<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
June 27, 1996
Date of Report
(Date of earliest event reported)
Exsorbet Industries, Inc
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Idaho
(State or other jurisdiction of incorporation)
0-25970 82-0464589
--------- ------------
(Commission file number) (IRS employer identification no.)
4294 Lakeland, Suite 200
Jackson, Mississippi 39208
---------------------- -------
(Address of principal executive offices) (Zip code)
(601) 936-4440
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On June 27, 1996, Exsorbet Industries, Inc. (the "Company")
entered into a Stock Exchange Agreement by and between the Company, KR
Acquisition, Inc., an Arkansas corporation and wholly owned subsidiary of the
Company ("Acquisition"), KR Industrial Service of Alabama, Inc., Kenneth R.
McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr. Pursuant to the terms of
the Agreement, the Company beneficially acquired all of the outstanding common
stock of KR Industrial Service of Alabama, Inc., an Alabama corporation, which
is an environmental industrial services company ("KR Industrial"). The stock
was actually acquired by Acquisition. Acquisition and KR Industrial Service of
Alabama are filing articles of merger. The stock of KR Industrial was acquired
from its sole shareholders, Kenneth R. McDonald, Carolyn McDonald and Kenneth
A. Flatt, Jr. In return, Kenneth and Carolyn McDonald received 545,338 shares
of the Company's common stock, par value $.001 per share (the "Company"). The
Board of Directors of the Company determined this consideration to be fair and
reasonable by determining the fair market value of KR Industrial to be
$2,120,000. The value of the Common Stock at closing, based on a five day
closing price prior to closing, was $3.8875. The amount of Common Stock
provided was representative of the fair market value of the company acquired.
At the time of the Agreement, the Company entered into employment agreements
with Kenneth R. McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr.
Kenneth R. McDonald will receive cash compensation of $100,000 annually. Mr.
McDonald was also granted stock options which will vest and be exercisable
based upon his achieving successful sales goals to be established by the
Company. Carolyn McDonald will receive cash compensation of $50,000 annually.
Kenneth A. Flatt, Jr. will receive cash compensation of $52,000.00 plus three
percent of gross revenues based on sales generated by Mr. Flatt. Kenneth R.
McDonald has also been appointed an executive vice-president of the Company.
(b) The assets acquired in the acquisition have been used as an
operating facility for KR Industrial. The assets include personal property,
inventory, and accounts receivables, as well as certain leased real property.
The Company will continue to make the same use of both the leased real property
used by KR Industrial and the personal property as existed prior to the
acquisition.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
WITH
INDEPENDENT AUDITOR'S REPORT
3
<PAGE> 4
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Independent Auditor's Report 1
Financial Statements
Balance sheets 2
Statements of income 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6 - 11
</TABLE>
4
<PAGE> 5
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
K.R. Industrial Service of Alabama, Inc.
Double Springs, Alabama
We have audited the accompanying balance sheets of K.R. INDUSTRIAL SERVICE OF
ALABAMA, INC. as of DECEMBER 31, 1995 AND 1994, and the related statements of
income, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of K.R.
Industrial Service of Alabama, Inc., as of December 31, 1995 and 1994, and the
results of their operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ COOPER, SHUFFIELD & COMPANY
Little Rock, Arkansas
August 9, 1996
5
<PAGE> 6
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Current Assets
Cash $ 64,294 $ -
Accounts receivable - trade (net of factored
accounts totaling $263,830 and $158,907
at 1995 and 1994, respectively) 175,132 73,176
Other 1,725 563
---------- -----------
Total Current Assets 241,151 73,739
---------- -----------
Other Assets
Other 3,175 -
---------- -----------
Property and Equipment
Machinery and equipment 873,933 351,734
Office equipment and furniture 29,620 29,620
Transportation equipment 232,390 264,997
Leasehold improvements 19,405 7,700
Property held under capital leases 1,327,478 825,363
---------- -----------
2,482,826 1,479,414
Less accumulated depreciation 364,811 247,681
---------- -----------
Net Property and Equipment 2,118,015 1,231,733
---------- -----------
Total Assets $2,362,341 $1,305,472
========== ==========
</TABLE>
6
<PAGE> 7
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
----------- --------------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 126,045 $ 42,676
Obligations under capital leases, current 230,197 123,002
Notes payable - 24,312
Accounts payable 190,099 118,769
Other current liabilities 67,992 36,646
---------- ----------
Total Current Liabilities 614,333 345,405
---------- ----------
Long-Term Liabilities
Long-term debt, less current maturities 217,356 144,860
Obligations under capital leases, less
current portion 471,624 279,097
---------- ----------
Total Long-Term Liabilities 688,980 423,957
---------- ----------
Stockholders' Equity
Common stock, $1 par value;
1,000 shares authorized, issued and
outstanding 1,000 1,000
Additional paid-in capital 204,712 204,712
Retained earnings 853,316 330,398
---------- ----------
Total Stockholders' Equity 1,059,028 536,110
---------- ----------
Total Liabilities and Stockholders' Equity $2,362,341 $1,305,472
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Sales $3,578,384 $2,088,483
Cost of Sales 1,817,551 1,168,003
---------- ----------
Gross Profit 1,760,833 920,480
---------- ----------
Expenses
Operating 374,962 189,359
General and administrative 757,520 429,887
Marketing 4,340 2,092
---------- ----------
Total Expenses 1,136,822 621,338
---------- ----------
Income from Operations 624,011 299,142
---------- ----------
Other Income (Expenses)
Interest expense (152,871) (98,913)
Gain (loss) on sale of assets 71,928 (13,130)
---------- ----------
Total Other Income (Expenses) (80,943) (112,043)
---------- ----------
Net Income $ 543,068 $ 187,099
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $ 1,000 $ - $ 151,501 $ 152,501
Net Income - 1994 187,099 187,099
Contributed Capital 204,712 204,712
Distributions to Stockholders (8,202) (8,202)
------------ ----------- ----------- ------------
Balance at December 31, 1994 1,000 204,712 330,398 536,110
Net Income - 1995 543,068 543,068
Distributions to Stockholders (20,150) (20,150)
------------ ----------- ----------- ------------
Balance at December 31, 1995 $ 1,000 $ 204,712 $ 853,316 $ 1,059,028
============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from Operating Activities:
Net income $ 543,068 $ 187,099
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 129,733 94,603
(Gain) loss on sale of property and equipment (71,928) 13,130
Changes in assets and liabilities:
Accounts receivable (103,118) 62,565
Other assets (3,175) 100
Accounts payable 71,330 4,937
Accrued expenses 31,346 (60,266)
----------- -----------
Net Cash Provided (Used) by Operating Activities 597,256 302,168
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment 186,854 -
Purchase of property and equipment (1,130,941) (261,603)
----------- -----------
Net Cash Provided (Used) by Investing Activities (944,087) (261,603)
----------- -----------
Cash Flows from Financing Activities:
Net borrowings (repayments) on notes payable (5,500) 24,282
Repayments of long-term debt (332,624) (222,118)
Proceeds from new borrowings on long-term debt 769,399 164,143
Distributions to stockholders (20,150) (8,202)
----------- -----------
Net Cash Provided (Used) by Financing Activities 411,125 (41,895)
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents 64,294 (1,330)
Cash and Cash Equivalents - Beginning of Year - 1,330
------------ -----------
Cash and Cash Equivalents - End of Year $ 64,294 $ -
============ ============
</TABLE>
10
<PAGE> 11
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 152,871 $ 98,913
============ =============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
1995 1994
------------ -------------
Note payable due from stockholder converted
to additional paid-in capital $ - $ 204,712
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. Summary of Significant Accounting Policies
a. Business Activity
K.R. Industrial Service of Alabama, Inc., (the "Company") was
incorporated in December 1992. The Company is an
environmental service company specializing in hazardous spill
containment and clean-up. Offices are located in Double
Springs, Mobile, Wilsonville and Decatur, Alabama and serves
clients primarily in the southeastern region of the United
States.
