<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amended
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
INTERNATIONAL FOAM SOLUTIONS, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Florida 65-0412538
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1885 Southwest 4th Avenue, Building B-3, Delray Beach FL 33444
- -------------------------------------------------------- ------
Issuer's Telephone Number (561) 272-6900
Securities to be registered pursuant to Section 12(b) of the Act.
None
------------------- -----------------------------------------
Title of each class Name of each exchange on which registered
Securities to be registered pursuant to Section 12(g) of the Act.
None
------------------- -----------------------------------------
Title of each class Name of each exchange on which registered
1
<PAGE> 2
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
International Foam Solutions, Inc., ("IFS, Inc.") was incorporated
under the laws of the State of Florida in May 1993. IFS, Inc. produces and
markets a self-contained system, termed the "Stryo Solve System," which utilizes
IFS, Inc.'s "Solution Machine" and a "Styro Solve" solution, for disposing of
and recycling polystyrene foam products. Polystyrene is a lightweight plastic,
composed of hydrogen and carbon atoms. It is derived from petroleum and natural
gas by-products, the most common of which, styrofoam, is utilized in the
packaging industry. IFS, Inc.'s Styro Solve System can also recycle other
polystyrene products, such as the material from which many computer monitors and
keyboards are made. To IFS, Inc.'s knowledge, IFS, Inc. offers the only safe,
efficient, economical and practical means of recycling such waste materials.
Since its inception, IFS, Inc. has been primarily engaged in the
research and development of its Styro Solve System, including the development
of machinery required to process the Styro Solve solution and recycle
polystyrene. IFS, Inc., together with two outside manufacturers, have
developed four models of its Solution Machines, for use by various businesses,
depending on their respective polystyrene usage and recycling requirements. The
smallest of the Solution Machines is approximately the size of an outdoor U.S.
Government issued mail deposit box, suitable for smaller cafeterias serving up
to eight hundred meals per day, as well as other businesses which consume up to
thirty pounds of styrofoam per day; the largest of such machines can recycle
approximately one hundred pounds per hour.
Due to limited capital resources, IFS, Inc.'s sales activities to date
have been minimal for its Styro Solve System. Prior to commencing such sales
activities, IFS, Inc. engaged in extensive beta site testing with a variety of
businesses in several locations, including a school district and several major
Fortune 500 companies, some of which continue to be current Company customers.
As a result of such beta site testing in prior years, IFS, Inc. believes it has
now developed an effective product and system for the recycling of polystyrene.
(b) Business of the Issuer
(1) Principal Products and Services and their Markets
IFS, Inc.'s principal products and services consist of two distinct
categories of products. One category is based on its Styro Solve System, for
consolidating, reducing and discarding polystyrene foam materials, which is
leased or sold to customers who have a need to discard used or excess
polystyrene products; the second category is the supply by IFS, Inc. of
recycled polystyrene beads and chips that are sold to plastic manufacturers as
raw material. IFS, Inc. has not generated any revenues from the sale of
recycled polystyrene beads and chips as IFS, Inc. does not presently have a
recycling plant in the U.S.
The Styro Solve System is made up of four fundamental components: the
Solution Machine (four models); the Styro Solve solution which is added to the
Solution Machine and sprayed on the polystyrene as it is shredded within the
Solution Machine, causing the compression (by removing the air) of such
2
<PAGE> 3
polystyrene into a gel-like substance called "Polygel," the pick up and removal
of the Polygel; and finally, support services by IFS, Inc., including
extended warranties on equipment and a full educational program (videos,
posters, teacher and student guides, student questionnaires, training of food
service and custodial personnel) on the Styro Solve System.
Styro Solve is IFS, Inc.'s brand name for the solvent used in the
Solution Machine to reduce the volume of polystyrene foam by approximately 90%
and convert the material into the Polygel. Styro Solve is based on a compound
derived from citrus oils, which may be readily obtained from the rinds and
other natural products of the citrus industry. An additional proprietary patent
pending on the process is also used in the manufacture of the Styro Solve
solution.
The Styro Solve System provides for polystyrene materials to be placed
in a free-standing metal bin (the Solution Machine) that houses a shredder to
physically break down the foam materials, and a sprayer to douse the shredded
material with a non-toxic, environmentally safe solution (Styro Solve). The
Solution Machine is sold or leased to a customer and is physically located on
such customer's premises. The Solution Machine shreds the polystyrene and
automatically sprays Styro Solve solution on the shredded foam pieces.
Shredding the polystyrene speeds the reduction process because the small pieces
dissolve more quickly in the Styro Solve solution than large pieces. The Styro
Solve softens and dissolves the polystyrene. Air trapped in the foam is
released leaving the Polygel, which is deposited into a removable bag or
container at the base of the Solution Machine. The bags of Polygel are
collected periodically from the machine by the customer and placed in large
drums or gaylords (large square storage containers that rest on a single
pallet) supplied by IFS, Inc. for a fee for later shipping at IFS, Inc.'s
expense. There is a minimum of eight hundred pounds of Polygel required prior
to IFS, Inc. collecting the Polygel from its customers. The Polygel undergoes
a filtering and extrusion process, during which impurities and the Styro Solve
solution used earlier are removed, leaving condensed polystyrene material in
the form of hard plastic beads or chips. Such polystyrene beads or chips may
then be sold to plastic manufacturers for use in other polystyrene products.
The Styro Solve solution removed during this step may be repackaged, reused (up
to approximately eighteen times) and resold to customers. IFS, Inc. is
currently storing the Polygel until such time as a recycling facility may be
built. While IFS, Inc. has not constructed a recycling facility in the U.S.,
a Japanese based licensee of IFS, Inc.'s patent is currently operating a
recycling facility on a limited basis in Japan. Because of insufficient
quantities of polygel being produced the Japanese Company has recycled on a
limited basis. IFS, Inc. believes, based upon its current internal analysis,
that the construction of a recycling facility in the U.S. will not be viable
until Polygel production reaches approximately four million pounds per year.
IFS, Inc. currently stores approximately 100,000 pounds of Polygel. The cost
estimated to construct a recycling facility is $1.5 million, based upon its
current internal analysis; IFS, Inc. has no immediate plans or funds set
aside for the construction of a recycling facility at this time.
IFS, Inc. does not presently manufacture or market its own recycled
products, but intends to do so, depending upon the availability of funding, of
which no assurances are given, in the event that a recycling facility may be
constructed. It is anticipated that such recycled products could include rebar
3
<PAGE> 4
chairs (for concrete), signage, paperclip holders, mechanical pencils,
electronics casings, etc., and that, depending upon funding availability, IFS,
Inc. could either purchase or lease appropriate manufacturing equipment. IFS,
Inc. has estimated that the cost to recycle the Polygel, which would include
overhead, machinery, shipping, labor and similar expenses, would be
approximately $.20 per pound of recycled product. This amount would increase to
approximately $.33 per pound if the cost of marketing activities for the end
product, which could entail utilizing Company employees and/or outside
distributors/independent contractors, were considered. It is estimated by IFS,
Inc. that the end product could resell for approximately $4.00 per pound.
Generally, IFS, Inc. plans to either sell or lease one of its four
models of its Solution Machines to prospective customers, depending upon their
particular polystyrene usage and recycling requirements. The retail price for
such machines are as follows: SM1100 (front load food service) -- $4,995.00;
SM2200 (top load food service) -- $5,995.00; SM 3300 (industrial grinder) --
$15,500.00; SM 3500 (industrial grinder/debulker combination) -- $29,995.00.
The Stryo Solve Solution is sold by IFS, Inc. to its customers/end users on
an as needed basis, depending upon their particular polystyrene usage and
recycling requirements, in either five gallon containers at a suggested retail
price of $100, or in fifty-five gallon drums at a suggested retail price of
$990.00. Certain discounts are afforded to Company distributors. To date,
virtually all of IFS, Inc.'s current customers, which number 55, have
purchased Solution Machines from IFS, Inc. All of the models of Solution
Machines are currently being utilized. One of IFS, Inc.'s customers entered
into a lease-to-own arrangement to acquire a Solution Machine. IFS, Inc. has
investigated several companies which have expressed interest in providing
lease-to-own financing to prospective customers, which companies IFS, Inc.
plans to introduce to prospective customers should they desire to lease a
Solution Machine rather than purchase such machine outright.
IFS, Inc. currently utilizes the services of two unaffiliated
subcontractors to manufacture all four models of the Solution Machines so as
not to be wholly reliant on a single source manufacturer. IFS, Inc. assembles
the Solution Machines at its facility in Delray Beach, Florida. IFS, Inc. has
found both subcontractors to be comparable in cost, reliable and comparable in
purchase/financing terms with 50% of purchase price payable with the order and
the balance due in 30 days.
Generally, IFS, Inc. maintains several of its four Solution Machine
models in inventory. Depending upon the availability of additional funding, of
which no assurances are given, IFS, Inc. plans to increase its inventory.
IFS, Inc. believes its principal market consists primarily of
various institutions and businesses which utilize and have a need to dispose of
polystyrene products, including participants in the food service industry such
as school, hospital and business cafeterias, and to a lesser extent, consumers
and the general public.
IFS, Inc. sells its products by its own sales force and through
distributors. Currently, IFS, Inc. has two in-house salesmen, two domestic
distributors and four independent representatives.
Current customers of IFS, Inc.'s distributors are believed to include
school districts located in Albany and Warwick, New York, Time Warner, HBO,
University of Pennsylvania Hospital, Estee Lauder, Inc., Hewlett Packard, and
Waste Management.
