<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
June 26, 1996
Date of Report
(Date of earliest event reported)
Exsorbet Industries, Inc
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Idaho
-----
(State or other jurisdiction of incorporation)
0-25970 82-0464589
--------- ------------
(Commission file number) (IRS employer identification no.)
4294 Lakeland, Suite 200
Jackson, Mississippi 39208
---------------------- -------
(Address of principal executive offices) (Zip code)
(601) 936-4440
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On June 26, 1996, Exsorbet Industries, Inc. (the "Company")
entered into an Agreement and Plan of Merger (the "Agreement") between the
Company, Larco Acquisition, Inc., an Arkansas corporation and wholly owned
subsidiary of the Company ("Acquisition"), Larco Environmental Services, Inc.,
and Larry Woodcock and Marilyn Woodcock. Pursuant to the Agreement, the Company
beneficially acquired all of the outstanding common stock of Larco
Environmental Services, Inc., a Louisiana corporation, which is an
environmental emergency response and industrial services company ("Larco").
The stock was actually acquired by Acquisition. Acquisition and Larco are
filing articles of merger in which Larco will be the surviving corporation.
The stock of Larco was acquired from its sole shareholders, Larry Woodcock and
Marilyn Woodcock. In return, the Woodcocks received 1,152,021 shares of common
stock of the Company, par value $.001 per share (the "Common Stock"). The
Board of Directors of the Company determined this consideration to be fair and
reasonable by determining the fair market value of Larco to be, at a minimum,
$4,500,000. The value of the Common Stock at closing, based on a five day
closing price prior to closing, was approximately $3.89. The amount of Common
Stock provided, the Board believed, was representative of the fair market value
of Larco. At the same time that the Agreement was entered into, employment
agreements were entered into with each of Larry Woodcock and Marilyn Woodcock.
Larry Woodcock will receive cash compensation of $125,000 per year. Marilyn
Woodcock will receive cash compensation of $60,000 per year. Stock options
were granted to each of Larry Woodcock and Marilyn Woodcock and a signing bonus
was provided to Larry Woodcock. The Company also purchased real estate used by
Larco from Larry Woodcock and Marilyn Woodcock. Such real estate is located at
1890 Swisco Road, Sulphur, Louisiana. The Woodcocks were paid $1,388,000 for
the real estate. Since the acquisition, Larry Woodcock has been appointed to
the Board of Directors of the Company until the next annual meeting of
shareholders of the Company. He has also been appointed to be an officer of
the Company as an executive vice-president. Marilyn Woodcock has been
appointed as the business manager for the emergency response and industrial
services division of the Company. Necessary funding for the transaction was
supplied by a bank loan from a bank making a request for confidentiality
pursuant to Section 13(d)(1)(B) of the Securities Exchange Act of 1934, as
amended.
(b) The assets acquired in the acquisition and real property
purchase have been used as an operating facility for Larco. The assets include
both real property (acquired directly from Larry Woodcock and Marilyn Woodcock)
and personal property, including vehicles, emergency equipment, and other
equipment used in the business. The Company will continue to make the same use
of both the real and personal property as existed prior to the acquisition.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
LARCO ENVIRONMENTAL SERVICES, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
WITH
INDEPENDENT AUDITOR'S REPORT
3
<PAGE> 4
LARCO ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Independent Auditor's Report 1
Financial Statements
Balance sheets 2
Statements of income 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6 - 13
</TABLE>
4
<PAGE> 5
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Larco Environmental Services, Inc.
Sulphur, Louisiana
We have audited the accompanying balance sheets of LARCO ENVIRONMENTAL
SERVICES, INC. as of DECEMBER 31, 1995 AND 1994, and the related statements of
income, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Larco
Environmental Services. Inc., as of December 31, 1995 and 1994, and the results
of their operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ COOPER, SHUFFIELD & COMPANY
Little Rock, Arkansas
July 26, 1996
5
<PAGE> 6
LARCO ENVIRONMENTAL SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Current Assets
Cash $ 34,841 $ 145,348
Accounts receivable - trade, net of allowance for
doubtful account of $176,703 and $138,245
at 1995 and 1994, respectively 805,608 767,925
Accounts receivable - other 13,111 20,499
Inventory 351,307 327,888
Income taxes receivable 93,346 195,611
Prepaid expenses 128,781 81,532
------------ -------------
Total Current Assets 1,426,994 1,538,803
------------ -------------
Other Assets
Deferred income tax benefit 212,449 -
Other 13,770 1,860
------------ -------------
Total Other Assets 226,219 1,860
------------ -------------
Property and Equipment
Machinery and equipment 3,642,383 2,971,637
Office equipment and furniture 100,602 100,099
Transportation equipment 1,222,825 1,065,093
Leasehold improvements 95,725 51,928
------------ -------------
5,061,535 4,188,757
Less accumulated depreciation 1,122,424 833,378
------------ -------------
Net Property and Equipment 3,939,111 3,355,379
------------ -------------
Total Assets $ 5,592,324 $ 4,896,042
============ ===========
</TABLE>
6
<PAGE> 7
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 352,078 $ 305,768
Notes payable - stockholder - 898,633
- banks and other 939,265 335,481
Accounts payable 654,007 256,889
Other current liabilities 156,116 146,495
------------ ------------
Total Current Liabilities 2,101,466 1,943,266
------------ ------------
Long-term debt, less current maturities 1,461,042 912,935
------------ ------------
Deferred income tax payable - 300,000
------------ ------------
Stockholders' Equity
Common stock, authorized 1000 shares
at no par value; issued and outstanding,
500 shares 5,000 5,000
Additional paid-in capital 823,655 -
Retained earnings 1,201,161 1,734,841
------------ ------------
Total Stockholders' Equity 2,029,816 1,739,841
------------ ------------
Total Liabilities and Stockholders' Equity $ 5,592,324 $ 4,896,042
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
LARCO ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Sales $ 5,677,617 $ 5,593,312
Cost of Goods Sold 2,211,009 1,350,817
------------ -----------
Gross Profit 3,466,608 4,242,495
General and Administrative Expenses 3,895,711 3,743,726
------------ -----------
Income (Loss) from Operations (429,103) 498,769
Other Income (Expenses)
Interest income 4,160 1,323
Interest expense (324,133) (156,250)
Miscellaneous (11,378) (1,753)
Loss on sale of asset (67,083) (3,648)
------------ -----------
Total Other Income (Expenses) (398,434) (160,328)
------------ -----------
Income (loss) before Income Taxes (827,537) 338,441
Provisions (Benefits) for Income Taxes (293,857) 126,242
------------ -----------
Net Income (Loss) $ (533,680) $ 212,199
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
LARCO ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $ 5,000 $ - $ 1,522,642 $ 1,527,642
Net Income - 1994 - - 212,199 212,199
------------ ----------- ----------- -----------
Balance at December 31, 1994 5,000 - 1,734,841 1,739,841
Net (Loss) - 1995 - - (533,680) (533,680)
Contributed Capital - 823,655 823,655
------------ ----------- ----------- -----------
Balance at December 31, 1995 $ 5,000 $ 823,655 $ 1,201,161 $ 2,029,816
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
LARCO ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from Operating Activities:
Net income (loss) $ (533,680) $ 212,199
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 354,321 251,484
Loss on sale of property and equipment 67,083 -
Deferred income taxes (512,449) (10,519)
Changes in assets and liabilities:
Accounts receivable (30,295) 180,096
Income taxes receivable 102,265 (31,282)
Prepaid expenses (47,249) (21,597)
Inventory (23,419) (15,500)
Other assets (11,910) (1,150)
Accounts payable 397,118 1,687
Accrued expenses 9,621 20,598
----------- -----------
Net Cash Provided (Used) by Operating Activities (228,594) 586,016
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment 26,663 -
Purchase of property and equipment (1,031,799) (1,424,159)
----------- -----------
Net Cash Provided (Used) by Investing Activities (1,005,136) (1,424,159)
----------- -----------
Cash Flows from Financing Activities:
Net borrowings (repayments) on notes payable 528,806 487,942
Repayments of long-term debt (383,609) (750,350)
Proceeds from new borrowings on long-term debt 978,026 1,245,276
----------- -----------
Net Cash Provided (Used) by Financing Activities 1,123,223 982,868
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents (110,507) 144,725
Cash and Cash Equivalents - Beginning of Year 145,348 623
----------- -----------
Cash and Cash Equivalents - End of Year $ 34,841 $ 145,348
=========== ===========
</TABLE>
10
<PAGE> 11
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 300,784 $ 165,044
============ ============
Income taxes $ 93,346 $ 167,500
============ ============
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Note payable due from stockholder converted
to additional paid-in capital $ 823,655 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. Summary of Significant Accounting Policies
a. Business Activity
Larco Environmental Services, Inc., (the "Company") was
incorporated in September 1986. The Company is an
environmental service company specializing in hazardous spill
containment and clean-up. During 1994, the company began
offering specialized training to the personnel of industrial
companies that manufacture, store or ship hazardous or other
similar materials. Offices are located in Beaumont, Texas and
Baton Rouge and Sulphur, Louisiana and serves clients
primarily in the gulf region of the United States.