b. Cash and Cash Equivalents
The Company considers all investments with a maturity of three
months or less to be cash equivalents.
c. Property and Equipment
Depreciation is provided by the straight-line method over the
estimated useful lives of the various assets. Amortization of
equipment purchased under capitalized lease obligations is
included in depreciation expense. Expenditures for
maintenance and repairs are charged to operations; major
expenditures for renewals and betterments are capitalized and
depreciated over their useful lives.
The estimated useful lives of property and equipment for
purposes of computing depreciation are as follows:
Machinery and equipment 5 to 20 years
Office equipment and furniture 7 to 15 years
Transportation equipment 5 to 10 years
Leasehold improvements 20 to 30 years
12
<PAGE> 13
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. Summary of Significant Accounting Policies (Continued)
d. Income Taxes
Effective January 1, 1994, the Company elected by unanimous
consent of the shareholders to be taxed under the provisions
of Subchapter S of the Internal Revenue Code. Under such
election, the Company's federal and state taxable income or
loss are passed on to the individual shareholders. Therefore,
no provision or liability for income tax has been included in
these financial statements.
e. Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at December 31, 1995 and
1994, and revenues and expenses for the years then ended. The
actual outcome of the estimates could differ from those
estimates made in the preparation of the financial statements.
f. Fair Value
The stated value of the Company's long-term debt approximates
the fair value based on the current rates offered to the
Company for debt of the same remaining maturities.
g. Concentration of Credit Risk
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of accounts
receivable - trade. Due to the nature of the services that
are provided, credit checks of potential clients are performed
when feasible. However, the Company does monitor its accounts
receivable closely and utilizes its personnel in the
collection process of any overdue accounts. See Note 2.
13
<PAGE> 14
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
2. Accounts Receivable
In August 1994 the Company entered into an arrangement to sell, or
factor, certain of its trade accounts receivable to a finance
organization. The initial agreement was amended in August 1995.
Under the agreement the Company receives an initial payment of seventy
percent of the amount of the accounts receivable purchased. The
remainder of the receivable is remitted upon collection net of certain
fees equal to a minimum of 3.25 percent and a maximum of 7.75 percent
of the amount purchased. The agreement expires in August 1997.
Accounts receivable, net of factored accounts are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Gross accounts receivable $ 438,962 $ 232,083
Factored accounts 263,830 158,907
------------ -------------
Net Accounts Receivable $ 175,132 $ 73,176
============ =============
</TABLE>
3. Note Payable - Stockholder
During 1994, the Company satisfied a debt to the stockholder in a
non-cash transaction which resulted in an addition to the additional
paid-in capital of the Company in the amount of $204,712.
4. Notes Payable - Bank and Other
Notes payable - bank and other consist of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
8.9% note payable to a bank, in monthly
installments of $706, including interest,
secured by a vehicle $ - $ 1,395
Note payable to a vendor, non-interest
bearing, in monthly installments of
$1,583, secured by equipment - 17,417
Note payable to an individual, non-interest
bearing, due on demand, secured by
equipment - 5,500
------------- -------------
$ - $ 24,312
============= =============
</TABLE>
14
<PAGE> 15
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. Long-Term Debt
Long-term debt consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
10% note payable to a bank, interest due
monthly, secured by stockholder assets and
personal guarantee, due September 1996 $ 40,000 45,000
9.5% note payable to a bank, in monthly
installments of $912, including interest,
secured by equipment, due May 1997 15,238 23,535
Other notes payable to a bank with interest
at 9 percent, due in monthly installments
through June 1996, secured by vehicles 5,970 17,136
Notes payable to various finance organizations,
with interest ranging from 11 percent to
22.8 percent, due in monthly installments
totaling $8,450, secured by various assets
of the company. 282,193 101,865
--------- ---------
343,401 187,536
Less current maturities 126,045 42,676
--------- ---------
$ 217,356 $ 144,860
========= =========
</TABLE>
15
<PAGE> 16
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. Long-Term Debt (Continued)
Following are aggregate maturities of long-term debt for each of the
next five years:
<TABLE>
<S> <C>
1996 $ 126,045
1997 81,335
1998 73,461
1999 53,680
2000 8,880
-----------
$ 343,401
===========
</TABLE>
6. Lease Commitments
As of December 31, 1995, the Company leased office space and certain
equipment under various noncancelable operating and capital leases.
Future minimum lease payments required under the operating and capital
leases are as follows:
<TABLE>
<CAPTION>
Operating Capital
For the year ended: Leases Leases
-------------- -----------
<S> <C> <C>
1996 $ 63,058 $ 291,276
1997 55,508 255,064
1998 40,723 156,111
1999 - 105,376
2000 - 71,598
-------------- -----------
Total minimum lease payments $ 158,839 $ 879,425
==============
Less amount representing interest
(at rates ranging from 3.1% to
17.1%) 177,604
-----------
Present value of net minimum lease
payments 701,821
Less current portion 230,197
-----------
Long-Term Portion $ 471,624
===========
</TABLE>
16
<PAGE> 17
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
6. Lease Commitments (Continued)
As of December 31, 1995, the Company has equipment purchased under
noncancelable capital leases with a cost of $1,327,478 and accumulated
amortization of $119,763. See note 7.