IFS, Inc. is unable to ascertain the percentage of revenues
generated by these customers as most of its customers purchase products through
independent distributors who, in turn, purchase products from IFS, Inc. Such
independent distributors do not disclose to IFS, Inc. the precise amount of
product ordered for each particular customer. Rather, such independent
distributors order IFS, Inc.'s product in bulk from IFS, Inc.
4
<PAGE> 5
IFS, Inc. also plans to target regions and companies in foreign
countries, pursuant to which it intends to enter into licensing agreements or
other arrangement with foreign companies for the manufacture and sale of IFS,
Inc.'s products. IFS, Inc. previously entered into a license agreement with a
Japanese entity pursuant to which IFS, Inc. was paid one million dollars in
consideration for IFS, Inc. granting such entity exclusive rights in Japan to
use and develop IFS, Inc.'s existing patents. Such agreement further provides
that if the Japanese entity builds recycling centers (termed "reconverting
facilities"), IFS, Inc. shall be paid a one time licensing fee based on
recycling capacity requirements which may apply to each facility. To date, such
agreement has not been further implemented by such Japanese entity due to local
economic conditions. IFS, Inc. understands from discussions with Styro Japan
that the Japanese economy was in an unstable condition, an effect of which
distracted potential clients from utilizing the recycling technology. Two
regions initially targeted by IFS, Inc. for foreign sales are the Far East and
European block countries. IFS, Inc. believes that due to, among other things,
the falling Japanese Yen, and due to IFS, Inc.'s lack of sufficient capital to
effectively market in these regions, IFS, Inc. has not been able to develop
business relationships in these regions.
IFS, Inc. is currently testing its Styro Solve solution for other
proprietary applications.
(2) Distribution Methods
IFS, Inc. distributes its products and services in essentially three
manners: (1) in-house employee and independent contractor sales, (2)
independent distributors and (3) outside independent contractors.
In-house sales are generated primarily from IFS, Inc.'s executive
offices located in Delray Beach, Florida, where the executive officers of IFS,
Inc. actively pursue business leads for IFS, Inc.'s products. IFS, Inc.
presently has one independent sales contractor (who is viewed as an "in-house"
independent sales contractor as he focuses solely upon IFS, Inc.'s products and
services), located in the Chicago, Illinois area, who is primarily responsible
for securing customers in such area. The officers are currently paid salaries,
but no bonuses or commissions on their sales of IFS, Inc.'s products. The
"in-house" independent sales contractor is paid commissions only.
Currently, IFS, Inc. has two domestic distributors, one in the Anaheim,
California area and one in Houston, Texas. Distributors execute agreements with
IFS, Inc. for the area in which they desire to market IFS, Inc.'s products. Such
distribution agreements currently provide for sales to such distributors at
wholesale prices. Distributors are essentially resellers, who purchase products
from IFS, Inc. and resell such products to their customers at a mark-up from the
price charged by IFS, Inc. to such distributors. Some agreements grant such
distributors partial exclusive territorial rights for certain types of
businesses (e.g. California public schools). The distributorship agreements
further provide, in some instances, that distributors have options to distribute
IFS, Inc.'s products on a non-exclusive basis to other specified territories,
provided that the distributor meets certain sales conditions which may be
established by the distributor agreement.
On or about January 11, 1997, IFS, Inc. entered into an agreement with
Styro Japan Co., Ltd., a Japanese corporation ("StyroJapan"), whereby IFS, Inc.
sold StyroJapan an exclusive license to utilize and develop IFS, Inc.'s patented
process for recycling or reconverting polystyrenes in Japan. The license differs
from a distribution agreement, as the former grants the use of the patented
recycling process, whereas the latter grants the right to sell IFS, Inc.'s
products, such as the Solution Machines and Styro Solve. Since 1997, there have
been no further sales to Styro Japan or any licensing agreements. In addition,
IFS, Inc. sold StyroJapan (through the Japanese distributor) approximately
$635,800 of its product during 1997. Licenses revenues from the Japanese company
aggregated $1,000,000 in 1997.
Outside representatives are paid commissions on sales. There are
currently 8 Company representatives servicing four states, North Carolina,
South Carolina, Florida and Illinois. Representatives generally execute an
independent representative agreement, pursuant to which, among other things, a
commission
5
<PAGE> 6
is payable based on sales by the representative. Such agreements generally
provide that IFS, Inc. will provide the sales representative with leads and
training, and that the representative shall not compete with IFS, Inc.
Depending upon the availability of additional funding, which may be
derived from operations as well from additional funding efforts, neither of
which are assured, IFS, Inc. intends to retain, during approximately the next
twelve months, up to approximately four additional in-house sales
representatives, as well as to secure additional distributors and outside sales
representative relationships in other parts of the United States such as Texas,
Wisconsin, California, Washington, New York, New Jersey.
Due to limited capital resources, IFS, Inc. has not engaged in any
media-type advertising, although Company personnel have performed demonstrations
of IFS, Inc.'s products and services before current and prospective customers,
as well as attended various industry trade shows. Depending on the availability
of additional funding, as discussed above, IFS, Inc. plans to engage in
advertising for its products and services utilizing infomercials, the internet,
radio and co-operative advertising with other companies including restaurants,
environmental groups and foam product manufacturers, as well as continue to
attend and present its products and services at industry trade shows. Emphasis
will be placed on education concerning the importance of recycling and
protecting the environment as well as promoting IFS, Inc.'s Styro Solve System
as the preferred safe and effective means of disposing of polystyrene waste.
(3) Status of Publicly Announced New Products or Services
IFS, Inc. has no new publicly announced products or services.
(4) Competitive Business Conditions
At present, to IFS, Inc.'s knowledge, IFS, Inc.'s Styro Solve System is
the world's only environmentally safe and economically practical means of
recycling polystyrene products and materials. IFS, Inc. potentially faces
competition from two primary fronts: competing companies (technologies) and
substitute products. Currently, IFS, Inc. does not believe that it faces
significant competition from other companies. No assurances can be given,
however, that IFS, Inc. will not face competition from new entrants into the
industry, having substantially greater financial and other resources than IFS,
Inc., in view of the substantial use of polystyrene products in the U.S. economy
and world-wide, and in IFS, Inc.'s view, the perceived need for disposing of and
recycling such products.
Three competing companies have participated or currently participate
in the polystyrene recycling market: National Polystyrene Recycling Company
("NPRC"), Dart Container Corporation ("Dart") and Resource Recovery Technology
("RRT"). One additional potential competitor, Styro Melt, was due to release
their line of recycling equipment, but has yet to do so.
6
<PAGE> 7
Until recently, IFS, Inc. considered its largest competitor to be
NPRC, which was originally formed as a joint venture between several major
chemical and petroleum companies. NPRC recently discontinued operations as a
result of, to IFS, Inc.'s knowledge, and among other factors, customer
dissatisfaction in having to wash and repack polystyrene materials prior to
shipment to recycling centers, utilization of valuable warehouse space to store
original shipping containers, incurring of labor costs to clean and package
polystyrene materials and incurring a fifteen cent per pound fee to recycle
such materials.
Dart, based in Wisconsin, currently offers a compacting machine only
to the food service industry which compacts only Dart polystyrene products and
requires the compacted polystyrene to be returned to Dart for recycling when
full, with the required shipping charge. Additionally, Dart relied on NPRC for
its recycling needs.
RRT based in Lakeland, Florida, utilizes a system similar in nature to
the Styro Solve System. RRT provides its customers with a large, six-foot
stainless steel container with a solvent that resides at the base of the
container. As polystyrene material is discarded into the bin, the solution
melts the foam into a fluid which is later removed. However, the polystyrene
material is not shredded to maximize use of the solution, which is itself a
chlorine based chemical which is potentially hazardous with environmental
risks. Such system is also quite expensive to operate; RRT charges a five
thousand dollar fee to have a container placed in a customer's premises and one
hundred forty dollars to periodically remove the gel fluid from the machine.
Each one hundred forty dollar charge will process approximately 100 pounds of
polystyrene, amounting to one dollar forty cents per pound, which is
substantially higher than the cost per pound using IFS, Inc.'s Stryo Solve
System. Since direct access must be provided to RRT's containers in order to
pump out the waste, geographical limits are placed on the location of the
polystyrene container. Further, limits on the placement of the container may
also be imposed by requirements of the Environmental Protection Agency ("EPA")
due to the caustic nature of the solution.
The second competitive challenge to IFS, Inc. is that of substitute
products; such products are primarily found in the food service industry where
three general categories of products compete. They include: disposable paper
products, disposable polystyrene foam products and non-disposable china
products (made from various materials).
Two concerns in the decision to use polystyrene foam products are the
environmental concerns and the related public relations impact, and the
economic concerns of the traditional waste management options. Due to public
relations and other concerns, certain large corporations, such as McDonalds,
have switched from utilizing polystyrene to paper based containers. Concerning
waste management, foam products consume a tremendous amount of space for their
weight. Very large dumpsters and frequent emptying, both of which are
expensive, are to be expected in any operation for which polystyrene foam is a
waste product.
Paper products generally cost more than polystyrene equivalents. The
U.S. Food and Drug Administration mandates that all paper-based food service
ware be made from virgin materials. The production of paper materials requires
more energy, creates three times more pollution and costs significantly more
7
<PAGE> 8
than analogous polystyrene products. Foam products are more sanitary, prevent
growth and spread of bacteria, more sturdy, more thermally efficient and can
be recycled instead of adding to landfills.
As to china and tableware, in addition to the high purchase price,
which will vary depending upon material and quality, non-disposable china and
tableware incur greater labor and clean up costs, including expensive
dish-washing equipment, detergents, water, electricity, labor, replacement of
broken pieces, inspection of sewage lines and inspection by local health
departments.