b. Cash and Cash Equivalents
The Company considers all investments with a maturity of three
months or less to be cash equivalents.
c. Inventories
Inventories are valued at the lower of cost (first-in,
first-out) or market.
d. Property and Equipment
Depreciation is provided primarily by the straight-line method
over the estimated useful lives of the various assets. For
income tax purposes, accelerated methods are used with
recognition of deferred income tax for the resulting timing
differences.
The estimated useful lives of property and equipment for
purposes of computing depreciation are as follows:
Machinery and equipment 5 to 25 years
Office equipment and furniture 5 to 10 years
Transportation equipment 5 to 20 years
Leasehold improvements 10 to 40 years
12
<PAGE> 13
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. Summary of Significant Accounting Policies (Continued)
e. Income Taxes
Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and
tax basis of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the
differences are expected to be realized. Income tax expense
is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and
liabilities.
f. Management 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 December 31, 1995 and
1994, and revenues and expenses for the years then ended. The
actual outcome of the estimates could differ from those
estimates made in the preparation of the financial statements.
g. Fair Value
The stated value of the Company's long-term debt approximates
the fair value based on the current rates offered to the
Company for debt of the same remaining maturities.
h. Concentration of Credit Risk
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of accounts
receivable - trade. The accounts receivable are generated
primarily through cost plus contracts. Due to the nature of
the services that are provided, credit checks of potential
clients are performed when feasible. However, the Company
does monitor its accounts receivable closely and utilizes its
personnel in the collection process of any overdue accounts.
13
<PAGE> 14
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Spill containment booms $ 247,387 $ 247,387
Supplies 103,920 80,501
------------ -------------
$ 351,307 $ 327,888
============ =============
</TABLE>
3. Note Payable - Stockholder
At December 31, 1994, note payable stockholder consisted of a 11.5
percent interest bearing note, due on demand. During 1995, the
Company satisfied this debt in a non-cash transaction which resulted
in an addition to the additional paid-in capital of the Company in the
amount of $823,655.
4. Notes Payable - Bank and Other
Notes payable - bank and other consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Line of credit with a bank, bearing interest
at the bank's prime lending rate plus
1%, currently at 10.75%, maximum credit
limit at December 31, 1995, $750,000,
secured by accounts receivable. $ 501,928 $ 290,542
Note payable to a bank, bearing interest at
the bank's prime base lending rate plus
1%, currently at 10.75%, due in October
1996, secured by equipment. 365,100 -
Note payable to a leasing company, due in
June 1996. Balance at December 31, 1995
represents the lease purchase price at
maturity. 72,237 -
</TABLE>
14
<PAGE> 15
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
4. Notes Payable - Bank and Other (Continued)
<TABLE>
<CAPTION>
1995 1994
----------- -------------
<S> <C> <C> <C>
Notes payable to an insurance company, due
in monthly installments totaling $8,309,
including interest ranging from 6.8% to
8.2%, due in 1995, unsecured - 44,939
------------ -------------
$ 939,265 $ 335,481
============ =============
5. Long-Term Debt
--------------
Long-term debt consisted of the following:
1995 1994
----------- -------------
Note payable to a bank, in monthly
installments of $3,932, including interest
at 8.75%. Note was refinanced during
1995 under modified terms $ - $ 114,944
Note payable to a bank in monthly
installments of $21,240, including interest,
at the bank's prime lending rate plus 1%.
Note was refinanced during 1995 under
modified terms - 629,165
Note payable to a bank in monthly
installments of $13,657, including interest,
at the bank's prime lending rate plus .6%,
currently at 10.60%, maturing in October
1997, secured by machinery and equipment 625,999 -
</TABLE>
15
<PAGE> 16
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. Long-Term Debt (Continued)
<TABLE>
<CAPTION>
1995 1994
----------- -------------
<S> <C> <C>
Note payable to a stockholder in monthly
installments of $3,000, including interest
at 11.5%, maturing in July 1998, unsecured $ 80,333 $ -
Note payable to a leasing company in
monthly installments of $311, including
interest at 15.21%, maturing in Augunterest,st
August 1998, secured by machinery and 1%.
equipment 9,632 13,359
Note payable to a financing company in
monthly installments of $9,948, including
interest at 10.65%, maturing in
December 1999, secured by machinery
and equipment 374,370 461,235
Various notes payable to a financing company
under a master agreement, payable in
total monthly payments totaling $16,887,
including interest at 9.95%, maturing
from March 2000 to October 2000, secured
by machinery and equipment 722,786 -
----------- ------------
1,813,120 1,218,703
Less current maturities 352,078 305,768
----------- ------------
$ 1,461,042 $ 912,935
=========== ============
</TABLE>
16
<PAGE> 17
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. Long-Term Debt (Continued)
Following are aggregate maturities of long-term debt for each of the
next five years:
<TABLE>
<S> <C>
1996 $ 352,078
1997 805,131
1998 292,257
1999 278,520
2000 85,134
-----------
$ 1,813,120
===========
</TABLE>
6. Income Taxes
Income tax at the statutory rate is reconciled to the Company's actual
provision (benefit) as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Percent Percent
of pre- of pre-tax
Amount tax loss Amount income
---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Tax (benefit) at federal
statutory rate $(281,363) 34% $115,070 34%
State income tax (benefit), net
of federal tax benefit (66,203) 8 18,106 5
Non - deductible expenses 18,874 (2) 9,404 3
Other 34,835 (4) (16,338) (5)
--------- ----- -------- ---
Provisions (benefits) for
Income taxes $(293,857) (36%) $126,242 37%
========= ==== ======== ==
</TABLE>
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Current income taxes (benefits) $ (81,408) $ (173,758)
Deferred income taxes (benefits) (212,449) 300,000
----------- ----------
Provisions (benefits) for income taxes $ (293,857) $ 126,242
=========== ==========
</TABLE>
17
<PAGE> 18
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
6. Income Taxes (Continued)
The Company's total deferred tax assets and deferred tax liabilities
at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Non-current:
Deferred tax liabilities $ 227,647 $ 300,000
Deferred tax assets (440,096) -
---------- -----------
Provisions (benefits) for income taxes $ (212,449) $ 300,100
========== ===========
</TABLE>
The Company has an unused net operating loss to offset future taxable
income and tax liabilities for income tax reporting purposes which
expire as follows:
<TABLE>
<CAPTION>
Net Operating
Years Ending December 31, Losses
------------------------- ----------------
<S> <C>
2015 $ 1,149,377
============
</TABLE>
7. Related Party Transactions
The Company leases the office and maintenance buildings from a
stockholder under an operating lease. Rent expense related to this
operating lease and included in general and administrative expenses
was approximately $62,000 and $130,000 for 1995 and 1994,
respectively. As of June 28, 1996, the real estate was sold to the
Company.
