation (unless the Corporation no longer treats such
information as confidential) other than to the Corporation or its designees and
employees or except as may otherwise be required in connection with the business
and affairs of the Corporation; PROVIDED, HOWEVER, that Executive may disclose
or divulge such information, knowledge or data that (i) was known to Executive
at the commencement of his employment with the Corporation; (ii) is or becomes
generally available to the public through no wrongful act on Executive's part;
or (iii) becomes available to Executive from a person or entity other than the
Corporation; and PROVIDED, FURTHER, that the provisions of this Section 12 shall
not apply to Executive's know-how to the extent utilized by him in subsequent
employment otherwise than in breach of this Agreement.

13. EQUITABLE RELIEF. The parties hereto acknowledge that Executive's services
are unique and that, in the event of a breach or a threatened breach by
Executive of Section 11 or 12 hereof, the Corporation shall not have an adequate
remedy at law. Accordingly, in the event of any such breach or threatened breach
by Executive, the Corporation shall be entitled to such equitable and injunctive
relief as may be available to restrain Executive and any business, firm,
partnership, individual, corporation or entity participating in such breach or
threatened breach from the violation of the provisions hereof. Nothing herein
shall be construed as prohibiting the Corporation from pursuing any other
remedies available at law or in equity for such breach or threatened breach,
including the recovery of damages and the immediate termination of the
employment of Executive hereunder.

14. TERMINATION FOR CAUSE. The Corporation may at any time upon written notice
to Executive terminate Executive's employment for Cause. For purposes of this
Agreement, the following shall constitute Cause: (i) the willful and repeated
failure of Executive to perform any material duties hereunder or gross
negligence of Executive in the performance of such duties, and if such failure
or gross negligence is susceptible of cure by Executive, the failure to effect
such cure within 20 days after written notice of such failure or gross
negligence is given to Executive; (ii) excessive use of alcohol or illegal drugs
interfering with the performance of Executive's duties hereunder; (iii) theft,
embezzlement, fraud, misappropriation of funds, other acts of dishonesty or the
violation of any law or ethical rule relating to Executive's employment by the
Corporation; (iv) the conviction of a felony or other crime involving moral
turpitude by Executive; or (v) the breach by Executive of any other material
provision of this Agreement, and if such breach is susceptible of cure by
Executive, the failure to effect such cure within 30 days after written notice
of such breach is given to Executive. For purposes of this Agreement, an action
shall be considered "willful" if it is done intentionally, purposely or
knowingly, distinguished from an act done carelessly, thoughtlessly or
inadvertently. In any such event, Executive shall be entitled to receive his
Base Salary to and including the date of termination.

Page 4 of 7
<PAGE>
If the Executive willfully breaches or habitually neglects the duties
which he is required to perform under the terms of this agreement, the Board of
Directors may at it option terminate this agreement by giving written notice of
termination to the Executive without prejudice to any other remedy to which
Corporation may be entitled either at law, in equity, or under this agreement.

15. TERMINATION FOR EMPLOYER BREACH. Executive may upon written notice to the
Corporation terminate this Agreement (a termination for "Employer Breach") in
the event of the breach by the Corporation of any material provision of this
Agreement, including, without limitation, a breach the Corporation of Section 1
or 4 hereof, and if such breach is susceptible of cure, the failure to effect
such cure within 30 days after written notice of such breach is given to the
Corporation. The termination of this Agreement by Executive by reason of
Employer Breach shall not constitute a waiver by Executive of any of his rights
to compensation of any kind hereunder.

16. CHANGE OF CONTROL
(a) If prior to termination of this Agreement, there should be a "Change
of Control," as defined in Section 16(b) below, and thereafter (i) Executive's
services should be terminated for any reason other than Executive's voluntary
withdrawal or Cause, or (ii) Executive is placed in any position of lesser
stature than that of Chief Financial Officer and Vice-President of the
Corporation; is assigned duties inconsistent with Chief Financial Officer and
Vice-President or duties which, if performed, would result in a significant
change in the nature or scope of powers, authority, functions or duties inherent
in such positions on the date hereof; is assigned performance requirements or
working conditions which are at variance with the performance requirements and
working conditions in effect immediately prior to the Change of Control; or is
accorded treatment on a general basis that is in derogation of his status as a
senior executive officer; (iii) any breach of Sections 4 through 9, inclusive,
of this Agreement; or (iv) any requirement of the Corporation that the location
at which Executive performs his principal duties for the Corporation be outside
a radius of 30 miles from the location at which Executive performed such duties
immediately prior to the Change of Control, then the Executive may terminate his
employment and this Agreement and upon such termination, the Corporation will
pay to Executive, the remaining term of his contract.

(b) For the purposes of this Agreement, (a) a Change of Control means (1)
the direct or indirect sale, lease, exchange or other transfer of all or
substantially all (50% or more) of the assets of the Corporation to any person
or entity or group of persons or entities acting in concert as a partnership or
other group (a "Group of Persons"), (2) the merger, consolidation or other
business combination of the Corporation with or into another corporation with
the effect that the shareholders of the Corporation immediately following the
merger, consolidation or other business combination, hold 50% or less of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger, consolidation or other business combination
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors of such surviving entity, (3) the
replacement of a majority of the Board of Directors in any given year as
compared to the directors who constituted the Board of Directors at the
beginning of such year, and such replacement shall not have been approved by the
Board of Directors, as constituted at the beginning of such year, or (4) a
person or Group of Persons shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become
the beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended,) of securities of the Corporation representing
50% or more of the combined voting power

Page 5 of 7
<PAGE>
of the then outstanding securities of the Corporation ordinarily (and apart from
rights accruing under special circumstances) having the right to vote in the
election of directors.

17. CUTBACK OF PARACHUTE PAYMENT. Notwithstanding anything to the contrary
herein, if it shall be determined that in the event of a change of control any
payment or distribution by the Corporation to or for the benefit of Executive (a
"Parachute Payment") would be subject to the excise tax (the "Excise Tax")
imposed by Section 4999 of the Code, then the Parachute Payment shall be reduced
to the largest amount as will result in such payments being deductible to the
Corporation and not subject to the Excise Tax.

18. INSURANCE POLICIES. The Corporation shall have the right from time to time
to purchase, increase, modify or terminate insurance policies on the life of
Executive for the benefit of the Corporation, in such amounts as the Corporation
shall determine in its sole discretion. In connection therewith, Executive
shall, at such time or times and at such place or places as the Corporation may
reasonably direct, submit himself to such physical examinations and execute and
deliver such documents as the Corporation may deem necessary or desirable.

19. SURVIVAL OF PROVISIONS. Neither the termination of this Agreement, nor of
Executive's employment hereunder, shall terminate or affect in any manner any
provision of this Agreement that is intended by its terms to survive such
termination.

20. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement
of the parties hereto, and the Prior Agreement between the Corporation and
Executive is hereby superseded and terminated effective immediately and shall be
without further force or effect. No amendment or modification shall be valid or
binding unless made in writing and signed by the party against whom enforcement
thereof is sought.

21. NOTICES. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or by
responsible overnight delivery service or sent by certified mail, return receipt
requested, postage and fees prepaid as follows:

If to the Corporation, at its address:

Evans Systems, Inc.
720 Avenue F North
Bay City, Texas 77414

If to the Executive, at his address:

Richard A. Geoggel
15719 Mesa Gardens
Houston, Texas 77095

Page 6 of 7
<PAGE>
Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under this Section 23. The date of the giving of any notice hand delivered
or delivered by responsible overnight carrier shall be the date of its delivery
and of any notice sent by mail shall be the date five days after the date of the
posting of the mail.

22. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement, nor the right to
receive any payments hereunder, may be assigned by Executive. This Agreement
shall be binding upon Executive, his heirs, executors and administrators and
upon the Corporation, its successors and assigns.

23. WAIVERS. No course of dealing nor any delay on the part of the Corporation
in exercising any rights hereunder shall operate as a waiver of any such rights.
No waiver of any default or breach of this Agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.

24. GOVERNING LAW. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the State of Texas, without regard to the effects
of the principles of conflicts of laws thereof. Jurisdiction of disputes with
regard to this Agreement or any aspect of the employment of Executive by the
Company shall be exclusively in the courts of the State of Texas and venue
relating to any such litigation shall be set in the court of proper jurisdiction
in Matagorda County, Texas.

25. INVALIDITY. If any clause, paragraph, section or part of this Agreement
shall be held or declared to be void, invalid or illegal, for any reason, by any
court of competent jurisdiction, such provision shall be ineffective but shall
not in any way invalidate or affect any other clause, paragraph, section or part
of this Agreement.

26. FURTHER ASSURANCES. Each of the parties shall execute such documents and
take such other actions as may be reasonably requested by the other party to
carry out the provisions and purposes of this Agreement in accordance with its
terms.

IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the day and year first above written.

EVANS SYSTEMS, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: Chairman and Chief
Executive Officer

/S/ RICHARD A., GOEGGEL
RICHARD A. GOEGGEL

Page 7 of 7

EXHIBIT 10.20

EMPLOYMENT AGREEMENT

AGREEMENT made as of this 22nd day of June, 1998, by and between EVANS SYSTEMS,
INC., a Texas corporation with its principal office at 720 Avenue F North, P.O.
Box 2480, Bay City, Texas 77414 (the "Corporation"), and RICHARD B. DIX,
residing at 3011 Hickory Park Circle, Sugarland, Texas 77479 ("Executive").

W I T N E S S E T H :

WHEREAS, the Corporation desires to appoint the Executive as the
Executive Vice President, as of April 16, 1998;

WHEREAS, Executive and the Corporation desire to enter into a new
employment agreement June 22, 1998;

WHEREAS, the Corporation desires to employ Executive, and Executive is
willing to undertake such employment, upon the terms and subject to the
conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Corporation hereby employs Executive as its
Executive Vice President, to perform the duties and responsibilities incident to
such offices, subject at all times to the control and direction of the Board of
Directors of the Corporation (the "Board of Directors").

2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. Executive hereby accepts such
employment and agrees that throughout the Term (as hereinafter defined), he will
devote his full time, attention, knowledge and skills, faithfully, diligently
and to the best of his ability, in furtherance of the business of the
Corporation, and will perform the duties assigned to him pursuant to Section 1
hereof, subject, at all times, to the direction and control of the Board of
Directors. As the Executive Vice President, Executive shall perform such
specific duties and shall exercise such specific authority as may be assigned to
Executive from time to time by the Board of Directors. Executive shall at all
times be subject to, observe and carry out such rules, regulations, policies,
directions and restrictions as the Corporation shall from time to time
establish. During the Term, Executive shall not, without the written approval of
the Board of Directors first had and obtained in each instance, directly or
indirectly, accept employment or compensation from, or perform services of any
nature for, any business enterprise other than the Corporation and its
subsidiaries. During the Term, Executive shall not be entitled to additional
compensation for rendering employment services to subsidiaries of the Company or
for serving in any office of the Corporation or any of its subsidiaries to which
he is elected or appointed.

Page 1 of 7
<PAGE>
3. TERM. Except as otherwise provided herein, Executive's employment hereunder
shall be for a term commencing as of April 16, 1998 and shall continue through
April 15, 2000 (the "Initial Term"), which may be renewed for such one (1) year
periods as the Corporation and Executive may mutually agree during the ninety
(90) day period immediately prior to the expiration of the Initial Term or any
renewal thereof (the Initial Term and any such renewal thereof are hereinafter
collectively referred to as the "Term").

4. COMPENSATION. Commencing as of April 16, 1998, the Corporation shall pay to
Executive and the Employee shall accept as his entire compensation for his
services hereunder the following, which shall be subject to withholding and
other employment taxes imposed by applicable law:

(a) The Corporation shall pay Executive a base salary ("Base Salary") at
the rate of one hundred eight thousand ($108,000) dollars per year for the first
year of his employment. For each year thereafter while this Agreement remains in
effect, the Base Salary will be increased by such higher amount as shall be
determined by the Board of Directors. The Base Salary shall be payable in equal
monthly installments.

5. STOCK OPTIONS. The Corporation is granting to Executive on the date hereof,
the following options: (i) a five-year option (the "Firm Option") to purchase
35,000 shares of Common Stock of the Corporation, $.01 par value (the "Common
Stock") at an exercise price of $1.25 per share, which shall be exercisable as
to 35,000 Common Shares which will vest one year from July 1, 1998, contingent
upon Evans Systems, Inc.'s obtaining a $0.10 per share profit in each of the
four quarters prior to July 1, 1999. Value means the closing price of the shares
of Common Stock on the U.S. national securities exchange on which the shares of
Common Stock are listed (if the shares are so listed) or on the NASDAQ National
Market or Small Cap Market (if the Common Shares are regularly quoted on the
NASDAQ National Market or Small Cap Market), or, if not so listed or regularly
quoted or if there is no such closing price, the mean between the closing bid
and asked prices of the shares of Common Stock in the over-the-counter market or
on such exchange or on NASDAQ, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Corporation. On the date hereof, the shares of Common Stock are listed
and traded on the NASDAQ National Market. Notwithstanding the foregoing, the
exercise of the Firm Option is contingent upon the Corporation filing an S-8
Registration with the Securities and Exchange Commission and approval of the
registration in accordance with the NASDAQ marketplace rules.

Page 2 of 7
<PAGE>
service, stock option, bonus or other employee benefit plan generally available
to the executive officers of the Corporation that may be in effect from time to
time during the Term, as well as any discretionary bonus pool of the
Corporation. The Corporation shall be under no obligation to institute or
continue the existence of any such employee benefit plan.

Executive acknowledges that the provisions of this Section 11 are
reasonable and necessary for the protection of the Corporation, and that each
provision, and the period or periods of time,

Page 3 of 7
<PAGE>
geographic areas and types and scope of restrictions on the activities specified
herein are, and are intended to be, divisible. If any provision of this Section
11, including any sentence, clause or part hereof, shall be deemed contrary to
law or invalid or unenforceable in any respect by a court of competent
jurisdiction, the remaining provisions shall not be affected, but shall, subject
to the discretion of such court, remain in full force and effect and any invalid
and unenforceable provisions shall be deemed, without further action on the part
of the parties hereto, modified, amended and limited to the extent necessary to
render the same valid and enforceable.

Page 4 of 7
<PAGE>
Executive. For purposes of this Agreement, an action shall be considered
"willful" if it is done intentionally, purposely or knowingly, distinguished
from an act done carelessly, thoughtlessly or inadvertently. In any such event,
Executive shall be entitled to receive his Base Salary to and including the date
of termination.

If the Executive willfully breaches or habitually neglects the duties
which he is required to perform under the terms of this agreement, the Board of
Directors may at it option terminate this agreement by giving written notice of
termination to the Executive without prejudice to any other remedy to which
Corporation may be entitled either at law, in equity, or under this agreement.

16. CHANGE OF CONTROL.
(a) If prior to termination of this Agreement, there should be a "Change
of Control," as defined in Section 16(b) below, and thereafter (i) Executive's
services should be terminated for any reason other than Executive's voluntary
withdrawal or Cause, or (ii) Executive is placed in any position of lesser
stature than that of Executive Vice President of the Corporation; is assigned
duties inconsistent with Executive Vice-President or duties which, if performed,
would result in a significant change in the nature or scope of powers,
authority, functions or duties inherent in such positions on the date hereof; is
assigned performance requirements or working conditions which are at variance
with the performance requirements and working conditions in effect immediately
prior to the Change of Control; or is accorded treatment on a general basis that
is in derogation of his status as a senior executive officer; (iii) any breach
of Sections 4 through 9, inclusive, of this Agreement; or (iv) any requirement
of the Corporation that the location at which Executive performs his principal
duties for the Corporation be outside a radius of 30 miles from the location at
which Executive performed such duties immediately prior to the Change of
Control, then the Executive may terminate his employment and this Agreement and
upon such termination, the Corporation will pay to Executive, the remaining term
of his contract.

Page 5 of 7
<PAGE>
any given year as compared to the directors who constituted the Board of
Directors at the beginning of such year, and such replacement shall not have
been approved by the Board of Directors, as constituted at the beginning of such
year, or (4) a person or Group of Persons shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended,) of securities of the
Corporation representing 50% or more of the combined voting power of the then
outstanding securities of the Corporation ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors.

If to the Corporation, at its address:

Evans Systems, Inc.
720 Avenue F North
Bay City, TX 77414

Page 6 of 7
<PAGE>
If to the Executive, at his address:

Richard B. Dix
3011 Hickory Park Circle
Sugarland, Texas 77479

Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under this Section 23. The date of the giving of any notice hand delivered
or delivered by responsible overnight carrier shall be the date of its delivery
and of any notice sent by mail shall be the date five days after the date of the
posting of the mail.

IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the day and year first above written.

EVANS SYSTEMS, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: Chairman and Chief
Executive Officer

/S/ RICHARD B. DIX
RICHARD B. DIX

Page 7 of 7

EXHIBIT 10.21

EMPLOYMENT AGREEMENT

AGREEMENT made as of this 6th day of April, 1998, by and between EVANS
SYSTEMS, INC., a Texas corporation with its principal office at 720 North Avenue
F, P.O. Box 2480, Bay City, Texas 77404 (the "Corporation"), and J.L. EVANS,
SR., residing at 822 Fifth Street, Bay City, Texas 77414 ("Executive").

W I T N E S S E T H :

WHEREAS, Executive has heretofore been employed pursuant to an employment
agreement dated as of April 1, 1993 between the Corporation and Executive (the
"Prior Agreement");

WHEREAS, Executive and the Corporation desire to enter into a new
employment agreement that supersedes and replaces the Prior Agreement;

WHEREAS, the Corporation desires to continue to employ Executive, and
Executive is willing to undertake such employment, upon the terms and subject to
the conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Corporation hereby employs Executive as its
President and Chief Executive Officer, to perform the duties and
responsibilities incident to such offices, subject at all times to the control
and direction of the Board of Directors of the Corporation (the "Board of
Directors").

2. ACCEPTANCE OF EMPLOYMENT; TIME AND ATTENTION. Executive hereby accepts such
employment and agrees that throughout the Term (as hereinafter defined), he will
devote his full time, attention, knowledge and skills, faithfully, diligently
and to the best of his ability, in furtherance of the business of the
Corporation, and will perform the duties assigned to him pursuant to Section 1
hereof, subject, at all times, to the direction and control of the Board of
Directors. As the President and Chief Executive Officer, Executive shall perform
such specific duties and shall exercise such specific authority as may be
assigned to Executive from time to time by the Board of Directors. Executive
shall at all times be subject to, observe and carry out such rules, regulations,
policies, directions and restrictions as the Corporation shall from time to time
establish. During the Term, Executive shall not, without the written approval of
the Board of Directors first had and obtained in each instance, directly or
indirectly, accept employment or compensation from, or perform services of any
nature for, any business enterprise other than the Corporation and its
subsidiaries. During the Term, Executive shall not be entitled to additional
compensation for rendering employment services to subsidiaries of the Company or
for serving in any office of the Corporation or any of its subsidiaries to which
he is elected or appointed.

PAGE 1 OF 9
<PAGE>
3. TERM. Except as otherwise provided herein, Executive's employment hereunder
shall be for a term commencing as of April 6, 1998 and shall continue through
September 30, 2001 (the "Initial Term"), which may be renewed for such one (1)
year periods as the Corporation and Executive may mutually agree during the
ninety (90) day period immediately prior to the expiration of the Initial Term
or any renewal thereof (the Initial Term and any such renewal thereof are
hereinafter collectively referred to as the "Term").

4. COMPENSATION. Commencing as of April 6, 1998, the Corporation shall pay to
Executive and the Employee shall accept as his entire compensation for his
services hereunder the following, which shall be subject to withholding and
other employment taxes imposed by applicable law:

(a) The Corporation shall pay Executive a base salary ("Base Salary") at
the rate of (i) one hundred twenty thousand ($120,000) dollars per year for the
first year of his employment, (ii) one hundred forty thousand ($140,000) dollars
per year for the second year of his employment, and (iii) one hundred fifty
thousand ($150,000) dollars per year for the third year of his employment. For
each year thereafter while this Agreement remains in effect, the Base Salary
will be increased by such higher amount as shall be determined by the Board of
Directors. The Base Salary shall be payable in equal monthly installments.

(b) In addition to his Base Salary hereunder, the Executive shall be
entitled to a profit incentive bonus (the "Bonus"). For each fiscal year during
Executive's employment hereunder, commencing with the fiscal year October 1,
1997 to September 30, 1998, the Bonus shall equal seven and one-half (7-1/2)
percent of the net consolidated after-tax profits of the Corporation. The net
consolidated after-tax profits of the Corporation shall mean the gross sales and
other income from operations of the Corporation and its subsidiaries (whether
now existing or hereinafter created), less costs of goods sold and operating
expense, depreciation expenses, bad debt write off and payment of corporate
income taxes. The net consolidated after-tax profits as used herein shall be
determined by the independent public accountants of the Corporation, in
accordance with generally accepted accounting principles and their determination
shall be binding and conclusive on the parties hereto. The Bonus is payable in
cash or, at the sole discretion of the Executive, in restricted stock of the
Corporation within ninety (90) days from the close and publication of the
audited fiscal year results.

5. STOCK OPTIONS. The Corporation is granting to Executive on the date hereof,
the following options: (i) a five-year option (the "Firm Option") to purchase
240,000 shares of Common Stock of the Corporation, $.01 par value (the "Common
Stock") at an exercise price of $3.50 per share, which shall be exercisable as
to 80,000 Common Shares from and after the first anniversary of the date of
grant, as to an additional 80,000 Common Shares from and after the second
anniversary of the date of grant, and as to the remaining 80,000 Common Shares
from and after the third anniversary of the date of grant; and (ii) a five-year
option (the "Trading Price Option") to purchase 90,000 shares of Common Stock at
an exercise price of $1.445 per share, which shall be exercisable subsequent to
the time that the Fair Market Value (as such term is hereinafter defined) of the
shares of Common Stock exceeds $6.50 for 10 consecutive trading days during the
Term. Fair Market Value means the closing price of the shares of Common Stock on
the U.S. national securities exchange on which the shares of Common Stock are
listed (if the shares are so listed) or on the

PAGE 2 OF 9
<PAGE>
NASDAQ National Market or Small Cap Market (if the Common Shares are regularly
quoted on the NASDAQ National Market or Small Cap Market), or, if not so listed
or regularly quoted or if there is no such closing price, the mean between the
closing bid and asked prices of the shares of Common Stock in the
over-the-counter market or on such exchange or on NASDAQ, or, if such bid and
asked prices shall not be available, as reported by any nationally recognized
quotation service selected by the Corporation. On the date hereof, the shares of
Common Stock are listed and traded on the NASDAQ National Market.
Notwithstanding the foregoing, the exercise of the Firm Option is contingent
upon the Corporation obtaining stockholder approval for the grant of such
option, in accordance with the NASDAQ marketplace rules.

In the event of a Change of Control (as such term is hereinafter defined),
(i) the Firm Option shall become exercisable in full (without regard to the
terms under which they were originally granted; provided that stockholder
approval of such option has been previously obtained) and (ii) the Trading Price
Option shall become exercisable if the per share valuation accorded the shares
of Common Stock in the transaction resulting in such Change of Control is equal
to or greater than $6.50. In the case of a Change of Control in which the shares
of Common Stock are not valued, E.G., the replacement of a majority of the Board
of Directors, the Trading Price Option shall become exercisable in full.

(a) For the purposes of this Agreement, (a) a Change of Control means (1)
the direct or indirect sale, lease, exchange or other transfer of all or
substantially all (50% or more) of the assets of the Corporation to any person
or entity or group of persons or entities acting in concert as a partnership or
other group (a "Group of Persons"), (2) the merger, consolidation or other
business combination of the Corporation with or into another corporation with
the effect that the shareholders of the Corporation immediately following the
merger, consolidation or other business combination, hold 50% or less of the
combined voting power of the then outstanding securities of the surviving
corporation of such merger, consolidation or other business combination
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors of such surviving entity, (3) the
replacement of a majority of the Board of Directors in any given year as
compared to the directors who constituted the Board of Directors at the
beginning of such year, and such replacement shall not have been approved by the
Board of Directors, as constituted at the beginning of such year, or (4) a
person or Group of Persons shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become
the beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended,) of securities of the Corporation representing
50% or more of the combined voting power of the then outstanding securities of
the Corporation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.

PAGE 3 OF 9
<PAGE>
(a) The Corporation shall obtain and maintain in full force and effect
during the Term, at the Corporation's sole cost and expense, a policy or
policies of term insurance on the life of Executive in the aggregate face amount
of two million ($2,000,000) dollars. Executive shall submit to any physical
examinations necessary to obtain such policies and shall otherwise cooperate
with the Corporation in obtaining such insurance coverage. Any insurance policy
maintained by the Corporation on the life of Executive pursuant to this Section
6(b) shall be made payable to such beneficiary or beneficiaries as Executive may
designate by written notice to the Corporation and the Corporation agrees,
promptly upon receipt of such notice, to take all such action as may be
necessary so as to notify the appropriate insurance company of any change of
beneficiary.

(b) The Corporation shall provide Executive with a full-size automobile
for his business and personal use. The Corporation shall keep such automobile
adequately insured and will reimburse Executive for all gasoline and repair
expenditures and other similar charges in accordance with Section 7 of this
Agreement. In lieu of the automobile provided by the Company, Executive may
elect to receive a non-accountable expense allowance of five hundred ($500)
dollars per month to reimburse him for the cost and expense of operating and
maintaining an automobile, which costs and expenses may include without
limitation, vehicle loan and lease payments, insurance premiums, gasoline and
repair expenditures and other similar charges. Executive acknowledges that the
value of his use of such automobile will be reported on his W-2 form in
accordance with applicable rules and regulations of the Internal Revenue Service
and agrees to take all reasonable steps necessary to assist the Corporation in
complying with any such rules and regulations.

9. VACATION. Executive shall be entitled to four (4) weeks' paid vacation in
respect of each twelve (12) month period during the Term, such vacation to be
taken at times mutually agreeable to Executive and the Board of Directors.
Unused vacation shall be carried over to the subsequent twelve (12) month period
and may not be carried over beyond the next twelve (12) month period.

PAGE 4 OF 9
<PAGE>
business entity that is engaged in the business of operating convenience stores,
marketing and distributing petroleum products, or providing environmental
remediation services or any other business which the Corporation is then engaged
during such period, (ii) for himself or on behalf of any other person,
partnership, corporation or entity, call on any customer of the Corporation for
the purpose of soliciting, diverting or taking away any customer from the
Corporation, or (iii) induce, influence, or seek to induce or influence, any
person engaged as an employee, representative, agent, independent contractor or
otherwise by the Corporation, to terminate his or her relationship with the
Corporation. Nothing herein contained shall be deemed to prohibit Executive from
investing his funds in securities of an issuer if the securities of such issuer
are listed for trading on a national securities exchange or are traded in the
over-the-counter market and Executive's holdings therein represent less than 2%
of the total number of shares or principal amount of the securities of such
issuer outstanding.

Executive acknowledges that the provisions of this Section 11 are
reasonable and necessary for the protection of the Corporation, and that each
provision, and the period or periods of time, geographic areas and types and
scope of restrictions on the activities specified herein are, and are intended
to be, divisible. If any provision of this Section 11, including any sentence,
clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions shall not be affected, but shall, subject to the discretion of such
court, remain in full force and effect and any invalid and unenforceable
provisions shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited to the extent necessary to render the same
valid and enforceable.

PAGE 5 OF 9
<PAGE>
14. DEATH. In the event of termination of Executive's employment hereunder by
reason of his death, the Corporation shall pay a benefit (the "Benefit Payment")
to such person or persons as Executive shall, at his option, from time to time
designate by written instrument delivered to the Corporation, each subsequent
designation to revoke all prior designations, or if no such designation is made,
to Executive's estate (the "Payment Beneficiary"). The Benefit Payment shall be
in an amount equal to one and one-half times Executive's then current Base
Salary, and shall be payable to the Payment Beneficiary in equal quarterly
installments over a period of one and one-half years, provided that if the
Corporation then maintains a life insurance policy on the life of Executive
under which it is the beneficiary, the amount of the death benefit payable
thereunder, to a maximum amount equal to the Benefit Payment, less installments
of the Benefit Payment theretofore paid, shall be paid to the Payment
Beneficiary on the Benefit Payment installment payment date next succeeding the
date on which the Corporation receives such death benefit proceeds and the
remainder of the Benefit Payment, if any, shall be paid in equal quarterly
installments as provided above.

15. DISABILITY. In the event that during the term of his employment by the
Corporation Executive shall become Disabled (as such term is hereinafter
defined) he shall continue to receive the full amount of the Base Salary to
which he was theretofore entitled for a period of eighteen (18) months after he
shall be deemed to have become Disabled. The Corporation may terminate this
Agreement and Executive's employment hereunder at any time after Executive is
Disabled, upon at least 10 days' prior written notice; provided, however, that
such termination shall not affect the Corporation's obligations to make payments
to Executive as provided in this Section 15. For the purposes of this Agreement,
Executive shall be deemed to have become Disabled when (x) by reason of physical
or mental incapacity, Executive is not able to perform a substantial portion of
his duties hereunder for a period of 180 consecutive days or for 180 days in any
one (1) year period or (y) when Executive's physician or a physician designated
by the Corporation shall have determined that Executive shall not be able, by
reason of physical or mental incapacity, to perform a substantial portion of his
duties hereunder. In the event that Executive shall dispute any determination of
his Disability pursuant to clauses (x) or (y) above, Executive shall not be
deemed to be Disabled unless and until three physicians qualified to practice
medicine in the United States of America, one to be selected by the Corporation,
one to be selected by Executive and the third to be selected by the designated
physicians, have determined (by a majority vote) that Executive is Disabled. If
Executive shall receive benefits under any disability policy maintained by the
Corporation, the Corporation shall be entitled to deduct the amount equal to the
benefits so received from base salary that they otherwise would have been
required to pay to Executive as provided above.

16. TERMINATION FOR CAUSE. The Corporation may at any time upon written notice
to Executive terminate Executive's employment for Cause. For purposes of this
Agreement, the following shall constitute Cause: (i) the willful and repeated
failure of Executive to perform any material duties hereunder or gross
negligence of Executive in the performance of such duties, and if such failure
or gross negligence is susceptible of cure by Executive, the failure to effect
such cure within 20 days after written notice of such failure or gross
negligence is given to Executive; (ii) excessive use of alcohol or illegal drugs
interfering with the performance of Executive's duties hereunder; (iii) theft,
embezzlement, fraud, misappropriation of funds, other acts of dishonesty or the
violation of any law or ethical rule relating to Executive's employment by the
Corporation; (iv) the conviction of a felony

PAGE 6 OF 9
<PAGE>
or other crime involving moral turpitude by Executive; or (v) the breach by
Executive of any other material provision of this Agreement, and if such breach
is susceptible of cure by Executive, the failure to effect such cure within 30
days after written notice of such breach is given to Executive. For purposes of
this Agreement, an action shall be considered "willful" if it is done
intentionally, purposely or knowingly, distinguished from an act done
carelessly, thoughtlessly or inadvertently. In any such event, Executive shall
be entitled to receive his Base Salary to and including the date of termination.

17. TERMINATION FOR EMPLOYER BREACH. Executive may upon written notice to the
Corporation terminate this Agreement (a termination for "Employer Breach") in
the event of the breach by the Corporation of any material provision of this
Agreement, including, without limitation, a breach the Corporation of Section 1
or 4 hereof, and if such breach is susceptible of cure, the failure to effect
such cure within 30 days after written notice of such breach is given to the
Corporation. The termination of this Agreement by Executive by reason of
Employer Breach shall not constitute a waiver by Executive of any of his rights
to compensation of any kind hereunder.

18. CUTBACK OF PARACHUTE PAYMENT. Notwithstanding anything to the contrary
herein, if it shall be determined that in the event of a change of control any
payment or distribution by the Corporation to or for the benefit of Executive (a
"Parachute Payment") would be subject to the excise tax (the "Excise Tax")
imposed by Section 4999 of the Code, then the Parachute Payment shall be reduced
to the largest amount as will result in such payments being deductible to the
Corporation and not subject to the Excise Tax.

19. INSURANCE POLICIES. The Corporation shall have the right from time to time
to purchase, increase, modify or terminate insurance policies on the life of
Executive for the benefit of the Corporation, in such amounts as the Corporation
shall determine in its sole discretion. In connection therewith, Executive
shall, at such time or times and at such place or places as the Corporation may
reasonably direct, submit himself to such physical examinations and execute and
deliver such documents as the Corporation may deem necessary or desirable.

20. SURVIVAL OF PROVISIONS. Neither the termination of this Agreement, nor of
Executive's employment hereunder, shall terminate or affect in any manner any
provision of this Agreement that is intended by its terms to survive such
termination.

21. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement
of the parties hereto, and the Prior Agreement between the Corporation and
Executive is hereby superseded and terminated effective immediately and shall be
without further force or effect. No amendment or modification shall be valid or
binding unless made in writing and signed by the party against whom enforcement
thereof is sought.

