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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
JUNE 27, 1996
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Date of Report
(Date of earliest event reported)
EXSORBET INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
IDAHO
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(State or other jurisdiction of incorporation)
0-25970 82-0464589
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(Commission file number) (IRS employer
identification no.)
4294 LAKELAND, SUITE 200
JACKSON, MISSISSIPPI 39208
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(Address of principal executive offices) (Zip code)
(601) 936-4440
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(Registrant's telephone number, including area code)<PAGE>
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On June 27, 1996, Exsorbet Industries, Inc. (the "Company") entered
into a Stock Exchange Agreement by and between the Company, KR Acquisition,
Inc., an Arkansas corporation and wholly owned subsidiary of the Company
("Acquisition"), KR Industrial Service of Alabama, Inc., Kenneth R. McDonald,
Carolyn McDonald, and Kenneth A. Flatt, Jr. Pursuant to the terms of the
Agreement, the Company beneficially acquired all of the outstanding common
stock of KR Industrial Service of Alabama, Inc., an Alabama corporation,
which is an environmental industrial services company ("KR Industrial"). The
stock was actually acquired by Acquisition. Acquisition and KR Industrial
Service of Alabama are filing articles of merger. The stock of KR Industrial
was acquired from its sole shareholders, Kenneth R. McDonald, Carolyn
McDonald and Kenneth A. Flatt, Jr. In return, Kenneth and Carolyn McDonald
received 545,338 shares of the Company's common stock, par value $.001 per
share (the "Company"). The Board of Directors of the Company determined this
consideration to be fair and reasonable by determining the fair market value
of KR Industrial to be $2,120,000. The value of the Common Stock at closing,
based on a five day closing price prior to closing, was $3.8875. The amount
of Common Stock provided was representative of the fair market value of the
company acquired. At the time of the Agreement, the Company entered into
employment agreements with Kenneth R. McDonald, Carolyn McDonald, and
Kenneth A. Flatt, Jr. Kenneth R. McDonald will receive cash compensation of
$100,000 annually. Mr. McDonald was also granted stock options which will
vest and be exercisable based upon his achieving successful sales goals to be
established by the Company. Carolyn McDonald will receive cash compensation
of $50,000 annually. Kenneth A. Flatt, Jr. will receive cash compensation of
$52,000.00 plus three percent of gross revenues based on sales generated by
Mr. Flatt. Kenneth R. McDonald has also been appointed an executive
vice-president of the Company.
(b) The assets acquired in the acquisition have been used as an
operating facility for KR Industrial. The assets include personal property,
inventory, and accounts receivables, as well as certain leased real property.
The Company will continue to make the same use of both the leased real
property used by KR Industrial and the personal property as existed prior to
the acquisition.
ITEM 7. FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable to
provide the required financial statements with this report on Form 8-K. As
permitted by Form 8-K, such financial statements will be filed under cover of
an amendment to this Form 8-K as soon as practicable, but in no case later
than 60 days after this Report on Form 8-K must be filed.
PRO FORMA FINANCIAL INFORMATION. It is impracticable to provide the
required pro forma financial information with this report on Form 8-K. As
permitted by Form 8-K, such pro forma financial information will be filed
under cover of an amendment to this Form 8-K as soon as practicable, but in
no case later than 60 days after this Report on Form 8-K must be filed.
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EXHIBITS.
2.1 Agreement dated June 27, 1996 by and between Exsorbet Industries,
Inc., KR Acquisition, Inc., KR Industrial Service of Alabama, Inc., Kenneth
R. McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr.
99.1 Press Release of Exsorbet Industries, Inc. dated June 27, 1996
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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.
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Charles E. Chunn, Jr.
Vice-President
Date: July 12, 1996
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EXHIBITS.
EXHIBIT
NUMBER
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2.1 Agreement dated June 27, 1996 by and between Exsorbet Industries,
Inc., KR Acquisition, Inc., KR Industrial Service of Alabama, Inc., Kenneth R.
McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr.
99.1 Press Release of Exsorbet Industries, Inc. dated June 27, 1996
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STOCK EXCHANGE AGREEMENT
among
KR ACQUISITION, an Arkansas corporation
and
KR INDUSTRIAL SERVICES OF ALABAMA, INC.
KENNETH R. McDONALD and CAROLYN McDONALD
KENNETH A. FLATT, JR.