8. Subsequent Events
At December 31, 1995, the Company and Scottsdale Insurance Company,
were co-defendants involving a patent infringement lawsuit. The
co-defendants have vigorously contested the lawsuit and continue to
contest the position that no infringement of patent rights occurred.
As of July 26, 1996, the matter is pending in the United States
District Court, Western Division of Louisiana, Lake Charles Division.
18
<PAGE> 19
LARCO ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
8. Subsequent Events (Continued)
Pursuant to a judgment effective July 7, 1995, co-defendant Scottsdale
Insurance Company has assumed the cost of defense and pays legal
counsel for those costs. Also pending is a contingent claim by
Scottsdale Insurance Company for reimbursement of certain sums not
less than $475,000 incurred by Scottsdale in defense of Larco
Environmental Services, Inc. Legal counsel has advised that it is not
highly probable that this claim will be pursued. On March 11, 1996,
Scottsdale Insurance Company paid Larco Environmental Services, Inc.,
$475,000 for costs associated with the defense of the lawsuit.
A trial date is set for October 1996 and settlement conferences are
currently scheduled for August 1996. Legal counsel has advised that
the plaintiff's claim of over one million dollars will be settled for
a fraction of that amount, despite the lack of an order or judgment
requiring the Company's insurer, Scottsdale Insurance Company, to
indemnify the Company for any final judgement which may be obtained.
Legal counsel also believes that Scottsdale Insurance Company is
willing to fund all or a substantial portion of a settlement.
During 1996, Exsorbet Industries, Inc., entered into an agreement with
Larco Environmental Services, Inc., to purchase all of the authorized
and outstanding common stock of Larco Environmental services, Inc., in
exchange for 1,152,000 shares of Exsorbet Industries, Inc., common
stock. The planned merger agreement was closed on June 28, 1996.
19
<PAGE> 20
PRO FORMA FINANCIAL INFORMATION. The following pro forma information
for the Acquisition, includes pro forma information for the acquisition of
LARCO Environmental Services, Inc., which was acquired by the Company on June
26, 1996.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXSORBET INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------- ---------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current Assets
Cash $ 2,608,706 $ 1,330,554 $ 877,182 $ 336,587
Accounts receivable
- trade, net
of allowances 8,793,988 4,288,233 4,787,962 2,860,260
Inventories 552,595 1,116,585 835,550 1,308,302
Prepaid and other 976,156 610,220 513,877 398,790
----------- ------------ ------------ ------------
Total Current Assets 12,931,445 7,345,592 7,014,571 4,903,939
----------- ------------ ------------ ------------
Other Assets
Intangible assets, net 10,370,086 10,283,828 9,895,871 9,338,262
Other assets 1,699,407 449,865 200,675 73,264
----------- ------------ ------------ ------------
Total Other Assets 12,069,493 10,733,693 10,096,546 9,411,526
----------- ------------ ------------ ------------
Property, Plant and
Equipment, net 14,887,168 8,979,650 12,103,989 9,319,736
----------- ------------ ------------ ------------
Total Assets $39,888,106 $ 27,058,935 $ 29,215,106 $ 23,635,201
=========== ============ ============ ============
</TABLE>
20
<PAGE> 21
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------- ---------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current Liabilities
Accounts payable
- trade $ 1,536,849 $ 1,256,070 $ 1,990,202 $ 1,430,887
Notes payable and
current maturities of
long-term debt 5,812,445 1,868,925 3,373,688 3,132,703
Other current liabilities 1,495,156 1,156,077 785,475 431,412
----------- ------------ ------------ ------------
Total Current Liabilities 8,844,450 4,281,072 6,149,365 4,995,002
----------- ------------ ------------ ------------
Long-term debt, less
current maturities 9,798,695 3,980,582 3,490,059 2,066,830
----------- ------------ ------------ ------------
Deferred Income Taxes 929,149 - 116,637 387,734
----------- ------------ ------------ ------------
Total Liabilities 19,572,294 8,261,654 9,756,061 7,402,047
----------- ------------ ------------ ------------
Minority Interest - - 36,574 11,001
----------- ------------ ------------ ------------
Stockholders' Equity
Common stock 10,583 10,539 10,583 10,080
Additional paid-in
capital 18,064,851 17,830,895 18,064,852 15,831,859
Retained earnings
(deficit) 2,240,378 955,847 1,347,036 332,695
Total Stockholders'
----------- ------------ ------------ ------------
Equity 20,315,812 18,797,281 19,422,471 16,174,634
----------- ------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $39,888,106 $ 27,058,935 $ 29,215,106 $ 23,635,201
=========== ============ ============ ============
</TABLE>
21
<PAGE> 22
EXSORBET INDUSTRIES, INC,
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, December 31,
---------------------------- ----------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 15,039,167 $ 11,078,050 $ 21,825,894 $ 16,658,704
Cost of Sales 8,485,384 7,303,205 12,052,473 9,460,369
------------ ------------ ------------ ------------
Gross Profit 6,553,783 3,774,845 9,773,421 7,198,335
------------ ------------ ------------ ------------
Costs and Expenses
Marketing Expense 786,842 493,065 1,134,574 354,879
General and
Administrative 2,080,932 1,471,814 7,896,129 6,006,812
------------ ------------ ------------ ------------
Total Costs and Expenses 2,867,774 1,964,879 9,030,703 6,361,691
------------ ------------ ------------ ------------
Income from Operations 3,686,009 1,809,966 742,718 836,664
Other Income
(Expense), Net (369,892) (237,835) (360,060) (282,298)
------------ ------------ ------------ ------------
Income before
Income Tax Provisions
(Benefits) 3,316,117 1,572,131 382,658 554,346
Provisions (Benefits) for
Income Taxes 1,260,124 597,410 (88,457) 196,623
------------ ------------ ------------ ------------
Net Income $ 2,055,993 $ 974,721 $ 471,115 $ 357,723
============ ============ ============ ============
Average Shares
Outstanding 10,582,400 10,326,100 10,436,700 9,867,700
============ ============ ============ ============
Net Income per Common
Share $ 0.19 $ 0.09 $ 0.05 $ 0.04
============ ============ ============ ============
</TABLE>
22
<PAGE> 23
EXSORBET INDUSTRIES, INC,
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, December 31,
--------------------------- ---------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Cash (Used) Provided
by Operating Activities $ (840,569) $ 684,467 $ 604,387 $ 785,748
------------ ------------ ------------ ------------
Cash Flows from Investing
Activities:
Net purchases of property,
plant and equipment (4,384,916) (135,268) (3,269,020) (4,465,363)
Change in other assets (1,790,384) (208,933) (417,982) -
------------ ------------ ------------ ------------
Net Cash Used in Investing
Activities (6,175,300) (344,201) (3,687,002) (4,465,363)
------------ ------------ ------------ ------------
Cash Flows from Financing
Activities:
Proceeds from issuance of
debentures 5,000,000 - - -
Net proceeds from notes
payable and long-term
debt 3,747,393 653,701 2,308,360 3,009,587
Distributions to
stockholders - - (485,150) (152,331)
Issuance of common stock - - 1,800,000 499,999
------------ ------------ ------------ ------------
Net Cash Flows provided by
Financing Activities 8,747,393 653,701 3,623,210 3,357,255
------------ ------------ ------------ ------------
Increase (Decrease) in Cash
and Cash Equivalents 1,731,524 993,967 540,595 (322,360)
Cash and Cash Equivalents -
Beginning of Period 877,182 336,587 336,587 658,947
------------ ------------ ------------ ------------
Cash and Cash Equivalents -
End of Period $ 2,608,706 $ 1,330,554 $ 877,182 $ 336,587
============ ============ ============ ============
</TABLE>
23
<PAGE> 24
EXHIBITS.