22. NOTICES. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or by
responsible overnight delivery service or sent by certified mail, return receipt
requested, postage and fees prepaid as follows:

PAGE 7 OF 9
<PAGE>
If to the Corporation, at its address set forth above, with
copies to:

Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman, Esq.

If to Executive, at his address set forth above.

23. NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement, nor the right to
receive any payments hereunder, may be assigned by Executive. This Agreement
shall be binding upon Executive, his heirs, executors and administrators and
upon the Corporation, its successors and assigns.

24. WAIVERS. No course of dealing nor any delay on the part of the Corporation
in exercising any rights hereunder shall operate as a waiver of any such rights.
No waiver of any default or breach of this Agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.

25. GOVERNING LAW. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the State of Texas, without regard to the effects
of the principles of conflicts of laws thereof. Jurisdiction of disputes with
regard to this Agreement or any aspect of the employment of Executive by the
Company shall be exclusively in the courts of the State of Texas and venue
relating to any such litigation shall be set in the court of proper jurisdiction
in Matagorda County, Texas.

26. INVALIDITY. If any clause, paragraph, section or part of this Agreement
shall be held or declared to be void, invalid or illegal, for any reason, by any
court of competent jurisdiction, such provision shall be ineffective but shall
not in any way invalidate or affect any other clause, paragraph, section or part
of this Agreement.

27. FURTHER ASSURANCES. Each of the parties shall execute such documents and
take such other actions as may be reasonably requested by the other party to
carry out the provisions and purposes of this Agreement in accordance with its
terms.

IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the day and year first above written.

PAGE 8 OF 9
<PAGE>
EVANS SYSTEMS, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: Chairman and Chief
Executive Officer

/S/ J.L. EVANS, SR.
J.L. EVANS, SR.

PAGE 9 OF 9

EXHIBIT 10.22

EXECUTION COPY

STOCK PURCHASE AGREEMENT

SYNAPTIX SYSTEMS CORPORATION
EVANS SYSTEMS, INC.
WAY ENERGY, INC.
October 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I.

PURCHASE AND SALE OF SHARES................................1
Section 1.1. Purchase and Sale of Shares............................................1
Section 1.2. Purchase Price.........................................................1
Section 1.3. Make Whole Adjustment..................................................2

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF SELLER AND ESI......................4
Section 2.1. Corporate Existence....................................................4
Section 2.2. Authorization; Validity................................................5
Section 2.3. No Breach of Statute or Contract.......................................5
Section 2.4. Subsidiaries...........................................................6
Section 2.5. Capitalization and Shareholdings.......................................6
Section 2.6. Financial Statements...................................................6
Section 2.7. Absence of Undisclosed Liabilities.....................................6
Section 2.8. Absence of Certain Changes or Events...................................6
Section 2.9. Proprietary Rights.....................................................8
Section 2.10. Litigation.............................................................9
Section 2.11. Contracts and Commitments.............................................10
Section 2.12. Compliance with Laws; Environmental Matters...........................10
Section 2.13. Taxes.................................................................12
Section 2.14. Employees.............................................................12
Section 2.15. Employee Benefit Plans................................................13
Section 2.16. Title to Property.....................................................13
Section 2.17. Investment............................................................14
Section 2.18. Related Party Agreements..............................................14
Section 2.19. Relations With Governments, etc.......................................14
Section 2.20. Inventories...........................................................14
Section 2.21. Insurance.............................................................15
Section 2.22. Brokers...............................................................15
Section 2.23. Closing Date Effect...................................................15

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF BUYER.........................15
Section 3.1. Corporate Existence...................................................15
Section 3.2. Authorization; Validity...............................................16
Section 3.3. No Breach of Statute or Contract......................................16
Section 3.4. Capitalization; Buyer Common Stock....................................17
Section 3.5. SEC Reports and Financial Statements..................................17
Section 3.6. Absence of Undisclosed Liabilities....................................18
Section 3.7. Absence of Certain Changes or Events..................................18
Section 3.8. Litigation............................................................19
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Section 3.9. Compliance with Laws; Environmental Matters...........................19
Section 3.10. Taxes.................................................................20
Section 3.11. Investment............................................................21
Section 3.12. Related Party Agreements..............................................21
Section 3.13. Employees.............................................................21
Section 3.14. Relations With Governments, etc.......................................21
Section 3.15. Brokers...............................................................22
Section 3.16. Closing Date Effect...................................................22

ARTICLE IV.

COVENANTS........................................22
Section 4.1. Access to Information.................................................22
Section 4.2. Agreement to Cooperate................................................23
Section 4.3. Conduct of Business Prior to the Closing Date.........................23
Section 4.4. Conduct of Buyer's Business Prior to the Closing Date.................24
Section 4.5. Confidentiality.......................................................25
Section 4.6. Announcements.........................................................25
Section 4.7. Satisfaction of Conditions............................................26
Section 4.8. Notice of Developments................................................26
Section 4.9. Reporting Status......................................................26
Section 4.10. AMEX Listing..........................................................26
Section 4.11. Board Representative..................................................26
Section 4.12. Company Funding.......................................................26

ARTICLE V.

CLOSING.........................................27
Section 5.1. Closing...............................................................27
Section 5.2. Deliveries by Seller and ESI..........................................27
Section 5.3. Deliveries by Buyer...................................................28

ARTICLE VI.

CONDITIONS PRECEDENT TO OBLIGATIONS...........................28
Section 6.1. Conditions to Obligations of Buyer....................................28
Section 6.2. Conditions to Obligations of Seller and ESI...........................29

ARTICLE VII.
INDEMNIFICATION..............................................31
Section 7.1. Survival of Representations and Warranties and Agreements.............31
Section 7.2. Indemnification.......................................................31
Section 7.3. Limitations on Indemnification........................................32
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Section 7.4. Procedure for Indemnification with Respect to Third-Party Claims......32
Section 7.5. Procedure For Indemnification with Respect to Non-Third-Party Claims..33

ARTICLE VIII.

TERMINATION...............................................34
Section 8.1. Termination by Buyer..................................................34
Section 8.2. Termination by Seller or ESI..........................................34
Section 8.3. Termination by Any Party..............................................34
Section 8.4. Termination by Mutual Consent.........................................35
Section 8.5. Effect of Termination.................................................35

ARTICLE IX.

MISCELLANEOUS PROVISIONS.................................35
Section 9.1. Notices...............................................................35
Section 9.2. Entire Agreement......................................................36
Section 9.3. Binding Effect; Assignment............................................36
Section 9.4. Captions..............................................................36
Section 9.5. Expenses of Transaction...............................................36
Section 9.6. Waiver; Consent.......................................................36
Section 9.7. No Third Party Beneficiaries..........................................37
Section 9.8. Counterparts..........................................................37
Section 9.9. Gender................................................................37
Section 9.10. Governing Law.........................................................37
Section 9.11. Knowledge.............................................................37
Section 9.12. Incorporation of Exhibits and Schedules...............................37
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INDEX TO EXHIBITS AND ANNEXES

EXHIBIT

A.................................................Registration Rights Agreement

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INDEX TO SCHEDULES

SELLER

2.1. List of Jurisdictions in Which the Company is Qualified to Do Business
2.3. Effects under Statute or Contract
2.5. Required Consents
2.6. Company Financial Statements
2.7. Absence of Undisclosed Liabilities
2.8. Absence of Certain Changes or Events
2.9. Intellectual Property Rights
2.10. Litigation
2.11. Contracts and Commitments
2.12. Compliance with Laws; Hazardous Substances
2.13. Taxes
2.14. Employees
2.15. Benefit Plans
2.16. Real Property
2.18. Related party Agreements
2.21. Insurance
2.22. Brokers
4.12. Company Indebtedness

BUYER

3.1. List of Jurisdictions in Which Buyer is Qualified to Do Business
3.4. Agreements, Etc. with Respect to Buyer Common Stock
3.7. Absence of Certain Changes or Events
3.8. Litigation
3.9. Compliance with Laws; Hazardous Substances
3.10. Taxes
3.12. Related Party Agreements
3.13. Employees
3.15. Brokers
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STOCK PURCHASE AGREEMENT

THIS AGREEMENT, dated as of October 30, 1998, is by and among
Synaptix Systems Corporation, a Colorado corporation, d.b.a. Affiliated
Resources Corporation ("Buyer"), Evans Systems, Inc., a Texas corporation
("ESI"), and Way Energy, Inc., a Delaware corporation ("Seller").

W I T N E S S E T H:

WHEREAS, the Seller is a wholly-owned subsidiary of ESI and owns
all of the issued and outstanding shares (the "Shares") of common stock, par
value $10.00 per share (the "Common Stock"), of ChemWay Systems, Inc., a Texas
corporation (the "Company");

WHEREAS, the Company has previously been engaged in the business
(hereinafter referred to as the "Business") of producing, packaging and
marketing automotive after-market chemical products, the operations of which was
suspended in February 1998; and

WHEREAS, the Buyer desires to purchase and the Seller desires to
sell the Shares, upon the terms and subject to the conditions set forth in this
Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, each of Buyer and Seller agrees as follows:

ARTICLE I.

PURCHASE AND SALE OF SHARES

Section 1.1. PURCHASE AND SALE OF SHARES. Upon the terms and
subject to the conditions set forth in this Agreement, on the Closing Date (as
hereinafter defined), Seller shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase from Seller, all right, title and interest in
and to the Shares free and clear of any restrictions or conditions to transfer
or assignment, rights of first refusal, mortgages, liens, pledges, charges,
encumbrances, equities, claims, covenants, conditions, restrictions, options or
agreements for an amount equal to the Purchase Price (as hereinafter defined).
On the Closing Date, Seller shall deliver to Buyer a certificate or certificates
representing the Shares, duly endorsed in blank or accompanied by a stock power
executed in blank.

Section 1.2. PURCHASE PRICE. The aggregate purchase price for the
Shares shall consist of shares of the Common Stock of the Buyer having an
aggregate value of $6,000,000 (the "Purchase Price"). The Purchase Price shall
be payable by delivery on the Closing Date of shares (the "Payment Shares") of
Buyer's Common

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Stock, $.003 par value per share (the "Buyer Common Stock"). All Payment Shares
to be delivered under this Agreement shall be valued at $4.00 (the "Closing Date
Price"). All references in this Agreement to the Payment Shares shall be
references to an aggregate number of shares of Buyer Common Stock with such
aggregate value.

Section 1.3. MAKE WHOLE ADJUSTMENT. (a) In the event that the
Anniversary Date Average Price (as defined below) is less than the Closing Date
Price, Buyer shall issue a number of additional shares of Buyer Common Stock
(the "Make Whole Shares") to ESI. The number of Make Whole Shares to be issued
to ESI shall be equal to (i) the Purchase Price less (x) the number of Payment
Shares delivered to ESI multiplied by (y) the Anniversary Date Average Price
divided by (ii) the Anniversary Date Average Price. The Anniversary Date Market
Price shall mean the greater of (x) $2.40 and (y) the average closing price of a
share of Buyer Common Stock on the Buyer's then principal trading market, during
the 20 consecutive trading day period ending two trading days prior to the one
year anniversary of the Closing Date. The Make Whole Shares, if any, shall be
delivered to ESI ten days after the one year anniversary of the Closing Date.

(b) Buyer's obligation to issue the Make Whole Shares shall be
absolute, non-contingent and irrevocable, independent of all other legal
relationships among the parties to this Agreement and not subject to any right
of set-off or other reduction of any kind, whether for any claim of any kind
whatsoever, liability, damage, loss, expense, cause of action or otherwise.

(c) If Buyer shall at any time during the period from the Closing
Date to the one year anniversary of the Closing Date subdivide the outstanding
Buyer Common Stock into a greater number of shares or consolidate the
outstanding Buyer Common Stock into a smaller number of shares (any such event
being called a "Buyer Stock Reorganization"), then the number of Make Whole
Shares to be issued shall be adjusted to a number determined by multiplying the
number of Make Whole Shares that would have been issued pursuant to the
foregoing formula by a fraction, the numerator of which shall be the number of
shares of Buyer Common Stock outstanding after giving effect to such Buyer Stock
Reorganization and the denominator of which shall be the number of shares of
Buyer Common Stock outstanding immediately before such Buyer Stock
Reorganization.

(d) (A) If (i) Buyer agrees to merge or consolidate with another
entity and Buyer is not the surviving entity upon consummation of the
merger or consolidation (the date of such consummation being the
"Transaction Date"), (ii) the Transaction Date occurs on or before the
last day upon which the Make Whole Shares could be delivered under
Section 1.3(a) hereof and the Make Whole Shares have not been issued and
delivered to ESI and (iii) the value two trading days before

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the Transaction Date of the consideration per share of Buyer Common
Stock to be received by shareholders of Buyer, determined by the Buyer's
board of directors acting in good faith (the "Consideration Value") in
such merger or consolidation is not equal to or greater than the Closing
Date Price, then on the Transaction Date immediately prior to the
consummation of the merger or consolidation, Buyer shall deliver to each
Seller for each share of Buyer Common Stock originally issued at the
closing hereunder and held by such Seller on the Transaction Date
(before the consummation of the merger or consolidation) either (x) an
amount of cash equal to the difference between the Closing Date Price
and the Consideration Value or (y) shares of Buyer Common Stock having a
value equal to the difference between the Closing Date Price and the
Consideration Value, with such value determined based upon the average
closing price of a share of Buyer Common Stock during the 20 trading
days ending two trading days prior to the Transaction Date, the form of
such payment, either cash or stock, to be at the option of Buyer.

(B) If (i) on or before the last date upon which the Make Whole
Shares could be delivered under Section 1.3(a) hereof (provided that no
Make Whole Shares have been issued and delivered to ESI), Buyer
concludes a transaction required to be reported under Section 13(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations promulgated thereunder (the "13(e)
Transaction") and (ii) the average closing price of a share of Buyer
Common Stock on the 20 trading days ending two trading days prior to the
last day upon which shareholders of Buyer could tender shares of Buyer
Common Stock in the 13(e) Transaction (the "13(e) Transaction Date
Average Price") is less than the Closing Date Price, on the date Buyer
distributes the consideration for the shares of Buyer Common Stock
tendered and accepted in the 13(e) Transaction, Buyer shall pay to ESI
an amount of cash per share tendered and accepted equal to the
difference between the Closing Date Price and the 13(e) Transaction Date
Average Price, provided that Buyer shall also pay to ESI the
consideration per share tendered and accepted of Buyer Common Stock paid
in the 13(e) Transaction to tendering shareholders for shares of Buyer
Common Stock accepted by the Buyer.

(c) Upon payment of the amounts provided in Section 1.3(d)(A),
Buyer and its successors and assigns shall have no further obligation to
issue the Make Whole Shares under Section 1.3(a). Upon payment of the
amounts provided in Section 1.3(d)(B), Buyer shall have no further
obligation to issue the Make Whole Shares under Section 1.3(a) to ESI
with respect to tendered shares that the Buyer accepted, but Buyer shall
remain obligated to issue the Make Whole Shares under Section 1.3(a)
with respect to all shares of Buyer Common

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Stock that were originally issued on the Closing Date and remain issued
and outstanding and owned by ESI on the first anniversary date of the
Closing Date.

(e) If, on or before the last date upon which the Make Whole
Shares could be delivered under Section 1.3(a) hereof, Buyer concludes a
recapitalization, capital reorganization or other similar transaction and as a
result shares of Buyer Common Stock are exchanged, converted, reclassified or
otherwise changed, in whole or in part, into one or more classes of other shares
or equity securities of Buyer (or securities convertible into shares or other
equity securities of Buyer), such shares, other equity securities or convertible
securities received by ESI shall be subject to the terms of this Section 1.3,
and Buyer's board of directors, acting in good faith, shall take such actions as
may reasonably be necessary to assure that ESI receives, with respect to such
shares, other equity securities or convertible securities, the full economic
benefit intended by this Section 1.3 with respect to the Buyer Common Stock
received by ESI on the Closing Date.

