<PAGE> 1
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
September 30, 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 August 5, 1996, Exsorbet Industries, Inc. (the "Company")
entered into an Agreement and Plan of Merger (the "Agreement") by and among the
Company, 7-7 Merger, Inc., an Arkansas corporation and wholly owned subsidiary
of the Company ("Merger Subsidiary"), 7-7, Inc., an Ohio corporation ("7-7")
and Calvin F. Lowe, Sr., Calvin F. Lowe, II, James Hodgson, Gary Platek, G.
Howard Collingwood, and Edward Kurzenberger (collectively, the "Shareholders").
A copy of the Agreement is filed herewith. Pursuant to the terms of the
Agreement the Company acquired all of the stock of 7-7 from the Shareholders on
September 30, 1996 (the "Acquisition") and 7-7 was then merged with and into
the Merger Subsidiary. In return the Shareholders received $3,000,000 in cash,
874,545 shares of the Company's common stock, par value $.001 per share (the
"Common Stock") valued at $3,250,000, and subordinated notes in the aggregate
stated principle amount of $900,000. The Company also agreed to nominate
Calvin F. Lowe, II for election to the Board of Directors by the shareholders
of the Company at the next annual meeting. The amount of the Common Stock
given to the Shareholders was determined by taking the average closing price of
the Common Stock for the period between June 4, 1996 (which was the date the
parties began true negotiations) and ten days prior to closing. The average
price of the Common Stock utilizing such formula was approximately $3.71 per
share. The number of shares of Common Stock given to the Shareholders was
determined by dividing such average price into $3,250,000. Concurrent with the
closing of the Acquisition, each Shareholder executed a consulting or
employment agreement with the Company. The employment agreement of G. Howard
Collingwood will be superseded by a new employment agreement effective on
September 30, 1996 upon the same terms as his previous employment agreement.
To finance the transaction, the Company entered into a Stock Purchase
Agreement with American Physicians Service Group, Inc., a Texas corporation
("APS"), dated September 30, 1996 (the "Stock Purchase Agreement") pursuant to
which the Company issued 1,200,000 shares of Common Stock to APS for $3,300,000
in cash of which $3,000,000 was used to consummate the Acquisition. A copy of
the Stock Purchase Agreement is filed herewith. The Company also entered into
a Stock Put Agreement, dated September 30, 1996 with APS pursuant to which the
Company agreed to repurchased such shares sold to APS for the same price that
APS paid under the Stock Purchase Agreement upon APS's request during the next
sixty days. If APS exercises the option to sell the shares back to the
Company, the Company may elect, in lieu of a $3,300,000 cash payment for the
shares, to issue a promissory note in the stated principal amount of $3,300,000
which shall accrue interest at a 15.75% annual rate and all the outstanding
principal together with accrued but unpaid interest on such note shall be due
and payable on October 1, 1997. If APS does not exercise such option, the
Company shall pay APS a sum of $60,000 following the expiration of the sixty
day period.
2
<PAGE> 3
To further induce APS to enter into the Stock Purchase Agreement each
of the Company's directors and an executive officer entered into option
agreements with APS, each dated September 30, 1996 (the "Option Agreements")
granting APS options to purchase an aggregate of 1,400,000 shares pursuant to
such Option Agreements, within the next sixty days and at a price of $2.75 per
share. The Company also entered into a Contingent Warrant Agreement, also
filed herewith, with APS dated September 30, 1996 whereby the Company will use
its best efforts to cause one or more of its shareholders to enter into option
agreements to sell an additional 400,000 shares of Common Stock to APS. If by
October 30, 1996 the Company is unsuccessful, the Company shall execute and
deliver an additional warrant to APS for the purchase of up to 400,000 shares
at the price of $2.75 per share within the next sixty days.
All of the shares of Common Stock acquired by APS are subject to a
Shareholders Rights Agreement, dated September 30, 1996 between the Company and
APS which provides registration rights for such shares (the "Sharehholders
Rights Agreement").
Additionally, pursuant to the Shareholders Rights Agreement, APS
agrees to hold 1,000,000 of the shares of Common Stock initially purchased by
APS for at least one year after the date of the agreement; except that APS may
sell such shares prior to such time (i) pursuant to the Stock Put Agreement,
and/or (ii) pursuant to a registration of such shares as contemplated by this
agreement. In the event APS desires to sell more than 20,000 shares of Common
Stock for cash on any particular day (other then pursuant to a registration
statement in effect with respect thereto), then APS will give the Company five
days advance written notice of such intention, specifying the price, or other
pricing methodology, and any other terms and conditions of such sale, and the
Company shall be entitled, during such five day period to elect to purchase
such Common Stock from APS on the same terms and conditions. This restriction
shall not apply to APS unless all of the Company's shareholders who own at
least five percent of the Company's Common Stock agree to be bound by the same.
The Company further agrees, pursuant to the Shareholders Rights
Agreement, to cause one individual designated by APS to be appointed to the
Company's Board of Directors promptly after the 1996 shareholder's meeting. In
the event APS acquires fifty percent of the aggregate shares of the Company's
Common Stock, then APS shall be entitled to designate a second individual to
serve on the Board of Directors of the Company, and the Company agrees to cause
such person to be promptly appointed to such position. Once APS has the right
to designate a second Board member, in the event the size of the Company's
Board of Directors is increased or otherwise becomes larger then ten directors,
then APS shall be entitled to designate a third individual to serve on the
Board of Directors of the Company, and the Company shall cause such person to
be promptly appointed to such position. After an APS designee is appointed to
the Board of Directors, the Company shall nominate and use its best efforts to
cause the Company's shareholders to elect and thereafter maintain all of APS's
designees on the Board of Directors for the period stated below. The Company
will also cause all the Company's shareholders who are also directors of the
Company to execute and deliver to APS an agreement in form and substance
acceptable to APS, to vote their shares in favor of the election of APS
designees to the Company's Board of Directors. The foregoing provisions
related to the designation by APS of individuals to serve on the Board of
Directors of the Company shall remain in place until APS (together with its
subsidiaries and affiliates) owns less than five percent of the issued and
outstanding Common Stock of the Company, and thereafter in the event APS
exercises its rights under the Stock Put Agreement until APS has been paid in
full all amounts due APS upon sale of the stock to the Company pursuant to the
Stock Put Agreement. All APS designees to the Board of Directors of the
Company may be changed from time to time by written notice of APS to the
Company. The Company agrees to cause such new designees to be elected to its
Board of Directors promptly upon receipt of such notice.
In the event that, at any time during a period of three years after
the date of the Shareholders Rights Agreement, the Company proposes to engage
in any transaction that involves the issuance of additional equity securities
of the Company, options or other rights to acquire equity securities of the
Company, or rights convertible into any equity securities of the Company, or
proposes to engage in any other non-equity related transaction that involves
amounts in excess of $100,000 (all the foregoing are collectively referred to
as "Target Transactions"), in which any person or entity who owns five percent
or more of the Company's outstanding common stock ("Major Shareholders") is to
be a participant, or has the right to participate, APS shall have a right of
first refusal to participate in any such transaction on the same basis and
terms as the applicable Major Shareholder(s). The Company agrees to give APS
sixty days advance written notice of any proposed Target Transaction.
(b) The assets acquired in the acquisition have been used as an
operating facility for 7-7, Inc. The assets include personal property,
intangible property rights, equipment, accounts receivables and real estate.
The Company intends to continue substantially the same use for such acquired
assets.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable
to provide all 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. Below are those
required financial statements that are available.
7-7, INC.
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
PAGE
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Balance Sheet, dated November 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Shareholders' Equity, for the year ended November 30, 1995 . . . . . . . . . . . . 7
Statement of Income for the year ended November 30, 1995 . . . . . . . . . . . . . . . . . . . 8
Statement of Cash Flow for the year ended November 30, 1995 . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-16
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Balance Sheet, dated November 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Statement of Retained Earnings, for the year ended November 30, 1994 . . . . . . . . . . . . . 20
Statement of Income for the year ended November 30, 1994 . . . . . . . . . . . . . . . . . . . 21
Statement of Cash Flows for the year ended November 30, 1994 . . . . . . . . . . . . . . . . . 22
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-28
</TABLE>
4
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
Board of Directors
7-7, Inc.
We have audited the accompanying balance sheet of 7-7, INC., as of November 30,
1995 and the related statements of income, shareholders' equity and cash flows
for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 7-7, Inc. as of November 30,
1995, and the results of its operations and cash flows for the year then ended,
in conformity with generally accepted accounting principles.
/s/ Meaden & Moore, Ltd.
MEADEN & MOORE, LTD.
Certified Public Accountants
January 8, 1996
Cleveland, Ohio
5
<PAGE> 6
BALANCE SHEET
7-7, Inc.
November 30, 1995
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS: $ 102,366
Cash and equivalents
Accounts receivable, net of allowance for
doubtful accounts of $50,000 4,789,284
Prepaid expenses 64,739
Deposit 25,000
------------
Total Current Assets 4,981,389
PROPERTY AND EQUIPMENT:
Land 30,000
Building and improvements 422,414
Licensed equipment 1,654,412
Field equipment 5,087,800
Office furniture and fixtures 124,618
------------
7,319,244
Less accumulated depreciation 3,864,977
------------
3,454,267
Equipment under construction 587,318
------------
4,041,585
OTHER ASSETS:
Cash surrender value of officers' life insurance 133,690
Deposits 6,994
Prepaid expenses 38,603
------------
179,287
------------
Total Assets $ 9,202,261
============
</TABLE>
See accompanying notes.