In view of the foregoing, IFS, Inc. believes that polystyrene foam
products are economically superior to substitute products and that with the
development of the Styro Solve System, cafeterias and restaurants may have
little reason to avoid making use of these products.
Based upon 1998 production figures published by the Plastic News
Magazine, the total polystyrene market aggregates approximately $8 to $10
billion in sales each year. The overall market for polystyrene recycling
continues to remain underdeveloped and under-marketed due to lack of awareness
of market opportunity and the current availability of technology to address
polystyrene environmental concerns. In many cases, companies and institutions
are unaware of the option or possibility of polystyrene foam recycling. Of the
few participants in this market, none are, in IFS, Inc.'s opinion, adequately
marketing the advantages of their products or the importance of recycling.
(5) Sources and Availability of Raw Materials and Names of Principal
Suppliers. The specific chemical identities, other than the terpenes, comprising
IFS, Inc.'s Styro Solve solution, are considered by IFS, Inc. to be proprietary
trade secrets. The ingredients comprising IFS, Inc.'s Styro Solve solution are
readily available from a number of suppliers, including Chem Central, Inc.,
Florida Chemical, Inc., BASF, Inc., DuPont, Inc. IFS, Inc. utilizes two outside
manufacturers to manufacture its four models of Solution Machines and has found
both manufacturers to be timely and responsive to IFS, Inc.'s need for the
Solution Machines.
(6) Dependence on Major Customers. IFS, Inc. is not currently dependent
on one or more major customers. However, IFS, Inc.'s primary source of revenue
in 1997 was generated by sales to a Japanese entity, Styro Japan. This revenue
is not expected to recur.
(7) Intellectual Property. IFS, Inc. owns a U.S. patent for the process
by which polystyrene is reduced to the Polygel. The patent is titled "Reduction
in Polystyrene with Activated Agent." Patent # 5223543 and expires in 2010. IFS,
Inc. has a patent pending for another process by which polystyrene may be
reduced to Polygel. This patent pending is titled "Reduction in Polystyrene
Foams with Dibastic Esters." IFS, Inc. is in the process of applying for patents
on its Solution Machine design and for trademarks for the Styrosolve Solution,
Polygel and the Solution Machine, within approximately the next two to three
months.
(8) Governmental Approval. At this point in time, there is no need for
government approval of IFS, Inc.'s principal products or services.
8
<PAGE> 9
(9) Governmental Approval, Regulation and Environmental Compliance.
The Styro Solve solution utilized in the Styro Solve System is non-hazardous
and biodegradable and therefore not subject to state or federal regulations
that would otherwise apply to hazardous substances. IFS, Inc. is and
otherwise will be subject to local, state and federal laws, rules and
regulations concerning the operation of businesses generally.
(10) Research and Development. IFS, Inc., on its own initiative, as
well as with third parties, is engaged in limited research and development
concerning potentially new proprietary applications for the Styro Solve
solution. Such amounts aggregated none and $81,344 in 1998 and 1997,
respectively, and $21,222 and none for the nine months ended September 30, 1999
and 1998, respectively.
(11) Employees. As of October 31, 1999, IFS, Inc. had four (4)
full-time employees. IFS, Inc. also engages sales representatives and
independent distributors. None of IFS, Inc.'s employees is represented by a
labor union, and IFS, Inc. considers its employee relations to be good. IFS,
Inc. does not anticipate the number of employees to grow significantly over the
next twelve months. IFS, Inc. believes that its future success will depend in
part on its continued ability to attract, hire and retain qualified personnel.
(c) Reports to Security Holders
Prior to filing this Form 10-SB, IFS, Inc. has not been required to
deliver annual reports and has not filed reports with the Securities and
Exchange Commission. In accordance with Section 12(g) of the Act, once IFS, Inc.
becomes a reporting company, management anticipates that appropriate reports and
other filings as may be required under the Act will be filed as they become due.
To the extent that IFS, Inc. is required to deliver annual reports to security
holders through its status as a reporting company, IFS, Inc. shall deliver
annual reports. Also, to the extent IFS, Inc. is required to deliver annual
reports by the rules or regulations of any exchange upon which IFS, Inc.'s
shares may be traded, IFS, Inc. shall deliver annual reports. If IFS, Inc. is
not required to deliver annual reports, IFS, Inc. will not go to the expense of
producing and delivering such reports. If IFS, Inc. is required to deliver
annual reports, they will contain audited financial statements as required.
Prior to the filing of this Form 10-SB, IFS, Inc. has not filed reports with the
Securities and Exchange Commission. Once IFS, Inc. becomes a reporting company,
management anticipates that appropriate reports and other filings as may be
required under the Securities Exchange Act of 1934 will have to be filed as they
become due. If IFS, Inc. issues additional shares, IFS, Inc. may file additional
registration statements for those shares. The public may read and copy materials
IFS, Inc. files with the Securities and Exchange Commission at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, 20549. The public
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission. The Internet
address of the Commission's site is (http://www.sec.gov). The internet address
of IFS, Inc.'s site is (http://SOLUTIONS-net.com/IFS).
9
<PAGE> 10
(d) Year 2000 Disclosure
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. IFS, Inc. does not believe that it has material exposure to
the Year 2000 issue with respect to its own information systems since its
existing systems correctly define the year 2000.
IFS, Inc. does not anticipate any problem in dealing with computer
entries in the year 2000 or thereafter, with any computers currently used at its
facility. Management believes all of IFS, Inc.'s computer systems are Year 2000
compliant. IFS, Inc. keeps current with all updates and revisions with all
software IFS, Inc. currently uses. It is anticipated that the software updates
reflect required revisions to accommodate transactions in the Year 2000 and
thereafter. Though it is not anticipated that IFS, Inc. will have a problem at
the turn of the century, IFS, Inc. intends to coordinate the resolution of any
Year 2000 problems with the vendors of the software IFS, Inc. utilizes.
Nonetheless, IFS, Inc. recognizes the problems which may arise in connection
with the Year 2000 issue.
IFS, Inc. has informally surveyed its clients to determine the extent
to which their computer systems (insofar as they relate to IFS, Inc.'s business)
are Year 2000 compliant and, as a result of such informal survey, believes the
Year 2000 issue will not materially affect its clients. Notwithstanding the
foregoing, the failure of a major client, if any, subject to the Year 2000 issue
to become Year 2000 compliant, could have an adverse effect on IFS, Inc. in
regards to such clients timely ability to process Company invoices, orders and
deliveries.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION
This Form 10-SB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
financial condition, results of operations and business of IFS, Inc., which
could cause actual results to differ materially from those anticipated. The
words "believe," "expect," "intend," "anticipate," "estimate," "plan" and
similar expressions identify certain of such forward looking statements, which
speak only as of the date of which they were made. All statements herein other
than those consisting solely of historical facts, that address activities,
events or development that IFS, Inc. expects or anticipates will or may occur
in the future, including such things as business strategy, measures to implement
strategy, competitive strengths, goals, projected revenues, costs and other
financial results. References to future success and other events may be forward-
looking statements.
10
<PAGE> 11
(a) Financial Condition, Changes in Financial Condition and Results of
Operations.
DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
Revenues
Revenues for the year ended December 31, 1998 decreased by
approximately $1.7 million from 1997 due primarily to actual and threatened
litigation which diverted IFS, Inc.'s management from its operations and
effectively curtailed IFS, Inc.'s marketing programs and related sales efforts
(refer to Part II, Item 2). In addition, during 1997 substantially all of IFS,
Inc.'s sales were to two Japanese companies, one of which entered into an
exclusive licensing agreement for Japan which resulted in IFS, Inc. earning a $1
million licensing fee. With respect to the other Japanese customer that
purchased the Styro Solve chemical product, IFS, Inc. reduced its selling price
on the expectation of increased sales volume. This resulted in lower gross
profit in 1997 as compared to 1998. In 1998, IFS, Inc. did not discount its
selling prices for Styro Solve.
On or about January 11, 1997, IFS, Inc. entered into an agreement with
Styro Japan Co., Ltd., a Japanese corporation ("StyroJapan"), whereby IFS, Inc.
sold StyroJapan an exclusive license to utilize and develop IFS, Inc.'s patented
process for recycling or reconverting polystyrenes in Japan. The license differs
from a distribution agreement, as the former grants the use of the patented
recycling process, whereas the latter grants the right to sell IFS, Inc.'s
products, such as the Solution Machines and Styro Solve. Since 1997, there have
been no further sales to Styro Japan or any licensing agreements. In addition,
IFS, Inc. sold StyroJapan (through the Japanese distributor) approximately
$635,800 of its product during 1997. A $1 million one time non-cancellable
license fee was recorded in 1997 and -0- in all other periods.
Cost of Sales
Cost of sales for the year ended December 31, 1998 decreased by
approximately $792,000 from 1997. The decrease was attributable to the sales
quantity decrease primarily due to the absence of the Japanese sales made in
1997.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 1998 decreased by approximately $1.2 million from 1997. The more
significant changes from 1997 to 1998 include the following: Rent expense
decreased by approximately $162,000. Repairs, maintenance and supplies decreased
by $51,000. These decreases were attributable to IFS, Inc. terminating its
existing lease and relocating to a new facility with a lower monthly rent and
maintenance expenses. Officers salaries decreased by approximately $382,000.