7. Related Party Transactions
The Company leases certain office facilities from a stockholder under
a month to month lease. Rent expense related to this operating lease
and included in general and administrative expenses was approximately
$5,000 and $1,500 for 1995 and 1994, respectively.
The stockholders have personally guaranteed a significant portion of
the long-term debt and capital lease obligations.
8. Subsequent Events
During 1996, Exsorbet Industries, Inc., entered into an agreement with
K.R. Industrial Service of Alabama, Inc., to purchase all of the
authorized and outstanding common stock of K.R. Industrial Service of
Alabama, Inc., in exchange for approximately 546,000 shares of
Exsorbet Industries, Inc., common stock, valued at $2,120,000. The
planned merger agreement was closed on June 28, 1996.
17
<PAGE> 18
PRO FORMA FINANCIAL INFORMATION. The following pro formas for the
Acquisition, include financial information from the acquisition of KR
Industrial Services of Alabama, Inc. that was acquired on June 26, 1996.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXSORBET INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------- --------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets
Cash $ 2,608,706 $ 1,330,554 $ 877,182 $ 336,587
Accounts receivable
- trade, net
of allowances 8,793,988 4,288,233 4,787,962 2,860,260
Inventories 552,595 1,116,585 835,550 1,308,302
Prepaid and other 976,156 610,220 513,877 398,790
----------- ----------- ------------ -----------
Total Current Assets 12,931,445 7,345,592 7,014,571 4,903,939
----------- ----------- ------------ -----------
Other Assets
Intangible assets, net 10,370,086 10,283,828 9,895,871 9,338,262
Other assets 1,699,407 449,865 200,675 73,264
----------- ----------- ------------ -----------
Total Other Assets 12,069,493 10,733,693 10,096,546 9,411,526
----------- ----------- ------------ -----------
Property, Plant and
Equipment, net 14,887,168 8,979,650 12,103,989 9,319,736
----------- ----------- ------------ -----------
Total Assets $39,888,106 $27,058,935 $ 29,215,106 $23,635,201
=========== =========== ============ ===========
</TABLE>
18
<PAGE> 19
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
--------------------------- ---------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Current Liabilities
Accounts payable
- trade $ 1,536,849 $ 1,256,070 $ 1,990,202 $ 1,430,887
Notes payable and
current maturities of
long-term debt 5,812,445 1,868,925 3,373,688 3,132,703
Other current liabilities 1,495,156 1,156,077 785,475 431,412
----------- ----------- ----------- -----------
Total Current Liabilities 8,844,450 4,281,072 6,149,365 4,995,002
----------- ----------- ----------- -----------
Long-term debt, less
current maturities 9,798,695 3,980,582 3,490,059 2,066,830
----------- ----------- ----------- -----------
Deferred Income Taxes 929,149 - 116,637 387,734
----------- ----------- ----------- -----------
Total Liabilities 19,572,294 8,261,654 9,756,061 7,402,047
----------- ----------- ----------- -----------
Minority Interest - - 36,574 11,001
----------- ----------- ------------ -----------
Stockholders' Equity
Common stock 10,583 10,539 10,583 10,080
Additional paid-in
capital 18,064,851 17,830,895 18,064,852 15,831,859
Retained earnings
(deficit) 2,240,378 955,847 1,347,036 332,695
----------- ----------- ----------- -----------
Total Stockholders' Equity 20,315,812 18,797,281 19,422,471 16,174,634
----------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $39,888,106 $27,058,935 $29,215,106 $23,635,201
=========== =========== =========== ===========
</TABLE>
19
<PAGE> 20
EXSORBET INDUSTRIES, INC,
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, December 31,
-------------------------- --------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales $15,039,167 $11,078,050 $21,825,894 $16,658,704
Cost of Sales 8,485,384 7,303,205 12,052,473 9,460,369
----------- ----------- ------------ -----------
Gross Profit 6,553,783 3,774,845 9,773,421 7,198,335
----------- ----------- ----------- -----------
Costs and Expenses
Marketing Expense 786,842 493,065 1,134,574 354,879
General and
Administrative 2,080,932 1,471,814 7,896,129 6,006,812
----------- ----------- ----------- -----------
Total Costs and Expenses 2,867,774 1,964,879 9,030,703 6,361,691
----------- ----------- ----------- -----------
Income from Operations 3,686,009 1,809,966 742,718 836,664
Other Income
(Expense), Net (369,892) (237,835) (360,060) (282,298)
----------- ----------- ----------- -----------
Income before
Income Tax Provisions
(Benefits) 3,316,117 1,572,131 382,658 554,346
Provisions (Benefits) for
Income Taxes 1,260,124 597,410 (88,457) 196,623
----------- ----------- ----------- -----------
Net Income $ 2,055,993 $ 974,721 $ 471,115 $ 357,723
=========== =========== =========== ===========
Average Shares
Outstanding 10,582,400 10,326,100 10,436,700 9,867,700
=========== =========== =========== ===========
Net Income per Common
Share $ 0.19 $ 0.09 $ 0.05 $ 0.04
=========== =========== =========== ===========
</TABLE>
20
<PAGE> 21
EXSORBET INDUSTRIES, INC,
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
June 30, December 31,
----------------------------- ---------------------------
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net Cash (Used) Provided
by Operating Activities $ (840,569) $ 684,467 $ 604,387 $ 785,748
---------- ---------- ---------- ----------
Cash Flows from Investing
Activities:
Net purchases of property,
plant and equipment (4,384,916) (135,268) (3,269,020) (4,465,363)
Change in other assets (1,790,384) (208,933) (417,982) -
--------- ---------- ---------- ----------
Net Cash Used in Investing
Activities (6,175,300) (344,201) (3,687,002) (4,465,363)
--------- ---------- ---------- ----------
Cash Flows from Financing
Activities:
Proceeds from issuance of
debentures 5,000,000 - - -
Net proceeds from notes
payable and long-term
debt 3,747,393 653,701 2,308,360 3,009,587
Distributions to
stockholders - - (485,150) (152,331)
Issuance of common stock - - 1,800,000 499,999
---------- ---------- ---------- ----------
Net Cash Flows provided by
Financing Activities 8,747,393 653,701 3,623,210 3,357,255
---------- ---------- ---------- ----------
Increase (Decrease) in Cash
and Cash Equivalents 1,731,524 993,967 540,595 (322,360)
Cash and Cash Equivalents -
Beginning of Period 877,182 336,587 336,587 658,947
---------- ---------- ---------- -----------
Cash and Cash Equivalents -
End of Period $2,608,706 $1,330,554 $ 877,182 $ 336,587
========== ========== ========== ==========
</TABLE>
21
<PAGE> 22
EXHIBITS.