6
<PAGE> 7
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 774,701
Line-of-credit 1,347,961
Accounts payable 2,867,922
Accrued expenses 281,354
-------------
Total Current Liabilities 5,271,938
LONG-TERM DEBT, net of current portion 1,305,594
SHAREHOLDERS' EQUITY:
Common stock, no par value, 500 shares authorized,
225.50 shares issued and outstanding, stated at 22,550
Paid-in capital 429,853
Retained earnings 2,172,326
-------------
Total Shareholders' Equity 2,624,729
-------------
Total Liabilities and Shareholders' Equity $ 9,202,261
=============
</TABLE>
7
<PAGE> 8
STATEMENT OF SHAREHOLDERS' EQUITY
7-7, Inc.
For the Year Ended November 30, 1995
<TABLE>
<CAPTION>
Common Paid-in Retained
Stock Capital Earnings
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at November 30, 1994 $ 23,775 $ 526,628 $ 1,650,033
Purchase of 12.25 shares of stock
for $1 per share (1,225) (96,775) 97,988
Net Income - - 424,305
-------------- -------------- --------------
Balance at November 30, 1995 $ 22,550 $ 429,853 $ 2,172,326
============== ============== ==============
</TABLE>
See accompanying notes.
8
<PAGE> 9
STATEMENT OF INCOME
7-7, Inc.
For the Year Ended November 30, 1995
<TABLE>
<S> <C>
Revenue $ 18,172,410
Operating expenses 14,395,706
--------------
Gross Profit 3,776,704
Selling, general and administrative expenses 3,081,957
--------------
Income from Operations 694,747
Other Income (Expense):
Interest expense (290,016)
Loss on disposal of equipment (995)
Cash discounts (886)
Miscellaneous 25,775
--------------
(266,142)
---------------
Income before Provision for Income Taxes 428,605
Provision for city income taxes 4,300
--------------
Net Income $ 424,305
==============
</TABLE>
See accompanying notes.
9
<PAGE> 10
STATEMENT OF CASH FLOWS
7-7, Inc.
For the Year Ended November 30, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 17,410,705
Cash paid to suppliers and employees (16,414,247)
Interest paid (290,016)
--------------
Net Cash Provided by Operating Activities 706,442
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 28,000
Capital expenditures (1,043,146)
--------------
Net Cash Used in Investing Activities (1,015,146)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line-of-credit 700,000
Additional borrowings 274,868
Principal payments on debt (719,589)
Purchase of company stock (12)
--------------
Net Cash Provided by Financing Activities 255,267
--------------
Decrease in Cash (53,437)
Cash and Cash Equivalents - December 1, 1994 155,803
--------------
Cash and Cash Equivalents - November 30, 1995 $ 102,366
==============
</TABLE>
See accompanying notes.
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Principles, Continued
Income Taxes:
Beginning December 1, 1992 the Company has elected to be treated as an
"S" Corporation whereby the income of the Company is taxes at the
shareholder level for Federal and state income tax purposes.
Accordingly, there are no Federal or state income taxes.
Corporate Distribution Policy:
Management's policy is to distribute cash to its shareholders to at
least cover the tax effect of any income passed through to the
shareholders. No distributions were made during the current fiscal
year.
Cash Equivalents:
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
2. Line-of-Credit
The Company has a line-of-credit with a bank providing a maximum loan
facility of $2,500,000. The loan is due upon demand. All borrowings
under the loan agreement bear interest at the prime rate plus 1.5%,
are secured by accounts receivable, property and equipment, and are
guaranteed by several shareholders and the majority shareholder's
spouse. The Company has letters of credit totaling $105,000 which are
secured by this loan agreement and restrict the amount available to be
borrowed. At November 30, 1995 the Company has $2,100,000 borrowed
against the line-of-credit.
Subsequent to November 30, 1995, the Company refinanced borrowings on
its line-of-credit. The terms of the refinancing call for 48 monthly
payments of approximately $19,000. The notes bear interest at 9.5%.
The financial statements reflect the revised payment requirements (See
Note 4).
3. Accounts Receivable/Litigation
The Company has accounts receivable of $247,155 due under a contract
for which payment is being withheld pending the outcome of a lawsuit.
7-7, Inc. has filed suit against the general contractor and its
bonding company for $1,271,468. A counter claim of $311,250 has been
submitted to 7-7, Inc. by the general contractor.
11
<PAGE> 12
<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATIONS:
<S> <C>
Net income $ 424,305
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization 672,683
Loss on disposal of equipment 995
Changes in Assets and Liabilities:
Increase in accounts receivable (1,098,390)
Decrease In prepaid expenses and supplies inventory 17,020
Increase in accounts payable 647,327
Increase in accrued expenses (27,928)
Increase in income taxes payable 4,300
-----------
Total Adjustments 282,137
-----------
Net Cash Provided by Operating Activities $ 706,442
===========
</TABLE>
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
7-7, Inc.
November 30, 1995
1. Summary of Significant Accounting Principles
Business Description:
7-7, Inc., (the Company) provides comprehensive environmental services
including transportation, recovery and disposal of hazardous and
nonhazardous materials for industrial and governmental customers. The
Company operates and derives revenue from contracts in various states.
Revenue and Cost Recognition:
For financial reporting purposes, revenue on long-term service
contracts is recognized as income when earned, based upon the
Company's estimate of the percentage-of-completion on individual
contracts, which is determined by comparing actual costs incurred to
total estimated contract costs or based on the volume of waste
processed. Any changes in these estimates are reflected in income
currently. Related costs and expenses are charged to operations as
incurred. The total amount of estimated losses, if any, on
uncompleted contracts is provided when known. Accounts payable
include billings in excess of costs and estimated earnings on
contracts in progress of $419,552.
Property and Equipment:
Property and equipment are carried at cost with expenditures for
maintenance and repairs charged to income as incurred. Asset costs and
the related accumulated depreciation on disposals are removed from the
respective accounts in the year of disposal and any gain or loss is
reflected in the income statement.
The Company provides depreciation using the straight-line method over
the estimated useful life of the assets as follows:
<TABLE>
<CAPTION>
Life
---------------
<S> <C>
Building and improvements 27 Years
Licensed equipment 5 - 10 Years
Field Equipment 5 - 10 Years
Office furniture and fixtures 5 - 7 Years
</TABLE>
Depreciation expense for the year amount to $668,272.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
3. Accounts Receivable/Litigation, continued
During the year, the Company charged against the gross profit of the
contract $121,503 of costs previously deferred.
The ultimate outcome of this litigation cannot be determined at this
time. Accordingly, any gain or loss which may ultimately arise has
not been recorded in these financial statements.
4. Long-term debt
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
Current Long-term
Portion Portion
-------------- --------------
<S> <C> <C>
Line-of-credit (See Note 2) $ 147,973 $ 604,066
Bank note payable in forty-eight principal installments of $15,208,
beginning January, 1994. The note bears interest at 1.5% over prime and
is secured by certain equipment. 182,500 197,708
Bank note payable in sixty principal installments of $7,920, beginning
March, 1992. The note bears interest at 1-3/4% over prime and is secured
by a blanket lien on all non-leased equipment.
95,040 30,816
Installment notes payable to financial institutions in varying monthly
installments, including interest at rates ranging from 6.9% to 14.5%
maturing through September, 2000, secured by certain equipment,
substantially all notes are guaranteed by a shareholder.
336,598 231,214
Mortgage note payable to bank with monthly payments of $2,079, including
interest at 10.5%, maturing in October, 2003, secured by land and
building. 12,590 110,870
Unsecured notes payable to major shareholders, due December, 1996 with
interest at 10%. - 130,920
-------------- --------------
$ 774,701 $ 1,305,594
============== ==============
</TABLE>
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
4. Long-term Debt, Continued
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996 $ 774,701
1997 667,588
1998 299,539
1999 243,684
2000 40,976
Thereafter 53,807
------------
$ 2,080,295
============
</TABLE>
5. Lease Commitments
The Company leases various equipment and property under month-to-month
rental agreements and operating leases expiring through 1996. Total
rental expense for fiscal 1995 was $2,254,326. At November 30, 1995,
future commitments on leases with an initial term in excess of one
year are insignificant.
6. Insurance
The Company is presently covered by a general liability insurance plan
which includes $6,000,000 coverage for its transportation operations.
In addition, the Company has environmental impairment liability
insurance of $1,000,000 for its environmental services contracting
operations. Management believes it has obtained the types and
coverages needed to meet regulatory requirements. Several claims have
been filed against the Company which are covered by insurance. One
claim is in excess of insurance coverage. However, the company and
counsel believe that final settlement demands will be reduced below
the insurance limits.
7. Stock Buy-sell Agreement
In November 1992, stock buy-sell agreements were entered into by all
shareholders to ensure unity and continuity of control in the
ownership and management of the Company.
The Company will purchase the stock of a "key management employee"
upon termination of employment, for $1 if such event occurs within the
first five years Of their employment agreement. After five years the
purchase price is based on a formula as stated in the buy-sell
agreement.