This decrease was attributable to the officers reducing their annual
compensation. Selling expenses decreased by approximately $591,000. This change
includes a one time sales commission of $250,000 which was paid to the sales
person that procured the 1997 $1 million license fee as discussed in revenues
above and to decreases in selling salaries and use of consultants of $341,000
resulting from IFS, Inc.'s deliberate reduction in its selling personnel in
1998 as compared to 1997. Travel expenses also decreased by approximately
$128,000. Due to a reduction in IFS, Inc.'s overall operating activities,
other professional services and other expenses decreased by $35,000 and $79,000,
respectively. The foregoing decreases in expenses during 1998 were offset by
increases in bad debts of $95,000 and legal fees and settlement costs of
$133,000.
Legal fees and settlement expenses aggregated $82,600 and $83,000 in
1998 and $33,500 and $0 in 1997, respectively. (See Section Item 2, Legal
Proceedings).
Research and development
As a result of limited funds, there were no research and development
expenses incurred in 1998.
Other income (expense)
Other income-net in 1998 consists principally of a $100,000 premium
from its Japanese licensee net of interest expense. Other expense-net in 1997
principally consists of interest expense and loss on disposal of leasehold
improvements.
Provision for income taxes
No provision for income taxes was necessary in 1998 and 1997 due to
the loss reported for such years (see Note 4 to the financial statements).
Further, given the uncertainties as to realization, the deferred tax assets
have been fully reserved.
11
<PAGE> 12
SEPTEMBER 30, 1999 COMPARED TO SEPTEMBER 30, 1998
Revenues
Revenues for nine months ended September 30, 1999 increased by
approximately $33,000 from 1998 as a result of IFS, Inc. being able to focus on
its core operations and shift its focus from dealing with actual and threatened
litigation which diverted IFS, Inc.'s attention in 1998. IFS, Inc. established
relationships with several new customers during this period.
Cost of sales
Cost of sales for the year nine months ended September 30, 1999
increased by approximately $21,000 from 1998. The increase was directly
attributable to the increase in sales. For the same period, the gross profit
margin improved by 7%, which resulted from IFS, Inc. being able to obtain higher
selling prices for its products.
12
<PAGE> 13
Selling general and administrative expenses
Selling, general and administrative for the nine months ended September
30, 1999 increased by approximately $87,000 from 1998. The increase was
primarily attributable to the recording of additional compensation expense from
the granting of certain stock options in 1999.
Research and development
Research and development expenses resumed in 1999. In 1999, IFS, Inc.
incurred approximately $21,000 for activities relating to improving the field
performance of its Solution Machines by minimizing the customer's need for
repair and servicing.
Other income (expense)
Pursuant to a distribution agreement and as a result of the licensee
not reaching certain minimum order provisions, IFS, Inc. was entitled to a
$100,000 premium from its Japanese licensee in 1998. In this connection, IFS,
Inc. recorded the $100,000 premium as other income. Subsequently, IFS, Inc.
provided for a related allowance, since the amount has not yet been paid. No
other activity occurred in 1999 between IFS, Inc. and the licensee.
Provision for income taxes:
No provision for income taxes was provided in 1999 due to the recurring
losses reported for the period and related uncertainty as to the recovery of the
related deferred tax assets. (See Note 4 to the financial statements)
Liquidity and Capital Resources:
IFS, Inc.'s sources of cash, primarily from financing activities during
1997, 1998 and during the nine months ended September 30, 1999 and 1998,
included proceeds from the issuance of common stock, shareholders loans from
IFS, Inc.'s officers and other borrowings. Sources are as follows: (1) Common
Stock issuance and exercise of options of $63,454 and $125,245 during the years
ended December 31, 1998 and 1997 respectively; and $618,670 and $22,353 for the
nine month period ended September 30, 1999 and 1998, respectively, (2)
Shareholders loans of $46,445 and $175,000 during the years ended December 31,
1998 and 1997 respectively, and (3) Borrowings from a commercial institution in
the amounts of $100,000 and $200,000 during the years ended December 31, 1998
and 1997, respectively. Operating activities used cash primarily due to IFS,
Inc.'s inability to achieve a profitable level of operations. The decrease in
cash used in operating activities from $880,274 to $166,421 from December 31,
1997 to December 31, 1998, was principally attributed to a decrease in the net
loss from one year to another. The increase in cash used in operating activities
from $131,931 for the nine months ended September 30, 1998 to $429,340 for the
nine months ended September 30, 1999, was principally attributed to an increase
in the net loss of $197,308 and a decrease in accounts payable and accrued
expenses from one period to another in the amount of $247,697.
Through September 30, 1999, IFS, Inc. raised approximately $574,000
from private investors.
The material terms of the shareholder and bank loans as of September
30, 1999 consist of (i) Equipment notes of $177,800 payable in monthly
installments of $3,030 including principal and interest at a fixed rate of 6.5%,
maturing July 1, 2004, collateralized by equipment. IFS, Inc. is in default
under the terms of this loan and in violation of certain convenants, (ii)
Shareholder loans of $70,746 payable in monthly principal installments of $5,000
and interest computed at prime rate (8.25% at September 30, 1999 and 7.75% at
December 31, 1998) due on March 1, 2001, (iii) Equipment loans of $90,513
payable in monthly installments of $3,555 including principal and interest,
maturing in June 2003. (42% at September 30, 1999 and December 31, 1998), (iv)
Shareholder loan of $30,898 principal and interest due 90 days after date of
note. All loans are past due and accrue interest at a 10% annual fixed rate, and
(v) Related party loan of $20,000 principal and interest due 90 days after date
of note. Loan is past due and accrues interest at a 10% annual fixed rate.
IFS, Inc. is a guarantor for a shareholder's loan to the bank. During
1999, both the shareholder and IFS, Inc. (as guarantor) were in default. In this
connection, IFS, Inc. and its shareholder's entered in a forbearance agreement
with the bank on June 19, 1999. Among other things, the forbearance agreement
provides for the collateralization of all of IFS, Inc.'s assets and a
rescheduling of the amounts due.
13
<PAGE> 14
IFS, Inc.'s financial statements are prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. During the latter part of 1997 and 1998 the
Company experienced protracted litigation which diverted management's efforts
from its core business, and effectively curtailed the Company's marketing
programs. During 1999 certain aspects of the previously mentioned litigation
were resolved and the Company was able to refocus and continue its marketing
efforts. IFS, Inc. has been in settlement negotiations to reduce the quantity of
outstanding litigation and the threat of any potentially adverse findings.
Management believes that resolving many of these matters through settlements
will enable it to focus much more of its attention on sales and to spend more of
its time on sales activities. Management believes that with the increased time
spent on marketing efforts, increased sales will result. Since it will be mostly
an increase of time spent by management which will be utilized in marketing and
sales activities as opposed to increased costs for, among other things,
advertising, the Company does not foresee the need for substantial, additional
capital to perform such increased marketing and sales activities. In the event
that substantial, additional capital is required, however, the Company would be
required to seek outside funding mechanisms, of which no assurances are given
that any funding would be made available to the Company or if made available, on
terms satisfactory to the Company.
IFS, Inc. is currently a party to several lawsuits, which are in
various stages of litigation. Any material adverse decision against IFS, Inc. in
any of such lawsuits will, in all likelihood, have a material adverse effect
upon IFS, Inc. and its operations. See "PART II- ITEM 2. LEGAL PROCEEDINGS."
IFS, Inc. anticipates, based on current plans and assumptions relating
to revenues from operations, that revenues from operations and additional third
party funding or investment, if available, will be sufficient to satisfy the
Company's estimated cash requirements to continue its operations. IFS, Inc. has
no firm current arrangements with respect to, or sources of, additional
financing. There can be no assurance that any such additional financing will be
available to the Company, and if available, will enable the Company to attain
profitable operations or continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effect on the
recoverability and classification of assets or the amount of classification of
liabilities that may result from the possible inability of IFS, Inc. to continue
as a going concern. Through September 30, 1999 and December 31, 1998, the
Company has incurred losses totaling $5,835,547 and $5,168,311. Negative working
capital aggregated $256,025 at September 30, 1999 and $441,330 for December 31,
1998. In addition, the Company is in violation of certain of its loan covenants.
14
<PAGE> 15
IFS, Inc. has no material commitments for capital expenditures.
Solution Machines are purchased by IFS, Inc. on an "as needed" basis based upon
orders received from IFS, Inc.'s customers.
To the extent that IFS, Inc. is able to obtain financing of at least
approximately $2,000,000, IFS, Inc. intends to utilize such funds primarily for
sales and marketing activities as well as for reduction of outstanding long and
short term debt obligations and for the construction of a recycling facility.
Management anticipates that such funds, if obtained, of which no assurances are
given, together with cash flow from operations, will be sufficient to finance
IFS, Inc.'s working capital requirements for approximately the next twelve
months. To the extent IFS, Inc. is unable to secure such approximate amount of
financing, IFS, Inc. plans to utilize any funds received for the same purposes
and in the same order of priority on an approximate pro-rata basis, subject to
the discretion of management to reallocate the usage of such funds. To the
extent IFS, Inc. is only able to secure minimal financing, its level of
operations will be materially and adversely effected.
Other than IFS, Inc.'s school customers, there are no seasonal aspects
that have had a material effect on IFS, Inc.'s financial condition or results of
operation.
From time to time IFS, Inc. may evaluate potential acquisitions
involving complementary businesses, products or technologies. IFS, Inc. has no
present agreements or understanding with respect to any such acquisition. IFS,
Inc.'s future capital requirements will depend on many factors, including entry
into strategic alliances, increases in advertising, marketing and promotions,
growth of IFS, Inc.'s customer base, general economic conditions and other
factors including the results of future operations. IFS, Inc. currently has four
full time employees. Management does not currently expect that it will be
required to hire a significant number of additional employees in the next 12
months.