(f) The 13(e) Transaction Date Average Price and the value of
Buyer Common Stock for the purposes of clause (y) of Section 1.3(d)(A) shall be
determined based upon the average closing price of a share of Buyer Common Stock
on the Buyer's then principal trading market, during the 20 consecutive trading
day period ending two trading days prior to such transaction date.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF SELLER AND ESI

Each of Seller and ESI represents and warrants to Buyer that:

Section 2.1. CORPORATE EXISTENCE. Each of Seller, ESI and the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and has the
corporate power to own, operate or lease its respective properties and to carry
on its business as now being conducted. Complete and correct copies of the
Articles of Incorporation of the Company and all amendments thereto, certified
by the Secretary of State of the State of Texas, and of the By-Laws of the
Company and all amendments thereto, certified by the Secretary of the Company,
heretofore have been delivered to Buyer. As a result of the business conducted
by the Company or the character or location of its properties, the Company is
duly qualified to do business and is in good standing in those states listed on
Schedule 2.1 hereto, which states are the only states where the nature of the
business conducted by it or the character or location of its properties requires
such qualification and where the failure to so qualify would have a material
adverse effect upon the business, operations, assets, properties, rights or
condition

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(financial or otherwise) or prospects of the Company or upon the ability of the
Company to consummate the transactions contemplated by this Agreement (a
"Material Adverse Effect").

Section 2.2. AUTHORIZATION; VALIDITY. Each of Seller and ESI has
all requisite corporate power and authority to enter into this Agreement and the
Lease Agreement (as defined hereinafter) to perform its obligations hereunder
and to consummate the transactions contemplated hereby. No declaration,
recording or registration with, or notice to, or authorization, consent or
approval of, any governmental or regulatory body or authority is necessary for
the execution and delivery of this Agreement and the Lease Agreement by Seller
and ESI or the consummation by Seller and ESI of the transactions contemplated
hereby or thereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, in the aggregate, have a Material Adverse Effect.
All necessary action has been taken by Seller and ESI with respect to the
execution, delivery and performance by Seller and ESI of this Agreement, the
Lease Agreement and the consummation of the transactions contemplated hereby and
thereby. Assuming the due execution and delivery of this Agreement and the Lease
Agreement by Buyer, each of these Agreements and the Lease Agreement is a legal,
valid and binding obligation of Seller and ESI, enforceable against Seller and
ESI in accordance with its respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application affecting the enforcement of creditors' rights and general
principles of equity (whether applied in a proceeding at law or in equity).

Section 2.3. NO BREACH OF STATUTE OR CONTRACT. Except as set
forth on Schedule 2.3 hereto, neither the execution and delivery of this
Agreement, nor the consummation by each of Seller and ESI of the transactions
contemplated hereby, nor compliance by each of Seller and ESI with any of the
provisions hereof, will (a) violate or cause a default under any statute
(domestic or foreign), judgment, order, writ, decree, rule or regulation of any
court or governmental authority applicable to Seller, ESI or the Company or any
of their respective properties; (b) breach or conflict with any of the terms,
provisions or conditions of the respective Certificates or Articles of
Incorporation or respective By-Laws of Seller, ESI or the Company; or (c)
violate, conflict with or breach or require the authorization, consent or
approval of any party under any agreement, contract, mortgage, instrument,
indenture or license to which Seller, ESI or the Company is a party or by which
Seller, ESI or the Company is or may be bound, or constitute a default (in and
of itself or with the giving of notice, passage of time or both) thereunder, or
result in the creation or imposition of any encumbrance upon, or give to any
other party or parties any claim, interest or right, including rights of
termination or cancellation in, or with respect to, any of their respective
properties or the Shares.

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Section 2.4. SUBSIDIARIES. The Company has no subsidiaries or
equity investments in any other corporation, association, partnership, joint
venture or other entity.

Section 2.5. CAPITALIZATION AND SHAREHOLDINGS. The authorized
capital stock of the Company consists of 500,000 shares of Common Stock, of
which 65,000 shares are issued and outstanding, and are owned of record and
beneficially by Seller. At the Closing, the Seller will own all of the Shares
free and clear of all liens, claims, charges or encumbrances. Except for the
required consents set forth on Schedule 2.5, the Seller has full right, power,
legal capacity and authority to transfer and deliver the Shares pursuant to this
Agreement and neither the Seller nor the Company is a party to or bound by any
agreements, arrangements or understandings restricting in any manner the sale or
transfer of the Shares. The capital stock of the Company is duly authorized and
all issued capital stock has been duly and validly issued and is fully paid and
non-assessable and free of preemptive rights. There is not outstanding, and
neither the Seller nor the Company is bound by or subject to, any subscription,
option, warrant, call, right, contract, commitment, agreement, understanding or
arrangement to issue any additional shares of capital stock of the Company,
including any right of conversion or exchange under any outstanding security or
other instrument, and no shares of Common Stock are reserved for issuance for
any purpose.

Section 2.6. FINANCIAL STATEMENTS. Attached hereto as Schedule
2.6 is a balance sheet of the Company at June 30, 1998 and related statement of
income for the nine months then ended (collectively the "Company Financial
Statements"), certified by the Chief Financial Officer of the Company as having
been prepared in accordance with GAAP consistently applied. Except as set forth
on Schedule 2.6, the Company Financial Statements (i) are true, correct and
complete, (ii) are in accordance with the books and records of the Company, and
(iii) fairly, completely and accurately present the financial position of the
Company at the dates specified and the results of its operations for the periods
covered.

Section 2.7. ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in the Company Financial Statements or on Schedule 2.7 attached
hereto, the Company has no debts, liabilities or obligations of any kind,
whether accrued, absolute, contingent or other, whether due or to become due,
that would have a Material Adverse Effect.

Section 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 2.8 hereto, since June 30, 1998, no event or circumstance has
occurred resulting or reasonably likely to result in a Material Adverse Effect.
Without limiting the generality of the foregoing, since that date there has not
been, with respect to the Company:

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(a) Any change in its Business, operations (as now conducted or
as presently proposed to be conducted), assets, properties or rights, prospects
or condition (financial or otherwise), or combination thereof which reasonably
could be expected to result in a Material Adverse Effect;

(b) Other than in the usual and ordinary course of business, any
increase in amounts payable by the Company to or for the benefit of or committed
to be paid by the Company to or for the benefit of any officer, director,
stockholder, consultant, agent or employee of the Company, in any capacity, or
in any benefits granted under any bonus, stock option, profit sharing, pension,
retirement, deferred compensation, insurance, or other direct or indirect
benefit plan with respect to any such person;

(c) Any transaction entered into or carried out other than in the
ordinary and usual course of its business, including without limitation, any
transaction resulting in the incurrence of liabilities or obligations;

(d) Any material change made in the methods of doing business or
in the accounting principles or practices or the method of application of such
principles or practices;

(e) Any mortgage, pledge, lien, security interest, hypothecation,
charge or other encumbrance imposed or agreed to be imposed on or with respect
to any of its properties that will not be discharged prior to the Closing Date
except for financing statements filed by personal property lessors as a matter
of notification only;

(f) Except in the ordinary course of business, any sale, lease or
other disposition of, or any agreement to sell, lease or otherwise dispose of
any of its properties, assets or services, individually or in the aggregate, in
excess of $25,000;

(g) Any purchase of or any agreement to purchase capital assets
or any lease or any agreement to lease, as lessee, any capital assets,
individually or in the aggregate, with a purchase price or carrying value in
excess of $25,000;

(h) Any modification, waiver, change, amendment, release,
rescission or termination of, or accord and satisfaction with respect to, any
material term, condition or provision of any contract, agreement, license or
other instrument to which the Company is a party, other than any satisfaction by
performance in accordance with the terms thereof in the usual and ordinary
course of its business;

(i) Any declaration of, or dividend or other distribution to the
Company's stockholders, purchase, redemption or reclassification of any of the
Company's capital stock or stock

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split, stock dividend, exchange or recapitalization or execution of any
agreement in respect of the foregoing;

(j) Any damage, destruction or similar loss, whether or not
covered by insurance, adversely affecting the Business;

(k) any labor grievances or claims filed, or any similar event or
condition of any character, that will have a Material Adverse Effect on the
Company;

(l) any cancellation, or agreement to cancel, any indebtedness,
obligation or other liability owing to it, provided that it may negotiate and
adjust bills in the course of good faith disputes with customers in a manner
consistent with past practice; or

(m) Any commitment by the Company to do any of the foregoing.

Section 2.9. PROPRIETARY RIGHTS. Schedule 2.9 sets forth a
complete and accurate list of all patents (including all reissues,
reexaminations, continuations, continuations-in-part and divisions thereof),
inventions, trade secrets, processes, proprietary rights, proprietary knowledge,
know-how, computer software, trademarks, names, service marks, trade names,
copyrights, symbols, logos, franchises and permits of the Company and all
applications therefor, registrations thereof and licenses, sublicenses or
agreements in respect thereof that the Company owns or has the right to use or
to which the Company is a party and all filings, registrations or issuances of
any of the foregoing with or by any federal, state, local or foreign regulatory,
administrative or governmental office or offices (collectively, the
"Intellectual Property Rights"). The Intellectual Property Rights listed on
Schedule 2.9 are all the proprietary rights necessary to the conduct of the
Business as now conducted. Except as set forth on Schedule 2.9 or as would not
reasonably be expected to have a Material Adverse Effect (a) the Company is the
sole and exclusive owner of all right, title and interest in and to all
Intellectual Proprietary Rights free and clear of all liens, claims, charges,
equities, rights of use, encumbrances and restrictions whatsoever, (b) no
consent or approval of any party will be required for the use of any of these
Intellectual Property Rights by Buyer following the Closing Date, and (c) no
governmental registration of any of these Intellectual Property Rights has
lapsed or expired or been canceled, abandoned, opposed or the subject of any
reexamination request.

Except as disclosed in Schedule 2.9 or as would not reasonably be
expected to have a Material Adverse Effect (a) the Company is not, nor will it
be as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any license,
sublicense or other

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agreement to which it is a party and pursuant to which it is authorized to use
any third-party patents, trademarks, service marks or copyrights (the
"Third-Party Intellectual Property Rights"); (b) no claims with respect to the
patents, registered and material unregistered trademarks and service marks,
registered copyrights, trade names and any applications therefor owned by the
Company (the "Company Intellectual Property Rights"), any trade secret material
to the Company, or Third-Party Intellectual Property Rights to the extent
arising out of any use, reproduction or distribution of such Third-Party
Intellectual Property Rights or through the Company, are currently pending or,
to the knowledge of ESI, threatened in writing by any person; and (c) ESI does
not know of any valid ground for any bona fide claims (i) to the effect that the
manufacture, sale, licensing or use of any products as now used, sold or
licensed or proposed for use, sale or license by the Company, infringes on any
copyright, patent, trademarks, service mark or trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the business of the Company as currently conducted or as proposed to be
conducted; (ii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret material to the
Company; or (iii) challenging the license or legally enforceable right to use of
the Third Party Intellectual Property Rights by the Company.

Section 2.10. LITIGATION. Schedule 2.10 sets forth a complete and
accurate list as of the date hereof of all claims, actions, suits, proceedings
or, to ESI's knowledge, investigations (collectively, the "Proceedings") pending
or threatened against or affecting the Company or any of the Company's
properties or to ESI's knowledge, any of the Company's officers or directors in
their capacities as such, in, before or by any federal, state, or local or
foreign court, governmental agency or other governmental body (each a
"Governmental Authority"). Seller and ESI shall update Schedule 2.10 as of the
Closing Date, but any information on such updated schedule relating to
Proceedings arising after the date hereof shall not constitute a breach of this
Section 2.10 unless such Proceedings have had or can reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 2.10, there is
no Proceeding pending or, to the knowledge of ESI, threatened against or
affecting the Company or any of the Company's properties or to ESI's knowledge,
any of the Company's officers or directors in their capacity as such, in, before
or by any Governmental Authority that has had or can reasonably be expected to
have a Material Adverse Effect, nor has any Governmental Authority notified the
Company prior to the date hereof of any intention to conduct any investigation
with respect to the Company. The Company is not subject to or in default with
the respect to any judgment, order, writ, injunction or decree or any
governmental restriction.

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Section 2.11. CONTRACTS AND COMMITMENTS. Schedule 2.11 lists all
personal property leases, contracts, agreements, contract rights, license
agreements, franchise rights and agreements, policies, purchase and sales
orders, quotations and executory commitments, instruments, third party
guaranties, indemnifications, arrangements, obligations and understandings,
whether oral or written, to which the Company is a party (whether or not legally
bound thereby), that are currently in effect and that require payments,
individually or in the aggregate, in excess of $25,000, other than purchase and
sale orders, quotations and executory commitments incurred in the ordinary
course of business of the Company (collectively, the "Contracts"). Each of the
Contracts is valid and binding, in full force and effect and enforceable against
the Company in accordance with its provisions. Except as set forth on Schedule
2.11, the Company has not assigned, mortgaged, pledged, encumbered, or otherwise
hypothecated any of its right, title or interest under any of the Contracts.
Neither the Company nor, to ESI's knowledge, any other party thereto is in
violation of, in default in respect of nor has there occurred an event or
condition which, with the passage of time or giving of notice (or both), would
constitute a material violation or a default of any Contract. No notice has been
received by Seller, ESI or the Company claiming any such default by the Company
or indicating the desire or intention of any other party thereto to amend,
modify, rescind or terminate the same.

Section 2.12. COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS.

(a) For the purposes of this Section 2.12, "Environmental Laws"
means any and all laws, statutes, codes, ordinances, orders, rules, regulations,
judgments, decrees, injunctions, writs, edicts, awards, authorizations or other
requirement of any national, state, county, municipal or other government,
domestic or foreign, or of any agency, board, bureau, commission, court,
department or other instrumentality thereof, or any obligation included in any
certificate, franchise, permit or license issued by any such governmental
authority or resulting from binding arbitration, including any requirement under
common law, relating to the environment or public or worker health or safety,
including ambient air, surface water, land surface or subsurface strata, or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
(including Solid Wastes, Hazardous Wastes or Hazardous Substances) or noxious
noise or odor into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, recycling, removal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes (including petroleum, petroleum
distillates, asbestos or asbestos-containing material, volatile organic
compounds or polychlorinated biphenyls).

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(b) The Company is in compliance in all material respects with
all laws, ordinances, regulations and orders applicable to the Business,
including without limitation all Environmental Laws applicable to it or any of
its owned or operated facilities, sites or other properties, businesses and
operations, including those which relate to the reporting by the Company of all
sites owned or operated by it where Solid Wastes, Hazardous Wastes or Hazardous
Substances have been treated, stored, disposed of or otherwise handled, and
possesses all necessary certifications and licenses required for the conduct of
its Business. Seller and ESI have no notice or actual knowledge of any
violations of such laws, ordinances, regulations and orders or notice of intent
to cancel, terminate or not renew such certifications or licenses, whether
actual, claimed or alleged, except as disclosed on Schedule 2.12 hereto and
except for those instances as are not reasonably likely to have a Material
Adverse Effect.

(c) The Company is not the subject of or, to the knowledge of
Seller or ESI, being threatened to be the subject of (i) any enforcement
proceeding, (ii) any investigation under any Environmental Law, or (iii) any
third party claim relating to the violation of any Environmental Law on or off
the properties of the Company.

(d) No release (as defined in the Environmental Laws) at, from in
or on any site owned or operated by the Company has occurred which, if all
relevant facts were known, would require remediation to avoid deed record
notices, restrictions liabilities or would result in other consequences that
would not be applicable if that release had not occurred.

(e) The Company has not transported or arranged for the
transportation of any Solid Wastes, Hazardous Wastes or Hazardous Substances to,
or disposed or arranged for the disposition of any Solid Wastes, Hazardous
Wastes or Hazardous substances at, any off-site location that could reasonably
be expected to lead to any claim against the Company or Buyer as a potentially
responsible party for any fines, clean-up costs, remedial work, damage to
natural resources, personal injury or property damage.

(f) To the knowledge of Seller or ESI, no storage tanks exist or
have ever existed on or under any of the properties owned or operated by the
Company from which any Solid Wastes, Hazardous Wastes or Hazardous Substances
have been released into the surrounding environment. The Company has provided
the Buyer with copies (or if not available, accurate written summaries) of all
environmental investigations, studies, audits, reviews and other analyses
conducted by or on behalf, or which otherwise are in the actual or constructive
possession, of the Company, respecting any facility, site or other property
presently owned or operated by the Company.

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Section 2.13. TAXES. Except as set forth on Schedule 2.13:3

(a) The Company has duly filed all federal, state, local and
foreign tax returns and tax reports required to have been filed by it prior to
the date hereof and will file, on or before the Closing Date, all such returns
and reports that are required to be filed after the date hereof and on or before
the Closing Date, all such returns and reports are true, correct and complete in
all material respects, none of such returns and reports has been amended, and
all taxes, assessments, fees and other governmental charges arising under such
returns and reports (i) have been fully paid (or, with respect to any returns or
reports filed between the date hereof and the Closing Date, will be), or (ii)
are being contested in good faith by appropriate proceedings (and are set forth
on Schedule 2.13);

(b) Schedule 2.13 sets forth the dates and results of any and all
audits of federal, state, local and foreign tax returns of the Company performed
by federal, state, local or foreign taxing authorities. No waivers of any
applicable statutes of limitations are outstanding. All deficiencies proposed as
a result of any audits have been paid or settled. There is no pending or
threatened federal, state, local or foreign tax audit of the Company and no
agreement with any federal, state, local or foreign tax authority that may
affect the subsequent tax liabilities of the Company; and

(c) The Company has no material liabilities for taxes other than
as shown on the Company Financial Statements, and no federal, state, local or
foreign tax authority is now asserting or, to the knowledge of Seller or ESI,
threatening to assert any deficiency or assessment for additional taxes with
respect to the Company.