In addition, in the event of death, the Company shall purchase the
stock of all the shareholders, at a price based on a formula as stated
in the buy-sell agreement. Proceeds from life insurance policies
would fund a significant portion of the purchase price of the major
shareholders.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
8. Stock Purchase
During 1995, the Company repurchased and retired 12.25 shares of its
common stock for $1 per share.
9. Stock Option
The Company has granted stock options to two shareholders. The
agreement grants the right to purchase 11.5 shares at $8,000 per share
which approximates fair market value. The stock options expire the
earlier of termination of employment or January 1, 2010.
10. Operating Agreement
The Company has entered into an operating agreement to build and
operate a coal chemical recycling facility. The term of the agreement
is for five years beginning May, 1995, with a provision to extend the
term upon the mutual consent of the parties.
Costs incurred through November 30, 1995 for construction of the
facility amount to $587,318. The Company expects the total costs of
this facility to be approximately $1,050,000.
16
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
Board of Directors
7-7, Inc.
We have audited the accompanying balance sheet of 7-7, INC., as of November 30,
1994 and the related statements of income, retained earnings and cash flows for
the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 7-7, Inc. as of November 30,
1994, and the results of its operations and cash flows for the year then ended,
in conformity with generally accepted accounting principles.
As disclosed in Note 7 to the financial statements, the Company is involved in
a dispute on a contract. The ultimate outcome of the dispute cannot be
determined at this time. Accordingly, any gain or loss which may ultimately
arise has not been recorded in these financial statements.
/s/ Meaden & Moore, Inc.
MEADEN & MOORE, Inc.
Certified Public Accountants
January 5, 1995
Cleveland, Ohio
17
<PAGE> 18
BALANCE SHEET
7-7, Inc.
November 30, 1994
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash and equivalents $ 155,803
Accounts receivable, net of allowance for
doubtful accounts of $50,000 3,581,923
Accounts receivable - other 109,531
Prepaid expenses and supplies inventory 81,759
--------------
Total Current Assets 3,929,016
PROPERTY AND EQUIPMENT:
Land 30,000
Building and improvements 400,840
Licensed equipment 1,498,121
Field equipment 4,925,640
Office furniture and fixtures 124,618
--------------
6,979,219
Less accumulated depreciation 3,283,513
--------------
3,695,706
OTHER ASSETS:
Cash surrender value of officers' life insurance 121,012
Deposits 16,744
Prepaid expenses 43,014
--------------
180,770
--------------
Total Assets $ 7,805,492
==============
</TABLE>
The accompanying note to financial statements are an integral part hereof.
18
<PAGE> 19
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 702,109
Line-of-credit 1,400,000
Accounts payable 2,220,595
Accrued expenses 211,484
-------------
Total Current Liabilities 4,534,188
LONG-TERM DEBT, net of current portion 1,070,868
SHAREHOLDERS' EQUITY:
Common stock, no par value, 500 shares authorized,
237.75 shares issued and outstanding, stated at 23,775
Paid-in capital 526,628
Retained earnings 1,650,033
-------------
Total Shareholders' Equity 2,200,436
-------------
Total Liabilities and Shareholders' Equity $ 7,805,492
=============
</TABLE>
19
<PAGE> 20
STATEMENT OF RETAINED EARNINGS
7-7, Inc.
For the Year Ended November 30, 1994
<TABLE>
<S> <C>
Balance at November 30, 1993 $ 1,929,644
Net loss (279,611)
-----------------
Balance at November 30, 1994 $ 1,650,033
================
</TABLE>
The accompanying note to financial statements are an integral part hereof.
20
<PAGE> 21
STATEMENT OF INCOME
7-7, Inc.
For the Year Ended November 30, 1994
<TABLE>
<S> <C>
Revenue $ 11,576,816
Operating expenses 9,493,960
--------------
Gross Profit 2,082,856
Selling, general and administrative expenses 2,086,701
--------------
Loss from Operations (3,845)
Other Income (Expense):
Interest expense (288,543)
Loss on disposal of equipment (5,233)
Cash discounts (12,552)
Miscellaneous 29,442
--------------
(276,886)
--------------
Loss before Provision for Income Taxes (280,731)
Recovery of city income taxes (1,120)
--------------
Net Loss $ (279,611)
==============
Loss per share $ (1,176)
==============
</TABLE>
The accompanying note to financial statements are an integral part hereof.
21
<PAGE> 22
STATEMENT OF CASH FLOWS
7-7, Inc.
For the Year Ended November 30, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 9,703,774
Cash paid to suppliers and employees (9,468,645)
Interest paid (288,543)
Income taxes recovered 115,810
-------------
Net Cash Provided by Operating Activities 62,396
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 85,100
Capital expenditures (493,313)
-------------
Net Cash Used in Investing Activities (408,213)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line-of-credit 680,000
Additional borrowings 484,006
Principal payments on debt (772,982)
-------------
Net Cash Provided by Financing Activities 391,024
-------------
Increase in Cash 45,207
Cash and Cash Equivalents - December 1, 1993 110,596
-------------
Cash and Cash Equivalents - November 30, 1994 $ 155,803
=============
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME TO NET CASH
USED IN OPERATIONS:
<S> <C>
Net loss $ (279,611)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation and amortization 548,880
Loss on disposal of equipment 5,233
Changes in Assets and Liabilities:
Increase in accounts receivable (1,822,522)
Increase in prepaid expenses and supplies
inventory (10,406)
Increase in accounts payable 1,599,220
Decrease in accrued expenses (89,013)
Increase in other assets (4,075)
Increase in income taxes recoverable (1,120)
Decrease in income tax deposits 115,810
---------------
Total Adjustments 342,007
--------------
Net Cash Provided by Operating Activities $ 62,396
==============
</TABLE>
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
7-7, Inc.
November 30, 1994
1. Summary of Significant Accounting Principles
Business Description:
7-7, Inc., (the Company) provides comprehensive environmental services
including transportation, recovery and disposal of hazardous and
nonhazardous materials for industrial and governmental customers.
During the year the Company sold services to one customer which
amounted to 21% of revenues. The Company operates and derives revenue
from contracts in various states. Management believes the Company
operates in only one business segment.
Revenue and Cost Recognition:
For financial reporting purposes, revenues on long-term service
contracts are recognized as income when earned, based upon the
Company's estimate of the percentage-of-completion on individual
contracts, which is determined by comparing actual costs incurred to
total estimated contract costs or based on the volume of waste
processed. Any changes in these estimates are reflected in income
currently. Related costs and expenses are charged to operations as
incurred. The total amount of estimated losses, if any, on
uncompleted contracts is provided when known.
Inventories:
Inventories are valued at the lower of cost (first-in, first-out
basis) or market. They consist of supplies used in operations.
Property and Equipment:
Property and equipment are carried at cost with expenditures for
maintenance and repairs charged to income as incurred. Asset costs and
the related accumulated depreciation on disposals are removed from the
respective accounts in the year of disposal and any gain or loss is
reflected in the income statement. Included in field equipment is
approximately $360,000 of equipment not placed in service at November
30, 1994.
24
<PAGE> 25
The Company provides depreciation using the straight-line method over
the estimated useful life of the assets as follows:
<TABLE>
<CAPTION>
Life
---------------
<S> <C>
Building and improvements 27 Years
Licensed equipment 5 - 10 Years
Field Equipment 5 - 10 Years
Office furniture and fixtures 5 - 7 Years
</TABLE>
Depreciation expense for the year amount to $534,487.
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Principles, Continued
Income Taxes:
Beginning December 1, 1992 the Company has elected to be treated as an
"S" Corporation whereby the income of the Company is taxes at the
shareholder level for Federal and state income tax purposes.
Accordingly, there are no Federal or state income taxes.
Corporate Distribution Policy:
Management's policy is to distribute cash to its shareholders to at
least cover the tax effect of any income passed through to the
shareholders. No distributions were made during the current fiscal
year.
Cash Equivalents:
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
2. Line-of-Credit
The Company has a line-of-credit with a bank providing a maximum loan
facility of $2,500,000. The loan is due upon demand. All borrowings
under the loan agreement bear interest at the prime rate plus 1.5%,
are secured by accounts receivable, property and equipment, and are
guaranteed by several shareholders and the majority shareholder's
spouse. The Company has letters of credit totaling $137,200 which are
secured by this loan agreement and restrict the amount available to be
borrowed. At November 30, 1994 the Company has $1,400,000 borrowed
against the line-of-credit.
3. Accounts Receivable/Litigation
The Company has included in accounts receivable $121,503 of change
orders for work beyond the original scope of a contract.
The change orders have been disputed by the project owner and general
contractor. 7-7, Inc. has filed suit against the general contractor
and its bonding company for $1,271,468. A counter claim of $311,250
has been submitted to 7-7, Inc. by the general contractor.
In addition, the Company has accounts receivable of $227,580 due under
the original contract for which payment is being withheld pending the
outcome of this matter.
The ultimate outcome of this litigation cannot be determined at this
time. Accordingly, any gain or loss which may ultimately arise has
not been recorded in these financial statements.