2.1 Agreement dated June 27, 1996 by and between Exsorbet
Industries, Inc., KR Acquisition, Inc., KR Industrial Service of Alabama, Inc.,
Kenneth R. McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr.
23.2 Consent of Cooper, Shuffield & Company.
99.1 Press Release of Exsorbet Industries, Inc. dated June 27, 1996
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXSORBET INDUSTRIES, INC.
/s/ Charles E. Chunn, Jr.
--------------------------------------
Charles E. Chunn, Jr.
Vice-President
Date: September 9, 1996
23
<PAGE> 24
EXHIBITS.
EXHIBIT
NUMBER
2.1 Agreement dated June 27, 1996 by and between Exsorbet
Industries, Inc., KR Acquisition, Inc., KR Industrial Service of Alabama, Inc.,
Kenneth R. McDonald, Carolyn McDonald, and Kenneth A. Flatt, Jr.
23.2 Consent of Cooper, Shuffield & Company.
99.1 Press Release of Exsorbet Industries, Inc. dated June 27, 1996
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STOCK EXCHANGE AGREEMENT
among
KR ACQUISITION, an Arkansas corporation
and
KR INDUSTRIAL SERVICES OF ALABAMA, INC.
KEN and CAROLYN McDONALD
Shareholders
JUNE 27, 1996
<PAGE> 2
AGREEMENT
This Agreement is made and entered into on this 27th day of June,
1996, by and between KR Acquisition, Inc. (the "Buyer"), an Arkansas
corporation which is a wholly owned subsidiary of Exsorbet Industries, Inc., an
Idaho corporation, Exsorbet Industries, Inc., an Idaho corporation (the
"Guarantor"), KR Industrial Services of Alabama, Inc., an Alabama corporation
(the "Target Corporation") and Ken McDonald and Carolyn McDonald and Mr. and
Mrs. Kenneth Flatt, Jr. (collectively Ken McDonald, Carolyn McDonald, and Mr.
and Mrs. Kenneth Flatt, Jr. will be called the "Sellers"). The Buyer and the
Sellers are referred to collectively herein as the Parties.
WHEREAS, the Sellers in the aggregate own all of the outstanding stock
of all classes of the Target Corporation; and
WHEREAS, the Buyer desires to buy from the Sellers all of the
outstanding stock of all classes of the Target Corporation upon the terms and
conditions stated herein; and
WHEREAS, the Sellers desire to sell to the Buyer all of the
outstanding stock of all classes of the Target Corporation upon the terms and
conditions stated herein; and
WHEREAS, each of the parties has made or undertaken certain promises,
obligations, representations, and covenants, as defined below, all of which
constitute the consideration for this Agreement;
IT IS, THEREFORE, AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Exchange of Shares of Stock.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, each of the Sellers agrees to exchange all of his or her shares
of stock of the Target Corporation with the Buyer, in consideration of the
exchange of certain shares of stock of Exsorbet Industries, Inc., an Idaho
corporation.
(b) Sellers Own All Outstanding Stock. The Sellers covenant and
warrant that they are the sole and exclusive direct owners of all of the
outstanding stock of all classes of the Target Corporation and that no other
person, persons, or entities are entitled to claim any interest whatsoever
(whether direct, indirect, beneficially, by security interest, lien, mortgage,
or otherwise) in any of the shares of stock of any class of the Target
Corporation.
(c) Stock. Contemporaneously with the execution of this Agreement,
Sellers are receiving certificates collectively representing 545,338 shares of
restricted common stock of Exsorbet Industries, Inc., an Idaho corporation.
Sellers acknowledge receipt of such shares. Such shares of stock shall be in
the joint name of Kenneth McDonald and Carolyn McDonald. Upon request, the
share certificates will be reissued, at the expense of the Buyer, in the
individual name of each Seller in such percentages of the total number of
available and unencumbered shares as are
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<PAGE> 3
desired. For purposes of this Agreement, each share of restricted common stock
will be treated as if it had a value of $3.8875.
(d) Restricted Stock. All shares of stock issued pursuant to this
Agreement shall be restricted by the rules and regulations of the United States
Securities and Exchange Commission. Transfers of the shares shall be subject to
Rule 144 of the United States Securities and Exchange Commission (contained at
17 CFR part 230). Unless and until the shares are registered, the shares of
stock may not be sold, transferred, hypothecated, encumbered, assigned, or
conveyed until after the expiration of two years from the date of issuance.
All shares of stock shall bear an appropriate restrictive legend specifying
that the shares may not be transferred unless pursuant to an exemption from
registration and subject to a satisfactory opinion of counsel. Such other
restrictive legend language as is required by the transfer agent for Exsorbet
Industries, Inc. may be included on the certificates.
(e) Stock of the Target Corporation. Contemporaneously with the
execution of this Agreement, the Sellers will deliver to the Buyer certificates
representing all of the shares of stock of all classes of the Target
Corporation. At such time, the Sellers shall execute such certificates and
take such action as is required to transfer such shares of stock to Buyer. In
the event that the Target Corporation utilizes the service of an agent for
transfer of shares of certificates of the Target Corporation, the Sellers shall
designate the name, address, and telephone number of such agent in a writing
signed by Buyer and attached to this Agreement.
(f) Debt Obligations. The Buyer shall be responsible for all
disclosed liabilities of the Target Corporation, unless otherwise specified
herein.
(g) Guarantee of Obligations. Exsorbet Industries, Inc., the
Guarantor, guarantees to insure that all obligations of the Buyer under the
terms of this Agreement are met.
(h) Other Documents. Contemporaneously with the execution of this
Agreement, Buyer shall deliver to the Sellers all documents, certificates, and
exhibits as are specified herein. At the same time, Sellers shall deliver to
the Buyers all documents, certificates, and exhibits as are specified herein.
Each party warrants and represents the accuracy and truthfulness of all such
documents.
(i) Subsidiaries. There are no subsidiaries of the Target Corporation.
(j) Stock Registration. The parties intend to provide for
registration of the shares of stock provided to the Sellers pursuant to this
Agreement, with such registration being at the option of the Sellers. Despite
the fact that registration may occur, Sellers agree not to transfer, convey,
sell, or place for sale on any stock market or by any other source more than
181,779 shares of stock received during any one year period for the first three
years following the execution of this Agreement. In order to provide for
registration of the shares of stock, Exsorbet Industries, Inc. and KR
Acquisition, Inc. shall:
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<PAGE> 4
(a) pay the costs and expenses (including attorney's fees and filing
fees with the United States Securities & Exchange Commission) for
filing a registration statement with the United States Securities &
Exchange Commission;
(b) provide such information as is requested by, or on behalf of, the
Buyers to assist in effectuating the registration process;
(c) cooperate in effectuating the registration process; and
(d) provide legal counsel to prepare all documentation necessary to
effectuate the registration process.