(d) All amounts required to be withheld by the Company and paid
to governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other taxes have been collected or withheld and paid to
the proper taxing authority. The Company has made all deposits required by law
to be made with respect to employees' withholding and other employment taxes.

Section 2.14. EMPLOYEES. The Company is not a party to or bound
by any collective bargaining agreement, nor has the Company experienced any
strike or material grievance, unfair labor practice or other collective
bargaining dispute within the three year period prior to the date hereof. To the
knowledge of Seller and ESI, the Company has not committed any wrongful
discharge or other wrongful act with respect to the employment or termination of
any employee prior to the Closing Date that, individually or in the aggregate,
can reasonably be anticipated to result in a Material Adverse Effect. Schedule
2.14 sets forth a complete list of the names, titles and rates of compensation
at the date hereof of all

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employees, nonemployee officers or directors and key consultants and independent
contractors of the Company. Except as set forth on Schedule 2.14, there are no
employment agreements, whether written or oral, to which the Company is a party.
The Company is not aware of any employee of the Company who is not a citizen of,
or authorized in accordance with federal immigration laws to be employed in, the
United States.

Section 2.15. EMPLOYEE BENEFIT PLANS. Schedule 2.15 hereto
comprises a listing of each bonus, stock option, stock purchase, benefit, profit
sharing, savings, retirement, liability, insurance, incentive, deferred
compensation, and other similar fringe or employee benefit plans, programs or
arrangements for the benefit of or relating to, any employee of, or independent
contractor or consultant to, and all other compensation practices, policies,
terms or conditions, whether written or unwritten (the "Employee Plans") which
the Company presently maintains, to which the Company presently contributes or
under which the Company has any liability and which relates to employees or
independent contractors of the Company. The Employee Plans administered by the
Company have been administered in all material respects in accordance with all
requirements of applicable law and terms of each such plan. Each Employee Plan
that is required or intended to be qualified under applicable law or registered
or approved by a governmental agency or authority, has been so qualified,
registered or approved by the appropriate governmental agency or authority and,
to the best of the Seller's and ESI's knowledge, nothing has occurred since the
date of the last qualification, registration or approval to adversely affect, or
cause, the appropriate governmental agency or authority to revoke such
qualification, registration or approval. Except as set forth in Schedule 2.15
all contributions (including premiums) in material amounts required by law or
contract to have been made or approved by the Company under or with respect to
Employee Plans have been paid or accrued by the Company. Without limiting the
foregoing, there are no material unfunded liabilities under any Employee Plan.
Neither the Seller nor ESI has received notice of any investigations, litigation
or other enforcement actions against the Company with respect to any of the
Employee Plans.

Section 2.16. TITLE TO PROPERTY. The Company has good and
marketable title, or valid leasehold rights (in the case of leased property), to
all real property and all personal property purported to be owned or leased by
it or used in the operation of its business, free and clear of all encumbrances,
excluding (i) liens for taxes, fees, levies, imposts, duties or governmental
charges of any kind which are not yet delinquent or are being contested in good
faith by appropriate proceedings which suspend the collection thereof; (ii)
liens for mechanics, materialmen, laborers, employees, suppliers or other which
are not yet delinquent or are being contested in good faith by appropriate
proceedings; (iii) liens created in the ordinary course of business

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in connection with the leasing or financing of office, computer and related
equipment and supplies; (iv) easements and similar encumbrances ordinarily
created for fuller utilization and enjoyment of property; (v) liens set forth on
Schedule 2.16; and (vi) liens or defects in title or leasehold rights that are
not reasonably likely to have a Material Adverse Effect. All of such owned or
leased property with a value in excess of $10,000 is listed on Schedule 2.16
hereto, as well as a brief description of each such property, which if leased
shall include the termination date of such lease. The Company has provided Buyer
with true, complete and correct copies of all title reports and insurance
policies relating to any of the real properties listed as being owned or leased
in Schedule 2.16 and of all leases under which the Company is leasing each of
the properties listed in Schedule 2.16 as being leased. The fixed assets of the
Company are affixed only to one or more of the real properties listed in
Schedule 2.16 and, except as set forth therein, are well-maintained and adequate
for the purposes for which they presently are being used or held for use,
ordinary wear and tear excepted. All the property, plant and equipment of the
Company are in good working order and condition, ordinary wear and tear
expected, and adequate for the purposes for which they presently are being used
or held for use.

Section 2.17. INVESTMENT. ESI is acquiring the Payment Shares and
will acquire the Make Whole Shares solely for its own account as an investment
and not with a view to, or for offer or resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder. ESI is an "accredited investor" as that term is defined in Rule 501
promulgated under the Act.

Section 2.18. RELATED PARTY AGREEMENTS. Except as set forth in
Schedule 2.18, there are no contracts or other agreements, written or oral, to
which the Company is a party or is bound or by which any property of the Company
is bound or may be subject and to which the Seller or any of its Affiliates (as
such term is defined in the Securities Act) also is a party.

Section 2.19. RELATIONS WITH GOVERNMENTS, ETC. The Company has
not made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office which would cause
the company to be in violation of the Foreign Corrupt Practices Act of 1977 or
any governmental requirement to a similar effect.

Section 2.20. INVENTORIES. All inventories, net of reserves
determined in accordance with GAAP, of the Company which are classified as such
on the Company Financial Statements are merchantable and salable or usable in
the ordinary course of business. The Company does not depend on any single
vendor for its inventories the loss of which could have a Material Adverse
Effect.

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Section 2.21. INSURANCE. Set forth on Schedule 2.21 is a list of
all insurance policies carried by the company, a list of all insurance loss runs
and worker's compensation claims received for the most recently ended three
policy years, and true, complete and correct copies of all insurance policies
carried by the Company which are in effect as of the date hereof, all of which
(A) have been issued by insurers of recognized responsibility and (B) currently
are, and will remain without interruption through the Closing Date, in full
force and effect. No insurance carried by the Company has been canceled by the
insurer during the past five years, and the Company has never been denied
coverage nor received any notice or other communication from any issuer of any
such insurance policy of any material increase in any deductibles, retained
amounts or the premiums payable thereunder, or any threatened increase in
deductibles, retainages or premiums.

Section 2.22. BROKERS. Except as disclosed on Schedule 2.22, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by or on behalf of Seller, ESI and the Company in such a
manner as not to give rise to any claim against Buyer, any Affiliate (as such
term is defined in the rules and regulations promulgated under the Securities
Act) thereof, Seller, ESI or the Company for a finder's fee, brokerage
commission, advisory fee or other similar payment.

Section 2.23. CLOSING DATE EFFECT. All of the representations and
warranties of Seller and ESI are true and correct as of the date hereof and
shall be true and correct on and as of the Closing Date with the same force and
effect as if such representations and warranties were made by Seller to Buyer on
the Closing Date.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller and ESI that:

Section 3.1. CORPORATE EXISTENCE. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Complete and correct copies of the Articles of Incorporation of Buyer
and all amendments thereto, certified by the Secretary of State of the State of
Colorado, and the By-laws of Buyer, and all amendments thereto, certified by the
Secretary of Buyer, heretofore have been delivered to Seller. As a result of the
business conducted by Buyer or the character or location of its properties,
Buyer is duly qualified to do business and is in good standing in those states
listed on Schedule 3.1 hereto, which are the only states where the nature of the
business conducted by it or the character or location of its properties requires
such qualification and where the failure to so qualify would have a material
adverse effect upon the business,

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<PAGE>
operations, assets, properties, rights or condition (financial or otherwise) or
prospects of Buyer or upon the ability of the Buyer to consummate the
transactions contemplated by this Agreement (a "Buyer Material Adverse Effect").

Section 3.2. AUTHORIZATION; VALIDITY. Buyer has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby. No
declaration, recording or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a Buyer Material Adverse Effect. All necessary corporate action
has been taken by Buyer with respect to the execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby. Assuming the due execution and delivery of this Agreement by Seller and
ESI, this Agreement is a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application affecting the enforcement of creditors' rights and general
principles of equity (whether applied in a proceeding at law or in equity).
There does not exist any circumstances that would operate to terminate, reduce,
alter or impair the obligation of Buyer to issue the Make Whole Shares or that
give rise to or would give rise to a right of set-off by Buyer or any defense to
the performance of Buyer's obligation to issue the Make Whole Shares in
accordance with the terms of this Agreement.

Section 3.3. NO BREACH OF STATUTE OR CONTRACT. Neither the
execution and delivery of this Agreement, nor the consummation by Buyer of the
transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will (a) violate or cause a default under any statute
(domestic or foreign), judgment, order, writ, decree, rule or regulation of any
court or governmental authority applicable to Buyer or any of its material
properties; (b) breach or conflict with any of the terms, provisions or
conditions of the Articles of Incorporation or By-laws of Buyer; or (c) violate,
conflict with or breach or require the authorization, consent or approval of any
party under any agreement, contract, mortgage, instrument, indenture or license
to which Buyer is a party or by which Buyer is or may be bound, or constitute a
default (in and of itself or with the giving of notice, passage of time or both)
thereunder, or result in the creation or imposition of any encumbrance upon, or
give to any other party or parties, any claim, interest or right, including
rights of termination or cancellation, in or with respect to any of Buyer's
properties.

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<PAGE>
Section 3.4. CAPITALIZATION; BUYER COMMON STOCK. Buyer's
authorized capital stock consists of (i) 25,000,000 shares of Buyer Common
Stock, of which 15,665,492 shares are issued and outstanding on the date hereof
and will be outstanding on the Closing Date and (ii) 10,000,000 shares of
Preferred Stock, $1.00 par value, of which there are no shares issued and
outstanding on the date hereof. Except as set forth in Schedule 3.4, there are
no subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements of any kind relating to the
issuance, sale or transfer by Buyer of its capital stock, including without
limitation, any rights of conversion or exchange under any outstanding
securities or other instruments. The issuance and delivery of the Payment Shares
and the Make Whole Shares have been duly and validly authorized by all necessary
corporate action on the part of Buyer and will be duly and validly issued, fully
paid and non-assessable. The Payment Shares and the Make Whole Shares will be
issued, transferred and delivered to ESI free and clear of any and all liens,
claims, charges, encumbrances, restrictions and agreements of any nature
whatsoever. The Payment Shares and the Make Whole Shares will not be issued,
transferred, and delivered to ESI in violation of any preemptive rights, rights
of first refusal or other similar rights.

Section 3.5. SEC REPORTS AND FINANCIAL STATEMENTS. Except for
Buyer's Form 10-KSB which was filed two days late on October 16, 1998, Buyer has
timely filed with the SEC, and has heretofore made available to Seller and ESI
true and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") on or after June 30, 1998
(as such documents have been amended or supplemented since the time of their
filing and, in the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively (collectively, the
"Buyer SEC Reports"). At the time of filing, the Buyer SEC Reports (including
any financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be. The audited consolidated financial statements
and unaudited interim consolidated financial statements (including the related
notes) of Buyer included in the Buyer SEC Reports have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of Buyer and its
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited interim financial

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statements, to normal year-end audit adjustments and any other adjustments
described therein (which will not be material individually or in the aggregate).

Section 3.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in the Buyer SEC Reports, Buyer has no material debts, liabilities or
obligations of any kind, whether accrued, absolute, contingent or other, whether
due or to become due, that would have a Buyer Material Adverse Effect.

Section 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 3.7 hereto, since June 30, 1998, no event or circumstance has
occurred resulting or reasonably likely to result in a Buyer Material Adverse
Effect. Without limiting the generality of the foregoing, since that date, there
has not been with respect to Buyer:

(a) Any change in its business, operations (as now conducted or
as presently proposed to be conducted), assets, properties or rights, prospects
or condition (financial or otherwise), or combination thereof which reasonably
could be expected to result in a Buyer Material Adverse Effect;

(b) Other than in the usual and ordinary course of business, any
increase in amounts payable by Buyer to or for the benefit of or committed to be
paid by Buyer to or for the benefit of any officer, director, stockholder,
consultant, agent or employee of Buyer, in any capacity, or in any benefits
granted under any bonus, stock option, profit sharing, pension, retirement,
deferred compensation, insurance, or other direct or indirect benefit plan with
respect to any such person;

(d) Any material change made in the methods of doing business or
in the accounting principles or practices or the method of application of such
principles or practices;

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<PAGE>
(g) Any purchase of or any agreement to purchase capital assets
or any lease or any agreement to lease, as lessee, any capital assets,
individually or in the aggregate, with a purchase price or carrying value in
excess of $25,000;

(i) Any declaration of, or dividend or other distribution to the
Company's shareholders, purchase, redemption or reclassification of any of the
Company's capital stock or stock split, stock dividend, exchange or
recapitalization or execution of any agreement in respect of the foregoing;

(j) Any damage, destruction or similar loss, whether or not
covered by insurance, adversely affecting Buyer's business; or

(k) Any commitment by the Buyer to do any of the foregoing.

Section 3.8. LITIGATION. Schedule 3.8 sets forth a complete and
accurate list as of the date hereof of all Proceedings pending or, to Buyer's
knowledge, threatened against or affecting the Buyer or any of the Buyer's
properties or to Buyer's knowledge any of Buyer's officers or directors in their
capacities as such, in, before or by any Governmental Authority. Buyer shall
update Schedule 3.8 as of the Closing Date, but any information on such updated
schedule relating to Proceedings arising after the date hereof shall not
constitute a breach of this Section 3.8 unless such Proceedings have had or can
reasonably be expected to have a Buyer Material Adverse Effect. Except as set
forth on Schedule 3.8 or as disclosed in the Buyer SEC Reports, there is no
Proceeding pending or, to the knowledge of Buyer, threatened against or
affecting the Buyer or any of the Buyer's properties or to Buyer's knowledge any
of the Buyer's officers or directors in their capacity as such, in, before or by
any Governmental Authority that has had or can reasonably be expected to have a
Buyer Material Adverse Effect, nor has any Governmental Authority notified the
Buyer prior to the date hereof of any intention to conduct any investigation
with respect to Buyer. The Buyer is not subject to or in default with the
respect to any judgment, order, writ, injunction or decree or any governmental
restriction.

Section 3.9. COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS.

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(a) Buyer is in compliance in all material respects with all
laws, ordinances, regulations and orders applicable to its business and Buyer
has no notice or actual knowledge of any violations thereof, whether actual,
claimed or alleged, except as disclosed on Schedule 3.9 hereto and except for
those instances of non-compliance or those violations as are not reasonably
likely to have a Buyer Material Adverse Effect.

(b) Buyer is not the subject of or, to its knowledge, being
threatened to be the subject of (i) any enforcement proceeding, or (ii) any
investigation, brought in either case under any Environmental Law, at any time
in effect or (iii) any third party claim relating to the violation of any
Environmental Law on or off the properties of Buyer. Buyer has not been notified
that it must obtain any permits and licenses or file documents for the operation
of its business under any Environmental Laws. Buyer has not been notified of any
conditions on or off its properties that can reasonably be expected to give rise
to any Environmental Law and that would result in a Buyer Material Adverse
Effect.

(c) Except as disclosed on Schedule 3.9, there are no Hazardous
Substances that Buyer has used, stored or otherwise held in or on any of the
facilities of Buyer that are present at or have migrated from the facilities,
whether contained in ambient air, surface water, groundwater, land surface or
subsurface strata.