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
4. Long-term debt
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
Current Long-term
Portion Portion
-------------- ------------
<S> <C> <C>
Bank note payable in forty-eight principal installments of $15,208,
beginning January, 1994. The note bears interest at 1.5% over prime and
is secured by certain equipment. $ 182,500 $ 380,208
Bank note payable in sixty principal installments of $7,920, beginning
March, 1992. The note bears interest at 1-3/4% over prime and is secured
by a blanket lien on all non-leased equipment.
95,040 125,856
Installment notes payable to financial institutions in varying monthly
installments, including interest at rates ranging from 6.9% to 14.5%
maturing through January, 1999, secured by certain equipment,
substantially all notes are guaranteed by a shareholder.
413,230 441,353
Mortgage note payable to bank with monthly payments of $2,079, including
interest at 10.5%, maturing in October, 2003, secured by land and
building. 11,339 123,451
----------- ------------
$ 702,109 $ 1,070,868
=========== ============
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1995 $ 702,109
1996 585,519
1997 313,722
1998 72,716
1999 25,979
Thereafter 72,932
---------------
$ 1,772,977
===============
</TABLE>
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
5. Lease Commitments
The Company leases various equipment and property under month-to-month
rental agreements and operating leases expiring through 1995. Total
rental expense for fiscal 1994 was $741,430. At November 30, 1994,
future commitments on leases with an initial term in excess of one
year are insignificant.
6. Insurance
The Company is presently covered by a general liability insurance plan
which includes $6,000,000 coverage for its transportation operations.
In addition, the Company has environmental impairment liability
insurance of $1,000,000 for its environmental services contracting
operations. Management believes it has obtained the types and
coverages needed to meet regulatory requirements and is not aware of
any claim asserted against the Company which would have a material
effect on the financial position of the Company.
7. Stock Buy-sell Agreement
In November 1992, stock buy-sell agreements were entered into by all
shareholders to ensure unity and continuity of control in the
ownership and management of the Company.
The Company will purchase the stock of a "key management employee"
upon termination of employment, for $1 if such event occurs within the
first five years of their employment agreement, subsequently, at a
price based on a formula as stated in the buy-sell agreement.
In addition, in the event of death, the Company shall purchase the
stock of the two major shareholders, at a price based on a formula as
stated in the buy-sell agreement. Proceeds from life insurance
policies would fund a significant portion of the purchase price.
(b) 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.
28
<PAGE> 29
(c) EXHIBITS. Each exhibit listed below and not filed herewith,
will be filed by amendment.
*2.1 Agreement and Plan of Merger dated August 5, 1996 by and among
Exsorbet Industries, Inc., an Idaho corporation, 7-7 Merger, Inc., 7-7, Inc.,
an Arkansas corporation, Calvin F. Lowe, Sr., Calvin F. Lowe, II, Gary Platek,
G. Howard Collingwood, James Hodgson and Edward Kurzenberger
10.1 Consulting Agreement of Calvin F. Lowe, Sr. dated September
30, 1996
10.2 Employment Agreement of Calvin F. Lowe, II, dated September
30, 1996
10.3 Employment Agreement of Gary Platek, dated September 30, 1996
10.4 Employment Agreement of G. Howard Collingwood dated August 5,
1996 (the parties have agreed to cause this agreement to be superseded by a new
agreement effective September 30, 1996)
10.5 Employment Agreement of James Hodgson, dated September 30,
1996
10.6 Employment Agreement of Edward Kurzenberger, dated September
30, 1996
10.7 Form of Promissory Note Payable to Individual 7-7, Inc.
Shareholders
*10.8 Stock Purchase Agreement dated September 30, 1996 by and
between Exsorbet Industries, Inc., an Idaho corporation, and American
Physicians Service Group, Inc., a Texas corporation.
10.9 Stock Put Agreement dated September 30, 1996 by and between
Exsorbet Industries, Inc., an Idaho corporation, and American Physicians
Service Group, Inc., a Texas corporation.
10.10 Shareholder Rights Agreement dated September 30,1996 by and
between Exsorbet Industries, Inc., an Idaho corporation, and American
Physicians Service Group, Inc., a Texas corporation.
10.11 Stock Warrant dated September 30, 1996 from Exsorbet
Industries, Inc., an Idaho corporation, to American Physicians Service Group,
Inc., a Texas corporation.
10.12 Contingent Warrant dated September 30, 1996 from Exsorbet
Industries, Inc., an Idaho corporation, to American Physicians Service Group,
Inc., a Texas corporation.
10.13 No Contest Agreement dated September 30, 1996 by and between
Exsorbet Industries, Inc., an Idaho corporation, and American Physicians
Service Group, Inc., a Texas corporation.
29
<PAGE> 30
10.14 Form of Option Agreement dated September 30, 1996 between
individual shareholders of Exsorbet Industries, Inc., an Idaho corporation,
and American Physicians Service Group, Inc., a Texas corporation.
*23.1 Consent of Meaden & Moore, Ltd.
*99.1 Press Release of Exsorbet Industries, Inc. dated September 30,
1996 (The copy included with this filing was re-released on October 3, 1996
with correction for minor typographical errors).
*filed herewith
30
<PAGE> 31
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/ Edward L. Schrader
-----------------------------------------
Edward L. Schrader
President
Date: October 15, 1996
31
<PAGE> 32
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated August 5, 1996 by and among
Exsorbet Industries, Inc., an Idaho corporation, 7-7 Merger, Inc., 7-7, Inc.,
an Arkansas corporation, Calvin F. Lowe, Sr., Calvin F. Lowe, II, Gary Platek,
G. Howard Collingwood, James Hodgson and Edward Kurzenberger
10.8 Stock Purchase Agreement dated September 30, 1996 by and
between Exsorbet Industries, Inc., an Idaho corporation, and American
Physicians Service Group, Inc., a Texas corporation.
23.1 Consent of Meaden & Moore, Ltd.
99.1 Press Release of Exsorbet Industries, Inc. dated September 30,
1996 (The copy included with this filing was re-released on October 3, 1996
with correction for minor typographical errors).
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (hereinafter "Agreement") is entered
into as of this 5th day of August, 1996, by and among 7-7, INC., an Ohio
corporation with its principal place of business being 607 Freedlander Road,
Wooster, Ohio 66791 (the "Target Corporation"), CALVIN F. LOWE, SR., CALVIN F.
LOWE, II, EDWARD KURZENBERGER, GARY PLATEK, JAMES HODGSON, and G. HOWARD
COLLINGWOOD, (together the "Shareholders" and individually a "shareholder"),
EXSORBET INDUSTRIES, INC., an Idaho corporation with its principal place of
business being 4294 Lakeland Drive, Suite 200, Jackson, Mississippi 39208 (and
having further offices at 1401 South Waldron Road, Suite 201, Fort Smith,
Arkansas 72903) (hereinafter "Exsorbet") and 7-7 MERGER, INC., an Arkansas
corporation and a wholly owned subsidiary of Exsorbet (hereinafter the "Merger
Sub").
RECITALS
A. The Target Corporation is engaged in the business of
environmental site remediation, hazardous waste transportation, removal and
disposal and liquiefication of coal tars (all of which, taken together, are
hereinafter referred to as the "Business").
B. Each of the directors of Target Corporation, Merger Sub, and
Exsorbet has determined that it is in the best interest of its respective
shareholders for Target Corporation to merge with and into Merger Sub upon the
terms and subject to the conditions of this Agreement (the "Merger").
C. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
D. Target Corporation, Merger Sub, Exsorbet, and Shareholders
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger.
IT IS, THEREFORE, AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. BASIC TRANSACTION
(a) The Merger. Subject to the terms and conditions of this Agreement,
at the effective time, the Target Corporation will be merged with and into
Merger Sub in accordance with the provisions of Ark. Code Ann. Section 4-26-
1006 with the effect provided in such section and in accordance with the
provisions of Section1701/79 of the Ohio General Corporation Law, with the
effect provided in such section. The separate corporate existence of the
Target Corporation shall thereupon cease and Merger Sub shall be the surviving
corporation of the Merger (the "Surviving
<PAGE> 2
Corporation") and shall continue to be governed by the laws of the State of
Arkansas.
(b) Effective Date. The Merger shall become effective on the date and
at the time (the "Effective Time") that the Articles of Merger shall have been
accepted for filing by the Secretary of State of the State of Arkansas and the
Secretary of State of the State of Ohio (or such later date and time as may be
specified in the Articles of Merger), which shall be the Closing Date as
provided in this Agreement.
(c) Article of Incorporation. The Articles of Incorporation of Merger
Sub as in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and of the Arkansas Business Corporation Act.
(d) By-Laws. The By-Laws of Merger Sub as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation, until
duly amended in accordance with the terms thereof, of the Surviving
Corporation's Articles of Incorporation of the Arkansas Business Corporation
Act.
(e) Directors. The Directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws.
Provided, however, such directors of the Surviving Corporation shall act
promptly after the Effective Time to increase the number of directors of the
Surviving Corporation and to appoint one (1) new director. The individual
selected by Shareholders shall be nominated to serve on the Board for a minimum
period of five (5) years. Further, such individual shall also be nominated to
serve on the Board of Exsorbet.
(f) Officers. From and after the Effective Time, the following persons
shall be officers of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and By-Laws: (i) Calvin F. Lowe, II -- president; (ii) Edward
Kurzenburger -- vice-president and chief financial officer; and (iii) G. Howard
Collingwood -- secretary.