Shareholders
JUNE 27, 1996
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AGREEMENT
This Agreement is made and entered into on this 27th day of June, 1996,
by and between KR Acquisition, Inc. (the "Buyer"), an Arkansas corporation
which is a wholly owned subsidiary of Exsorbet Industries, Inc., an Idaho
corporation, Exsorbet Industries, Inc., an Idaho corporation (the
"Guarantor"), KR Industrial Services of Alabama, Inc., an Alabama corporation
(the "Target Corporation") and Kenneth R. McDonald and Carolyn McDonald and
Kenneth A. Flatt, Jr. (collectively Kenneth R. McDonald, Carolyn McDonald,
and Kenneth A. Flatt, Jr. will be called the "Sellers"). The Buyer and the
Sellers are referred to collectively herein as the Parties.
WHEREAS, the Sellers in the aggregate own all of the outstanding stock of
all classes of the Target Corporation; and
WHEREAS, the Buyer desires to buy from the Sellers all of the outstanding
stock of all classes of the Target Corporation upon the terms and conditions
stated herein; and
WHEREAS, the Sellers desire to sell to the Buyer all of the outstanding
stock of all classes of the Target Corporation upon the terms and conditions
stated herein; and
WHEREAS, each of the parties has made or undertaken certain promises,
obligations, representations, and covenants, as defined below, all of which
constitute the consideration for this Agreement;
IT IS, THEREFORE, AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. EXCHANGE OF SHARES OF STOCK.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, each of the Sellers agrees to exchange all of his or her
shares of stock of the Target Corporation with the Buyer, in consideration of
the exchange of certain shares of stock of Exsorbet Industries, Inc., an
Idaho corporation.
(b) SELLERS OWN ALL OUTSTANDING STOCK. The Sellers covenant and warrant
that they are the sole and exclusive direct owners of all of the outstanding
stock of all classes of the Target Corporation and that no other person,
persons, or entities are entitled to claim any interest whatsoever (whether
direct, indirect, beneficially, by security interest, lien, mortgage, or
otherwise) in any of the shares of stock of any class of the Target
Corporation.
(c) STOCK. Contemporaneously with the execution of this Agreement,
Sellers are receiving certificates collectively representing 545,338 shares
of restricted common stock of Exsorbet Industries, Inc., an Idaho
corporation. Sellers acknowledge receipt of such shares. Such shares of
stock shall be in the joint name of Kenneth McDonald and Carolyn McDonald.
Upon request, the share certificates will be reissued, at the expense of the
Buyer, in the individual name of each
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Seller in such percentages of the total number of available and unencumbered
shares as are desired. For purposes of this Agreement, each share of
restricted common stock will be treated as if it had a value of $3.8875.
(d) RESTRICTED STOCK. All shares of stock issued pursuant to this
Agreement shall be restricted by the rules and regulations of the United
States Securities and Exchange Commission. Transfers of the shares shall be
subject to Rule 144 of the United States Securities and Exchange Commission
(contained at 17 CFR part 230). Unless and until the shares are registered,
the shares of stock may not be sold, transferred, hypothecated, encumbered,
assigned, or conveyed until after the expiration of two years from the date
of issuance. All shares of stock shall bear an appropriate restrictive
legend specifying that the shares may not be transferred unless pursuant to
an exemption from registration and subject to a satisfactory opinion of
counsel. Such other restrictive legend language as is required by the
transfer agent for Exsorbet Industries, Inc. may be included on the
certificates.
(e) STOCK OF THE TARGET CORPORATION. Contemporaneously with the
execution of this Agreement, the Sellers will deliver to the Buyer
certificates representing all of the shares of stock of all classes of the
Target Corporation. At such time, the Sellers shall execute such
certificates and take such action as is required to transfer such shares of
stock to Buyer. In the event that the Target Corporation utilizes the
service of an agent for transfer of shares of certificates of the Target
Corporation, the Sellers shall designate the name, address, and telephone
number of such agent in a writing signed by Buyer and attached to this
Agreement.
(f) DEBT OBLIGATIONS. The Buyer shall be responsible for all disclosed
liabilities of the Target Corporation, unless otherwise specified herein.
(g) GUARANTEE OF OBLIGATIONS. Exsorbet Industries, Inc., the Guarantor,
guarantees to insure that all obligations of the Buyer under the terms of
this Agreement are met.