During the 12 month period following the filing of this Form 10-SB,
IFS, Inc. intends to seek and obtain additional debt and/or equity financing to
further develop its business operations, principally sales and marketing. No
assurances are given that IFS, Inc. will be able to successfully obtain
sufficient debt and/or equity financing on terms acceptable to IFS, Inc. There
are no current commitments for financing IFS, Inc.'s operations. IFS, Inc.'s
inability, for whatever reason, to secure additional financing on terms
acceptable to IFS, Inc. will have a material adverse effect on IFS, Inc. and its
operations.
Impact of Inflation
To the extent permitted by competition, IFS, Inc. passes increased
costs attributable to inflation to its customers by increased sales prices over
a reasonable period of time. Also it is IFS, Inc.'s policy to place all of its
major supplier purchases out to bid.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measures those instruments at fair value.
The statement applies to all entities and is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. IFS, Inc. did not engage in
derivative instruments or hedging activities in any periods presented in the
financial statements and management does not expect this statement to have a
material impact on IFS, Inc.'s financial position, results of operation, or cash
flows.
15
<PAGE> 16
ITEM 3. DESCRIPTION OF PROPERTY
IFS, Inc.'s executive offices are located in, and substantially all of
its operating activities are conducted from, its leased office space located at
1885 Southwest 4th Avenue, Building B-3, Delray Beach, FL 33444. IFS, Inc.
believes that it will be able to obtain suitable space as needed at competitive
market rates and has the physical ability to acquire additional office space at
its current location. IFS, Inc. leases approximately 3,000 square feet of office
and warehouse space and does not own any real estate. IFS, Inc. is not in the
business of investing in real estate or real estate mortgages.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of October 31,
1999 about each person who is known to IFS, Inc. to be the beneficial owner of
more than 5% of IFS, Inc.'s Common Stock:
Security Ownership of Management:
<TABLE>
<S> <C> <C> <C>
Title of Class Name and Address Amount and Nature Percent of Class
Of Beneficial Owner of Beneficial Owner
Common Harvey Katz, 2,920,791(1) 21%
Chief Executive Officer/
Director
50 East Rd. #7E
Delray Beach, FL
Common Antonio Bianco 380,000 3%
Chief Operating Officer
5801 N.W. 74th Terr
Parkland FL
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Common Claudia Iovino 2,303,117(2) 17%
President/Director
6364 Amberwoods Dr.
Boca Raton, FL
Common Diane Lucien, Director 25,000(3) less than 1%
22732 S.W. 10th St.
Boca Raton, FL 33433
All directors and executive
officers as a group
(4 persons) 5,968,435(4) 40%
</TABLE>
(*) All percentages are calculated based upon 13,783,390 shares issued and
outstanding as of the date of filing this Form 10-SB plus exercisable
warrants and options within 60 days.
(1) Includes warrants to purchase 181,360 shares of common stock; See Item 8
"Warrants." See also, Item 6, "Executive Compensation."
(2) Includes warrants to purchase 158,167 shares of common stock; See Item 8
"Warrants." See also, Item 6, "Executive Compensation" plus 647,500 shares
of common stock jointly owned with husband plus 419,520 shares of common
stock owned by a Company that Mrs. Iovino has a controlling interest.
(3) Includes warrants to purchase 25,000 shares of common stock; See Item 8,
"Description of Securities; Warrants."
(4) Includes warrants to purchase 339,527 shares of Common Stock
(c) Changes in Control. There is no arrangement which may result in a change of
control.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and Executive Officers
As of October 31, 1999, the directors and executive officers of IFS,
Inc., their ages, positions in IFS, Inc., the dates of their initial election or
appointment as director or executive officer, and the expiration of the terms as
directors are as follows:
Period Served as Director/
Name Age Position Officer
---- --- -------- -------------------------
Harvey Katz 52 Chief Executive
Officer/Director 1993 to present
Claudia Iovino 61 President/Director 1993 to present
Antonio Bianco 50 Chief Operating
Officer April 1999 to present
Diane Lucien 44 Director February 1999 to present
17
<PAGE> 18
(b) Business Experience
HARVEY KATZ - CHIEF EXECUTIVE OFFICER. In addition to his duties at
IFS, Inc. which commenced in 1993, Mr. Katz is a consultant to HKI, Inc., an
entity in which he is an investor, for which Mr. Katz previously served as
President from 1982 to 1998 (See also Item 7 below). As President of HKI, Inc.,
Mr. Katz developed that company's marketing plans for its NU Silver, Brass Plus,
and Dumpster Fresh products. Mr. Katz was formerly a Trust Accountant at
Continental Illinois National Bank, Assistant District Accountant at Berman
Truck Leasing, and President of both HKC Enterprises and HK Measure Service.
Mr. Katz was educated at Loop City College, Loyola University, and the
University of Chicago, all in Chicago, Illinois. He has had articles published
by the University of Florida Department of Plastics Information regarding the
Styro Solve method of Polystyrene reduction. Mr. Katz served in the US Army
National Guard, where he was activated for the Vietnam War and ultimately
received an Honorable Discharge. Mr. Katz is Co-Chairman of the Broward County
Recycling Committee (for commercial purposes).
CLAUDIA IOVINO - PRESIDENT AND DIRECTOR. Ms. Iovino has been employed
by and has served as a director of IFS, Inc. since 1993 and currently serves as
the President of IFS, Inc. From 1982 until this year, Ms. Iovino was the CEO of
HKI, Inc., an entity in which she holds a controlling interest. Ms. Iovino has
experience in many aspects of operating a growing company involved in the
development, manufacturing and marketing of chemical products and has experience
in the day-to-day operation of a small chemical plant, including sales
coordination.
ANTONIO BIANCO - CHIEF OPERATING OFFICER. Prior to joining IFS, Inc. in
April 1999, Mr. Bianco was self employed as a management consultant from 1997 to
March 1999 and was Vice President/General Manager from 1993-1997 and Vice
President/Operations and Finance from 1989-1992 of Cool Care, Inc., a Deerfield
Beach, Florida based subsidiary of Dole Food Co., where he dealt with the design
and manufacture of equipment and refrigerated facilities for major retail and
wholesale food distributors internationally. Mr. Bianco is fluent in both French
and Italian.
DIANNE LUCIEN - DIRECTOR. Ms. Lucien has owned and operated her own
consulting firm for the past ten years which specializes in accounting software
and management consulting. She received her B.S. degree in accounting from
Arizona State University. Prior to her consulting business, she was employed by
Deloitte, Haskins and Sells (now Deloitte Touche) in Arizona, New York and
Florida, in the audit and emerging business consulting department. Her practice
specializes in the manufacturing, job shop, distribution and service industries.
18
<PAGE> 19
IFS, Inc.'s directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified. IFS, Inc.'s
officers are appointed by the Board of Directors and serve at the pleasure of
the Board and subject to employment agreements, if any, approved and ratified by
the Board.
(c) Directors of Other Reporting Companies
None of IFS, Inc.'s executive officers or directors is a director of
any company that files reports with the Securities and Exchange Commission.
(d) Significant Employees-Not applicable.
(e) Family Relationships
There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of IFS, Inc.
(f) Involvement in Certain Legal Proceedings
None of the officers, directors, promoters or control persons of IFS,
Inc. have been involved in the past five (5) years in any of the following: (1)
Any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time; (2) Any conviction in criminal
proceedings or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses); (3) Being subject to any order, judgment
or decree, not subsequently reversed, suspended or vacated, or any Court of
competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or (4) Being found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities laws or
commodities law, and the judgment has not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
aggregate compensation paid to IFS, Inc.'s chief executive officers. No other
officer received compensation of $100,000 or more during the periods presented.
19
<PAGE> 20
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
- ------------------------------------------------------ ---------------------- -----------
Name Other Securities
And Annual Restricted Underlying
Principal Compen- Stock Options/ LTIP All other
Position Year Salary Bonus sation(1) Awards SARs Payouts Compensation
- --------- ---- -------- ----- --------- --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harvey Katz 1998 $ 2,884 n/a $77,116 n/a n/a n/a n/a
Chief Executive 1997 $120,750 $6,360(2)
Officer n/a n/a n/a n/a n/a n/a
</TABLE>
(1) Represents stock issued in lieu of cash for salary.
(2) Represents auto allowance.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
on Exercise (#) Value Realized($) Unexercisable Unexercisable
-----------------------------------------------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harvey Katz None None 181,360 -- $ 0 $ --
</TABLE>
On or about October 1, 1996, IFS, Inc. entered into an employment
agreement with Harvey Katz. Pursuant to such agreement, Mr. Katz was retained as
IFS, Inc.'s chief executive officer at an annual salary of $150,000, subject to
increases as provided therein, plus reimbursement for expenses, including, but
not limited to, automobile expenses. The agreement was amended in September 1998
to provide for Mr. Katz's salary to be $80,000.00 per year. The agreement
further provides that if Mr. Katz is terminated without cause as defined in the
agreement, he will be entitled to a severance payment equal to thirty six months
of employment.
On or about October 1, 1996, IFS, Inc. executed an employment agreement
with Claudia Iovino. Pursuant to such agreement, Ms. Iovino was retained as the
president of IFS, Inc. at an annual salary of $120,000, subject to increases as
provided therein, plus reimbursement for expenses, including, but not limited
to, automobile expenses. The agreement was amended in September 1998 to provide
for Ms. Iovino to serve as president of IFS, Inc. at an annual salary of $80,000
per year. The agreement further provides that if Ms. Iovino is terminated
without cause as defined in the agreement, she will be entitled to a severance
payment equal to thirty six months of employment.