2. Conversion of Shares in the Merger; Purchase Price.
(a) Shareholders covenant and warrant that, upon execution of this
Agreement and continuing until the closing, they are the sole and exclusive
direct owners of all outstanding stock of all classes of 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. Each
<PAGE> 3
of the shareholders further covenants and warrants that no current or former
spouse of any Shareholders is entitled to claim any interest in any of the
shares of stock of the Target Corporation, by statute, property division,
through community property laws, or otherwise.
(b) The entire unauthorized capital stock of the Target Corporation
consists of five hundred (500) shares of common stock, of which Two Hundred
Thirty-Seven (237) shares are issued and outstanding. No treasury shares are
held. All the issued and outstanding shares of stock of all classes of the
Target Corporation have been duly authorized, are validly issued, fully paid,
and nonassessable and are held of record by the Shareholders.
(c) All of the Target Corporation shares issued, outstanding and owned
by Shareholders immediately prior to the Effective Time, by virtue of the
Merger and without any action on the Shareholders' part, shall be exchanged for
(i) that number of shares of Exsorbet Common Stock that, valued at the Average
Closing Market Price for the time period between June 4, 1996 and ending ten
days prior to the date of execution of this Agreement, is equivalent to Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000.00); (ii) cash in the
amount of Three Million Dollars ($3,000,000.00) to be paid by check, draft, or
negotiable instrument made payable to all Shareholders as indicated below; and
(iii) a subordinated note in the sum of Nine Hundred Thousand Dollars
($900,000.00) in the form as is attached hereto as Exhibit "A." Such Note
will be amortized over a five (5) year period and shall bear interest at a rate
of eight percent (8%) per annum. A copy of the amortization schedule for such
note is attached hereto as Exhibit "B." As used herein, the term "Purchase
Price" shall refer to the shares of stock of Exsorbet Industries, Inc., the
cash supplied to the Shareholders, and the subordinated note, all as identified
in the section.
(d) For the purposes of determining and paying the Merger consideration:
(i) "Average Closing Market Price" means the final sale or
trading price of Exsorbet Common Stock on the Nasdaq Stock
Market, Inc. small cap market at the close of such stock market
on any given date. The determination of the closing trade price
by Bloomberg, L.P. shall be conclusive.
(ii) "Stock" means the total number of shares of Exsorbet
Common Stock issued pursuant to Subparagraph 2(c).
(e) All shares of the Target Corporation to be exchanged for Exsorbet
Common Stock pursuant to this Section 2, shall cease to be outstanding, shall
be canceled and retired and shall cease to exist, and each holder of a stock
certificate representing any such Target Corporation Shares shall thereafter
cease to have any rights with respect to such Target Corporation Shares, except
the right to receive for each of the Target Corporation Shares, upon the
surrender of such stock certificate in Accordance with this Section, the number
of shares of Exsorbet Common Stock
3
<PAGE> 4
specified above, together with the cash portion of the Purchase Price.
(f) Each of the Shareholders, being all shareholders of 7-7, Inc.,
waives any and all rights that a dissenter may possess pursuant to the laws of
the State of Ohio, or of any State, or of the United States to obtain any
payment, compensation, or other consideration by virtue of failing to consent
to the merger of 7-7, Inc. with 7-7 Merger, Inc.
3. Form of Consideration.
(a) At the Effective Time, each Shareholder shall surrender to the
Surviving Corporation all outstanding certificates representing Target
Corporation Shares together with stock powers duly endorsed in blank with
signatures appropriately guaranteed, and shall thereupon receive, in exchange
therefore, his pro rata share of the Purchase Price. Until such surrender,
each of the outstanding certificates representing Target Corporation Shares
shall, after the Effective Time, be deemed for all purposes to evidence only a
right to receive a pro rata portion of the Purchase Price as follows: Calvin
F. Lowe, Sr. -- 33.333%; Calvin F. Lowe, II -- 36.287%; Edward Kurzenberger --
7.595%; G. Howard Collingwood -- 7.595%; Gary Platek -- 7.595%; and James
Hodgson -- 7.595%.
(b) The Purchase Price shall be paid as follows:
(i) The cash consideration call for in Article 2(c) herein shall
be paid at Closing.
(ii) The stock consideration shall be exchanged and issued at
Closing.
(iii) The delivery of the Promissory Note referred to in Article
2(c) shall take place at closing. Said Promissory Note shall
consist of six (6) separate Promissory Notes payable to each of
the six individual shareholders, pro rata.
(c) No fractional share of Exsorbet Common Stock shall be issued in the
Merger. In lieu of any such fractional shares, each holder of Target
Corporation Shares who would otherwise have been entitled to a fraction of a
share of Exsorbet Common Stock upon surrender of stock certificates for
exchange pursuant to this Article 3 shall be entitled to receive an amount in
cash (without interest) equal to the last reported sale price of one share of
Exsorbet Common Stock on the NASDAQ Small Cap Market on the last business day
prior to the Closing Date, multiplied by such fraction.
(d) Stock Registration. At the request of any Shareholder, the
Merger Sub shall begin the "process of registration" of all the shares of
common (capital) stock of Exsorbet Industries, Inc. provided to the
Shareholders under this Agreement. No Shareholder shall be obligated to allow
4
<PAGE> 5
his shares of stock to be registered. However, failure to participate in the
registration process will result in waiving of the right to register the shares
of stock at the expense of the Merger Sub. The obligations of the Merger Sub
in the process of registration shall be: (i) paying the costs and expenses
(including attorney's fees and filing fees with the United States Securities
and Exchange Commission) for filing a registration statement; (ii) providing
such information and cooperation as is reasonably requested by the Shareholders
or the attorneys filing the registration statement; (iii) execute such lawful
documentation as is necessary to effectuate registration; and (iv) take all
other action reasonably requested by the Shareholders or the attorneys
registering the shares of stock, to register the shares of stock. The
attorneys handling the registration process shall determine the type of
registration to be sought. No Shareholder may sell more than fifty percent
(50%) of his shares of stock obtained pursuant to this Agreement within one
year after the date of this Agreement, even if all shares are registered.
(e) Stock of the Target Corporation. At closing, the Shareholders will
deliver to the Merger Sub certificates representing all of the shares of stock
of any class of the Target Corporation, representing all shares of stock of any
class of the Target Corporation. At such time, the Shareholders shall execute
such certificates and take such action as is required to transfer such shares
of stock to Merger Sub. In the event that the Target Corporation utilizes the
service of an agent for transfer of shares of certificates of the Target
Corporation, the Shareholders shall designate the name, address, and telephone
number of such agent in a writing signed by Merger Sub and attached to this
Agreement.
(f) Other Documents. Contemporaneously with the execution of this
Agreement, Merger Sub shall deliver to the Shareholders all documents,
certificates, and exhibits as are specified herein. At the same time,
Shareholders shall deliver to the Merger Sub all documents, certificates, and
exhibits as are specified herein. Each party warrants and represents the
accuracy and truthfulness of all such documents.
4. Time of Closing. As used herein, the term "closing" refers to that
time when all parties to this Agreement exchange and provide the documentation,
exhibits, and consideration that is required under this Agreement. Closing
shall take place at the Effective Time, as defined above, at a mutually
agreeable location no later than August 31, 1996. At the option of the Merger
Sub, closing may occur upon five days written notice by the Merger Sub to the
Shareholders. In the event that a location for closing cannot be agreed upon,
closing shall occur at the facilities of 7-7, Inc.
5. Overseas Market. 7-7, Inc. shall be allowed reasonable flexibility
in pursuing overseas markets, provided the markets are commercially reasonable.
6. Nomination to Board of Directors. The board of directors of
Exsorbet Industries, Inc. will create a new position on its board of directors.
An individual selected by Shareholders shall be nominated to serve on the board
for a minimum period of five years.
5
<PAGE> 6
7. Confidentiality. Each of the parties, and their employees, agents,
officers, and directors shall keep confidential all information acquired
concerning the operation of 7-7, Inc. and Exsorbet Industries, Inc. prior to
merger unless such information is already publicly available, is subsequently
made publicly available without a breach of this Agreement, or is generally
known. The provisions of this paragraph shall not prohibit the release of such
information as is necessary to provide a press release concerning the proposed
merger of 7-7, Inc. with 7-7 Merger, Inc. Additionally, a copy of this
Agreement and any other agreements between the parties may be filed with Form
8-K, or any other filings, with the United States Securities and Exchange
Commission.
8. Representations and Warranties.
(a) Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants to the Merger Sub
that the statements contained in this section are correct and complete as of
the date of this Agreement and will continue to be true at merger.
(i) Organization of Target Corporation. The Target Corporation is duly
organized, validly existing, and in good standing under the laws of the
State of Ohio. 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
engaged and to use the properties used by it. A list of the officers
and directors of the Target Corporation is attached hereto as Exhibit
"C."
(ii) Capitalization.