(h) OTHER DOCUMENTS. Contemporaneously with the execution of this
Agreement, Buyer shall deliver to the Sellers all documents, certificates,
and exhibits as are specified herein. At the same time, Sellers shall
deliver to the Buyers all documents, certificates, and exhibits as are
specified herein. Each party warrants and represents the accuracy and
truthfulness of all such documents.
(i) SUBSIDIARIES. There are no subsidiaries of the Target Corporation.
(j) STOCK REGISTRATION. The parties intend to provide for registration
of the shares of stock provided to the Sellers pursuant to this Agreement,
with such registration being at the option of the Sellers. Despite the fact
that registration may occur, Sellers agree not to transfer, convey, sell, or
place for sale on any stock market or by any other source more than 181,779
shares of stock received during any one year period for the first three years
following the execution of this Agreement. In order to provide for
registration of the shares of stock, Exsorbet Industries, Inc. and KR
Acquisition,
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Inc. shall:
(a) pay the costs and expenses (including attorney's fees and filing fees
with the United States Securities & Exchange Commission) for filing a
registration statement with the United States Securities & Exchange
Commission;
(b) provide such information as is requested by, or on behalf of, the
Buyers to assist in effectuating the registration process;
(c) cooperate in effectuating the registration process; and
(d) provide legal counsel to prepare all documentation necessary to
effectuate the registration process.
Exsorbet Industries, Inc. utilizes the services of the Baker & McKenzie Law
Firm in Dallas, Texas as their securities attorneys. It is anticipated that
such law firm will prepare the registration statement for filing with the
United States Securities & Exchange Commission. The law firm preparing the
registration statement will evaluate this transaction, determine the best
type of registration process in consideration of all factual matters, and
consult with the parties about the type of registration to occur. The Buyers
will cooperate in the registration process, but will not incur any expense in
registration of the shares of stock.
2. REPRESENTATIONS.
(a) RELIANCE. Neither Buyer nor the Sellers are relying upon any
representation or information provided by any other party or signatory to
this Agreement unless such representation or information is contained in a
written document provided to the party relying upon such representation or
information. However, Buyer and Guarantor are relying upon all information
and documentation provided by Sellers in the due diligence inquiry conducted
into this transaction by Buyer and Guarantor.
(b) REPRESENTATIONS OF THE SELLERS. Each of the Sellers represents to
the Buyer that the statements contained in this section are correct and
complete as of the date of this Agreement.
(i) ORGANIZATION OF TARGET CORPORATION. The Target Corporation is duly
organized, validly existing, and in good standing under the laws of the
State of Alabama. The Target Corporation is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Target Corporation. The Target Corporation has full
corporate power and authority to carry on the businesses in which it is
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engaged and to use the properties used by it. No person other than
the Sellers is either an officer or director of the Target
Corporation.
(ii) CAPITALIZATION. All of the shares of issued capital stock of
the Target Corporation are issued in the names of the Sellers. The
Target Corporation has not issued any type of stock other than
common stock. All of the issued and outstanding shares of stock of
the Target Corporation have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by
the Sellers. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require the Target Corporation to issue, sell, or otherwise cause
to become outstanding any of its stock of any class. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target
Corporation. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the
capital stock of the Target Corporation. The Sellers directly own
all of the issued and outstanding stock of all classes of the
Target Corporation, 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 Sellers are not a party to any option, warrant,
purchase right, or other contract or commitment that could require
the Sellers to sell, transfer, or otherwise dispose of any stock of
the Target Corporation (other than this Agreement). The Sellers
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
Corporation.
(iii) AUTHORIZATION OF TRANSACTION. The Sellers 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 Sellers, enforceable in
accordance with its terms and conditions. The Sellers 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.
(iv) NONCONTRAVENTION. 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 Seller or the Target Corporation 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 Seller or the
Target Corporation is a party or by which either Seller
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or the Target Corporation is bound or to which any of the assets of
either Seller or the Target Corporation is subject.
(v) BROKERS' FEES. The Sellers 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 Buyer could become liable or obligated.
(vi) INVESTMENT. The Sellers are acquiring the restricted common
stock solely for their own account for investment purposes. They
have had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in
holding the stock.