Exsorbet Industries, Inc. utilizes the services of the Baker & McKenzie Law
Firm in Dallas, Texas as their securities attorneys. It is anticipated that
such law firm will prepare the registration statement for filing with the
United States Securities & Exchange Commission. The law firm preparing the
registration statement will evaluate this transaction, determine the best type
of registration process in consideration of all factual matters, and consult
with the parties about the type of registration to occur. The Buyers will
cooperate in the registration process, but will not incur any expense in
registration of the shares of stock.
2. Representations.
(a) Reliance. Neither Buyer nor the Sellers are relying upon any
representation or information provided by any other party or signatory to this
Agreement unless such representation or information is contained in a written
document provided to the party relying upon such representation or information.
However, Buyer and Guarantor are relying upon all information and documentation
provided by Sellers in the due diligence inquiry conducted into this
transaction by Buyer and Guarantor.
(b) Representations of the Sellers. Each of the Sellers represents to
the Buyer that the statements contained in this section are correct and
complete as of the date of this Agreement.
(i) Organization of Target Corporation. The Target Corporation is
duly organized, validly existing, and in good standing under the laws
of the State of Alabama. The Target Corporation is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the
lack of such qualification would not have a material adverse effect on
the business, financial condition, operations, results of operations,
or future prospects of the Target Corporation. The Target Corporation
has full corporate power and authority to carry on the businesses in
which it is engaged and to use the properties used by it. No person
other than the Sellers is either an officer or director of the Target
Corporation.
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<PAGE> 5
(ii) Capitalization. All of the shares of issued capital stock of the
Target Corporation are issued in the names of the Sellers. The Target
Corporation has not issued any type of stock other than common stock.
All of the issued and outstanding shares of stock of the Target
Corporation have been duly authorized, are validly issued, fully paid,
and nonassessable, and are held of record by the Sellers. There are
no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target Corporation to
issue, sell, or otherwise cause to become outstanding any of its stock
of any class. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights
with respect to the Target Corporation. There are no voting trusts,
proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Target Corporation. The Sellers
directly own all of the issued and outstanding stock of all classes of
the Target Corporation, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state
securities laws), taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The Sellers are not a party to any option, warrant, purchase
right, or other contract or commitment that could require the Sellers
to sell, transfer, or otherwise dispose of any stock of the Target
Corporation (other than this Agreement). The Sellers are not a party
to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any stock of the Target Corporation.
(iii) Authorization of Transaction. The Sellers have full power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement constitutes valid and legally
binding obligations of the Sellers, enforceable in accordance with its
terms and conditions. The Sellers need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iv) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Seller or the Target Corporation is subject; or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which either Seller or the Target Corporation is a party or by
which either Seller or the Target Corporation is bound or to which any
of the assets of either Seller or the Target Corporation is subject.
(v) Brokers' Fees. The Sellers have no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions
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<PAGE> 6
contemplated by this Agreement for which the Buyer could become liable
or obligated.
(vi) Investment. The Sellers are acquiring the restricted common
stock solely for their own account for investment purposes. They have
had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding the
stock.
(vii) Assets of the Target Corporation. The Target Corporation has
good and marketable title to, or a valid leasehold interest in, the
properties and assets used by them, located on their premises, or
shown on the most recent balance sheet or acquired after the date
thereof, free and clear of all security interests, except for
properties and assets disposed of in the ordinary course of business
since the date of the most recent balance sheet. Sellers warrant that
no other person or entity is entitled to claim a mortgage interest,
security interest, or otherwise claim a right to possession of the
real property utilized by the Target Corporation, except for first
mortgage owners and true owners of the buildings utilized. The
buildings, machinery, equipment, and other tangible assets that the
Target Corporation own and lease are free from material defects
(patent and latent), have been maintained in accordance with normal
industry practice, and are in reasonably good operating condition and
repair (subject to normal wear and tear).
(viii) There are no pending or, to the knowledge of any of the
Sellers and the directors and officers of the Target Corporation,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the real property utilized by either Target
Corporation. All real property improvements utilized by the Target
Corporation have received all required approvals of governmental
authorities (including material licenses and permits) required in
connection with the ownership or operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
(ix) Agreement to Merge. In their capacity as directors of the Target
Corporation, the Sellers agree to give their consent to merger of the
Target Corporation in such form as is subsequently directed by the
Board of Directors of Exsorbet Industries, Inc., provided that such
merger shall not result in a merger of the Target Corporation with a
corporation or entity other than Exsorbet Industries, Inc. or a wholly
owned subsidiary of Exsorbet Industries, Inc.
(x) Financial Statements. Attached hereto as Exhibit "A" are the
following financial statements (collectively the "Financial
Statements"): (i) unaudited consolidated balance sheets and statements
of income, changes in stockholders' equity, and cash flow for all
periods through May 31, 1996; (ii) unaudited consolidated balance
sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the three months ended March 31, 1996 for the
Target Corporation. The Financial Statements (including the notes
thereto) have
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<PAGE> 7
been prepared in accordance with generally accepted accounting
principles in effect in the United States applied on a consistent
basis throughout the periods covered thereby and present fairly the
financial condition of the Target Corporation as of such dates and the
results of operations of the Target Corporation for such periods;
provided, however, that the most recent financial statements are
subject to normal adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items.
(xi) Events Subsequent to Most Recent Fiscal Year End. Since March 31,
1996, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future
prospects of the Target Corporation taken as a whole. Without
limiting the generality of the foregoing, since that date:
(a) the Target Corporation has not sold, leased, transferred,
or assigned any material assets, tangible or intangible,
outside the ordinary course of business;
(b) the Target Corporation has not entered into any material
agreement, contract, lease, or license outside the ordinary
course of business;
(c) no person or entity has accelerated, terminated, made
material modifications to, or canceled any material agreement,
contract, lease, or license to which the Target Corporation is
a party or by which any of them is bound;
(d) the Target Corporation has not imposed any security
interest upon any of its assets, tangible or intangible;
(e) the Target Corporation has not made any material capital
expenditures outside the ordinary course of business;
(f) the Target Corporation has not made any material capital
investment in, or any material loan to, any other person
outside the ordinary course of business;
(g) the Target Corporation has not created, incurred, assumed,
or guaranteed indebtedness outside the ordinary course of
business;
(h) the Target Corporation has not granted any license or
sublicense of any material rights under or with respect to any
"intellectual property." The term "intellectual property" as
used herein refers to: (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications,
and patent disclosures, together with
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<PAGE> 8
all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names,
and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all
applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and
all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including
ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible
embodiments thereof (in whatever form or medium);
(i) there has been no material change made or authorized in
the charter or by-laws of any of the Target Corporation. (It
is understood that a change in corporate records reflecting
that the past corporate president has no authority to act on
behalf of the Target Corporation is not material.);
(j) the Target Corporation has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital
stock;
(k) the Target Corporation has not declared, set aside, or
paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(l) the Target Corporation has not experienced any material,
damage, destruction, or loss (whether or not covered by
insurance) to its property. (The provisions of this paragraph
do not imply that the Target Corporation has not experienced
depreciation with respect to certain assets.);
(m) the Target Corporation has not made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees outside the ordinary course of
business;
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<PAGE> 9
(n) the Target Corporation has not entered into any employment
contract or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or
agreement.