Section 3.10. TAXES. Except as set forth on Schedule 3.10:

(a) Buyer and its subsidiaries have duly filed all federal,
state, local and foreign tax returns and tax reports required to be filed by
them prior to the date hereof and will file, on or before the Closing Date, all
such returns and reports which are required to be filed after the date hereof
and on or before the Closing Date, all such returns and reports are true,
correct and complete in all material respects, none of such returns and reports
has been amended, and all taxes, assessments, fees and other governmental
charges arising under such returns and reports (i) have been fully paid (or,
with respect to any returns or reports filed between the date hereof and the
Closing Date, will be) or (ii) are being contested in good faith by appropriate
proceedings (and are set forth on Schedule 3.10);

(b) Schedule 3.10 sets forth the dates and results of any and all
audits of federal, state, local and foreign tax returns of Buyer and its
subsidiaries have performed by federal, state, local or foreign taxing
authorities. No waivers of any applicable statutes of limitations are
outstanding. All deficiencies proposed as a result of any audits have been paid
or settled. There is no pending or threatened federal, state, local or foreign
tax audit of Buyer and its subsidiaries and no agreement with any federal,

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state, local or foreign tax authority that may affect the subsequent tax
liabilities of the Company; and

(c) Buyer and its subsidiaries have no material liabilities for
taxes other than as shown on the financial statements included in the Buyer SEC
Reports, and no federal, state, local or foreign tax authority is now asserting
or, to the knowledge of Buyer, threatening to assert any deficiency or
assessment for additional taxes with respect to the Company.

(d) All amounts required to be withheld by the Buyer and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other taxes have been collected or withheld and paid to
the proper taxing authority. The Buyer has made all deposits required by law to
be made with respect to employees' withholding and other employment taxes.

Section 3.11. INVESTMENT. The Buyer is acquiring the Shares
solely for its own account as an investment and not with a view to, or for offer
or resale in connection with, any distribution thereof within the meaning of the
Securities Act, and the rules and regulations promulgated thereunder. Buyer is
an "accredited investor" as that term is defined in Rule 501 promulgated under
the Act.

Section 3.12. RELATED PARTY AGREEMENTS. Except as set forth in
Schedule 3.12, there are no contracts or other agreements, written or oral, to
which the Buyer is a party or is bound or by which any property of the Buyer is
bound or may be subject and to which the Buyer or any of its Affiliates (as such
term is defined in the Securities Act) also is a party.

Section 3.13. EMPLOYEES. The Buyer is not a party to or bound by
any collective bargaining agreement, nor has the Buyer experienced any strike or
material grievance, unfair labor practice or other collective bargaining dispute
within the three year period prior to the date hereof. The Buyer has not
committed any wrongful discharge or other wrongful act with respect to the
employment or termination of any employee prior to the Closing Date that,
individually or in the aggregate, can reasonably be anticipated to result in a
Material Adverse Effect. Schedule 3.13 sets forth a complete list of the names,
titles and rates of compensation at the date hereof of all employees,
nonemployee officers or directors and key consultants and independent
contractors of the Buyer. Except as set forth on Schedule 3.13, there are no
Employment Agreements, whether written or oral, to which the Buyer is a party.
The Buyer is not aware of any employee of the Buyer who is not a citizen of, or
authorized in accordance with federal immigration laws to be employed in, the
United States.

Section 3.14. RELATIONS WITH GOVERNMENTS, ETC. The Buyer
has not made, offered or agreed to offer anything of value to any

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governmental official, political party or candidate for government office which
would cause the Buyer to be in violation of the Foreign Corrupt Practices Act of
1977 or any governmental requirement to a similar effect.

Section 3.15. BROKERS. Except as disclosed on Schedule 3.15 all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by or on behalf of Buyer in such a manner as not to give
rise to any claim against Buyer, Seller or ESI, any Affiliate thereof, or the
Company for a finder's fee, brokerage commission, advisory fee or other similar
payment.

Section 3.16. CLOSING DATE EFFECT. All of the representations and
warranties of Buyer are true and correct as of the date hereof and shall be true
and correct on and as of the Closing Date with the same force and effect as if
such representations and warranties were made by Buyer to Seller and ESI on the
Closing Date.

ARTICLE IV.

COVENANTS

Section 4.1. ACCESS TO INFORMATION.

(a) ESI and Seller shall cause the Company to afford to Buyer
and, on a need to know basis, its accountants, counsel, financial advisors and
other representatives (the "Buyer Representatives") full access during normal
business hours throughout the period prior to the Closing Date to all of its
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) and, during such period, shall furnish promptly to the
Buyer or Buyer Representatives such other information concerning the Company's
business as Buyer shall reasonably request; provided that no investigation
pursuant to this Section 4.1 shall amend or modify any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the transactions contemplated hereby. Buyer shall treat,
and shall cause the Buyer Representatives to treat, all such materials and
information in accordance with Section 4.5 hereof.

(b) Buyer shall afford ESI, Seller and, on a need to know basis,
their respective accountants, counsel, financial advisors and other
representatives (the "Seller Representatives") full access during normal
business hours throughout the period prior to the Closing Date to all of the
respective properties, books, contracts, commitments and records (including, but
not limited to, tax returns) of Buyer and its subsidiaries and, during such
period, shall furnish promptly to Seller, ESI or the Seller Representatives (i)
a copy of each report, schedule and other

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document filed by any of them with the SEC in connection with the transactions
contemplated by this Agreement or that may have a material effect on their
respective businesses, and (ii) such other information concerning Buyer's
business as Seller and ESI shall reasonably request; provided that no
investigation pursuant to this Section 4.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the transactions contemplated hereby.
Seller and ESI shall treat, and shall cause the Seller Representative to treat,
all such materials and information in accordance with the terms and conditions
of the Non-Disclosure Agreement.

Section 4.2. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable efforts to obtain all necessary
or appropriate waivers, consents and approvals and to effect all necessary
filings and submissions.

Section 4.3. CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE.

(a) During the period from the date of this Agreement to the
Closing Date, except as otherwise contemplated by this Agreement or consented to
or approved by Buyer in writing, ESI and Seller shall cause the Company (i) to
conduct its business in the usual, regular and ordinary course consistent with
past practice and prudent business principles and (ii) to use its reasonable
efforts to maintain and preserve intact its business organization, employees,
goodwill with customers and advantageous business relationships and to retain
the services of its officers and key employees.

(b) Seller and ESI agree that on and or after the date hereof and
prior to the Closing Date, without the consent of Buyer, Seller and ESI shall
not cause or otherwise suffer or permit the Company to:

(i) incur or become subject to, or agree to incur or become
subject to, any obligation or liability (absolute or contingent) except current
liabilities incurred, and obligations under contracts entered into, in the
ordinary course of business;

(ii) mortgage, pledge or subject to lien, charge or any
encumbrance, any of the Company's properties or agree so to do;

(iii) sell or transfer or agree to sell or transfer any of its
assets, properties or services or cancel or agree to cancel

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any debt or claim, except in each case in the ordinary course of business;

(iv) consent or agree to a waiver of any right of substantial
value;

(v) terminate any contract, agreement, license or other
instrument to which it is a party that provides for monthly payments by or to
the Company in excess of $10,000;

(vi) through negotiation or otherwise, make any commitment or
incur any liability or obligation to any labor organization except in the
ordinary course of business consistent with past practice;

(vii) make or agree to make any accrual or arrangement for or
payment of bonuses or special compensation of any kind to any officer, employee
or agent;

(viii) terminate any employee of the Company earning in excess of
$25,000 per annum or directly or indirectly pay or make a commitment to pay any
severance or termination pay to any officer, employee or agent except in the
ordinary course of business consistent with past practice;

(ix) introduce any new method of management, operation or
accounting with respect to its business or any of the assets, properties or
rights applicable thereto;

(x) make capital expenditures or commitments therefor in excess
of $10,000 except for repairs and maintenance in the ordinary course of business
consistent with past practice; or

(xi) authorize or enter into any agreement to do any of the
foregoing.

Section 4.4. CONDUCT OF BUYER'S BUSINESS PRIOR TO THE CLOSING
DATE. Buyer agrees that, between the date of this Agreement and the Closing
Date, except (a) for any actions taken by Buyer relating to any other
acquisitions or business combinations or (b) as expressly contemplated by any
other provision of this Agreement, unless Seller and ESI shall otherwise agree
in writing, (x) the respective business of Buyer and its subsidiaries shall be
conducted only in, and shall not take any action except in, the ordinary course
of business consistent with past practice. By way of amplification and not
limitation, except (a) for any actions taken by Buyer relating to any other
acquisitions or business combinations or (b) as expressly contemplated by any
other provision of this Agreement, neither Buyer nor its subsidiaries shall,
between the date of this Agreement and the Closing Date, directly or indirectly,
do, or agree to do, any of the following

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without the prior written consent of Seller and ESI, which consent shall not be
unreasonably withheld or delayed:

(i) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock,
except that any subsidiary of Buyer may pay dividends or
make other distributions to Buyer or any other subsidiary
of Buyer;

(ii) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any
of its capital stock;

(iii) sell, transfer, license, sublicense or otherwise
dispose of any material assets; or

(iv) authorize or enter into any formal or informal
agreement or otherwise make any commitment to do any of
the foregoing.

Section 4.5. CONFIDENTIALITY. Each of the parties to this
Agreement covenants and agrees to hold in strict confidence all data and
information obtained from the other party hereto or any subsidiary, division,
associate, representative, agent or affiliate of any such party, including but
not limited to information furnished prior to the date hereof (unless such
information is or becomes publicly available without the fault of any
representative of such party, or public disclosure of such information is
required by law in the opinion of counsel to such party) and shall insure that
such representatives do not disclose information to others without the prior
written consent of the other party hereto, and in the event of the termination
of this Agreement, to cause its representatives to return promptly every
document furnished by the other party hereto or any subsidiary, division,
associate, representative, agent or affiliate of any such party in connection
with the transactions contemplated hereby and any copies thereof which may have
been made, other than documents which are publicly available.

Section 4.6. ANNOUNCEMENTS. None of the parties to this Agreement
nor any of their respective Affiliates shall make any public announcements prior
to the Closing Date or any time thereafter with respect to this Agreement or the
transactions contemplated hereby without the written consent of the other
parties hereto, unless advised by counsel that such disclosure is required by
law (in which event such party shall promptly notify the other parties hereto).

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Section 4.7. SATISFACTION OF CONDITIONS. Each of the parties
hereto shall use its best efforts to fulfill or obtain the fulfillment of all of
the conditions to Closing.

Section 4.8. NOTICE OF DEVELOPMENTS. Buyer, ESI and Seller agree
to give each other prompt written notice in the event its own representations
and warranties are discovered to be untrue as of the time made or in the event
such party determines that such representations and warranties shall be untrue
as if made at and as the Closing Date. No disclosure by Buyer, ESI or Seller
pursuant to this Section 4.8, however, shall be deemed to or shall supplement
the schedules hereto or to cure any misrepresentation or breach of warranty;
PROVIDED, HOWEVER, that the delivery of or failure to deliver any notice
pursuant to this Section 4.8 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.

Section 4.9. REPORTING STATUS. Until one year after the date as
of which the Seller may sell all of the Purchase Shares without restriction
pursuant to Rule 144(k) promulgated under the Securities Act, the Buyer shall
use its best efforts to timely file all reports required to be filed with the
SEC pursuant to the Exchange Act and to maintain its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such termination.

Section 4.10. AMEX LISTING. The Buyer shall use reasonable
efforts to secure the listing of the Buyer Common Shares, including the Payment
Shares and the Make Whole Shares, on the American Stock Exchange.

Section 4.11. BOARD REPRESENTATIVE. Buyer shall appoint a
designee of ESI to its Board of Directors at the earliest practicable date
following the Closing Date and shall nominate and recommend the re-election of
such designee at its next annual meeting of stockholders; provided, however,
that if Seller shall no longer own at least 5% of the issued and outstanding
shares of Buyer Common Stock the Buyer shall have no further obligation under
this Section 4.11. In the event that ESI chooses not to seek the appointment of
a designee to the Buyer's Board of Directors, the Buyer shall (i) allow a
representative of ESI to attend and observe meetings of its Board of Directors
and (ii) provide ESI with all notices and other documents provided to its Board
of Directors.

Section 4.12. COMPANY FUNDING. The Buyer will secure equity or
debt financing on or prior to the Closing Date in an amount which Buyer and ESI
reasonably believe will be sufficient to satisfy the creditors of the Company.
The Buyer will make a capital contribution (the "Capital Contribution") to the
Company in an amount to be reasonably agreed to by the Buyer and ESI, the
proceeds of which shall be used to satisfy creditors of the Company

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and to fund the commencement of the Company's operations. In addition, Buyer
shall use its best efforts to secure the release of ESI as guarantor of
indebtedness of the Company set forth on Schedule 4.12, including without
limitation, (a) executing agreements with creditors of the Company to provide a
guaranty to such creditors in a form reasonably satisfactory to such creditors,
and (b) providing such creditors with all of the information it requests on a
timely basis.

ARTICLE V.

CLOSING

Section 5.1. CLOSING. This transaction shall close and all
deliveries to be made at the time of closing (the "Closing") shall take place at
10:00 a.m., local time, on November 30, 1998, or on such other date as may be
agreed upon from time to time in writing by Seller and Buyer (the "Closing
Date"). The Closing shall take place at the offices of Short & Ketchand, 11
Greenway Plaza, Suite 1512, Houston Texas 77046, or at such other place as the
Buyer and the Seller shall mutually agree.

Section 5.2. DELIVERIES BY SELLER AND ESI. On or prior to the
Closing Date, Seller and ESI shall deliver to Buyer, duly and properly executed,
the following:

(a) A certificate or certificates representing the Shares, duly
endorsed in blank for transfer or accompanied by separate stock powers duly
executed in blank, with all necessary documentary stamps evidencing the payment
of all applicable transfer taxes.

(b) Resolutions of the Board of Directors of Seller and ESI
authorizing the execution and delivery of this Agreement by Seller and the
performance of its obligations hereunder, certified by the Secretary of each of
the Seller and ESI.

(c) A certificate of the Secretary of State of Texas dated as of
a recent date as to the good standing of the Company in such state.

(d) A certificate of the Secretary of State of each state listed
on Schedule 2.1, dated as of a recent date as to the good standing of the
Company in each such state.

(e) A Certificate of the President and Secretary of Seller and
ESI in accordance with Section 6.1(d).

(f) A Registration Rights Agreement to be entered into by and
between Buyer and ESI, in the form attached hereto as Exhibit A (the
"Registration Rights Agreement").

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(g) Such other separate instruments or documents that Buyer may
reasonably deem necessary or appropriate in order to consummate the transactions
contemplated by this Agreement including, without limitation, all regulatory and
contractual consents of third parties.

Section 5.3. DELIVERIES BY BUYER. On or prior to the Closing
Date, Buyer shall deliver to Seller and ESI all duly and properly executed, the
following:

(a) Resolutions of the Board of Directors of Buyer authorizing
the execution and delivery of this Agreement by Buyer and the performance of its
obligations hereunder, certified by the Secretary of Buyer.

(b) A certificate of the Secretary of State of Colorado dated as
of a recent date as to the good standing of Buyer in such state.

(d) The Payment Shares, registered in the name of ESI or its
designee, any such designation to be made by ESI in writing and delivered to
Buyer not later than two days prior to the Closing Date.

(e) The Registration Rights Agreement.

(f) Such other separate instruments or documents that Seller and
ESI may reasonably deem necessary or appropriate in order to consummate the
transactions contemplated by this Agreement.

ARTICLE VI.

CONDITIONS PRECEDENT TO OBLIGATIONS

Section 6.1. CONDITIONS TO OBLIGATIONS OF BUYER. Each and every
obligation of Buyer to be performed on the Closing Date shall be subject to the
satisfaction as of or before the Closing Date of the following conditions
(unless waived in writing by Buyer):

(a) REPRESENTATIONS AND WARRANTIES. Seller's and ESI's
representations and warranties set forth in Article II of this Agreement shall
have been true and correct in all respects when made and shall be true and
correct in all material respects at and as of the Closing Date as if such
representations and warranties were made as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the extent
that any

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representation or a warranty is made as of a specified date, in which case such
representation or warranty shall be true in all material respects as of such
date.

(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and other
obligations under this Agreement which are to be performed or complied with by
Seller and ESI shall have been fully performed and complied with on or prior to
the Closing Date, including, without limitation, the delivery of the fully
executed instruments and documents in accordance with Section 5.2 hereof.

(c) NO ADVERSE PROCEEDING. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or administrative,
or governmental investigation against Buyer, Seller, ESI or the Company, for the
purpose of enjoining or preventing the consummation of this Agreement, or
otherwise claiming that this Agreement or the consummation hereof is illegal.

(d) CERTIFICATE. Seller and ESI shall have delivered to Buyer a
certificate, dated the Closing Date, executed by Seller's and ESI's President
and Secretary, to the effect that (i) the conditions set forth in subsections
(a) and (b) and, to the best knowledge of such officers, (c), of this Section
6.1 have been satisfied and (ii) the Articles of Incorporation and By-laws of
the Company shall have not been amended since the date upon which certified
copies of each had been delivered to Buyer and remain in full force and effect.