(vii) ASSETS OF THE TARGET CORPORATION. The Target Corporation
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. Sellers
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 Corporation,
except for first mortgage owners and true owners of the buildings
utilized. The buildings, machinery, equipment, and other tangible
assets that the Target Corporation own and lease are free from
material defects (patent and latent), have been maintained in
accordance with normal industry practice, and are in reasonably
good operating condition and repair (subject to normal wear and
tear).
(viii) There are no pending or, to the knowledge of any of the
Sellers and the directors and officers of the Target Corporation,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the real property utilized by either Target
Corporation. All real property improvements utilized by the Target
Corporation 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.
(ix) AGREEMENT TO MERGE. In their capacity as directors of the
Target Corporation, the Sellers agree to give their consent to
merger of the Target Corporation in such form as is subsequently
directed by the Board of Directors of Exsorbet Industries, Inc.,
provided that such merger shall not result in a merger of the
Target Corporation with a corporation or entity other than Exsorbet
Industries, Inc. or a wholly owned subsidiary of Exsorbet
Industries, Inc.
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(x) FINANCIAL STATEMENTS. Attached hereto as Exhibit "A" are the
following financial statements (collectively the "Financial
Statements"): (i) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash
flow for all periods through May 31, 1996; (ii) unaudited
consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the three months
ended March 31, 1996 for the Target Corporation. 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 Corporation as of such dates and the results of
operations of the Target Corporation for such periods; provided,
however, that the most recent financial statements are subject to
normal adjustments (which will not be material individually or in
the aggregate) and lack footnotes and other presentation items.
(xi) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since March
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 Corporation taken as a whole.
Without limiting the generality of the foregoing, since that date:
(a) the Target Corporation has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the
ordinary course of business;
(b) the Target Corporation 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 Corporation is a party or by which any
of them is bound;
(d) the Target Corporation has not imposed any security interest upon
any of its assets, tangible or intangible;
(e) the Target Corporation has not made any material capital
expenditures outside the ordinary course of business;
(f) the Target Corporation has not made any material capital investment
in, or any material loan to, any other person outside the ordinary
course of business;
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(g) the Target Corporation has not created, incurred,
assumed, or guaranteed indebtedness outside the ordinary
course of business;
(h) the Target Corporation 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 tangible
embodiments thereof (in whatever form or medium);
(i) there has been no material change made or authorized
in the charter or by-laws of any of the Target
Corporation. (It is understood that a change in
corporate records reflecting that the past corporate
president has no authority to act on behalf of the Target
Corporation is not material.);
(j) the Target Corporation has not issued, sold, or
otherwise disposed of any of its capital stock, 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 Corporation 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;
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(l) the Target Corporation 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
Corporation has not experienced depreciation with respect
to certain assets.);
(m) the Target Corporation 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 Corporation 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 Corporation has not granted any increase
in the base compensation of any of its directors,
officers, and employees outside the ordinary course of
business.
(p) the Target Corporation 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 Corporation has not made any other
material change in employment terms for any of its
directors, officers, and employees outside the ordinary
course of business.
(xii) UNDISCLOSED LIABILITIES. Sellers warrant and represent that
the Target Corporation has not incurred any material liability
(whether known or unknown, whether asserted 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.
(xiii) LEGAL COMPLIANCE. The Target Corporation has 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,
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investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them 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 Corporation.
(xiv) TAX MATTERS.
(a) The Target Corporation 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 Corporation (whether or not shown on any income tax return)
have been paid. The Target Corporation is not the beneficiary of
any extension of time within which to file any Income Tax Return.
(b) Except as stated elsewhere, there is no material dispute or
claim concerning any income tax liability of the Target Corporation
either (A) claimed or raised by any authority in writing or (B) as
to which any of the Sellers and the directors and officers of the
Target Corporation has knowledge based upon personal contact with
any agent of such authority.
(c) There have been no audits of the income tax returns of the
Target Corporation by any federal, state, local, or foreign taxing
authority. The Target Corporation has not been notified that it
will be subject to an audit by any federal, state, local, or
foreign taxing authority. The Target Corporation 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.
(d) The Target Corporation has not filed a consent under Internal
Revenue Code Section 341(f) concerning collapsible corporations.
The Target Corporation has not made any material payments, is
obligated to make any material payments, or is 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 Corporation 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 Corporation is not a party to any tax
allocation or sharing agreement. The Target Corporation (A) has
not been a member
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of an affiliated group filing a consolidated federal Income Tax
Return and (B) has no liability for the taxes of any person or
entity (other than the Target Corporation) 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) The Target Corporation (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 Corporation in filing its
income tax returns.