(a) The entire authorized capital stock of 7-7, Inc. consists of
Five Hundred (500) shares of common stock, of which Two Hundred
Thirty Seven (237) shares are issued and outstanding. No
treasury shares are held. All of the issued and outstanding
shares of stock of all classes of the Target Corporation has been
duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Shareholders. 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
6
<PAGE> 7
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 Shareholders
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 and as otherwise stated
in a Buy-Sell Agreement dated November, 1992, a copy of which is
attached hereto as Exhibit "D"), taxes, security interests,
options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Shareholders are not a party
to any option, warrant, purchase right, or other contract or
commitment that could require the Shareholders to sell, transfer,
or otherwise dispose of any stock of the Target Corporation. The
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 Corporation. The Buy-Sell Agreement
specified above shall terminate as of the merger of the Target
Corporation with the Merger Sub.
(b) There are in existence certain stock option agreements
existing by and between the individual Shareholders. These stock
options will be exercised prior to merger. All proceeds received
from the exercise of such options will be paid to the Target
Corporation. The exercise of such stock options will not change
any terms of this Agreement, will not increase the number of
shareholders of the Target Corporation, and will not add a new
shareholder or shareholders of the Target Corporation.
(iii) Authorization of Transaction. The 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 Shareholders, enforceable in accordance with
its terms and conditions. The 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.
(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 Shareholder 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
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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 Shareholder or the
Target Corporation is a party or by which either Shareholder or the
Target Corporation is bound or to which any of the assets of either
Shareholder or the Target Corporation is subject. Notwithstanding the
provisions of this subsection, the Shareholders will provide the Merger
Sub with copies of all of the Target Corporation's material lease,
promissory notes, and other obligations prior to merger for which prior
notice or consent of a creditor may be required to effectuate the
signing of this Agreement.
(v) Brokers' Fees. The 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
Sub could become liable or obligated.
(vi) Investment. The Shareholders (A) understand that, at the time of
issuance, the restricted common stock of Exsorbet Industries, Inc.,
provided as a portion of the consideration for this Agreement, has not
been registered under the Securities Act, 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) are
acquiring the restricted common stock solely for their own account for
investment purposes, and not with a view to the immediate distribution
thereof; (C) are sophisticated investors with knowledge and experience
in business and financial matters; (D) have received certain information
concerning the Merger Sub and have 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) are
able to bear the economic risk and lack of liquidity inherent in holding
the restricted common stock.
(vii) Assets of the Target Corporation. The Target Corporation has
good and marketable title to the properties and assets used by it,
located on its 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.
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 or personal property utilized by the Target
Corporation, except as is disclosed in Exhibit "E," attached hereto.
(viii) Pending Litigation Concerning Property. There are no pending or,
to the knowledge of any of the Shareholders and the directors and
officers of the Target Corporation, threatened condemnation proceedings,
lawsuits, or administrative
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actions relating to the real and personal property utilized by the
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. Merger of the Target Corporation and Merger
Sub will take place as is specified above. Each of the parties to this
Agreement consents to such merger. The merger shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
(x) Financial Statements. Attached hereto as Exhibit "F" are the
following financial statements (collectively the "financial
statements"): (i) audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the
fiscal years ended November 30, 1993, 1994, and 1995, and unaudited
financial statements for the six months ended May 30, 1996, which are
maintained in accordance with generally accepted accounting procedures,
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.
(xi) Events Subsequent to Most Recent Fiscal Year End. 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 Corporation taken as a whole. (As used in this
paragraph, the term "material" shall mean a change in an amount equal to
more than ten percent of the total consideration provided under this
Agreement to the Shareholders.) 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 party (including the Target Corporation) has accelerated,
terminated, made material modifications to, or canceled any
material
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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, outside the
ordinary course of business;
(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 or
entity outside the ordinary course of business;
(g) the Target Corporation has not created, incurred, assumed, or
guaranteed any debt 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," as defined below;
(i) there has been no change made or authorized in the charter or
by-laws of the Target Corporation;
(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,
except that options to acquire 5.75 shares of capital stock of
the Target Corporation have been granted to individual
Shareholders Gary Platek and James Hodgson, which will be
exercised prior to merger, as indicated above [the percentage
ownership of the shares of stock of the Target Corporation
computed above have considered that such options have already
been exercised];
(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;
(l) the Target Corporation has not experienced any material,
damage, destruction, or loss (whether or not covered by
insurance) to its
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property;
(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,
except as is disclosed in Exhibit "G," attached hereto;
(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);
(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; and
(r) the Target Corporation has not obligated or promised to take
any of the actions specified in the subparagraphs above.
(xii) Undisclosed Liabilities. 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. However, contingencies attached hereto as Exhibit "H" are
known contingencies that existed prior to Merger for which no
indemnification will be provided by Shareholders. Any unrecorded
liabilities prior to Merger which were not the result of the
contingencies identified on the exhibited specified in this subsection
are liabilities for which indemnity to the Merger Sub and Exsorbet will
be provided, as specified below, for a period of two years following
Merger.
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(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 facts have occurred which would form the basis
for any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand on, against, or involving 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) 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
Shareholders and the directors and officers of the Target
Corporation has Knowledge based upon personal contact with any
agent of such authority.
(c) Attached hereto as Exhibit "I" is a disclosure listing all
federal, state, local, and foreign Income Tax Returns filed with
respect to the Target Corporation for which an audit has been
conducted or the Target Corporation have been notified that an
audit will be conducted. The Shareholders have delivered to the
Merger Sub, or allowed the Merger Sub to inspect, correct and
complete copies of all federal Income Tax Returns, examination
reports, and statements of deficiencies assessed against, or
agreed to by the Target Corporation for the time periods through
and including November 30, 1995. The Target Corporation has not
waived any statute of limitations in respect of 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
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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 of an affiliated group filing a
consolidated federal Income Tax Return (other than a group the
common parent of which was the Target Corporation) and (B) has no
liability for the taxes of any Person (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 is a subchapter S corporation, and
neither the Target Corporation nor any of the Shareholders has
taken any action which has, or could result in, revocation of
such status prior to execution of this Agreement. The Target
Corporation has not, and will not, take any action on or after
July 1, 1996 which would materially affect its financial
statements or the financial status of the Target Corporation.
(xv) Intellectual Property.
(a) The term "intellectual property" as used herein refers to:
(i) 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, (ii) 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, (iii) all
copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all
mask works and all applications, registrations, and renewals in
connection therewith, (v) 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
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business and marketing plans and proposals), (vi) all computer
software (including data and related documentation), (vii) all
other proprietary rights, and (viii) all copies and tangible
embodiments thereof (in whatever form or medium);
(b) 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 Shareholders 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 the Target Corporation must license or refrain from using
any "Intellectual Property" rights of any third party). To the
knowledge of any of the Shareholders 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.
(c) No patent or registration has been issued to Target
Corporation with respect to any of its "Intellectual Property,"
except for patent numbers 4,788,115, 4,579,563, and 4,758,246
issued by the United States Patent Office ("the patents"). The
patents are, and shall remain, the property of the Target
Corporation, subject only to a settlement agreement which has
been provided to the Merger Sub. No further applications for
patents have been made for any additional Intellectual Property.
No third party has been granted any right, license, or agreement
to use any of the "Intellectual Property" of the Target
Corporation, except as stated in the confidential settlement
agreement. 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 Target Corporation has no major inventory, except
for feedstock and processed tar products.
(xvii) Contracts. Attached hereto as Exhibit "J" is a list of all
contracts and agreements to which the Target Corporation is a party.
Such list may exclude any non-material contract creating an obligation
on the Target Corporation in an amount less than Two Thousand Five
Hundred Dollars ($2,500.00). 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
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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 Two Thousand Five Hundred Dollars ($2,500.00) or providing material
severance benefits; any agreement under which either Target Corporation
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
Corporation.
(xviii) Notes and Accounts Receivable. Except as disclosed in Exhibit
"K," all notes and accounts receivable of the Target Corporation are
reflected properly on their 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 only to the reserve for bad debts 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 merger date in
accordance with the past custom and practice of the Target Corporation.
(xix) Powers of Attorney. To the knowledge of any of the Shareholders
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. Exhibit "L" attached hereto is a list of each material
insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety
arrangements) with respect to which the Target Corporation is a party, a
named insured, or otherwise the beneficiary of coverage.
(xxi) Litigation. Exhibit "M," attached hereto is a list of each
instance in which the Target Corporation (a) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or
(b) is a party or, to the knowledge of any of the Shareholders and the
directors and officers of the Target Corporation, 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.
(xxii) Employees. To the knowledge of any of the Shareholders 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 a party to and bound by a
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collective bargaining agreement, has not 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
Shareholders 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. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form and in
operation in all material respects with the applicable requirements of
ERISA, the 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 or entity.
(xxv) Environment, Health, and Safety.
(a) As used in this section, 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 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) Except as disclosed in Exhibit "H," the Target Corporation
(A) 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
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comply), (B) 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 (C) 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) The Target Corporation will not have any known material
liabilities pursuant to any Environmental, Health, and Safety
Laws at the time of merger. It is understood that the Target
Corporation is in the business of handling and arranging for
disposal of various substances. The Target Corporation
represents that the prior handling and disposal services
performed were performed in compliance with Environmental, Health
and Safety Laws in effect at the time such services were
performed.
(d) It is understood that the Target Corporation is in the
business of transporting, handling, and processing hazardous
materials and hazardous wastes, and that the properties and
equipment utilized by it may contain or temporarily store such
materials as is required to perform these services. The
Shareholders are not aware of any information that would indicate
that the Target Corporation is presently exposed to any liability
whatsoever arising as a result of transporting, handling, or
processing such hazardous materials and hazardous wastes.