(e) CONSENTS AND APPROVALS. All consents, approvals and
authorizations of all material contracts, licenses, agreements or instruments
required for consummation of the transactions contemplated by this Agreement
shall have been received and shall be in full force and effect.

(f) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event or circumstance resulting or reasonably likely to result in a Material
Adverse Effect.

(g) LEASE AGREEMENT. Buyer shall have entered into a real
property lease or sublease (the "Lease Agreement") with the lessor or the
sublessor for a portion used by the Company in the premises located at the Port
of Bay City, in a form reasonably satisfactory to Buyer.

Section 6.2. CONDITIONS TO OBLIGATIONS OF SELLER AND ESI. Each
and every obligation of Seller and ESI to be performed on the Closing Date shall
be subject to the satisfaction as of or before the Closing Date of the following
conditions (unless waived in writing by Seller or ESI):

(a) REPRESENTATIONS AND WARRANTIES. Buyer's representations and
warranties set forth in Article III of this

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Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects at and as of the Closing
Date as if such representations and warranties were made as of the Closing Date,
except for changes permitted or contemplated by this Agreement and except to the
extent that any representation or a warranty is made as of a specified date, in
which case such representation or warranty shall be true in all material
respects as of such date.

(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and other
obligations under this Agreement which are to be performed or complied with by
Buyer shall have been fully performed and complied with on or prior to the
Closing Date including, without limitation, the delivery and the fully executed
instruments and documents in accordance with Section 5.3 hereof.

(c) NO ADVERSE PROCEEDING. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or administrative,
or governmental investigation against Buyer, Seller or the Company, for the
purpose of enjoining or preventing the consummation of this Agreement, or
otherwise claiming that this Agreement or the consummation hereof is illegal.

(d) CERTIFICATE. Buyer shall have delivered to Seller and ESI a
certificate, dated the Closing Date, executed by Buyer's President and Secretary
to the effect that (i) the conditions set forth in subsections (a) and (b) and,
to the best knowledge of such officers, (c), of this Section 6.2 have been
satisfied and (ii) the Articles of Incorporation and By-laws of Buyer shall have
not been amended since the date upon which certified copies of each had been
delivered to Seller and remain in full force and effect.

(e) NO BUYER MATERIAL ADVERSE EFFECT. There shall not have
occurred any event or circumstance resulting or reasonably likely to result in a
Buyer Material Adverse Effect, including but not limited to, a reduction of the
Fair Market Value of the Buyer Common Stock below $3.20. Fair Market Value shall
be calculated based upon the average of the closing sales prices of Buyer Common
Stock on the Nasdaq OTC Bulletin Board for any five consecutive trading days.

(f) TAX FREE STATUS. The Seller shall have received advice of its
tax counsel that it will not be taxed upon receipt of the Payment Shares and the
Make Whole Shares.

(g) COMPANY FUNDING; RELEASE OF GUARANTY. Buyer shall have made
the Capital Contribution to the Company. In addition, ESI and Seller shall have
been released from all obligations relating to the indebtedness of the Company
set forth on Schedule 4.12.

ARTICLE VII.

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INDEMNIFICATION

Section 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
AGREEMENTS. Subject to the limitations set forth in this Article VII and
notwithstanding any investigation conducted at any time with regard thereto by
or on behalf of Buyer, ESI or the Seller, all representations, warranties,
covenants and agreements of Buyer, ESI and the Seller in this Agreement shall
survive the execution, delivery and performance of this Agreement and shall be
deemed to have been made again by the Buyer, ESI and the Seller at and as of the
Closing. The obligation of indemnity provided herein shall survive the Closing.

Section 7.2. INDEMNIFICATION.

(a) Subject to the limitations set forth in this Article VII,
Seller and ESI shall indemnify and hold harmless Buyer from and against any and
all losses, liabilities, damages, demands, claims, suits, actions, judgments or
causes of action, assessments, costs and expenses including, without limitation,
interest, penalties, reasonable attorneys' fees, any and all reasonable expenses
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation (collectively, "Damages"), asserted
against, resulting to, imposed upon, or incurred or suffered by Buyer, directly
or indirectly, as a result of or arising from any inaccuracy in or breach of the
representations and warranties or covenants of the Seller or ESI contained in
this Agreement (individually an "Indemnifiable Claim" and collectively
"Indemnifiable Claims" when used in the context of Buyer as the Indemnified
Party (as hereinafter defined)).

(b) Subject to the limitations set forth in this Article VII,
Buyer shall indemnify and hold harmless Seller and ESI from and against any and
all Damages asserted against, resulting to, imposed upon, or incurred or
suffered by Seller or ESI, directly or indirectly, as a result of or arising
from any inaccuracy in or breach of any of the representations and warranties or
covenants of the Buyer contained in this Agreement (individually an
"Indemnifiable Claim" and collectively "Indemnifiable Claims" when used in the
context of Seller or ESI as the Indemnified Party).

(c) For purposes of this Article VII, all Damages shall be
computed net of any insurance coverage (from the amount of which coverage there
shall be deducted all costs and expenses, including attorneys' fees, of the
Indemnified Party not reimbursed by such coverage) with respect thereto that
reduces the Damages that would otherwise be sustained; PROVIDED, HOWEVER, that
in all cases, the timing of the receipt or realization of insurance proceeds
shall be taken into account in determining the amount of reduction of Damages.

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Section 7.3. LIMITATIONS ON INDEMNIFICATION. Rights to
indemnification hereunder are subject to the following limitations:

(a) All obligations of indemnity provided herein resulting from
the assertion of liability with respect to any representations and warranties
(other than Sections 2.13 and 3.10 which shall survive for the applicable
statute of limitations including all extensions thereof and Sections 2.12, 2.14
and 3.4 which shall survive until eighteen months after the Closing Date) shall
terminate on the first anniversary of the Closing Date.

(b) If, prior to the termination of any obligation to indemnify
as provided for herein, written notice of a claimed breach is given by the party
seeking indemnification including in detail the basis therefor (the "Indemnified
Party") to the party from whom indemnification is sought (the "Indemnifying
Party") or a suit or action based upon a claimed breach is commenced against the
Indemnified Party, the Indemnified Party shall not be precluded from pursuing
such claimed breach or suit or action, or from recovering from the Indemnifying
Party (whether through the courts or otherwise) on the claim, suit or action, by
reason of the termination otherwise provided for above.

(c) The right of any party hereto to commence or assert an
action, suit, claim or proceeding for Damages in respect of the breach of a
representation or warranty contained herein shall terminate at the same time
that the obligation of indemnification provided herein with respect to such
breach shall terminate.

(d) No party shall assert any claim against any other party or
parties for indemnification hereunder with respect to any breach of a
representation or warranty unless and until the amount of all such claims shall
exceed $20,000.

Section 7.4. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
THIRD-PARTY CLAIMS. The Indemnified Party shall give the Indemnifying Party
prompt written notice of any third party claim, demand, assessment, suit or
proceeding to which the indemnification set forth in Section 7.3 applies, which
notice to be effective must describe such claim in reasonable detail (the
"Indemnification Notice"). Notwithstanding the foregoing, the Indemnified Party
shall not have any obligation to give any notice of any assertion of liability
by a third party unless such assertion is in writing, and the rights of the
Indemnified Party to be indemnified hereunder in respect of any third party
claim shall not be adversely affected by its failure to give notice pursuant to
the foregoing unless and, if so, only to the extent that, the Indemnifying Party
is materially prejudiced thereby. The Indemnifying Party shall have the right to
control the defense or settlement of any such action subject to the provisions
set forth below, but the Indemnified Party may, at its election, participate in
the defense of any action or proceeding at its sole cost and expense.
Notwithstanding

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the foregoing, if there exists a conflict of interest that would make it
inappropriate for the same counsel to represent both the Indemnified Party, on
the one hand, and the Indemnifying Party, on the other hand, in connection with
any Indemnifiable Claim, then the Indemnified Party shall be entitled to retain
its own counsel as is reasonably satisfactory to the Indemnifying Party at the
Indemnifying Party's expense. In the event that such Indemnified Party shall
seek indemnification as provided herein, such Indemnified Party shall make
available to the Indemnifying Party, at its expense, all witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably required
by the Indemnifying Party. Should the Indemnifying Party fail to defend any such
Indemnifiable Claim (except for failure resulting from the Indemnified Party's
failure to timely give notice of such Indemnifiable claim), then, in addition to
any other remedy, the Indemnified Party may settle or defend such action or
proceeding through counsel of its own choosing and may recover from the
Indemnifying Party the amount of such settlement, demand, or any judgment or
decree and all of its costs and expenses, including reasonable fees and
disbursements of counsel. Except as permitted in the preceding sentence, the
Indemnifying Party shall not be liable for any settlement effected without its
written consent, which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, if such approval is unreasonably withheld, the liability of the
Indemnifying Party shall be limited to the amount of the proposed compromise or
settlement and the amount of the Indemnified Party's reasonable counsel fees
incurred in defending such claim, as permitted by the preceding sentence, at the
time such consent is unreasonably withheld. Notwithstanding the preceding
sentence, the right of the Indemnified Party to compromise or settle any claim
without the prior written consent of the Indemnifying Party shall only be
available if a complete release of the Indemnifying Party is contemplated to be
part of the proposed compromise or settlement of such third party claim.

Section 7.5. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
NON-THIRD-PARTY CLAIMS. In the event that the Indemnified Party asserts the
existence of an Indemnifiable Claim (but excluding claims resulting from the
assertion of liability by third parties), it shall give prompt written notice to
the Indemnifying Party specifying the nature and amount of the claim asserted
(the "Non-Third Party Claim Indemnification Notice"). If the Indemnifying Party,
within 30 days (or such greater time as may be necessary for the Indemnifying
Party to investigate such Indemnifiable Claim not to exceed 60 days), after
receiving the Non-Third Party Claim Indemnification Notice from the Indemnified
Party, shall not give written notice to the Indemnified Party announcing its
intent to contest such assertion of the Indemnified Party (the "Contest
Notice"), such assertion shall be deemed accepted and the amount of the claim
shall be deemed a valid Indemnifiable Claim. During the time period set forth in
the preceding sentence, the Indemnified

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Party shall cooperate fully with the Indemnifying Party in respect of such
Indemnifiable Claim. In the event, however, that the Indemnifying Party contests
the assertion of a claim by giving a Contest Notice to the Indemnified Party
within such period, then if the parties hereto, acting in good faith, cannot
reach agreement with respect to such claim within 60 days after such notice was
first given to the Indemnifying Party, such parties may seek any remedy
available to them at law or in equity.

ARTICLE VIII.

TERMINATION

Section 8.1. TERMINATION BY BUYER. This Agreement may be
terminated and cancelled at any time prior to the Closing Date by Buyer upon
written notice to Seller and ESI if: (i) any of the representations or
warranties of Seller contained herein shall prove to be inaccurate or untrue in
any respect; (ii) any obligation, term or condition to be performed, kept or
observed by Seller hereunder has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement, provided,
however, that (x) Buyer has given Seller and ESI written notice of all reasons
for the proposed termination and (y) Seller or ESI has not cured any such
condition within 10 days of receiving the Buyer's notice; or (iii) Buyer is not
satisfied in its sole discretion with the results of its full due diligence
review of the Business by Buyer and its counsel and agents, provided, however,
that the Buyer's right to terminate pursuant to this subsection (iii) shall
terminate on November 30, 1998.

Section 8.2. TERMINATION BY SELLER OR ESI. This Agreement may be
terminated and cancelled at any time prior to the Closing Date by Seller and ESI
upon written notice to Buyer if: (i) any of the representations or warranties of
Buyer contained herein shall prove to be inaccurate or untrue in any material
respect; (ii) any obligation, term or condition to be performed, kept or
observed by Buyer hereunder has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement, provided,
however, that (x) Seller and ESI has given Buyer written notice of all reasons
for the proposed termination and (y) Buyer has not cured any such condition
within 10 days of receiving the Seller's and ESI's notice; or (iii) ESI and the
Seller are not satisfied in their sole discretion with the results of their due
diligence review of the Buyer and its respective business operations, prospects,
liabilities and assets, provided, however, the Buyer's right to terminate
pursuant to this subsection (iii) shall terminate on November 30, 1998.

Section 8.3. TERMINATION BY ANY PARTY. Any party hereto shall
have the right to terminate and cancel this Agreement if (i) the Closing Date
shall not have occurred on or before November 30, 1998, unless extended pursuant
to Section 5.1 hereof; provided that

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<PAGE>
such failure of occurrence shall not have resulted from the delay, default or
breach of such party; or (ii) a court of competent jurisdiction shall have
issued an order, decree or ruling permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and nonappealable.

Section 8.4. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and cancelled at any time prior to the Closing Date by mutual written
consent of Buyer, Seller and ESI.

Section 8.5. EFFECT OF TERMINATION. In the event of termination
of this Agreement by any party hereto as provided in this Article VIII, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of any party or their respective officers or directors (except as
set forth in this Section 8.5, Section 4.5 and in Section 4.6 which shall
survive the termination). Nothing in this Section 8.5 shall relieve any party
from liability for any breach or failure of observance of the provisions of this
Agreement.

ARTICLE IX.

MISCELLANEOUS PROVISIONS

Section 9.1. NOTICES. All notices and other communications
required or permitted under this Agreement shall be deemed to have been duly
given and made when received if in writing and if served either by personal
delivery to the party for whom intended (which shall include delivery by Federal
Express or similar nationally recognized service) or five business days after
being deposited, postage prepaid, certified or registered mail, return receipt
requested, in the United States mail bearing the address shown in this Agreement
for, or such other address as may be designated in writing hereafter by, such
party:

IF TO SELLER OR ESI: Evans Systems, Inc.
720 North Avenue F
P.O. Box 2480
Bay City, Texas 77404-2480
Attention: Chief Executive Officer

WITH A COPY TO: Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Michael Otner, Esq.

IF TO BUYER: Synaptix Systems Corporation
3050 Post Oak Boulevard, Suite 1080
Houston, Texas 77056
Attention: Chief Executive Officer

-35-
<PAGE>
WITH A COPY TO: Boyer Ewing & Harris
9 Greenway Plaza, Suite 3200
Houston, Texas 77046
Attention: John Boyer, Esq.

Section 9.2. ENTIRE AGREEMENT. This Agreement, the documents
referred to herein, and the other matters agreed to in writing by the parties on
the date hereof, embody the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, oral or written, relative to said
subject matter.

Section 9.3. BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon Buyer, Seller and ESI and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be transferred or assigned (by operation of law or
otherwise) by either of the parties hereto without the prior written consent of
the other party except that Buyer shall have the right to assign its rights but
not its obligations hereunder to any Affiliate thereof. Any transfer or
assignment of any of the rights, interests or obligations hereunder in violation
of the terms hereof shall be void and of no force or effect.

Section 9.4. CAPTIONS. The Article and Section headings of this
Agreement are inserted for convenience only and shall not constitute a part of
this Agreement in construing or interpreting any provision hereof.

Section 9.5. EXPENSES OF TRANSACTION. Seller and ESI shall pay
all costs and expenses incurred by them, in connection with this Agreement and
the transactions contemplated hereby. Buyer shall pay all costs and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.

Section 9.6. WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by each of the
parties hereto, and no waiver of any of the provisions or conditions of this
Agreement or any of the rights of a party hereto shall be effective or binding
unless such waiver shall be in writing and signed by the party claimed to have
given or consented thereto. Except to the extent that a party hereto may have
otherwise agreed to in writing, no waiver by that party of any condition of this
Agreement or breach by the other party of any of its obligations,
representations or warranties hereunder shall be deemed to be a waiver of any
other condition or subsequent or prior breach of the same or any other
obligation or representation or warranty by such other party, nor shall any
forbearance by the first party to seek a remedy for any

-36-
<PAGE>
noncompliance or breach by such other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.

Section 9.7. NO THIRD PARTY BENEFICIARIES. Subject to the
provisions of Section 9.3 hereof, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation or legal entity, other than the parties hereto, any rights, remedies
or other benefits under or by reason of the provisions of this Agreement.

Section 9.8. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.

Section 9.9. GENDER. Whenever the context requires, words used in
the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be deemed to include and designate the
masculine, feminine or neuter gender.

Section 9.10. GOVERNING LAW. This Agreement shall in all respects
be construed in accordance with and governed by the laws of the State of Texas,
without regard to the principles of conflicts of laws thereof.

Section 9.11. KNOWLEDGE. As used in this Agreement, the term
"knowledge", when used herein with respect to Seller, ESI or Buyer shall mean
the knowledge of each of the executive officers of Seller or Buyer, as the case
may be.

Section 9.12. INCORPORATION OF EXHIBITS AND SCHEDULES. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

-37-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the day and year first above written.