(xv) INTELLECTUAL PROPERTY.
(a) The Target Corporation has not interfered with, infringed upon,
misappropriated, or violated any material "intellectual property"
rights of third parties in any material respect, and none of the
Sellers and the directors and officers of the Target Corporation
has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that any of the Target Corporation
must license or refrain from using any "intellectual property"
rights of any third party). To the knowledge of any of the Sellers
and the directors and officers of the Target Corporation, no third
party has interfered with, infringed upon, misappropriated, or
violated any material "intellectual property" rights of the Target
Corporation in any material respect.
(b) No patent or registration has been issued to any of the Target
Corporation with respect to any of its "intellectual property," and
no application for a patent has been made for any such
"intellectual property." No third party has been granted any
right, license, or agreement to use any of the "intellectual
property" of the Target Corporation. The Target Corporation
possesses all right, title, and interest to all "intellectual
property" used by it, without restriction by any contract, court
order, or governmental authority.
(xvi) INVENTORY. The inventory of the Target Corporation consists of
raw materials and supplies, manufactured and processed parts, work in
process, and finished
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goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged, or defective, subject only to the
reserve for inventory writedown set forth on the face of the most
recent balance sheet (rather than in any notes thereto) as adjusted
for operations and transactions through the date of this Agreement
in accordance with the past custom and practice of the Target
Corporation.
(xvii) CONTRACTS. The Target Corporation will provide a complete
list of all contracts and agreements to which it is a party within
ten days from the date of this Agreement. The Target Corporation
is not a party to any partnership or joint venture agreements,
contract of indemnity, confidentiality agreement, stock option or
purchase plan, stock appreciation plan, deferred compensation plan,
severance plan, or any other plan for the benefit of employees,
officers, or directors other than a safety plan, health insurance
plan, or other plans disclosed during the period of due diligence
inquiry by the Buyer and Guarantor. The Target Corporation is not a
party to 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 Corporation, Buyer, or Guarantor. The
Target Corporation is a party to a single factoring agreement with
one single corporate entity.
(xviii) NOTES AND ACCOUNTS RECEIVABLE. The notes and accounts
receivable of the Target Corporation 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, subject
to the generally accepted or normal reserve for bad debts in
accordance with the past custom and practice of the Target
Corporation.
(xix) POWERS OF ATTORNEY. To the knowledge of either of the Sellers
and the directors and officers of the Target Corporation, there are
no material outstanding powers of attorney executed on behalf of
the Target Corporation.
(xx) INSURANCE. The Target Corporation has maintained adequate
property, casualty, liability, and worker's compensation coverage.
A list and copy of all such insurance policies will be provided
within five days from the present date. Sellers warrant that all
such policies are currently in full force and effect and will not
expire, lapse, or be canceled within ten days from the present
date. In the event that such policies shall expire, lapse, or be
canceled within such time period, Sellers agree to provide at least
three business days written notice in advance of such occurrence.
(xxi) LITIGATION. The Target Corporation is: (i) not subject to
any outstanding injunction, judgment, order, decree, ruling, or
charge; (ii) not a party or
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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. However,
the Target Corporation does have two outstanding workers
compensation claims pending for which workers compensation
insurance is in force and the workers compensation insurance
carrier has been notified in writing, and Sellers and the Target
Corporation have fully cooperated with the workers compensation
insurance carrier and complied with all conditions of such
insurance coverage.
(xxii) EMPLOYEES. To the knowledge of either of the Sellers and the
directors and officers of the Target Corporation, no executive, key
employee, or significant group of employees plans to terminate
employment with the Target Corporation during the next 12 months.
The Target Corporation 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. The
Target Corporation has not committed any material unfair labor
practice. None of the Sellers and the directors and officers of the
Target Corporation 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 Corporation.
(xxiii) EMPLOYEE BENEFITS. Every employee benefit plan (and each
related trust, insurance contract, or fund) of the Target
Corporation complies in form and in operation in all material
respects with the applicable requirements of the Employment
Retirement Income Security Act of 1974 ("ERISA"), the Internal
Revenue Code, and other applicable laws.
(xxiv) GUARANTIES. The Target Corporation is not a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(xxv) 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
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to emissions, discharges, releases, or threatened releases
of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic 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) The Target Corporation (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) All properties and equipment used in the business of
the Target Corporation 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 Corporation.