(b) Representations and Warranties of the Merger Sub and Exsorbet. The
Merger Sub and Exsorbet represent and warrant to the Shareholders that the
statements contained in this section are correct and complete as of the date of
this Agreement and will continue to be true at merger.
(i) Organization of the Merger Sub and Exsorbet. Exsorbet Industries,
Inc. is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Idaho. 7-7 Merger, 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 Merger Sub 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
Merger Sub, enforceable in accordance with its terms and conditions.
The Merger Sub need not give any notice to, make any filing
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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 Merger Sub or Exsorbet is subject or any provision of its charter
or bylaws.
(iv) Brokers Fees. The Merger Sub and Exsorbet 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 any Shareholder could become liable or obligated.
(v) Investment. The Merger Sub is not obtaining the Target Corporation
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of any securities laws.
9. Post-Merger 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 Shareholders acknowledge and agree that from and after
the Merger the Merger Sub 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 party
actively is 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 merger date 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 party.
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(c) Transition. Neither of the 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
Corporation from maintaining the same business relationships with the Target
Corporation after the merger as it maintained with the Target Corporation prior
to the merger.
(d) Removal of Personal Guarantees. The Merger Sub and Exsorbet will
use their best efforts to effectuate the removal of any personal guarantees by
the Shareholders for debts of the Target Corporation guaranteed individually by
the Shareholders. Such attempts will take place within 180 days after merger.
10. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Merger Subs and Shareholders contained
herein shall survive the merger hereunder (even if the aggrieved party knew or
had reason to know of any misrepresentation or breach of warranty at the time
of merger) and continue in full force and effect for a period of two years
thereafter.
(b) Indemnification Provisions for the Benefit of the Merger Sub and
Exsorbet. In the event any of the Shareholders breaches any of their
representations, warranties, or covenants contained herein, then each of the
Shareholders agrees to indemnify the Merger Sub and Exsorbet from and against
the entirety of any damages the Merger Sub and Exsorbet may suffer as a result
of such breach except as follows:
(i) if available, the Merger Sub will either maintain the Target
Corporation's existing liability insurance or purchase new insurance
with the same coverage, which names the individual Shareholders as
additional insureds thereof, to provide coverage for any claims subject
to this provision during the term of indemnification; and
(ii) Each Shareholder's maximum personal liability for
indemnification shall not exceed sixty- five percent (65%) of the
shareholder's pro rata portion of cash consideration received under
this Agreement. The provisions of this paragraph shall not, however,
relieve any third party (including in insurance company, bonding
company, or other third party providing indemnity) from the same
liability to the extent that such third party would be liable under
another agreement.
(c) Indemnification Provisions for Benefit of the Shareholders.
In the event the Merger Sub or Exsorbet breaches any of its representations,
warranties, and covenants contained herein, then the Merger Sub and Exsorbet
agree to indemnify the Shareholders from and against the entirety of any
damages the Shareholders, or any of them, may suffer as a result of such
breach.
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(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 paragraph, shall have the right to participate in,
and control, 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 breach of
representation, warranty, or covenant.
11. 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.
12. 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.
13. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
successors, heirs, administrators, personal representatives, 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
Merger Sub and the Shareholders. Provided however, this provision shall not be
construed as prohibiting a transfer of the cash consideration that Shareholders
are to receive under this Agreement nor as providing any greater restriction on
transferability of the restricted common stock of Exsorbet Industries, Inc.
than is otherwise stated herein.
14. 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. Furthermore, a facsimile
signature contained on this document or a facsimile copy of this document shall
be as valid and binding as the original.
15. 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.
16. 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
20
<PAGE> 21
below:
<TABLE>
<S> <C>
If to the Shareholders: Calvin F. Lowe, Sr., 2895 S. Dockside Drive, Avon Park, FL 33825.
- -----------------------
Calvin F. Lowe, II, 2958 TWP Road, #709, Londonville, OH 44842.
Edward Kurzenberger, 927 Buchholz Drive, Wooster, OH 44691.
G. Howard Collingwood, Carriage Hill Apartments, 5208 Everhand Road, N.W., Apartment
#11, Canton, OH 44718.
Gary Platek, 9460 Mulberry Road, Chesterland, OH 44026.
James Hodgson, 21408 W. Holts East, Genoa, OH 43430.
If to the Merger Sub: Charles E. Chunn, Jr., 1401 South Waldron Road, Suite 201, Fort Smith, AR 72903 [or
- ---------------------
such other address as the Shareholders are hereafter directed in writing].
</TABLE>
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.
17. 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
Merger Sub and the Shareholders, or any individual Shareholder if such
amendment or waiver concerns only one Shareholder. 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.
18. 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.
21
<PAGE> 22
19. 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
Shareholders agree that the Target Corporation has not borne and will not bear
any of the Shareholders costs and expenses (including any of their legal fees
and expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
20. 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.
21. Incorporation of Exhibits, Annexes, and Schedules. 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.
7-7 MERGER, INC.,
an Arkansas corporation
By: /s/ Edward L. Schrader________________
Officer
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By: /s/ Edward L. Schrader
Officer
7-7, INC.,
an Ohio corporation
By: /s/ Calvin F. Lowe, II
Officer
22
<PAGE> 23
-------------------------------------------------
Calvin F. Lowe, Sr.
-------------------------------------------------
Calvin F. Lowe, II
-------------------------------------------------
Edward Kurzenberger
-------------------------------------------------
G. Howard Collingwood
-------------------------------------------------
Gary Platek
-------------------------------------------------
James Hodgson
23
<PAGE> 1
EXHIBIT 10.8
STOCK PURCHASE AGREEMENT
This Agreement is made and entered into on this 30th day of September,
1996, by and between American Physicians Service Group, Inc., a Texas
corporation (the "Buyer"), and Exsorbet Industries, Inc., an Idaho corporation
(the "Seller").
In consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows:
1. Definitions.
"Exsorbet" and "Exsorbet Industries, Inc." refer to that certain
entity which is incorporated under the laws of the State of Idaho under the
name "Exsorbet Industries, Inc." as well as any successor corporation.
"Shareholder Rights Agreement"means an Agreement by and between
American Physicians Service Group, Inc. and Exsorbet Industries, Inc. dated
September 30, 1996 and entitled "Shareholder Rights Agreement."
"Stock Put Agreement"means an Agreement by and between American
Physicians Service Group, Inc. and Exsorbet Industries, Inc. dated September
30, 1996, and entitled "Stock Put Agreement."
2. Purchase and Sale of 1,200,000 Shares of Common Stock.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, and further subject to the terms of the Stock Put Agreement and
Shareholder Rights Agreement, Buyer agrees to, and does hereby, purchase from
Seller One Million Two Hundred Thousand (1,200,000) shares of common (capital)
stock of Exsorbet Industries, Inc. at the price of Two Dollars and Seventy-Five
Cents ($2.75) per share.
(b) Delivery of Share Certificate. Buyer acknowledges receipt of a
certificate evidencing 1,200,000 shares of common stock of Exsorbet Industries,
Inc., such certificate being issued in the name of "American Physicians Service
Group, Inc."
(c) Payment. Seller acknowledges receipt of Three Million Three
Hundred Thousand U.S. Dollars ($3,300,000) from Buyer as payment in full for
the shares of stock specified above. Such sum is being delivered by wire
transfer to a banking account directed by Seller.
3. Stock Registration. Unless and until registered, all of the
shares of stock issued by Exsorbet Industries, Inc. pursuant to this Agreement
may not be sold or transferred unless and until registered or pursuant to a
valid exemption from registration. All stock certificates issued pursuant
<PAGE> 2
to this Agreement shall bear a restrictive legend in substantially the
following form:
"No sale, offer to sell, or transfer of the shares represented by this
certificate shall be made unless a registration statement under the
Federal Securities Act of 1933, as amended, with respect to such
shares is then in effect or an exemption from the registration
requirements of said act is then in fact applicable to said shares."
4. Representations of Exsorbet. Seller represents and warrants
the following facts to be true as of the time of execution of this Agreement:
(a) Exsorbet Industries, Inc. is a corporation duly organized and
existing under the laws of the State of Idaho, and is in good standing
within the State of Idaho;
(b) Seller has full corporate power and authority to perform its
obligations hereunder;
(c) Neither the execution and the delivery of this Agreement, nor
the consummation of the transaction contemplated hereby, will violate
any corporate by-laws, corporate charter, court orders, injunctions,
decrees, or rulings;
(d) There is only one class of stock of Exsorbet Industries, Inc.,
being the common or capital stock of such corporation. There is only
series of such stock. There are no series or classes of stock with
any preferred or preferential rights;
(e) The stock of Exsorbet Industries, Inc. trades on the Nasdaq
Stock Market, Inc. SmallCap Market under the symbol "EXSO;" and
(f) The shareholders of Exsorbet Industries, Inc. have been
requested to approve a proposed merger of such corporation into
Consolidated Eco-Systems, Inc., a Delaware corporation. If such
merger is approved, the Delaware corporation would be the surviving
corporation. Consolidated Eco-Systems, Inc. is, or when organized
will be, a wholly-owned subsidiary of Exsorbet Industries, Inc. In
the event that the proposed merger is approved, Exsorbet Industries,
Inc. binds and obligates itself to insure, and warrants, that
Consolidated Eco-Systems, Inc. would be bound by each and every term
of this Agreement.