BUYER:

SYNAPTIX SYSTEMS CORPORATION

By: /S/ PETER C. VANUCCI
Name: Peter C. Vanucci
Title: Chairman & CEO

SELLER:

WAY ENERGY, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: President

EVANS SYSTEMS, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: President

-38-

EXHIBIT 10.23

Amendment No. 1 to Stock Purchase Agreement

Amendment No. 1 dated as of December 29, 1998 to the Stock Purchase
Agreement dated as of October 30, 1998 (the "Stock Purchase Agreement"), by and
among Synaptix Systems Corporation, a Colorado corporation, d.b.a. Affiliated
Resources Corporation ("Buyer"), Evans Systems, Inc., a Texas corporation
("ESI"), and Way Energy, Inc., a Delaware corporation ("Seller").

W I T N E S S E T H :

WHEREAS, the above parties have entered into the Stock Purchase
Agreement, pursuant to which Buyer will buy and Seller will sell all of the
issued and outstanding shares (the "Shares") of common stock, par value $1.00
per share, of ChemWay Systems, Inc., a Texas corporation (the "Company"); and

WHEREAS, the parties desire, upon the terms and conditions hereinafter set
forth, to amend the Stock Purchase Agreement as set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

1. Section 1.3(a) is hereby amended in its entirety to read as follows:

"MAKE WHOLE ADJUSTMENT. In the event that the Anniversary Date Average
Price (as defined below) is less than the Closing Date Price, Buyer shall issue
a number of additional shares of Buyer Common Stock (the "Make Whole Shares") to
Seller . The number of Make Whole Shares to be issued to Seller shall be equal
to the greater of (i) zero or (ii) the Payment Shares subtracted from the
quotient of the Purchase Price divided by Anniversary Date Market Price. The
Anniversary Date Market Price shall mean the greater of (x) $2.40 and (y) the
average closing price of a share of Buyer Common Stock on the Buyer's then
principal trading market, during the 20 consecutive trading day period ending
two trading days prior to the one year anniversary of the Closing Date. The Make
Whole Shares, if any, shall be delivered to Seller ten days after the one year
anniversary of the Closing Date. The maximum number of Make Whole Shares to be
delivered shall be 1,000,000."

2. Section 1.3(d) (A) is hereby amended in its entirety to read as
follows:

"(A) If (i) Buyer agrees to merge or consolidate with another
entity and Buyer is not the surviving entity upon consummation of
the merger or consolidation (the date of such consummation being the
"Transaction Date"), (ii) the Transaction Date occurs on or before
the last day upon which the Make Whole Shares could be delivered
under Section 1.3(a) hereof and the Make Whole Shares

-1-
<PAGE>
have not been issued and delivered to Seller and (iii) the value two
trading days before the Transaction Date of the consideration per
share of Buyer Common Stock to be received by shareholders of Buyer,
determined by the Buyer's board of directors acting in good faith
(the "Consideration Value") in such merger or consolidation is not
equal to or greater than the Closing Date Price, then on the
Transaction Date immediately prior to the consummation of the merger
or consolidation, Buyer shall deliver to each Seller for each share
of Buyer Common Stock originally issued at the closing hereunder and
held by such Seller on the Transaction Date (before the consummation
of the merger or consolidation) shares of Buyer Common Stock having
a value equal to the difference between the Closing Date Price and
the Consideration Value, with such value determined based upon the
average closing price of a share of Buyer Common Stock during the 20
trading days ending two trading days prior to the Transaction Date."

3. Section 1.3(d)(B) is hereby amended in its entirety to read as follows:

"(B) If (i) on or before the last date upon which the Make
Whole Shares could be delivered under Section 1.3(a) hereof
(provided that no Make Whole Shares have been issued and delivered
to Seller), Buyer concludes a transaction required to be reported
under Section 13(e) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations
promulgated thereunder (the "13(e) Transaction") and (ii) the
average closing price of a share of Buyer Common Stock on the 20
trading days ending two trading days prior to the last day upon
which shareholders of Buyer could tender shares of Buyer Common
Stock in the 13(e) Transaction (the "13(e) Transaction Date Average
Price") is less than the Closing Date Price, on the date Buyer
distributes the consideration for the shares of Buyer Common Stock
tendered and accepted in the 13(e) Transaction, Buyer shall pay to
Seller an amount of cash per share tendered and accepted equal to
the difference between the Closing Date Price and the 13(e)
Transaction Date Average Price (as if Buyer had issued shares of
Buyer Common Stock having a value equal to the difference between
the Closing Date Price and the Transaction Date Average Price, and
such shares were tendered and accepted), provided that Buyer shall
also pay to Seller the consideration per share tendered and accepted
of Buyer Common Stock paid in the 13(e) Transaction to tendering
shareholders for shares of Buyer Common Stock accepted by the
Buyer."

4. Article I is hereby supplemented to include an additional provision,
Section 1.4, that shall read as follows:

"Section 1.4 PUT RIGHT. At any time after April 1, 1999 (the
"Put Date"), Seller shall have the right to sell (i.e. to "put") the
Payment Shares to the Buyer for $4.00 per Payment Share as described
below (the "Put"). Notwithstanding

-2-
<PAGE>
anything to the contrary herein, the Put shall immediately terminate
and be of no further force and effect upon the satisfaction and full
performance by Buyer of those covenants set forth in Sections 4.12
and 4.13 of the Stock Purchase Agreement, provided that there is no
inaccuracy or breach of the representations of the Buyer contained
in Section 3.17.

(a) At any time on or after the Put Date, Seller may
notify the Buyer of its irrevocable election to
exercise the Put by delivering to the Company a
duly completed notice of such election.

(b) No later than 10 business days after Seller's
delivery of the notice of election, the Buyer
shall effect the purchase of the Shares, at the
closing (the "Closing") to occur at a mutually
convenient time, date and location.

(c) At the Closing, (i) the Buyer shall pay to Seller
$4.00 per Share, and (ii) Seller shall convey any
Payment Shares subject to the Put to the Buyer
free and clear of all liens, claims or
encumbrances and deliver to the Buyer appropriate
stock powers in blank duly executed by Seller.

(d) As security for the Buyer's satisfaction of its
obligations under this Section 1.4, the Buyer
shall enter into a Security Agreement in favor of
Seller substantially in the form of Exhibit B
hereto.

5. Article III is hereby supplemented to include an additional provision,
Section 3.17, that shall read as follows:

"Section 3.17. COMPANY FUNDING. Since October 30, 1998 the Buyer has
issued or agreed to issue an aggregate of 920,000 shares for aggregate cash
proceeds of $800,000 and a note payable in an amount of $1,500,000. The Buyer
has received additional subscriptions for 80,000 shares which is expected to
yield aggregate net proceeds of $200,000 (the "Subscriptions"). The Buyer has
entered into a letter agreement dated December 18, 1998 with ICI Americas, Inc.
("ICI"), a copy of which is attached hereto as Exhibit 3.17 (the "ICI
Agreement"), regarding repayment of approximately $1,000,000 of the indebtedness
of the Company to ICI. At the Closing, the Buyer shall contribute $500,000 of
the previously described net proceeds to enable the Company to make the $500,000
payment required at Closing. The Buyer has no reason to believe that it will be
unable to satisfy other trade creditors of the Company and or to fund the
commencement of the Company's operations on or prior to February 1, 1999."

-3-
<PAGE>
6. Article IV is hereby amended by deleting Section 4.12 and inserting in
its place the following:

"Section 4.12. ADDITIONAL FINANCINGS; COMMENCEMENT OF OPERATIONS, ETC..
On of before February 1, 1999, the Buyer will (i) receive full payment of the
principal amount of the note described in Section 3.17 above, (ii) receive
payment of the Subscriptions or other equity financing resulting in at least
$200,000 in additional net proceeds, (iii) contribute at least $1,500,000 of the
proceeds from the financings described in Section 3.17 and this Section 4.12 to
satisfy creditors of the Company and to fund the operations of the Company, (iv)
satisfy all existing liabilities to the creditors that are set forth on Schedule
4.12 and (v) commence full operations of the Company. The Buyer further agrees
to continue to provide the Seller Representatives with full access to the
properties, contracts and records of the Buyer and its subsidiaries until
fulfillment of Sections 4.12 and 4.13 and the Buyer shall furnish promptly to
the Seller or Seller Representatives such other information concerning the
business of the Buyer and the Company as the Seller shall reasonably request."

7. Article IV is hereby supplemented to include an additional provision,
Section 4.13, that shall read as follows:

"Section 4.13 REPAYMENT OF WAREHOUSE NOTE, ETC.. Following the Closing
Date, Buyer covenants and agrees to satisfy all obligations of ESI under the
note dated November 29,1996 (the "Warehouse Note") in favor of Texas Commerce
Bank National Association currently having a principal balance of approximately
$240,000 and to pay all payments of principal and interest under such Warehouse
Note as such payments become due and payable. In addition, as soon as
practicable following the Closing Date and not later than March 31, 1999, the
Buyer hereby covenants and agrees to (i) repay the entire unpaid balance of the
Warehouse Note, together with all accrued but unpaid interest thereon, (ii)
fully perform, or cause the Company to fully perform, the ICI Agreement, and
(iii) repay all of the indebtedness of the Company to Dot Chemical, Inc. ("Dot")
or obtain a full release of Seller and affiliate from all indebtedness of the
Company to Dot."

8. Article IV is hereby supplemented to include an additional provision,
Section 4.14, that shall read as follows:

"Section 4.14 RESTRICTION ON BUYER'S ACTIONS. Buyer covenants and
agrees that, except (i) as contemplated by this Agreement, or (ii)
as agreed in writing by Seller, after the date hereof, and prior to
the time that all covenants of the Buyer in set forth in Sections
4.12 and 4.13 of this Agreement have been satisfied:

i. the Buyer will not, directly or indirectly, (a) sell, transfer
or pledge or agree to sell any capital stock of the Company or
(b) split, combine or reclassify Buyer's outstanding Common
Stock;

-4-
<PAGE>
ii. (a) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect
to its capital stock; (b) sell, transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any assets of
the Company that are subject to the terms of the Security
Agreement; or (c) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock;

iii. the Buyer will not modify, amend or terminate any of the
Company's Material Agreements or waive, release or assign any
material rights or claims of the Company;

iv. neither Buyer nor the Company will adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of
Buyer or the Company;

v. Except for payments required to satisfy existing liabilities
to creditors of the Company and ESI pursuant to Sections 4.12
and 4.13, the Company will not make or agree to make any
capital expenditure or capital expenditures greater than
$50,000 in the aggregate;

vi. neither Buyer nor any of its Subsidiaries will increase the
compensation of any director, executive officer or other key
employee of Buyer or pay any benefit or amount not required by
a plan, agreement, understanding or arrangement as in effect
on the date of the Agreement to any such person;

vii. neither Buyer nor any of its Subsidiaries will take, or agree
to commit to take, any action that would make any
representation or warranty of the Buyer contained herein
inaccurate in any material respect; or

viii. neither Buyer nor any of its Subsidiaries will authorize or
enter into an agreement to do any of the foregoing."

9. Section 5.3(d) is hereby amended in its entirety to read as follows:

"(d) The Payment Shares, registered in the name of the
Seller."

10. Section 6.2(f) is hereby amended in its entirety to read as follows:

"(f) TAX FREE STATUS. The Seller shall have received advice of
its tax counsel that it will not be taxed upon receipt of the
Payment Shares and the Make Whole Shares, other than amounts, if
any, treated as interest pursuant to Section 483 of the Internal
Revenue Code of 1986, as amended and Treasury Regulations
promulgated thereunder."

-5-
<PAGE>
11. Section 6.2(g) is hereby deleted in its entirety.

12. The Registration Rights Agreement is hereby amended in its entirety
and replaced with the Registration Rights Agreement attached hereto as Exhibit
B.

13. The Disclosure Schedules are hereby amended and replaced in their
entirety with the amended Disclosure Schedules attached hereto as Exhibit C.

14. Except as modified above, and in the letter agreement dated as of
October 30, 1998 the terms and conditions of the Stock Purchase Agreement are
hereby confirmed and shall remain in full force and effect.

15. This Amendment may be executed simultaneously in two or more
counterparts which may be by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties have duly executed this Amendment
No. 1 as of the date first above written.

BUYER:

SYNAPTIX SYSTEMS CORPORATION

By: /S/ VIRGINIA M. LAZAR
Name: Virginia M. Lazar
Title: Executive Vice President & Secretary

SELLER:

WAY ENERGY, INC.

By: /S/ J.L. EVANS, SR.
Name: J.L. Evans, Sr.
Title: President

EVANS SYSTEMS, INC.

By: /S/ J.L. EVAN, SR.
Name: J.L. Evans, Sr.
Title: President

-6-

EXHIBIT 22.0

SUBSIDIARIES OF REGISTRANT

1) EVANS OIL OF LOUISIANA, INC.
100% Owned Subsidiary
Incorporated in the State of Louisiana

2) IN & OUT MINI MART, INC.
100% Owned Subsidiary
Incorporated in the State of Texas

3) DIAMOND MINI MART, INC.
100% Owned Subsidiary of In & Out Mini Mart, Inc.
Incorporated in the State of Texas

4) EVANS OIL COMPANY, INC.
100% Owned Subsidiary
Incorporated in the State of Texas

5) EDCO, INC.
19% Owned Subsidiary of Evans Systems, Inc.
81% Owned Subsidiary of Evans Oil Company, Inc.
Incorporated in the State of Texas

6) WAY ENERGY SYSTEMS, INC.
100% Owned Subsidiary
Incorporated in the State of Delaware

7) CHEMWAY SYSTEMS, INC.(1)
100% Owned Subsidiary of Way Energy Systems, Inc.
Incorporated in the State of Texas

8) EDCO ENVIRONMENTAL SYSTEMS, INC.
100% Owned Subsidiary
Incorporated in the State of Texas

9) DISTRIBUTOR INFORMATION SYSTEMS CORPORATION 100% Owned Subsidiary
Incorporated in the State of Texas

(1) ChemWay Systems, Inc. was sold by the Company on December 29, 1998.

Page 18

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-62684, 33-94372 and No. 333-60217) and the
Prospectus constituting part of the Registration Statement on Form S-3 (No.
333-08197) of Evans Systems, Inc. of our report dated January 13, 1999,
appearing on page F-2 of this Form 10-K.

PricewaterhouseCoopers LLP

Houston, Texas
January 13, 1999

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 831
<SECURITIES> 0
<RECEIVABLES> 3,060
<ALLOWANCES> (264)
<INVENTORY> 3,714
<CURRENT-ASSETS> 9,980
<PP&E> 29,730
<DEPRECIATION> (12,499)
<TOTAL-ASSETS> 33,188
<CURRENT-LIABILITIES> (8,737)
<BONDS> 0
0
0
<COMMON> (33)
<OTHER-SE> (13,267)
<TOTAL-LIABILITY-AND-EQUITY> (33,188)
<SALES> 104,114
<TOTAL-REVENUES> 104,114
<CGS> 89,957
<TOTAL-COSTS> 17,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,312
<INCOME-PRETAX> (4,769)
<INCOME-TAX> (1,433)
<INCOME-CONTINUING> (3,336)
<DISCONTINUED> (828)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,164)
<EPS-PRIMARY> (1.34)
<EPS-DILUTED> (1.34)

</TABLE>

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,297
<SECURITIES> 0
<RECEIVABLES> 4,924
<ALLOWANCES> (340)
<INVENTORY> 7,962
<CURRENT-ASSETS> 14,962
<PP&E> 35,014
<DEPRECIATION> (13,404)
<TOTAL-ASSETS> 38,004
<CURRENT-LIABILITIES> (16,654)
<BONDS> 0
0
0
<COMMON> (32)
<OTHER-SE> (15,917)
<TOTAL-LIABILITY-AND-EQUITY> (38,004)
<SALES> 137,996
<TOTAL-REVENUES> 137,996
<CGS> 122,552
<TOTAL-COSTS> 18,420
<OTHER-EXPENSES> 489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 922
<INCOME-PRETAX> (4,288)
<INCOME-TAX> (1,295)
<INCOME-CONTINUING> (2,993)
<DISCONTINUED> (1,346)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,339)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> (1.41)

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 133,007
<TOTAL-REVENUES> 133,007
<CGS> 115,741
<TOTAL-COSTS> 16,907
<OTHER-EXPENSES> 104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 830
<INCOME-PRETAX> (285)
<INCOME-TAX> (100)
<INCOME-CONTINUING> (185)
<DISCONTINUED> 1,304
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,119
<EPS-PRIMARY> .37
<EPS-DILUTED> .37

</TABLE>