2.1 Agreement and Plan of Merger dated June 26, 1996 by and
between Exsorbet Industries, Inc., Exsorbet Acquisition, Inc., Larco
Environmental Services, Inc., and Larry and Marilyn Woodcock
99.1 Press Release of Exsorbet Industries, Inc. dated June 26, 1996
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXSORBET INDUSTRIES, INC.
/s/ Charles E. Chunn, Jr.
--------------------------------
Charles E. Chunn, Jr.
Vice-President
Date: September 9, 1996
25
<PAGE> 26
EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<S> <C>
2.1 Agreement and Plan of Merger dated June 26, 1996 by and between Exsorbet Industries, Inc., Exsorbet
Acquisition, Inc., Larco Environmental Services, Inc., and Larry and Marilyn Woodcock
99.1 Press Release of Exsorbet Industries, Inc. dated June 26, 1996
</TABLE>
<PAGE> 1
EXHIBIT 2.1
TABLE OF CONTENTS
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
EXSORBET INDUSTRIES, INC.
(Parent)
LARCO ACQUISITION, INC.
(Merger Subsidiary)
AND
LARCO ENVIRONMENTAL SERVICES, INC.
(Target)
<TABLE>
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2 CERTIFICATE OF INCORPORATION AND BY-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 EFFECTIVE TIME OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.5 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FURTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 DIRECTOR APPOINTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 DEBT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 GENERAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 REPRESENTATIONS OF THE MERGER SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) ORGANIZATION OF THE MERGER SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(b) AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 REPRESENTATIONS OF THE CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) ORGANIZATION OF TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
(c) AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) ASSETS OF THE TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(I) FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(j) SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(k) UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(n) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(o) CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(p) NOTES AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(q) POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(r) INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(s) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(t) EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(u) EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(v) GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(w) ENVIRONMENT, HEALTH, AND SAFETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 SPECIFIC INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PARENT . . . . . . . . . . . . . . . . . . . . . 19
5.2 GENERAL INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE PARENT . . . . . . . . . . . . . . . . . . . 20
5.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . 20
5.4 MATTERS CONCERNING INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 SUCCESSION AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.9 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.10 INCORPORATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.12 KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
EXSORBET INDUSTRIES, INC.
(Parent)
LARCO ACQUISITION, INC.
(Merger Subsidiary)
AND
LARCO ENVIRONMENTAL SERVICES, INC.
(Target)
This Agreement and Plan of Reorganization (the "Agreement"), is made
this 26th day of June, 1996, by and among EXSORBET INDUSTRIES, INC., an Idaho
corporation (the "Parent"), LARCO ACQUISITION, INC., an Arkansas corporation
and a wholly-owned subsidiary of Parent (the "Merger Subsidiary"), LARCO
ENVIRONMENTAL SERVICES, INC., a Louisiana corporation (the "Target") and Larry
Woodcock and Marilyn Woodcock (the "Controlling Shareholders"), and provides
for the Target to become a wholly-owned subsidiary of the Parent by the merger
of the Merger Subsidiary with and into the Target and for the shareholders of
the Target by such merger, to become shareholders instead of the Parent. The
Parent, the Merger Subsidiary, the Target and the Controlling Shareholders are
referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Parent desires to acquire, on the terms and subject to
the conditions reflected below, the stock of the Target; and
WHEREAS, the Target believes that it is desirable to become a
wholly-owned subsidiary of the Parent as provided below:
WHEREAS, the requisite Boards of Directors have approved the
acquisition of Target by Parent.
WHEREAS, the requisite Boards of Directors have approved the merger
of Merger Subsidiary into Target (the "Merger"), pursuant to the Agreement of
Merger set forth in Exhibit 1.1 hereto ("Merger Agreement") and the
transactions contemplated hereby, in accordance with the applicable provisions
of the statutes of the States of Arkansas and Louisiana, which permit such
Merger.
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization with the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, each of the Parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions thereto.
1
<PAGE> 5
NOW, THEREFORE, THE PARTIES TO THIS PLAN OF REORGANIZATION AND
AGREEMENT do hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.4)
and subject to the terms and conditions of this Agreement and the Merger
Agreement, Merger Subsidiary will merge with and into the Target by the filing
with the Secretary of State of the State of Louisiana and, the Secretary of
State of the State of Arkansas, of the fully executed Merger Agreement, in a
form identical in all material respects to that attached hereto as Exhibit 1.1,
or, if permitted, a certificate of merger in lieu thereof ("Certificate of
Merger") and such other documents as may be required by applicable law to
effectuate the Merger, (1) each share of common stock of the Target outstanding
prior to the Merger will, by said occurrence and with no further action on the
part of the holder thereof be, transformed and converted into the right to
receive, upon surrender of the certificate for such share of the common stock
of the Target, the Consideration (as defined in Section 1.3 below), without
interest or any similar payment thereon or with respect thereto; (2) each share
of common stock of the Merger Subsidiary outstanding prior to the Merger will,
by said occurrence and with no further action on the part of the holder thereof
be transformed and converted into 3.333 shares of the Common Stock of the
Target, so that thereafter the Parent will be the sole and exclusive owner of
equity securities of the Target; (3) the officers of the Target immediately
prior to the effectiveness of the Merger will continue to hold such offices
after the effectiveness of the Merger, and thereafter subject at all times to
the discretion of the board of directors of the Target; (4) the board of
directors of the Target immediately prior to the effectiveness of the Merger
will continue to hold such positions after the effectiveness of the Merger; (5)
the Target, as the surviving corporation of the Merger (the "Surviving
Corporation") shall be the owner of all the business, assets, rights and other
attributes theretofore held by either the Merger Subsidiary or the Target; and
(6) the name of the Target shall thereafter be the same as that of the Target
prior to the Merger.
1.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Articles of
Incorporation and By-Laws of the Target as in effect immediately prior to the
effective time shall be the Articles of Incorporation and By-Laws of the
Incorporation after the Effective Time.
1.3 CONSIDERATION. Pursuant to the Merger, each holder of shares
of common stock of the Target immediately prior to the Merger shall be entitled
to receive, from and after the effectiveness of the Merger, in respect of each
share of common stock of the Target outstanding immediately prior to the Merger
owned by such holder (and upon surrender of the certificate(s) therefor, duly
endorsed and in all respects and in proper form for transfer), his or her pro
rata share of the Consideration. The term "Consideration" for purposes of this
Agreement shall mean the 1,152,021 shares of common stock of the Parent, into
which each share of common stock of the Target outstanding immediately prior to
the consummation of the Merger will be converted by reason of the Merger. All
stock issued by the Parent shall be subject to Rule 144 of the United States
Securities and Exchange Commission.
1.4 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, a duly certified and acknowledged copy of the Merger Agreement, or a
certificate of merger (the "Certificate of Merger") duly
2
<PAGE> 6
prepared, executed and acknowledged by Merger Subsidiary and the Target, shall
be delivered to the Secretary of State of the State of Louisiana and Arkansas
for filing, as provided under the applicable law of such states, on the Closing
Date (as defined in Section 1.5). The Merger shall become effective upon the
filing of the Merger Agreement or the Certificate of Merger with the
Secretaries of State of the States of Louisiana and Arkansas or at such time
thereafter as is provided in the Merger Agreement or the Certificate of Merger
pursuant to the mutual agreement of Parent and Target (the "Effective Time").
1.5 CLOSING. The closing of the Merger (the "Closing") will take
place on June 26, 1996 and the Certificate of Merger will be filed as soon as
practicable after the Closing.
ARTICLE II
FURTHER AGREEMENTS
2.1 DIRECTOR APPOINTMENT. Parent, through its current board of
directors, will appoint Larry Woodcock to a position as a director on the board
of directors of the Parent to take effect no later than June 30, 1996. Prior
to such appointment, Parent will obtain directors and officers liability
insurance.