5. Representations and Understandings of American Physicians
Service Group, Inc. Buyer understands that the shares of stock issued pursuant
to this Agreement have not been, and will not by the terms of this Agreement
be, registered under the Securities Act, 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. The terms of this
paragraph may be modified or amended by other Agreements existing between the
parties.
2
<PAGE> 3
Buyer represents that:
(i) it is acquiring the shares of common stock of Exsorbet
Industries, Inc. solely for its own account for investment purposes,
and not with a view to the distribution thereof;
(ii) it is a sophisticated investor with knowledge and experience in
business and financial matters;
(iii) it has received certain information concerning the Buyer and has
had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding the
stock of the Seller, provided however that the terms hereof shall be
subject to a 60 day Stock Put Agreement during which time Buyer shall
be afforded the right to conduct full due diligence inquiry of Seller,
to the extent desired;
(iv) it is able to bear the economic risk and lack of liquidity
inherent in holding the stock of Seller;
(v) it is an Accredited Investor, as defined by Regulation D
promulgated pursuant to the Securities Act of 1933, as amended; and
(vi) it has full corporate power and authority to enter into this
Agreement and to consummate the transaction contemplated hereunder.
6. Subsidiary Disclosure. Exsorbet Industries, Inc. has provided
information concerning its operating structure and specifically including a
list of its subsidiary corporations. Exsorbet represents and warrants that
such information is complete and accurate. A list of subsidiary corporations
is attached hereto, marked as Exhibit "A" and incorporated herein by reference.
7. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
8. 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; provided, however, that Buyer
may assign this Agreement and its rights hereunder to any subsidiary or
affiliate of Buyer, and Buyer may transfer or convey its rights in any shares
of stock of the Seller and the Seller may merge with that certain Delaware
corporation known as Consolidated Eco-Systems, Inc., provided that such
corporation agrees to be completely bound by all terms of all contracts in
existence between the parties.
3
<PAGE> 4
9. 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.
10. 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.
11. 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
three 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:
<TABLE>
<S> <C> <C>
If to the Seller: Copy to: Charles E. Chunn, Jr., 1401 South Waldron Road, Suite 201, Fort
Smith, AR 72903.
If to the Buyer: Copy to: Duane K. Boyd, Jr., 1301 Capital of Texas Highway, Suite C-300, Austin, TX
78746-6550.
</TABLE>
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.
12. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Texas.
13. 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 Seller. 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.
14. Severability. Any term or provision of this Agreement that is
invalid or unenforceable
4
<PAGE> 5
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.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
"SELLER"
By: /s/ James Connors
Title: Executive Vice-President
AMERICAN PHYSICIAN SERVICE GROUP, INC.
a Texas corporation
"BUYER"
By: Duane Boyd, Jr.
Title: President
5
<PAGE> 6
EXHIBIT "A"
EXSORBET INDUSTRIES, INC.
REVENUE GENERATING SUBSIDIARY CORPORATIONS
Consolidated Environmental Services, Inc., an Arkansas corporation;
Cierra, Inc., an Arkansas corporation.;
Larco Environmental Services, Inc., a Louisiana corporation.;
KR Industrial Service of Alabama, Inc., an Alabama corporation at
present;
Exsorbet Technical Services, Inc., an Arkansas corporation, d/b/a
SpilTech Services, Inc.; and
Eco-Acquisition, Inc., an Arkansas corporation (this company will be
changing its name to Eco-Systems, Inc.).
This list does not include non-revenue generating subsidiaries of Exsorbet
Industries, Inc.
6
<PAGE> 1
EXHIBIT 23.1
Independent Auditor's Consent
The Board of Directors of
Exsorbet Industries, Inc.
We consent to incorporation by reference in the Registration Statement on Form
S-3 (File No. 333-3369) of our reports dated January 8, 1996 and January 5,
1995, relating to the balance sheets of 7-7, Inc. as of November 30, 1995 and
November 30, 1994, and the related statements of income, shareholders' equity,
and cash flows, and related notes for the years then ended.
/s/ Meaden & Moore, Ltd.
MEADEN & MOORE, LTD.
Cleveland, Ohio
October 15, 1996
<PAGE> 1
EXHIBIT 99.1
EXSORBET INDUSTRIES, INC.
4294 LAKELAND DRIVE, SUITE 200
JACKSON, MS 39208
PHONE (601) 936-6633
Contact: Exsorbet Industries, Inc.
Dr. Ed Schrader
President
(601) 974-1342
Charles E. Chunn, Jr.
Executive Vice President, CFO
(501) 452-1987
Ed Penick, Jr.
Vice President
(501) 664-7745
FOR IMMEDIATE RELEASE
EXSORBET INDUSTRIES, INC. ANNOUNCES ACQUISITION OF
7-7, INC SPECIALIZED ENVIRONMENTAL SERVICES
Jackson, MS--Monday, September 30, 1996--Exsorbet Industries, Inc.
(NASDAQ: Small Cap: EXSO) today announced the acquisition of 7-7, Inc.
Specialized Environmental Services. The company was acquired through a
combination of cash and Exsorbet common stock for all of the outstanding shares
of 7-7, Inc. The deal is structured around an "earn out" arrangement according
to 7-7's future profitability.
7-7, Inc. will be treated as a purchase by Exsorbet. For the fiscal
year ending 11-30-95, 7-7, Inc. reported approximately $18 million in gross
sales. Through the first nine months of 1996, revenues were in excess of $10
million. Total assets for the company as of August 31, 1996 were $9,230,000.
Current estimated backlog of contracts for 7-7, Inc. exceeds $12 million. 7-7,
Inc. had a net loss of $1.1 Million for the first nine months of the current
fiscal year due to the start up cost associated with its Liquiefication Process
plant. This loss is not expected to recur as the plant becomes fully
operational. 7-7, Inc. employs 160 people.
Founded in 1978, 7-7, Inc. is located in Wooster, Ohio. The company
offers a wide range of environmental services including remediation, emergency
response, barge cleaning, industrial maintenance and hazardous waste recycling.
The firm has developed a Liquiefication Process that recycles into a commercial
product hazardous coal tar and petroleum tar sludges. The Liquiefication
Process has broad applications for the steel industry, petroleum and chemical
refineries, utility power plants, wood treatment facilities, and EPA Superfund
sites.
<PAGE> 2
Through this process, tar waste sludges are transformed (either on
site or off site) into viable feedstocks, such as high-BTU fuel stock and
various grades of coal chemical feedstocks. Currently, 7-7 has three
Liquiefication units, one of which is a permanent facility located in Cleveland
with a capacity of up to 300 tons per day and two are mobile units with
capacities of 100 to 150 tons each per day. These mobile units are used on
specific projects.
7-7, Inc. has recently entered into an agreement to utilize its
technology in international opportunities. 7-7 has signed a joint venture with
CEVA International to begin a project next month for the treatment of tar
sludges in Hungary. The Hungarian project is projected to process
approximately 40,000 tons of sludge for a total amount of approximately $6
million through 1997.
Dr. Ed Schrader, President and CEO of Exsorbet Industries, said, "we
are very pleased with the acquisition of 7-7. The potential for growth through
expanding emergency response and industrial services into the Ohio River Valley
offers us great opportunities. In addition, the patented Liquiefication
Process, a highly technical process, provides significant savings for clients
by reducing the cost of disposal over traditional methods such as landfills or
incinerators. Also, to the benefit of our clients, it relieves the waste
generator, remediation firm, and end user of the continuing liability
associated with hazardous waste disposal."
The key management personnel of 7-7 will remain with employment
contracts and continue to operate the company. In addition, they will be
instrumental in developing the interaction with existing Exsorbet subsidiaries.
7-7's emergency response division, which operates primarily in the Ohio River
Valley, will benefit from networking with Larco, an Exsorbet subsidiary which
is a leading emergency response responder in the Gulf Coast area, by extending
the emergency response coverage of Exsorbet from the Gulf Coast to the Great
Lakes. Likewise, 7-7's field remediation services will coordinate their
activities with CESI, an Exsorbet subsidiary that provides comprehensive
environmental remediation services.
Cal Lowe, II, President of 7-7 commented "we are looking forward to
the new and expanded opportunities our company will be able to offer with our
merger with Exsorbet. We can assist each other in building what I believe will
be a world class environmental firm with outstanding leadership in emergency
response, industrial services and the liquiefication of coal tar sludges."
Exsorbet Industries, Inc. is a full service environmental 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, industrial maintenance services, and twenty- four hour emergency
response services.
Subsidiaries of Exsorbet Industries, Inc. include Eco-Systems;
Exsorbet Technical/SpilTech Services, Inc.; Consolidated Environmental
Services, Inc.; Cierra, Inc.; LARCO Environmental Services, Inc.; and K. R.
Industrial Service of Alabama, Inc. Offices are located in Jackson, MS; Fort
Smith and Little Rock, AR; Mobile, Birmingham, and Double Springs, AL; Baton
Rouge,
<PAGE> 3
Sulphur (Lake Charles), LA; Kansas City, MO; Tulsa, OK; Knoxville, TN; Dallas,
Bridge City, Euless, and Houston, TX.