(o) the Target Corporation has not granted any increase in the
base compensation of any of its directors, officers, and
employees outside the ordinary course of business.
(p) the Target Corporation has not adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any
of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan).
However, a profit sharing plan is in existence and such action
will be taken to assure that no vesting or interest is lost or
diminished; and
(q) the Target Corporation has not made any other material
change in employment terms for any of its directors, officers,
and employees outside the ordinary course of business.
(xii) Undisclosed Liabilities. Sellers warrant and represent that
the Target Corporation has not incurred any material liability
(whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due,
including any liability for taxes), except for (i) liabilities set
forth on the face of the most recent balance sheet (rather than in any
notes thereto) and (ii) liabilities which have arisen after the most
recent fiscal month end in the ordinary course of business.
(xiii) Legal Compliance. The Target Corporation has complied with
all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to
comply, except where the failure to comply would not have a material
adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Target Corporation.
(xiv) Tax Matters.
(a) The Target Corporation has filed all income tax returns
that it was required to file. All such income tax returns were
correct and complete in all material respects. All income
taxes owed by the Target Corporation (whether or not shown on
any income tax
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<PAGE> 10
return) have been paid. The Target Corporation is not the
beneficiary of any extension of time within which to file any
Income Tax Return.
(b) Except as stated elsewhere, there is no material dispute
or claim concerning any income tax liability of the Target
Corporation either (A) claimed or raised by any authority in
writing or (B) as to which any of the Sellers and the
directors and officers of the Target Corporation has knowledge
based upon personal contact with any agent of such authority.
(c) There have been no audits of the income tax returns of the
Target Corporation by any federal, state, local, or foreign
taxing authority. The Target Corporation has not been
notified that it will be subject to an audit by any federal,
state, local, or foreign taxing authority. The Target
Corporation has not waived any statute of limitations in
respect to income taxes or agreed to any extension of time
with respect to an income tax assessment or deficiency.
(d) The Target Corporation has not filed a consent under
Internal Revenue Code Section 341(f) concerning collapsible
corporations. The Target Corporation has not made any material
payments, is obligated to make any material payments, or is a
party to any agreement that under certain circumstances could
obligate it to make any material payments that will not be
deductible under Internal Revenue Code Section 280G. The
Target Corporation has not been a United States real property
holding corporation within the meaning of Internal Revenue
Code Section 897(c)(2) during the applicable period specified
in Internal Revenue Code Section 897(c)(1)(A)(ii). The Target
Corporation is not a party to any tax allocation or sharing
agreement. The Target Corporation (A) has not been a member
of an affiliated group filing a consolidated federal Income
Tax Return and (B) has no liability for the taxes of any
person or entity (other than the Target Corporation) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(e) The Target Corporation (A) did not, as of the most recent
fiscal month end, exceed by any material amount the reserve
for income tax liability (rather than any reserve for deferred
taxes established to reflect timing differences between book
and tax income) set forth on the face of the most recent
balance sheet (rather than in any notes thereto) and (B) will
not exceed by any material amount that reserve as adjusted for
operations and transactions through date of
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this Agreement in accordance with the past custom and practice
of the Target Corporation in filing its income tax returns.
(xv) Intellectual Property.
(a) The Target Corporation has not interfered with, infringed
upon, misappropriated, or violated any material "intellectual
property" rights of third parties in any material respect, and
none of the Sellers and the directors and officers of the
Target Corporation has ever received any charge, complaint,
claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any
claim that any of the Target Corporation must license or
refrain from using any "intellectual property" rights of any
third party). To the knowledge of any of the Sellers and the
directors and officers of the Target Corporation, no third
party has interfered with, infringed upon, misappropriated, or
violated any material "intellectual property" rights of the
Target Corporation in any material respect.
(b) No patent or registration has been issued to any of the
Target Corporation with respect to any of its "intellectual
property," and no application for a patent has been made for
any such "intellectual property." No third party has been
granted any right, license, or agreement to use any of the
"intellectual property" of the Target Corporation. The Target
Corporation possesses all right, title, and interest to all
"intellectual property" used by it, without restriction by any
contract, court order, or governmental authority.
(xvi) Inventory. The inventory of the Target Corporation consists of
raw materials and supplies, manufactured and processed parts, work in
process, and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of
which is slow-moving, obsolete, damaged, or defective, subject only to
the reserve for inventory writedown set forth on the face of the most
recent balance sheet (rather than in any notes thereto) as adjusted
for operations and transactions through the date of this Agreement in
accordance with the past custom and practice of the Target
Corporation.
(xvii) Contracts. The Target Corporation will provide a complete list
of all contracts and agreements to which it is a party within ten days
from the date of this Agreement. The Target Corporation is not a
party to any partnership or joint venture agreements, contract of
indemnity, confidentiality agreement, stock option or purchase plan,
stock appreciation plan, deferred compensation plan, severance plan,
or any other plan for the benefit of employees, officers, or directors
other than a safety plan, health insurance plan, or other plans
disclosed during the period of due diligence inquiry by the Buyer and
Guarantor. The Target Corporation is
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not a party to any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Target Corporation, Buyer, or Guarantor. The Target
Corporation is a party to a single factoring agreement with one single
corporate entity.
(xviii) Notes and Accounts Receivable. The notes and accounts
receivable of the Target Corporation are reflected properly on its
books and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject to the
generally accepted or normal reserve for bad debts in accordance with
the past custom and practice of the Target Corporation.
(xix) Powers of Attorney. To the knowledge of either of the Sellers
and the directors and officers of the Target Corporation, there are no
material outstanding powers of attorney executed on behalf of the
Target Corporation.