2.2 DEBT OBLIGATIONS. Parent shall be responsible for the
liabilities of the Target, unless otherwise specified, and shall take all steps
necessary to cause the Controlling Shareholders to be removed as guarantors of
all Target debt and to cause any lenders to release the Controlling
Shareholders from any personal obligations on Target debt. Parent shall not be
responsible for any liability of Target in connection with the case of Rymel v.
Larco described in Exhibit "G" hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 GENERAL STATEMENT. The Parties make the representations and
warranties to each other which are set forth in this Article III.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY. Parent and Merger Subsidiary jointly and severally represent and
warrant to Target and Controlling Shareholders, as of the date hereof and at
the Effective Time, as follows:
(a) ORGANIZATION OF THE MERGER SUBSIDIARY. Exsorbet Industries, Inc.
is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Idaho. Larco Acquisition,
Inc. is a wholly owned subsidiary of Exsorbet Industries, Inc. and is
duly organized, validly existing, and in good standing under the laws
of the State of Arkansas.
(b) AUTHORIZATION OF TRANSACTION. Each of the Parent and the Merger
Subsidiary has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Parent and the Merger
Subsidiary, enforceable in accordance with its terms and conditions.
Neither the Parent nor the Merger Subsidiary need give any
3
<PAGE> 7
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Parent or the Merger Subsidiary are subject or any provision of
their respective charter or bylaws.
(d) BROKERS' FEES. Neither the Parent nor the Merger Subsidiary has
any liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which any Seller could become liable or
obligated.
(e) INVESTMENT. The Parent (A) understands that the restricted
common stock of the Target, which it will receive pursuant to the
Merger, has not been, and will not be, registered under the Securities
Act of 1933, or under any state securities laws, and are being offered
and sold in reliance upon federal and state exemptions for
transactions not involving any public offering; (B) is acquiring such
restricted common stock solely for its own account for investment
purposes, and not with a view to the distribution thereof; (C) is a
sophisticated investor with knowledge and experience in business and
financial matters; (D) has received certain information concerning the
Target and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in
holding the restricted common stock; and (E) is able to bear the
economic risk and lack of liquidity inherent in holding the restricted
common stock.
3.3 REPRESENTATIONS OF TARGET. Target and Controlling Shareholders
jointly and severally represent and warrant to each of Parent and Merger
Subsidiary as of the date hereof and at the Effective time, as follows:
(a) ORGANIZATION OF TARGET. To the knowledge of Target and the
Controlling Shareholders, Target is duly organized, validly existing,
and in good standing under the laws of the State of Louisiana. To the
knowledge of Target and the Controlling Shareholders, Target is duly
authorized to conduct business in the states of Louisiana and Texas
and has ICC licenses in Louisiana, Florida, Mississippi, Georgia,
Arkansas, Tennessee and Oklahoma. To the knowledge of Target and the
Controlling Shareholders, Target has full corporate power and
authority to carry on the businesses in which it is engaged and to use
the properties used by it. A list of the officers and directors of
Target is attached hereto as Exhibit "A."
(b) CAPITALIZATION. The entire authorized capital stock of Larco
Environmental Services, Inc. consists of 1,000 shares, with 1,000
shares issued in the names of the Controlling Shareholders. All of
the issued and outstanding shares of stock of all classes of the
Target has been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Controlling Shareholders.
There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments
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that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its stock of any class. Besides the stock
appreciation rights in Larco Environmental Services of Baton Rouge,
Inc. previously disclosed herein, there are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to the Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target. The Controlling
Shareholders directly own all of the issued and outstanding stock of
all classes of the Target, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and
state securities laws), taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The Controlling Shareholders are not a party to any option,
warrant, purchase right, or other contract or commitment that could
require the Controlling Shareholders to sell, transfer, or otherwise
dispose of any stock of the Target (other than this Agreement). The
Controlling Shareholders are not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any
stock of the Target.
(c) AUTHORIZATION OF TRANSACTION. The Target and Controlling
Shareholders have full power and authority to execute and deliver this
Agreement and to perform their obligations hereunder. This Agreement
constitutes valid and legally binding obligations of the Target and
Controlling Shareholders, enforceable in accordance with its terms and
conditions. The Target and Controlling Shareholders need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement.
(d) NONCONTRAVENTION. To the knowledge of the Target and Controlling
Shareholders, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Controlling Shareholders or the Target is subject; or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which either the Controlling Shareholders or the Target is a party
or by which either the Controlling Shareholders or the Target is bound
or to which any of the assets of either the Controlling Shareholders
or the Target is subject. The parties acknowledge disclosure of the
agreement existing between Ron Barron and Larco Environmental
Services of Baton Rouge, Inc.
(e) BROKERS' FEES. The Target and Controlling Shareholders have no
liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which the Merger Subsidiary could become liable or
obligated.
(f) INVESTMENT. The Target and Controlling Shareholders are
acquiring the restricted common stock solely for their own account for
investment purposes, and not with a view to the distribution thereof
and have received certain information concerning Exsorbet Industries,
Inc. and have had the opportunity to obtain additional information as
desired in order to evaluate the
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merits and the risks inherent in holding the stock.
(g) ASSETS OF THE TARGET. To the knowledge of the Target and
Controlling Shareholders, the Target has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by
them, located on their premises, or shown on the most recent balance
sheet or acquired after the date thereof, free and clear of all
security interests, except for properties and assets disposed of in the
ordinary course of business since the date of the most recent balance
sheet and as heretofore disclosed to the Parent. The Controlling
Shareholders have disclosed that the real property utilized by the
Target is owned individually by the Controlling Shareholders. The
Controlling Shareholders warrant that no other person or entity is
entitled to claim a mortgage interest, security interest, or otherwise
claim a right to possession of the real property utilized by the
Target, except as is disclosed in Exhibit "B," attached hereto. To the
knowledge of the Target and Controlling Shareholders, the buildings,
machinery, equipment, and other tangible assets that the Target owns
and leases are free from material defects (patent and latent), have
been maintained in accordance with normal industry practice, and are in
good operating condition and repair (subject to normal wear and tear).
It is specifically noted that the Merger Subsidiary and Parent have
inspected the buildings and equipment utilized by the Target. Such
buildings, equipment, machinery, and other tangible assets are
acceptable, and the Merger Subsidiary and Parent will not be asserting
any claim against the Target and Controlling Shareholders for updating,
painting, repairing, or modifying the buildings or equipment.
(h) There are no pending or, to the knowledge of the Target and
Controlling Shareholders and the directors and officers of the Target,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the real property utilized by either Target. All
real property improvements utilized by the Target have received all
required approvals of governmental authorities (including material
licenses and permits) required in connection with the ownership or
operation thereof, and have been operated and maintained in accordance
with applicable laws, rules, and regulations in all material respects.
(i) FINANCIAL STATEMENTS. Attached hereto as Exhibit "C" are the
following financial statements (collectively the "Financial
Statements"): (i) unaudited consolidated balance sheets and statements
of income for the fiscal years ended July 31, 1993, 1994, and 1995 for
the Target; and (ii) unaudited consolidated balance sheets and
statements of income through May 31, 1996 for the Target. The
Financial Statements (including the notes thereto) have been prepared
in accordance with generally accepted accounting principles in effect
in the United States applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of
the Target as of such dates and the results of operations of the
Target for such periods; provided, however, that the most recent
financial statements (being all documents identified in this
subparagraph for the period ended December 31, 1995) are subject to
normal year-end adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items.
(j) SUBSEQUENT EVENTS. To the knowledge of the Target and
Controlling Shareholders, since May 31, 1996, there has not been any
material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Target
taken as a whole.