On or about October 1, 1996, IFS, Inc. entered into an employment
agreement with Anthony DiChiara. Pursuant to such agreement, Mr. DiChiara was
retained as IFS, Inc.'s treasurer at an annual salary, subject to increases as
provided therein, of $80,000. Mr. DiChiara later agreed to accepted a position
with the company as its controller. Mr. DiChiara has sued IFS, Inc. alleging
that he is due a severance pay based on the agreement retaining him as the
treasurer. It is IFS, Inc.'s position that the agreement retaining Mr. DiChiara
was mutually terminated and no further obligations were due under the agreement
retaining him as treasurer.
20
<PAGE> 21
On or about April 5, 1999, IFS, Inc. executed an employment agreement
with Antonio Bianco. Pursuant to such agreement, Mr. Bianco was retained as IFS,
Inc.'s chief operating officer at an annual salary of $50,000, subject to
increases as provided therein. The agreement also provides for Mr. Bianco to
exercise options to purchase IFS, Inc.'s common stock at a price of between $.10
and $1.00 over a period of five years. The agreement further provides that if
Mr. Bianco is terminated without cause as defined in the agreement, Mr. Bianco
will be entitled to a severance payment equal to twelve months of employment.
There is no standard or any other arrangements, pursuant to which any
director of the registrant was compensated for any services provided as a
director. Accordingly, no director was compensated for services provided as a
director for the periods presented.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two (2) years, IFS, Inc. has not entered into a
transaction with a value in excess of $60,000 with a director, officer or
beneficial owner of 5% or more of IFS, Inc.'s Common Stock, except as disclosed
in the following paragraphs:
In or about May 20, 1993, IFS, Inc. entered into a five year agreement
with HKI, Inc., whereby IFS, Inc. granted to HKI the exclusive manufacturing and
bottling rights for the Styro Solve Solution. The agreement provided that as
long as HKI, Inc. could timely provide IFS, Inc. with the Styro Solve Solution,
IFS would purchase the Styro Solve Solution from HKI, Inc. The agreement
provided for two renewal periods of five years each. Such amounts aggregated
$4,000 in 1998 and $441,000 in 1997. Neither company renewed the agreement when
it expired on or about May 20, 1998.
On or about October 21, 1997, IFS, Inc. borrowed from its officers,
Mrs. Claudia Iovino and Mr. Harvey Katz, $134,700. This loan is payable in
monthly principal installments of $5,000 and interest computed at prime rate
(8.25% at September 30, 1999 and 7.75% December 31, 1998). Amounts outstanding
as of September 30, 1999 and December 31, 1998 totaled $70,746 and $111,553,
respectively.
IFS, Inc. is a guarantor for the shareholder's loan to the bank. During
1999, both the shareholder and IFS, Inc. (as guarantor) were in default. In this
connection, IFS, Inc. and its shareholders entered into a forbearance agreement
with the bank on June 19, 1999. Among other things, the forbearance agreement
provides for the collateralization of all of IFS, Inc.'s assets and a
rescheduling of the amounts due.
During the year ended December 31, 1997, IFS, Inc. issued 181,360
shares of common stock to Harvey Katz, in satisfaction of accrued compensation
of $272,040 that was recorded in 1996. IFS, Inc. also granted warrants to
purchase 181,360 shares of common stock at $2.50 per share expiring on May 31,
2001. Additionally, during 1999, 300,000 shares of common stock were issued to
him for compensation aggregating $80,000.
During the year ended December 31, 1997, IFS, Inc. issued 108,444
shares of common stock to Anthony DiChiara, a former employee of IFS, Inc., in
satisfaction of accrued compensation of $162,666 that was recorded in 1996.
Through December 31, 1998, IFS, Inc. has borrowed from Harvey Katz and
Claudia Iovino, the amount of $105,600 for working capital. The loans bear
interest at 10% and are payable over a 90 day period. All loans are past due.
Amounts outstanding at September 30, 1999 and December 31, 1998, totaled $30,898
and $66,445, respectively.
During the year ended December 31, 1997, IFS, Inc. issued 158,167
shares of common stock to Claudia Iovino in satisfaction of accrued compensation
of $237,250 that was earned and recorded in 1996. IFS, Inc. also granted
warrants to purchase 158,167 shares of common stock at $2.50 per share expiring
on May 31, 2001. Additionally, during 1999, 300,000 shares of common stock were
issued to her for compensation aggregating $80,000. Refer to Item 4 for further
details.
Between April 1, 1999 and July 31, 1999, IFS, Inc. issued Antonio
Bianco, an officer, options to purchase 1,150,000 shares of IFS, Inc.'s common
stock at prices ranging from $.10 to $1.00. The options vest from April 1999 to
April 2000 and have expiration dates ranging from July 1999 to April 2002. IFS,
Inc. valued these options using the Black-Scholes Method. 450,000 options were
exercised during the nine month period ended September 30, 1999.
21
<PAGE> 22
On or about May 1, 1998, IFS, Inc. executed an employment agreement
with Robert Kauffman for Mr. Kauffman to serve as IFS, Inc.'s chief executive
officer for a period of five years. The terms of the agreement generally
provided for Mr. Kauffman to act as chief executive officer at a $150,000 per
year salary. IFS, Inc. contends that Mr. Kauffman never activated the contract
or assumed the position for which he had been contracted and had otherwise
materially and repeatedly breached the agreement. See, however, Part II, Item 2
below.
IFS, Inc. currently shares office space with HKI, Inc., which is
currently owned primarily by Claudia Iovino, IFS, Inc.'s president. IFS, Inc.
subleases space from HKI, Inc. at a rent of $12,000 per year, which includes
electricity. The companies maintain their own telephone lines and currently pay
their own office expenses.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
IFS, Inc.'s Articles of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock, $.01 par value per share. There is no
preferred stock authorized. Holders of shares of Common Stock are entitled to
one vote for each share on all matters to be voted on by the stockholders.
22
<PAGE> 23
Holders of shares of Common Stock are entitled to share ratably in dividends,
if any, as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of IFS, Inc., the holders of shares of Common Stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities. Holders of Common Stock have no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All of the shares of Common Stock issued
and outstanding are fully paid and non assessable.
Warrants
Each purchaser who purchased IFS, Inc.'s common stock pursuant to its
Section 4(2) and 4(6) private placement of stock in 1996 received warrants to
purchase IFS, Inc.'s common stock, exercisable at a price of $2.50. Some of IFS,
Inc.'s employees and officers were issued warrants exercisable at $1.50. All of
the warrants expire May 31, 2001. The total number of shares subject to warrants
are 2,958,222.
PART II.
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Market Information
IFS, Inc.'s Common Stock currently trades on the "Pink Sheets". Prior
to December 15, 1999, IFS, Inc.'s common stock was traded on the
Over-The-Counter Bulletin Board (OTC:BB) under the trading symbol "IFOS". IFS,
Inc.'s Common Stock was listed for trading on the OTC:BB on September 17, 1998,
at which time there was a trading market for such shares. Since such time there
has been a limited trading market for IFS, Inc.'s Common Stock. OTC Quotations
presented reflect inter-dealer prices with related retail mark-up or commission
and may not represent actual transactions. Effective November 15, 1999, IFS,
Inc. was no longer in compliance with the National Association of Securities
Dealers, Inc. (NASD(R)) filing requirements. Accordingly, the letter "E" was
appended to the trading symbol. Since the Securities and Exchange Commission had
not approved IFS, Inc.'s Form 10-SB, which was filed on November 24, 1999, by
December 15, 1999, the deadline for the approval of IFS, Inc.'s Form 10-SB, IFS,
Inc. was removed from the OTC:BB. Once the NASD receives notification that IFS,
Inc. has fully complied with the filing requirements and same has been approved
by the SEC, IFS, Inc. intends to take all necessary actions to become relisted
on the OTC:BB.
The following table sets forth the average closing prices for the
Common Stock for each calendar quarter and subsequent interim period since the
Common Stock commenced actual trading, as reported by the National Quotation
Bureau, and represent the average closing price at the end of the business day:
Fiscal 1999 Closing Price
- ----------- -------------
First Quarter $.15
Second Quarter $.25
Third Quarter $.25
Fiscal 1998 Closing Price
- ----------- -------------
Third Quarter $.75
Fourth Quarter $.29
23
<PAGE> 24
There can be no assurance that an active public market for the Common
Stock will develop or be sustained. In addition, the shares of Common Stock are
subject to various governmental or regulatory body rules which affect the
liquidity of the shares.
Holders
There were approximately 186 holders of record of IFS, Inc.'s Common
Stock as of January 19, 2000.
Dividends
IFS, Inc. has never paid cash dividends on its Common Stock and does
not intend to do so in the foreseeable future. IFS, Inc. currently intends to
retain its earnings for the operation and expansion of its business. IFS, Inc.'s
continued need to retain earnings for operations and expansion are likely to
limit IFS, Inc.'s ability to pay dividends in the future.
ITEM 2. LEGAL PROCEEDINGS
IFS, Inc. is involved in several legal proceedings as described below.
IFS, Inc. has not filed any significant lawsuits as of the date of this
filing. IFS, Inc. has been and continues to be a defendant in several lawsuits.
IFS, Inc. believes that it has accrued in its financial statements the estimated
amount of all legal settlements. Such lawsuits primarily involve (I) former
employees who allege that their agreements with IFS, Inc. entitled them to
additional compensation upon their termination which IFS, Inc. has disputed, and
(II) allegedly past due debts of IFS, Inc. Two additional matters which were
brought against IFS, Inc. involved allegations by the Plaintiffs that certain
principals of IFS, Inc. dissipated IFS, Inc.'s funds in bad faith. These two
additional matters have been stagnant for approximately one year, as neither of
the Plaintiffs have continued to prosecute their cases during such time.