(b) REPRESENTATIONS OF THE BUYER. The Buyer represents to the Sellers
that the statements contained in this section are correct and complete as of
the date of this Agreement.
(i) ORGANIZATION OF THE BUYER. Exsorbet Industries, Inc. is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Idaho. KR 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.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance
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with its terms and conditions. The Buyer 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.
(iii) 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 Buyer is subject or any provision of
its charter or bylaws.
(iv) BROKERS' FEES. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for
which any Seller could become liable or obligated.
(v) INVESTMENT. The Buyer is not acquiring the Target Shares with a
view toward distribution or sale, and is acquiring such shares
solely for business and investment purposes.
3. 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 Sellers acknowledge and agree that from and after the date of
execution of this Agreement the Buyer will be entitled to possession of all
documents, books, records (including tax records), agreements, and financial
data of any sort relating to the Target Corporation.
(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 Corporation,
each of the other 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.
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(c) TRANSITION. Neither of the Sellers 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 Corporation
from maintaining the same business relationships with the Target Corporation
after the date of this Agreement as it maintained with the Target Corporation
prior to execution.
(d) CONFIDENTIALITY. As used herein, the term "confidential
information" means any information concerning the businesses and affairs of
the Target Corporation, the Buyer, and the Guarantor that is not already
generally available to the public. Each of the Sellers 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 Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the confidential
information which are in his or its possession. In the event that any of the
Sellers 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 Seller will notify the Buyer promptly of the request or
requirement so that the Buyer 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 Sellers is,
on the advice of counsel, compelled to disclose any confidential information
to any tribunal or else stand liable for contempt, that Seller may disclose
the confidential information to the tribunal; provided, however, that the
disclosing Seller shall use his or its reasonable best efforts to obtain, at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the confidential
information required to be disclosed as the Buyer shall designate.
4. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SPECIFIC INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
Sellers shall indemnify and hold harmless the Buyer and Exsorbet Industries,
Inc. for any debts and obligations known to the Sellers, or which should be
known by Sellers through the use of reasonable accounting procedures, and
which were not disclosed prior to closing. However, as far as contingent
liabilities are concerned, indemnification shall be limited to contingent
liabilities and obligations actually known by either of the Sellers and which
were not disclosed. A contingent liability shall be considered to be known
by the Sellers if the Sellers or Target Corporation had received written or
oral notification of a claim, the likelihood of assertion of a claim, or of
potential litigation prior to closing, or if the Sellers have actual
knowledge that a claim is likely to be made against the Target Corporation.
(b) GENERAL INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYER. In
the event either of the Sellers has misrepresented any matter contained
herein, in accordance with the applicable state law definition of
misrepresentation, then each of the Sellers agrees to indemnify the Buyer,
its successors, the Target Corporation, and Exsorbet Industries, Inc. from
and against the entirety of any monetary loss resulting from such
misrepresentation or misrepresentations. However,
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Sellers shall not have any obligation to indemnify the Buyer 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 Sellers contained herein
until such breach, or an aggregate of breaches, exceeds the sum of Ten
Thousand Dollars ($10,000.00).
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS.
(i) In the event the Buyer breaches any of its representations
contained herein, in accordance with the applicable state law
definition of misrepresentation, then the Buyer agrees to indemnify
the Sellers from and against any monetary loss the Sellers, or
either of them, may suffer as a result of such misrepresentation or
misrepresentations.
(ii) The Buyer shall indemnify the Sellers from any monetary loss
that the Sellers, or either of them, may suffer as a result of any
claim arising from their participation as an employee, agent,
officer, or director of either of the Target Corporation for acts
or omissions occurring prior to the execution of this Agreement.
Provided however, the Buyer shall have no obligation to indemnify
the Sellers, or either of them, for any monetary loss suffered as a
result of a claim or threatened claim known to the Sellers, 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.
(d) 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 liability, 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.
5. 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.
6. 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.
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7. 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 Buyer and the Sellers.
8. 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.
9. 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.
10. 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 Sellers: Kenneth R. McDonald and Carolyn McDonald at the
same address as is in existence for the Target Corporation unless
otherwise directed in writing by either or both of such persons.
If to the Buyer: Charles E. Chunn, Jr., 1401 South Waldron Road,
Suite 201, Fort Smith, AR 72903 [or such other address as
hereafter directed in writing].