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Without limiting the generality of the foregoing, since that date:
(a) the Target has not sold, leased, transferred, or assigned
any material assets, tangible or intangible, outside the
ordinary course of business;
(b) the Target has not entered into any material agreement,
contract, lease, or license outside the ordinary course of
business;
(c) no person or entity has accelerated, terminated, made
material modifications to, or canceled any material agreement,
contract, lease, or license to which the Target is a party or
by which it is bound, outside of the ordinary course of
business;
(d) the Target has not imposed any security interest upon any
of its assets, tangible or intangible, outside of the ordinary
course of business;
(e) the Target has not made any material capital expenditures
outside the ordinary course of business;
(f) the Target has not made any material capital investment
in, or any material loan to, any other person outside the
ordinary course of business;
(g) the Target has not created, incurred, assumed, or
guaranteed any indebtedness for borrowed money and capitalized
lease obligations outside of the ordinary course of business;
(h) the Target has not granted any license or sublicense of
any material rights under or with respect to any "intellectual
property." The term "intellectual property" as used herein
refers to: (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications,
and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions,
and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals
in connection therewith, (c) all copyrightable works, all
copyrights, and all applications, registrations, and renewals
in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business
information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals),
(f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all
copies and
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tangible embodiments thereof (in whatever form or medium);
(i) there has been no material change made or authorized in
the articles of incorporation or by-laws of the Target;
(j) the Target has not issued, sold, or otherwise disposed of
any of its capitalstock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(k) the Target has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(l) the Target has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to
its property. (The provisions of this paragraph do not imply
that the Target has not experienced depreciation with respect
to certain assets since May 31, 1996, as it has in previous
years);
(m) the Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and
employees outside the ordinary course of business;
(n) the Target has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(o) the Target has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the ordinary course of business. However, the Target
has agreed to provide a raise to its Chief Financial Officer,
David Wilburn, in the amount of $5,000.00 annually effective
August 1, 1996;
(p) the Target has not adopted, amended, modified, or
terminated any bonus, profit- sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any
of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan).
However, a profit sharing plan is in existence and such action
will be taken to assure that no vesting or interest is lost or
diminished; and
(q) the Target has not made any other material change in
employment terms for any of its directors, officers, and
employees outside the ordinary course of business. (It is
understood that placing emergency response personnel on a
salary is within the ordinary course of business).
(k) UNDISCLOSED LIABILITIES. To the knowledge of the Target and
Controlling Shareholders, the Target has not incurred any material
liability (whether known or unknown, whether asserted
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<PAGE> 12
or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due, including any liability for taxes), except for (i)
liabilities set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (ii) liabilities which have
arisen after the most recent fiscal month end in the ordinary course
of business. Notwithstanding any other provision herein, the Target
may have a nominal income tax liability in the total amount of
approximately $30,000, plus penalties and interest, for the fiscal
years ending July 31, 1992 and/or July 31, 1993. Such contingent debt
has arisen by virtue of a tax audit. Accountants' fees have been
incurred and are currently owed by the Target in connection with the
tax audit. No other material income tax liability not incurred in the
ordinary course of business is known to exist.
(l) LEGAL COMPLIANCE. To the knowledge of the Target and Controlling
Shareholders, the Target has materially complied with all applicable
laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against it alleging any failure so to comply, except where
the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations, or
future prospects of the Target.
(m) TAX MATTERS.
(a) To the knowledge of the Target and Controlling
Shareholders, the Target has filed all income tax returns that
it was required to file. All such income tax returns were
correct and complete in all material respects. All income
taxes owed by the Target (whether or not shown on any income
tax return) have been paid, except for a total income tax
liability of approximately $30,000.00 owed for the 1992 and/or
1993 tax years of the Target. The Target is not the
beneficiary of any extension of time within which to file any
Income Tax Return.
(b) Except as previously disclosed or stated elsewhere, to
the knowledge of the Target and Controlling Shareholders,
there is no known material dispute or claim concerning any
income tax liability of the Target either (A) claimed or
raised by any authority in writing or (B) as to which the
Controlling Shareholders and the directors and officers of the
Target has knowledge based upon personal contact with any
agent of such authority. Provided however, it has been
disclosed that there is a dispute concerning income tax
liability of the Target for the 1992 and/or 1993 income tax
year of approximately $30,000, plus penalties and interest.
(c) Attached hereto as Exhibit "D" is a disclosure listing all
federal, state, local, and foreign income tax returns filed
with respect to the Target for which an audit has been
conducted or the Target has been notified that an audit will
be conducted. The Target and Controlling Shareholders have
delivered to the
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Merger Subsidiary, or allowed the Merger Subsidiary to
inspect, correct and complete copies of all federal and state
income tax returns, examination reports, and statements of
deficiencies assessed against, or agreed to by the Target for
the time periods through and including May 31, 1996. The
Target has not waived any statute of limitations in respect to
income taxes or agreed to any extension of time with respect
to an income tax assessment or deficiency, with the exception
of the return for 1992.
(d) The Target has not filed a consent under Internal Revenue
Code Section 341(f) concerning collapsible corporations. The
Target has not made any material payments, is not obligated to
make any material payments, and is not a party to any
agreement that under certain circumstances could obligate it
to make any material payments that will not be deductible
under Internal Revenue Code Section 280G. The Target has not
been a United States real property holding corporation within
the meaning of Internal Revenue Code Section 897(c)(2) during
the applicable period specified in Internal Revenue Code
Section 897(c)(1)(A)(ii). The Target is not a party to any
tax allocation or sharing agreement. The Target (A) has not
been a member of an Affiliated Group filing a consolidated
federal Income Tax Return (other than a group the common
parent of which was the Target) or (B) has no liability for
the taxes of any Person (other than the Target) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(e) Except with respect to the amount of approximately $30,000
in income tax liability that may exist for the 1992 and/or
1993 income tax year, the unpaid Income Taxes of the Target
(A) did not, as of the most recent fiscal month end, exceed by
any material amount the reserve for income tax liability
(rather than any reserve for deferred taxes established to
reflect timing differences between book and tax income) set
forth on the face of the most recent balance sheet (rather
than in any notes thereto) and (B) will not exceed by any
material amount that reserve as adjusted for operations and
transactions through date of this Agreement in accordance with
the past custom and practice of the Target in filing its
income tax returns.
(n) INTELLECTUAL PROPERTY.
(a) To the knowledge of the Controlling Shareholders and
officers and directors of the Target, except for issues
alleged against the Target in pending patent infringement
litigation identified in Exhibit "G", the Target has not
interfered with, infringed upon, misappropriated, or violated
any material "intellectual property"
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rights of third parties in any material respect, and neither
of the Controlling Shareholders and the directors and officers
of the Target has ever received any charge, complaint, claim,
demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any
claim that the Target must license or refrain from using any
"intellectual property" rights of any third party). To the
knowledge of the Controlling Shareholders and the directors
and officers of the Target, no third party has interfered
with, infringed upon, misappropriated, or violated any
material "intellectual property" rights of the Target in any
material respect.
(b) No patent or registration has been issued to the Target
with respect to any of its "intellectual property," and no
application for a patent has been made for any such
"intellectual property," except that a patent was applied for
a Pneumatic Excavation System on July 20, 1995. The patent
application is being processed by Alan J. Atkinson, 2700 Post
Oak Boulevard, Suite 1530, Houston, TX 77056 (telephone
713-626- 7800). No third party has been granted any right,
license, or agreement to use any of the "intellectual
property" of the Target. The Target possesses all right,
title, and interest to all "intellectual property" used by it,
without restriction by any contract, court order, or
governmental authority.
(o) CONTRACTS. Attached hereto as Exhibit "E" is a list of all
contracts and agreements, excluding emergency response contracts and
agreements, to which the Target is a party. Such list may exclude any
non-material contract. Such list shall specifically include: all
partnership and joint venture agreements; contracts of indemnity;
confidentiality agreements; any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of its current or
former directors, officers, and employees; any collective bargaining
agreement; any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $1,000.00 or providing material severance
benefits; any agreement under which either Target has advanced or
loaned any amount to any of its directors, officers, and employees
outside the ordinary course of business; or any agreement under which
the consequences of a default or termination could have a material
adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Target.