IFS, Inc. believes that only two of the cases--number 1 and 4
below--have any connection with each other. Mr. Greenfield, the plaintiff in
case number 1 below, was purportedly one of the attorneys for Mr. Northcutt and
possibly others, who initially threatened litigation against IFS, Inc. In an
effort to resolve such threatened litigation, IFS, Inc. settled with Mr.
Northcutt and the other complainants. As part of the settlement, IFS, Inc.
issued stock to such complainants, who in turn directed a portion of such stock
be issued to their attorneys, in consideration for their legal fees.
Accordingly, Mr. Greenfield became a stockholder in IFS, Inc. and subsequently
sued IFS, Inc. as described below (number 1). In disregard for the settlement,
Mr. Northcutt subsequently sued IFS, Inc. in the case described below
(Number 4).
(1) Greenfield v. International Foam Solutions, Inc., et al., case no.
98-005083 in Palm Beach Circuit Court, Palm Beach County, Florida. Leo
Greenfield is an alleged Company stockholder who sued IFS, Inc. for,
among other things, breach of fiduciary duty and related causes of action.
He has also sought to appoint a receiver of the corporation. He claims
that many IFS transactions involved conflicts of interest and seeks to
void same. The matter is in the discovery phase of the litigation. No
trial dates have been set. IFS, Inc. and Mr. Greenfield have reached a
verbal agreement to fully resolve the matter, however, no written
agreements have been executed although same have been sent to Mr.
Greenfield for his signature several months ago. IFS, Inc. intends to
continue to vigorously defend this matter in the event that settlement
documents are not executed.
(2) A.L. Garey v. International Foam Solutions, Inc., et al., case no.
97-18073 COCE 53 in Broward County Court, Broward County, Florida. A.L.
Garey was a prior manufacturer of the Solution Machines. The plaintiff
claims it is owed approximately $10,000 for parts which it allegedly
purchased in connection with the fulfillment of IFS, Inc.'s order, but
which were unassembled by it because of a mutual termination of their
agreement for the plaintiff to manufacture the Solution Machines. The
Company alleges that the plaintiff caused damages in excess of $10,000
by negligently designing and constructing the machines. IFS, Inc.
recently settled this matter.
24
<PAGE> 25
(3) Florida First Capital Finance Corporation v. International Foam Solutions,
Inc., et al., case no. C1099-371-35, Orange County Circuit Court, Orange
County, Florida. In January 1999, the plaintiff sued IFS, Inc. alleging
that it is in default of a promissory note in the principal amount of
$200,000. IFS, Inc. contends it does not owe the full amount allegedly past
due. The proceeding is in the discovery phase. No trial dates have been
set. IFS, Inc. has recorded the outstanding amount of the promissory note
on the balance sheet.
(4) Northcutt, et al. v. International Foam Solutions, Inc., et al., case
number 98-001836 AB, Palm Beach County Florida Circuit Court. The
plaintiffs are shareholders of IFS, Inc. and alleged certain causes of
action substantially similar to, and to IFS, Inc.'s belief in cooperation
with, Mr. Greenfield's litigation against IFS, Inc. (see (#1) above).
However, this case was dismissed with leave to amend and the plaintiffs
failed to amend their complaint within the time allowed by the judge.
Accordingly, the matter is ripe for dismissal; and IFS, Inc. will move the
court for dismissal; accordingly no liability has been accrued.
(5) Keefer v. International Foam Solutions, Inc., case no. 98-006525, Palm
Beach County Florida Circuit Court. Mr. Keefer is a former employee who has
sued IFS, Inc. for alleged breach of an employment contract. Mr. Keefer
claims he is entitled to a severance pay in the amount of approximately
$56,000.00 under the employment contract because he alleges he was
terminated without cause. However, it is IFS, Inc.'s position that Mr.
Keefer walked off the job and effectively quit, and accordingly, not
entitled to any severance under the employment agreement. IFS, Inc.
recently settled this matter. The settlement requires that IFS, Inc. issue
restricted stock to the Plaintiff and make certain payments over the course
of less than one year. The exact terms of the agreement are confidential by
agreement of the parties.
(6) D'Agostino v. International Foam Solutions, Inc., case no. 98-6523 AB, Palm
Beach County, Florida Circuit Court. Mr. D'Agostino is a former employee
who has sued IFS, Inc. for breach of an employment contract. D'Agostino
claims he is entitled to a severance pay in the amount of approximately
$42,000 under an employment contract because he alleges he was terminated
without cause. However, IFS, Inc. terminated D'Agostino with cause and
accordingly, D'Agostino was not entitled to the severance under the
employment agreement. IFS, Inc. recently settled this matter. The
settlement requires that IFS, Inc. issue restricted stock to the Plaintiff
and make certain payments over the course of less than one year. The exact
terms of the agreement are confidential by agreement of the parties.
(7) DiChiara v. International Foam Solutions, Inc., case number CL 98-9930 AH,
in the Palm Beach County Florida Circuit Court. Mr. Dichiara is a former
employee who has sued IFS, Inc. for, among other things, alleged breach of
an employment contract. Dichiara claims he is entitled to a severance pay
in the amount of approximately $80,000 under the employment contract
because he alleges he was terminated without cause. However, IFS, Inc.
contends that it entered into a new agreement with Dichiara to be employed
in a different capacity, which was treated as a novation of the former
agreement with Dichiara, and as such Dichiara was not entitled to the
severance under the former employment agreement. A trial is scheduled for
February 22, 2000 and will be vigorously defended by IFS, Inc.
25
<PAGE> 26
(8) Ecological Technologies, Inc. v. International Foam Solutions, Inc., case
number 98-003218 in the Palm Beach County Florida Circuit Court. The
plaintiff sued IFS, Inc. for breach of a promissory note and is attempting
to foreclose on certain Japanese patent rights of IFS, Inc. which were
pledged as collateral for the note. A judgment was entered against IFS,
Inc. in the amount of approximately $11,000. However, IFS, Inc. has
satisfied this in full and accordingly, ownership of any Japanese patent
rights are no longer in dispute. The plaintiff also sued IFS, Inc. for
damages due to its allegation that IFS, Inc. is doing business in Japan,
where the plaintiff claims it has exclusive territorial rights, a claim
which IFS, Inc. denies. No trial date has been set and the parties will
engage in discovery on this separate claim for damages. IFS, Inc. will
vigorously defend this lawsuit.
(9) Robert Kauffman v. International Foam Solutions, Inc., et al., case number
99012968, in the Broward County Florida Circuit Court. Mr. Kauffman, who
has alleged that he was the former CEO of IFS, Inc. has sued IFS, Inc. for,
among other things, breach of an employment agreement, claiming damages in
excess of $150,000 resulting from IFS, Inc.'s alleged breach of the
employment agreement. It is IFS, Inc.'s position that Mr. Kauffman,
although he executed the agreement, never activated the contract or assumed
the role of CEO and otherwise materially failed to perform under the
agreement. This case is in the discovery phase and IFS, Inc. intends to
vigorously defend this matter. In this connection, IFS, Inc. does not
believe it has any obligations to Mr. Kauffman. Accordingly, it is too
early for counsel to assess the likelihood of success, therefore no
amounts have been accrued.
(10) Sovis & Scholl v. International Foam Solutions, Inc., case number MC
99-14670 RE, in the Palm Beach County Florida Circuit Court. The Plaintiffs
claimed they were mislead by a former Company employee when they purchased
IFS, Inc.'s stock. They sought to rescind their stock purchase. The
plaintiffs and IFS, Inc. have verbally agreed to settle the case and the
parties are in the process of executing settlement agreements, whereby IFS
will pay the Plaintiffs a settlement amount over a three month period.
(11) Waterview Resolution Corp. ("WRC"). WRC has sent IFS, Inc. a demand letter
seeking the payment of $11,166.79 which WRC claims is a deficiency balance
owed by IFS, Inc. when WRC sold certain equipment (floor cleaning
equipment) in connection with an alleged default of an equipment lease.
IFS, Inc. denies that any sums are due under any lease agreement. The
parties have not engaged in any settlement discussions and no litigation
has been filed, although WRC still claims such amount is due. Accordingly,
it is too early for counsel to assess the likelihood of success, therefore
no amounts have been accrued.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- Not applicable -
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
IFS, Inc.'s last securities offering, which occurred between November
1998 and April 1999 and then between April 1999 and December 1999, was pursuant
to Rule 504 of Regulation D. In 1998, IFS, Inc. sold its common stock for an
aggregate amount of $73,454.00 to less than 35 non-accredited investors and to
accredited investors, thereby complying with the purchaser requirements of
Regulation D. In April 1999, when the amendments to Rule 504 became effective,
IFS, Inc. terminated its prior 504 offering which was sold to less than 35
non-accredited investors and to accredited investors, thereby complying with the
purchaser requirements of Regulation D. Subsequently, IFS, Inc. engaged in a new
504 offering, which if aggregated with the funds raised from the offering
immediately prior thereto, did not exceed $1,000,000.00. During this latter 504
offering, IFS, Inc. sold its common stock only to accredited investors. From
January, 1999 through November, 1999, IFS, Inc. sold its common stock for an
aggregate amount of $646,334.00. The following table breaks down, by month, the
cumulative number of shares sold of IFS, Inc.'s common stock and the type of
investor (accredited or non-accredited) the shares were sold:
Month # of Shares Sold Accredited (A) or Non-Accredited(N)
- ----- ----------------- -----------------------------------
11/98 140,211 A
12/98 24,000 A
1/99 400,000 A
2/99 200,000 A
3/99 500,000 A
4/99 1,133,533 A
5/99 200,167 A
6/99 75,000 A
7/99 1,099,720 A
8/99 100,000 A
9/99 64,706 A
10/99 100,000 A
From January 1997 through December 1997, IFS, Inc. sold 55,401 shares
of the common stock for $125,245. Such sales were effected to accredited
investors, pursuant to Section 4(2) and 4(6) of the Securities Act.