(xx) Insurance. The Target Corporation has maintained adequate
property, casualty, liability, and worker's compensation coverage. A
list and copy of all such insurance policies will be provided within
five days from the present date. Sellers warrant that all such
policies are currently in full force and effect and will not expire,
lapse, or be canceled within ten days from the present date. In the
event that such policies shall expire, lapse, or be canceled within
such time period, Sellers agree to provide at least three business
days written notice in advance of such occurrence.
(xxi) Litigation. The Target Corporation is: (i) not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(ii) not a party or threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. However, the Target
Corporation does have two outstanding workers compensation claims
pending for which workers compensation insurance is in force and the
workers compensation insurance carrier has been notified in writing,
and Sellers and the Target Corporation have fully cooperated with the
workers compensation insurance carrier and complied with all
conditions of such insurance coverage.
(xxii) Employees. To the knowledge of either of the Sellers and the
directors and officers of the Target Corporation, no executive, key
employee, or significant group of employees plans to terminate
employment with the Target Corporation during the next 12 months. The
Target Corporation is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strike or
material grievance, claim of unfair labor practices, or other
collective bargaining dispute within the past three years. The
Target Corporation has not committed any material unfair labor
practice. None of the Sellers and the directors
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and officers of the Target Corporation has any knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Target
Corporation.
(xxiii) Employee Benefits. Every employee benefit plan (and each
related trust, insurance contract, or fund) of the Target Corporation
complies in form and in operation in all material respects with the
applicable requirements of the Employment Retirement Income Security
Act of 1974 ("ERISA"), the Internal Revenue Code, and other applicable
laws.
(xxiv) Guaranties. The Target Corporation is not a guarantor or
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(xxv) Environment, Health, and Safety.
(a) As used herein, the term "Environmental, Health, and
Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments
(and all agencies thereof) concerning pollution or protection
of the environment, public health and safety, or employee
health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
(b) The Target Corporation (i) has complied with the
Environmental, Health, and Safety Laws in all material
respects (and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any such
failure to comply), (ii) has obtained and been in substantial
compliance with all of the terms and conditions of all
material permits, licenses, and other authorizations which are
required under the Environmental, Health, and Safety Laws, and
(iii) has complied in all material respects with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables
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which are contained in the Environmental, Health, and Safety
Laws.
(c) All properties and equipment used in the business of the
Target Corporation and its respective predecessors and
subsidiaries have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1,2-transdichloroethylene,
dioxins, dibenzofurans, and extremely hazardous substances,
except for exposure to such substances limited to periods of
emergency response activity by the Target Corporation.
(b) Representations of the Buyer. The Buyer represents to the Sellers
that the statements contained in this section are correct and complete as of
the date of this Agreement.
(i) Organization of the Buyer. Exsorbet Industries, Inc. is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Idaho. KR Acquisition, Inc. is a
wholly owned subsidiary of Exsorbet Industries, Inc. and is duly
organized, validly existing, and in good standing under the laws of
the State of Arkansas.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions.
The Buyer need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws.
(iv) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which any
Seller could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Target Shares with a
view toward distribution or sale, and is acquiring such shares solely
for business and investment purposes.
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<PAGE> 15
3. Covenants. The Parties agree as follows with respect to
un the period after execution of this Agreement.
(a) General. In case at any time after the execution of this
Agreement, any further action is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the
requesting party unless such action was specifically required under the terms
of this Agreement. The Sellers acknowledge and agree that from and after the
date of execution of this Agreement the Buyer will be entitled to possession of
all documents, books, records (including tax records), agreements, and
financial data of any sort relating to the Target Corporation.
(b) Litigation Support. In the event and for so long as any signatory
to this Agreement is actively contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the execution of this Agreement involving the Target Corporation, each of
the other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending person or entity.
(c) Transition. Neither of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Target Corporation from
maintaining the same business relationships with the Target Corporation after
the date of this Agreement as it maintained with the Target Corporation prior
to execution.
(d) Confidentiality. As used herein, the term "confidential
information" means any information concerning the businesses and affairs of the
Target Corporation, the Buyer, and the Guarantor that is not already generally
available to the public. Each of the Sellers will treat and hold as such all
of the confidential information, refrain from using any of the confidential
information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the confidential information which are in his
or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any confidential information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
section. If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any confidential information to any tribunal or else stand liable for
contempt, that Seller may disclose the confidential information to the
tribunal; provided, however, that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the reasonable request of the Buyer, an
order or other
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<PAGE> 16
assurance that confidential treatment will be accorded to such portion of the
confidential information required to be disclosed as the Buyer shall designate.
4. Remedies for Breaches of This Agreement.
(a) Specific Indemnification Provisions for Benefit of the Buyer.
Sellers shall indemnify and hold harmless the Buyer and Exsorbet Industries,
Inc. for any debts and obligations known to the Sellers, or which should be
known by Sellers through the use of reasonable accounting procedures, and which
were not disclosed prior to closing. However, as far as contingent liabilities
are concerned, indemnification shall be limited to contingent liabilities and
obligations actually known by either of the Sellers and which were not
disclosed. A contingent liability shall be considered to be known by the
Sellers if the Sellers or Target Corporation had received written or oral
notification of a claim, the likelihood of assertion of a claim, or of
potential litigation prior to closing, or if the Sellers have actual knowledge
that a claim is likely to be made against the Target Corporation.
(b) General Indemnification Provisions for the Benefit of the
Buyer. In the event either of the Sellers has misrepresented any matter
contained herein, in accordance with the applicable state law definition of
misrepresentation, then each of the Sellers agrees to indemnify the Buyer, its
successors, the Target Corporation, and Exsorbet Industries, Inc. from and
against the entirety of any monetary loss resulting from such misrepresentation
or misrepresentations. However, Sellers shall not have any obligation to
indemnify the Buyer from and against any monetary loss arising out of, relating
to, in the nature of, or caused by the breach of any representation or warranty
of the Sellers contained herein until such breach, or an aggregate of breaches,
exceeds the sum of Ten Thousand Dollars ($10,000.00).
(c) Indemnification Provisions for Benefit of the Sellers.
(i) In the event the Buyer breaches any of its representations
contained herein, in accordance with the applicable state law
definition of misrepresentation, then the Buyer agrees to indemnify
the Sellers from and against any monetary loss the Sellers, or either
of them, may suffer as a result of such misrepresentation or
misrepresentations.
(ii) The Buyer shall indemnify the Sellers from any monetary loss
that the Sellers, or either of them, may suffer as a result of any
claim arising from their participation as an employee, agent, officer,
or director of either of the Target Corporation for acts or omissions
occurring prior to the execution of this Agreement. Provided however,
the Buyer shall have no obligation to indemnify the Sellers, or either
of them, for any monetary loss suffered as a result of a claim or
threatened claim known to the Sellers, or either of them, at the date
of execution of this Agreement but which was not disclosed on, or in
an exhibit to, this Agreement.