(p) NOTES AND ACCOUNTS RECEIVABLE. To the knowledge of the
Controlling Shareholders, with the exception of those obligations
listed on Exhibit "I" attached hereto and the Global Spill Response,
National Bank, and American Marine accounts, which are considered
uncollectible, a relatively small percentage of accounts receivable
are marginal or not collectible and the notes and accounts receivable
of the Target are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are current
and collectible, and will be collected in accordance with their terms
at their recorded amounts. Target has no reserve for bad debts.
(q) POWERS OF ATTORNEY. To the knowledge of either of the Controlling
Shareholders and the directors and officers of the Target, there are
no material outstanding powers of attorney executed on behalf of the
Target except that George Gragson, C.P.A., has an active power of
attorney to represent the Target in connection with the federal tax
matter previously described.
(r) INSURANCE. Exhibit "F" attached hereto is a list of each material
insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond
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and surety arrangements) with respect to which the Target is a party,
a named insured, or otherwise the beneficiary of coverage. It is also
understood that a life insurance policy on Larry Woodcock with the
Target and The Calcasieu Marine National Bank of Lake Charles ("Bank")
as beneficiaries will remain the property of the Controlling
Shareholders and the beneficiary status will be changed as desired by
the Controlling Shareholders.
(s) LITIGATION. Exhibit "G," attached hereto is a list of each
instance in which any of the Target (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the knowledge of any of the Controlling Shareholders and
the directors and officers of the Target, is threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(t) EMPLOYEES. To the knowledge of either of the Controlling
Shareholders and the directors and officers of the Target, no
executive, key employee, or significant group of employees plans to
terminate employment with the Target during the next 12 months. The
Target is not a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strike or material
grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three years. To the knowledge of
the Controlling Shareholders, the Target has not committed any
material unfair labor practice. Neither of the Controlling
Shareholders and the directors and officers of the Target has any
knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of the Target.
(u) EMPLOYEE BENEFITS. To the knowledge of the Controlling
Shareholders, every employee benefit plan (and each related trust,
insurance contract, or fund) of the Target complies in form and in
operation in all material respects with the applicable requirements of
the Employee Retirement Income Security Act of 1974 ("ERISA"), the
Internal Revenue Code, and other applicable laws.
(v) GUARANTIES. The Target is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness)
of any other person or entity.
(w) ENVIRONMENT, HEALTH, AND SAFETY.
(a) As used herein, the term "Environmental, Health, and
Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection
of the environment, public health and safety, or employee
health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
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materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
(b) To the knowledge of the Controlling Shareholders, the
Target (I) has complied with the Environmental, Health, and
Safety Laws in all material respects (and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any such failure to comply), (ii) has obtained
and been in substantial compliance with all of the terms and
conditions of all material permits, licenses, and other
authorizations which are required under the Environmental,
Health, and Safety Laws, and (iii) has complied in all
material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in
the Environmental, Health, and Safety Laws.
(c) To the knowledge of the Controlling Shareholders, all
properties and equipment used in the business of the Target
and its respective predecessors and subsidiaries have been
free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2- transdichloroethylene, dioxins,
dibenzofurans, and extremely hazardous substances, except for
exposure to such substances limited to periods of emergency
response activity by the Target.
ARTICLE IV
COVENANTS
4.1 COVENANTS. The parties agree as follows with respect to the
period after execution of this Agreement.
(a) GENERAL. In case at any time after the execution of this
Agreement, any further action is necessary to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting party unless such action was specifically required under the terms
of this Agreement. The Parent and the Controlling Shareholders acknowledge and
agree that from and after the Closing Date the Parent will be entitled to
possession of all documents, books, records (including tax records),
agreements, and financial data of any sort relating to the Target.
(b) LITIGATION SUPPORT. In the event and for so long as any
signatory to this Agreement is actively contesting or defending against any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the execution of this Agreement involving the
Target, each of the other
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parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
person or entity.
(c) TRANSITION. Neither the Target nor the Controlling Shareholders
will take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Target from maintaining the same business relationships with
the Target after the date of this Agreement as it maintained with the Target
prior to execution.
(d) CONFIDENTIALITY. As used herein, the term "confidential
information" means any information concerning the businesses and affairs of the
Target, the Parent, and the Merger Subsidiary that is not already generally
available to the public. Each of the Controlling Shareholders will treat and
hold as such all of the confidential information, refrain from using any of the
confidential information except in connection with this Agreement, and deliver
promptly to the Parent or destroy, at the request and option of the Parent, all
tangible embodiments (and all copies) of the confidential information which are
in his or its possession. In the event that any of the Controlling
Shareholders is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any confidential
information, that Controlling Shareholders will notify the Parent promptly of
the request or requirement so that the Parent may seek an appropriate
protective order or waive compliance with the provisions of this section. If,
in the absence of a protective order or the receipt of a waiver hereunder, any
of the Controlling Shareholders is, on the advice of counsel, compelled to
disclose any confidential information to any tribunal or else stand liable for
contempt, that Controlling Shareholders may disclose the confidential
information to the tribunal; provided, however, that the disclosing Controlling
Shareholders shall use his or its reasonable best efforts to obtain, at the
reasonable request of the Parent, an order or other assurance that confidential
treatment will be accorded to such portion of the confidential information
required to be disclosed as the Parent shall designate.
ARTICLE V
INDEMNIFICATION
5.1 SPECIFIC INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PARENT.
Controlling Shareholders shall indemnify and hold harmless the Parent and
Merger Subsidiary for any debts and obligations known to the Target or the
Controlling Shareholders, or which should be known by the Target or the
Controlling Shareholders through the use of reasonable accounting procedures,
and which were not disclosed prior to Closing. The Controlling Shareholders
agreement to indemnify Parent for contingent liabilities shall be limited to
contingent liabilities actually known by the Controlling Shareholders and not
disclosed.
5.2 GENERAL INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE PARENT.
In the event any of the Controlling Shareholders has misrepresented any matter
contained herein, in accordance with the applicable state law definition of
misrepresentation, then each of the Controlling Shareholders agrees to
indemnify the Parent, its successors, the Target, and the Merger Subsidiary
from and against the entirety of any monetary loss resulting from such
misrepresentation or misrepresentations. However, Controlling Shareholders
shall not have
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any obligation to indemnify the Parent from and against any monetary loss
arising out of, relating to, in the nature of, or caused by the breach of any
representation or warranty of the Controlling Shareholders contained herein
until such breach, or an aggregate of breaches, exceeds the sum of Twenty-Five
Thousand Dollars ($25,000.00). Notwithstanding any other provision contained
herein, Controlling Shareholders shall have no liability for any debts or
obligations of Target which are disclosed herein or in an exhibit attached
hereto. Exhibit "H," attached hereto is a list of all debts and obligations
(absolute, contingent, or otherwise) of the Target which, to the knowledge of
either of the Controlling Shareholders, now exists or may exist in the future
as a result of any act or omission occurring at any time prior to the execution
of this Agreement. Exhibit "H," need not contain a list of litigation, as such
disclosure has otherwise occurred.
5.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE CONTROLLING SHAREHOLDERS.
(a) In the event the Parent breaches any of its representations contained
herein, in accordance with the applicable state law definition of
misrepresentation, then the Parent agrees to indemnify the Controlling
Shareholders from and against any monetary loss the Controlling
Shareholders, or either of them, may suffer as a result of such
misrepresentation or misrepresentations.
(b) The Parent shall indemnify the Controlling Shareholders from any
monetary loss that the Controlling Shareholders, or either of them, may
suffer as a result of any claim arising from their participation as an
employee, agent, officer, or director of the Target for acts or omissions
occurring prior to the execution of this Agreement. Provided however, the
Parent shall have no obligation to indemnify the Controlling Shareholders,
or either of them, for any monetary loss suffered as a result of a claim or
threatened claim known to the Controlling Shareholders, or either of them,
at the date of execution of this Agreement but which was not disclosed on,
or in an exhibit to, this Agreement.