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 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, Sellers may provide up to two addresses where notices must be
delivered.
11. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
12. 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
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terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
13. EXPENSES. Each of the Parties and the Target Corporation will bear
their own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers agree that the Target Corporation has not borne and will not bear any
of the Sellers costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
14. 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.
15. INCORPORATION OF EXHIBITS. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
KR ACQUISITION, INC.,
an Arkansas corporation
"Buyer"
By: /s/ Ed L. Schrader
-------------------------
Officer
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
"Guarantor"
By: /s/ Ed L. Schrader
------------------------
Officer
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KR INDUSTRIAL SERVICES
OF ALABAMA, INC.,
an Alabama corporation
"Target Corporation"
By: /s/ Kenneth R. McDonald
----------------------------
Officer
/s/ Kenneth R. McDonald
--------------------------------
Kenneth R. McDonald - Seller
/s/ Carolyn McDonald
--------------------------------
Carolyn McDonald - Seller
/s/ Kenneth A. Flatt
--------------------------------
Kenneth A. Flatt, Jr. - Seller
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EXHIBIT 99.1
Contact: Exsorbet Industries, Inc.
Dr. Ed Schrader
President
(601) 936-6633
Charles E. Chunn, Jr.
Vice-President
Exsorbet Industries, Inc.
(501) 452-1987
Ed Penick, Jr.
Vice President
Exsorbet Industries, Inc.
(501) 664-7745
EXSORBET INDUSTRIES, INC. ANNOUNCES ACQUISITION OF
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
JACKSON, MS. -- Friday, June 28, 1996 -- Exsorbet Industries, Inc.
(NASDAQ Small Cap: EXSO) announced today the acquisition of K.R. Industrial
Service of Alabama, Inc. Exsorbet Industries acquired K.R. Industrial
Service through a pooling transaction in which all of KR Industrial Service's
outstanding shares of stock were obtained for 545,388 shares of common stock
in Exsorbet Industries.
K.R. Industrial Service expects to report an after tax profit for the
second quarter of 1996 as well as the year ending December 31, 1996.
Financial results of the company will be consolidated with the first and
second quarter results of Exsorbet enhancing both gross revenue and
profitability for Exsorbet Industries, Inc.
Unaudited financial results for K.R. Industrial Service from January 1,
1996 through May 30, 1996 revenues are approximately $2.5 Million. Total
assets of K.R. Industrial Service as of May 31, 1996 amount to approximately
$2.5 Million.
KR Industrial Service is a leading private hydro blasting and industrial
service company in Alabama. With offices in Mobile, Birmingham, and along
the industrial corridor at the Tennessee
<PAGE>
River through Decatur, using proprietary techniques, KR Industrial Service
provides boiler clean-out and rehabilitation for utility companies, without
requiring a complete shut down of the utility, saving both time and lost
sales. K.R. Industrial Service is also experienced in hazardous material
handling and emergency response. Ken McDonald, principal shareholder of K.R.
Industrial Service, has over fifteen years experience in the industrial
service, hazardous waste, and emergency response industry. With this
transaction, Ken McDonald will receive a five year employment agreement with
K.R. Industrial Service.
Dr. Ed Schrader, president of Exsorbet Industries, Inc., said, "This is
an important element in Exsorbet's assemblage of emergency response,
hazardous waste, and industrial services companies, complimenting our other
recent acquisitions. K.R. Industrial Service expands opportunity along
inland water ways as far north at St. Louis and along the eastern portion of
the Gulf of Mexico into Florida. This new member of the Exsorbet Family
further reflects Exsorbet's commitment to be the major emergency response and
industrial service provider in the central and southeastern United States."
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 materials and service, bioremediation, environmental
engineering and project management, and twenty-four hour emergency response
service.
Subsidiaries of Exsorbet Industries, Inc. are Eco-Systems, Inc.,
Exsorbet Technical/SpilTech Services, Inc., Consolidated Environmental
Services, Inc., Cierra, Inc., and Larco Environmental Services, Inc. Offices
are located in Dallas, Bridge City, Euless, and Houston, TX; Fort Smith and
Little Rock, AR; Tulsa, OK; Kansas City, MO; Jackson, MS; Mobile (Daphne),
AL; Baton Rouge and Sulphur (Lake Charles), LA; and Atlanta, GA.