15
<PAGE> 17
(d) Matters Concerning Indemnity. In the event that
either party becomes aware of any claim or threatened claim being made
against such party for which any other party could ultimately be held
liability, either directly or by virtue of the indemnity requirements
of this Agreement, the party becoming aware of such claim or
threatened claim shall immediately cause written notice of the claim
or threatened claim to be given to all other parties. Any party which
could ultimately be held liable, by virtue of the indemnity provisions
of this Agreement, shall have the right to participate in the legal
defense of the party against whom a claim or threatened claim has been
made. No claim for indemnity shall be made which results from a
settlement or consent judgment without the consent of the indemnifying
party, which consent shall not be unreasonably withheld. The
foregoing indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy any
Party may have for misrepresentation, breach of contract, or any other
cause of action which may exist.
5. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
6. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
7. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Sellers.
8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Sellers: Ken McDonald and Carolyn McDonald at the same
address as is in existence for the Target Corporation unless otherwise
directed in writing by either or both of such persons.
If to the Buyer: Charles E. Chunn, Jr., 1401 South Waldron Road, Suite
201, Fort Smith, AR 72903 [or such other address as hereafter directed
in writing].
16
<PAGE> 18
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth. If necessary, Sellers may
provide up to two addresses where notices must be delivered.
11. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13. Expenses. Each of the Parties and the Target Corporation will
bear their own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby.
The Sellers agree that the Target Corporation has not borne and will not bear
any of the Sellers costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
14. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
15. Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
17
<PAGE> 19
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
KR ACQUISITION, INC.,
an Arkansas corporation
"Buyer"
By: /s/ Ed Schrader
----------------------------------
Officer
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
"Guarantor"
By: /s/ Ed Schrader
----------------------------------
Officer
KR INDUSTRIAL SERVICES OF ALABAMA, INC.,
an Alabama corporation
"Target Corporation"
By: /s/ Ken McDonald
----------------------------------
Officer
/s/ Ken McDonald
---------------------------------------
Ken McDonald - Seller
/s/ Carolyn McDonald
---------------------------------------
Carolyn McDonald - Seller
/s/ Kenneth Flatt, Jr.
---------------------------------------
Mr. Kenneth Flatt, Jr. - Seller
/s/ Mrs. Kenneth Flatt, Jr.
---------------------------------------
Mrs. Kenneth Flatt, Jr. - Seller
18
<PAGE> 1
Independent Auditor's Consent
The Board of Directors
K.R Industrial Service of Alabama, Inc.:
We consent to incorporation by reference in the Registration Statement on Form
S-3 (File No. 333-3369) of our report dated August 9, 1996, relating to the
balance sheets of K.R Industrial Service of Alabama, Inc. as of December 31,
1995 and December 31, 1994, and the related statements of income, stockholders'
equity, and cash flows, and related schedule for the years then ended.
/s/ COOPER, SHUFFIELD & COMPANY
COOPER, SHUFFIELD & COMPANY
Little Rock, Arkansas
September 10, 1996
<PAGE> 1
Contact: Exsorbet Industries, Inc.
Dr. Ed Schrader
President
(601) 936-6633
Charles E. Chunn, Jr.
Vice-President
Exsorbet Industries, Inc.
(501) 452-1987
Ed Penick, Jr.
Vice President
Exsorbet Industries, Inc.
(501) 664-7745
EXSORBET INDUSTRIES, INC. ANNOUNCES ACQUISITION OF
K.R. INDUSTRIAL SERVICE OF ALABAMA, INC.
JACKSON, MS. -- Friday, June 28, 1996 -- Exsorbet Industries, Inc.
(NASDAQ Small Cap: EXSO) announced today the acquisition of K.R. Industrial
Service of Alabama, Inc. Exsorbet Industries acquired K.R. Industrial Service
through a pooling transaction in which all of KR Industrial Service's
outstanding shares of stock were obtained for 545,388 shares of common stock in
Exsorbet Industries.
K.R. Industrial Service expects to report an after tax profit for the
second quarter of 1996 as well as the year ending December 31, 1996. Financial
results of the company will be consolidated with the first and second quarter
results of Exsorbet enhancing both gross revenue and profitability for Exsorbet
Industries, Inc.
Unaudited financial results for K.R. Industrial Service from January
1, 1996 through May 30, 1996 revenues are approximately $2.5 Million. Total
assets of K.R. Industrial Service as of May 31, 1996 amount to approximately
$2.5 Million.
KR Industrial Service is a leading private hydro blasting and
industrial service company in Alabama. With offices in Mobile, Birmingham, and
along the industrial corridor at the
<PAGE> 2
Tennessee River through Decatur, using proprietary techniques, KR Industrial
Service provides boiler clean-out and rehabilitation for utility companies,
without requiring a complete shut down of the utility, saving both time and
lost sales. K.R. Industrial Service is also experienced in hazardous material
handling and emergency response. Ken McDonald, principal shareholder of K.R.
Industrial Service, has over fifteen years experience in the industrial
service, hazardous waste, and emergency response industry. With this
transaction, Ken McDonald will receive a five year employment agreement with
K.R. Industrial Service.
Dr. Ed Schrader, president of Exsorbet Industries, Inc., said, "This
is an important element in Exsorbet's assemblage of emergency response,
hazardous waste, and industrial services companies, complimenting our other
recent acquisitions. K.R. Industrial Service expands opportunity along inland
water ways as far north at St. Louis and along the eastern portion of the Gulf
of Mexico into Florida. This new member of the Exsorbet Family further
reflects Exsorbet's commitment to be the major emergency response and
industrial service provider in the central and southeastern United States."
Exsorbet Industries, Inc. is a diversified environmental product and
service company specializing in state of the art technical solutions for
problems in site remediation, dewatering and pond solidification, hazardous
waste cleanup materials and service, bioremediation, environmental engineering
and project management, and twenty-four hour emergency response service.
Subsidiaries of Exsorbet Industries, Inc. are Eco-Systems, Inc.,
Exsorbet Technical/SpilTech Services, Inc., Consolidated Environmental
Services, Inc., Cierra, Inc., and Larco Environmental Services, Inc. Offices
are located in Dallas, Bridge City, Euless, and Houston, TX; Fort Smith and
Little Rock, AR; Tulsa, OK; Kansas City, MO; Jackson, MS; Mobile (Daphne), AL;
Baton Rouge and Sulphur (Lake Charles), LA; and Atlanta, GA.