5.4 MATTERS CONCERNING INDEMNITY. In the event that either party
becomes aware of any claim or threatened claim being made against such party
for which any other party could ultimately be held liable, either directly or
by virtue of the indemnity requirements of this Agreement, the party becoming
aware of such claim or threatened claim shall immediately cause written notice
of the claim or threatened claim to be given to all other parties. Any party
which could ultimately be held liable, by virtue of the indemnity provisions of
this Agreement, shall have the right to participate in the legal defense of the
party against whom a claim or threatened claim has been made. No claim for
indemnity shall be made which results from a settlement or consent judgment
without the consent of the indemnifying party, which consent shall not be
unreasonably withheld. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable, or common law
remedy any party may have for misrepresentation, breach of contract, or any
other cause of action which may exist.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 AMENDMENT. This Agreement may be amended by the mutual consent
of all the parties.
6.2 WAIVER. At any time prior to the Effective Time, the parties
hereto may, in their respective sole
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discretion and to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto; (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto; and (iii) waive
compliance with any of the agreements, covenants or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed by or on
behalf of such party.
ARTICLE VII
MISCELLANEOUS
7.1 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
7.2 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
7.3 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Parent and the Controlling Shareholder.
7.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.5 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.6 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Controlling Shareholders: Larry Woodcock and Marilyn
Woodcock, 650 Esplanade, Lake Charles, LA 70607 or such other address at the
Parent is hereafter directed in writing.
If to the Parent: Charles E. Chunn, Jr., 1401 South Waldron Road, Suite
201, Fort Smith, AR 72903 or such other address as the Controlling Shareholders
are hereafter directed in writing.
If to the Target: 1890 Swisco Road, Sulphur, LA 70663.
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited
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courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
If necessary, Controlling Shareholders may provide up to two addresses where
notices must be delivered.
7.7 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.8 EXPENSES. Each of the Parties and the Target will bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Controlling
Shareholders agree that the Target has not borne and will not bear any of the
Controlling Shareholders costs and expenses (including any of their legal fees
and expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
7.9 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
7.10 INCORPORATION OF EXHIBITS. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
7.11 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Louisiana, without regard to any
applicable principles of conflicts of law.
7.12 KNOWLEDGE. Any statement herein made "to the knowledge" of a
party hereto, or similar language, shall mean the actual knowledge of the
persons to which such statement relates, without any requirement of independent
verification or inquiry. Any reference to company' knowledge shall mean the
knowledge of the executive officers of the company.
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization on the date first above written.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
"Parent"
By: /s/
--------------------------------------
Officer
LARCO ACQUISITION, INC.,
an Arkansas corporation
"Merger Subsidiary"
By: /s/
--------------------------------------
Officer
LARCO ENVIRONMENTAL SERVICES, INC.,
a Louisiana corporation
"Target"
By: /s/
--------------------------------------
Officer
CONTROLLING SHAREHOLDERS:
/s/ Larry Woodcock
------------------------------------------
Larry Woodcock
/s/ Marilyn Woodcock
------------------------------------------
Marilyn Woodcock
18
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EXHIBIT 99.1
Contact: Exsorbet Industries, Inc.
Dr. Edward Schrader
President
601/974-1342
Charles E. Chunn, Jr.
Executive Vice President, CFO
501/452-1987
Ed Penick, Jr.
Vice President
501/664-7745
EXSORBET INDUSTRIES ANNOUNCES ACQUISITION OF
LARCO ENVIRONMENTAL SERVICES INC.
Jackson, MS -- Wednesday, June 26, 1996 -- Exsorbet Industries Inc.
(NASDAQ: Small Cap: EXSO) today announced the acquisition of LARCO
Environmental Services Inc. The company was acquired through a pooling
transaction in which Exsorbet obtained all outstanding shares of LARCO common
stock in return for 1,152,000 shares of Exsorbet Industries Inc. common stock.
LARCO expects to report an after tax profit for the second quarter of
1996, as well as 1996 year-to-date. Financial results for the company will be
consolidated with first and second quarter results of Exsorbet Industries Inc.,
boosting both revenue and profitability for Exsorbet Industries Inc.
For the fiscal year ending July 31, 1995, LARCO reported approximately
$6,300,000 in gross sales and approximately $500,000 after tax profit. Through
the first eight months of current fiscal year July 31, 1996, revenues of
approximately $4,000,000 position the company on target to match last year's
revenues. Total assets for the company as of May 31, 1996, were $5,609,000.
LARCO Environmental Services Inc. was established in 1979, to serve
the oil spill recovery and emergency response needs of the Gulf Coast area.
Through the years, the company has evolved alongside the ever-changing
industrial community. That change has included adding equipment rental,
environmental supplies, and emergency response training to their growing list
of capabilities. LARCO has industrial service and full emergency response
capabilities at offices in Bridge City, Texas; Baton Rouge, Louisiana, and Lake
Charles (Sulfur), Louisiana.
LARCO's most recent move to meet the needs of the industrial community
is its merger with Exsorbet Industries Inc. "Exsorbet is very excited about
this merger, "said Dr. Edward Schrader, President and Chief Executive Officer
of Exsorbet Industries Inc. "The synergies between our companies is great.
<PAGE> 2
This will be a good mesh for our companies."
LARCO has established itself as a leading spill cleanup responder in
the Gulf South. Its reputation has carried it well beyond the Gulf waters to
include jobs in Puerto Rico, Florida, and the Atlantic Coast. The company has
expanded its preventative maintenance services to customers as the industry
needs evolved. For the past year and a half, it has applied its industrial
expertise to the creation and development of an industrial services division.
It has applied for a patent on its proprietary "pneumatic excavation system"
utilized in both industrial service and emergency response operations.
"We feel that the market is wide open for a premier service company
such as LARCO, because we can reduce the clients' liability and offer a very
dependable and economical service," said Larry Woodcock, Chief Executive
Officer of LARCO Environmental Services. In addition to these enhanced
services, the company offers emergency response, spill response, safety
training and industrial cleaning. To provide well-rounded service, certified
divers are available for emergency response and industrial-type work. LARCO
services a variety of industries that include the pulp and paper, petrochemical
and mining industries.
In 1988, LARCO realized the need for a credible and cost-effective
training facility to meet the stringent needs of federal training requirements.
They established the LARCO Training Academy, providing the industrial community
with an opportunity to train using "real world" emergency response personnel
with training regulatory backgrounds.
Dr. Schrader said, "The addition of LARCO thrusts us into the
leadership role in spill response and industrial service in the central Gulf of
Mexico." Soon to be consolidated with the new "LARCO Division" of Exsorbet,
are the industrial services and spill response activities of SpilTech, an
existing Exsorbet Industries subsidiary with existing operational bases in
Euless, Texas; Little Rock, Arkansas; and Mobile, Alabama.
Schrader further stated that, "With LARCO we will step up our
aggressive expansion activities along the Gulf of Mexico, inland barge and bulk
vessel transportation routes, as well as major industrial focus throughout the
eastern United States. LARCO professionals have established an excellent
relationship with their chemical, petroleum and manufacturing clients that will
present an opportunity for internal growth for Exsorbet Industries'
subsidiaries Eco-Systems, Cierra Engineering, Consolidated Environmental
Services, and SpilTech Services."
Exsorbet Industries, Inc. is a diversified environmental product and
service company specializing in state of the art technical solutions for
problems in site remediation, dewatering and pond solidification, hazardous
waste cleanup material and service, bioremediation, environmental engineering
and project management, and twenty-four hour emergency response.
Subsidiaries of Exsorbet Industries, Inc. include Eco-Systems,
Exsorbet Technical/SpilTech Services, Inc., Consolidated Environmental
Services, Inc., and Cierra, Inc. Offices are located in Dallas, Euless, and
Houston, Texas: Fort Smith and Little Rock, Arkansas; Tulsa, Oklahoma; Kansas
City, Missouri; Jackson, Mississippi; Daphne, Alabama; and Atlanta, Georgia.
2