26
<PAGE> 27
Securities sold other than for cash are as follows:
Common
Shares Amount
----------- ----------
1997:
- ----
Compensation 447,971 $671,956
Professional Services 3,000 $ 4,500
Legal Settlement(1) 206,000 $345,188
1998:
- -------
Professional Services 370,000 $ 79,999
1999:
- -----
Compensation 600,000 $160,000
Professional Services 122,842 $ 50,454
(1) Accrued in 1996.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporations Act contains provision entitling
directors and officers of IFS, Inc. to indemnification from judgements, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
as the result of an action or proceeding in which they may be involved by reason
of being or having been a director or officer of IFS, Inc., provided said
officers or directors acted in good faith.
In so far as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
IFS, Inc. pursuant to the foregoing provisions, or otherwise, IFS, Inc. has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment of IFS, Inc. of expenses
incurred or paid by a director, officer, or controlling person of IFS, Inc. in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
offered hereby, IFS, Inc. will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
27
<PAGE> 28
PART F/S
PART III
Item 1
Item 2
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 20, 2000 International Foam Solutions, Inc.
By: /s/ Harvey Katz
--------------------------------
Harvey Katz, CEO
28
<PAGE> 29
EXHIBIT INDEX
27 Financial Data Schedule (for S.E.C. use only)
99.1 Articles of Incorporation
99.2 Company By-Laws
99.3 CMC financing agreement*
99.4 Promissory Note*
99.5 Warrants (form)
99.6 Japan Licensing Agreement
99.8 Form of Stock Certificate
99.9 Employment Agreement with Harvey Katz*
99.10 Employment Agreement with Claudia Iovino*
99.11 Employment Agreement with Tony Bianco*
* Filed herewith
29
<PAGE> 30
INTERNATIONAL FOAM SOLUTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants F-2
Balance Sheets at September 30, 1999 (unaudited) and December 31, 1998 F-3
Statements of Operations for the nine months ended September 30, 1999
(unaudited) and 1998 (unaudited) and for the years ended
December 31, 1998 and 1997 F-4
Statements of Stockholders' Equity (Deficit) for the nine months ended
September 30, 1999 (unaudited) and for the years ended
December 31, 1998 and 1997 F-5
Statements of Cash Flows for the nine months ended September 30, 1999
(unaudited) and 1998 (unaudited) and for the years ended
December 31, 1998 and 1997 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE> 31
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
International Foam Solutions, Inc.
We have audited the accompanying balance sheet of International Foam Solutions,
Inc. as of December 31, 1998 and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 31,
1998 and 1997. These financial statements are the responsibility of IFS, Inc.'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 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 audits provide 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 International Foam Solutions,
Inc. at December 31, 1998 and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming IFS, Inc. will
continue as a going concern. As discussed in Note 2 to the financial statements,
IFS, Inc. had cumulative losses since inception in 1993 and is dependent upon
outside financing to expand its operations. These factors raise substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Miami, Florida
October 29, 1999, except for Note 13 BDO Seidman, L.L.P.
which is as of November 15, 1999
F-2
<PAGE> 32
INTERNATIONAL FOAM SOLUTIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS (NOTES 5 AND 7)
CURRENT
Cash $ 64,954 $ 1,145
Accounts receivable, less allowance for doubtful accounts
$132,000 27,228 25,605
Inventories 366,117 419,560
Prepaid expenses and other 12,159 12,159
----------- -----------
Total current assets 470,458 458,469
PROPERTY AND EQUIPMENT, net (Note 3) 193,319 205,623
PATENTS, less accumulated amortization of $92,216 and $81,881 142,055 152,390
DEPOSITS AND OTHER 18,789 18,028
----------- -----------
$ 824,621 $ 834,510
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of notes payable (Note 5) 211,119 230,204
Current maturities of notes payable to stockholders (Note 5) 90,898 96,445
Accounts payable 201,574 263,534
Accrued salaries 127,000 209,000
Accrued legal costs 83,000 83,000
Other accrued expenses 12,892 17,616
----------- -----------
Total current liabilities 726,483 899,799
----------- -----------
Notes payable, less current portion (Note 5) 77,194 86,848
Notes payable to shareholders, less current portion (Note 5) 10,746 81,553
----------- -----------
Total liabilities 814,423 1,068,200
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTES 6 AND 13)
STOCKHOLDERS' (DEFICIT) EQUITY (NOTE 8)
Common stock, par value $.01, 20,000,000
shares authorized, 13,673,390 and 8,850,264
shares issued and outstanding (Note 6) 136,734 88,503
Additional paid-in capital 5,741,379 4,856,276
Deficit (5,835,547) (5,168,311)
Stock subscriptions receivable for 80,525 and 25,000
shares of Common stock (32,210) (10,000)
Treasury stock, at cost (39,764 shares) (158) (158)
----------- -----------
Total stockholders' equity (deficit) 10,198 (233,690)
----------- -----------
$ 824,621 $ 834,510
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 33
INTERNATIONAL FOAM SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
NINE MONTHS NINE MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------------
1999 1998 1998 1997
------------- ------------- ---------- ----------
(UNAUDITED) (UNAUDITED)
REVENUES:
<S> <C> <C> <C> <C>
Product sales $ 59,728 $ 27,107 $ 47,543 $ 718,187
Licensing fee (Note 11) -- -- -- 1,000,000
----------- ---------- ---------- ----------
59,728 27,107 47,543 1,718,187
----------- ---------- ---------- ----------
OPERATING EXPENSES:
Cost of sales (exclusive of depreciation
and amortization shown separately below)
(Note 7) 42,062 21,021 35,168 827,027
Selling, general and administrative
(Notes 6 and 8) 585,819 505,271 589,112 1,835,658
Research and development 21,222 -- -- 81,344
Depreciation and amortization 43,067 57,935 68,502 31,945
----------- ---------- ---------- ----------
692,170 584,227 692,782 2,775,974
----------- ---------- ---------- ----------
LOSS FROM OPERATIONS (632,442) (557,120) (645,239) (1,057,787)
----------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income -- 32 32 12,622
Other income (Note 11) 548 100,000 100,000 --
Interest expense (35,342) (13,840) (30,759) (19,238)
Abandonment of leasehold improvements
and fixed assets -- (5,000) (5,000) (72,202)
----------- ---------- ---------- ----------
Total other income (expense) (34,794) 81,192 64,273 (78,818)
----------- ---------- ---------- ----------
NET LOSS (NOTE 4) $ (667,236) (475,928) (580,966) $(1,136,605)
----------- ---------- ---------- ----------
NET LOSS PER SHARE
Basic and diluted
WEIGHTED AVERAGE NUMBER OF
OUTSTANDING SHARES $ (.06) $ (.06) $ (.07) $ (.14)
Basic and diluted 11,045,060 8,460,660 8,568,869 8,274,700
=========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 34
INTERNATIONAL FOAM SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
(NOTE 8)
<TABLE>
<CAPTION>
Common Stock Additional Stock Total
---------------------- paid-in Subscriptions Treasury Stockholders'
Shares Amount Capital Deficit Receivable Stock Equity
--------- --------- ----------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 7,703,681 $ 77,037 $3,840,056 $(3,450,740) $ -- $ -- $ 466,353
Issuance of common stock for cash 55,401 554 124,691 -- -- -- 125,245
Compensation charges in connection
with issuance of warrants (Note 8) -- -- 71,472 -- -- -- 71,472
Issuance of common stock in
satisfaction of officers' accrued
compensation (Note 8) 447,971 4,480 667,476 -- -- -- 671,956
Issuance of common stock in
exchange for services 3,000 30 4,470 -- -- -- 4,500
Issuance of common stock in
connection with a legal
settlement agreement 206,000 2,060 -- -- -- -- 2,060
Net loss for year -- -- -- (1,136,605) -- -- (1,136,605)
---------- -------- ---------- ----------- -------- ----- --------
Balance at December 31, 1997 8,416,053 84,161 4,708,165 (4,587,345) -- -- 204,981
Issuance of common stock in
exchange for compensation and
professional services (Note 8) 270,000 2,700 76,299 -- -- -- 78,999
Issuance of common stock for cash 139,211 1,392 62,062 -- -- -- 63,454
Stock subscriptions receivable 25,000 250 9,750 -- (10,000) -- --
Treasury stock acquired -- -- -- -- -- (158) (158)
Net loss for year -- -- -- (580,966) -- -- (580,966)
---------- -------- ---------- ----------- -------- ----- --------
Balance at December 31, 1998 8,850,264 88,503 4,856,276 (5,168,311) (10,000) (158) (233,690)
Issuance of common stock for cash 3,594,759 35,948 537,722 -- -- -- 573,670
Issuance of common stock in
exchange for professional
services 122,842 1,228 49,226 -- -- -- 50,454
Exercise of options at $0.10 450,000 4,500 40,500 -- -- -- 45,000
Stock subscription receivable 55,525 555 21,655 -- (22,210) -- --
Issuance of common stock in
satisfaction of officers' accrued
compensation 600,000 6,000 154,000 -- -- -- 160,000
Compensation charges in connection
with issuance of options (Note 8) -- -- 82,000 -- -- -- 82,000
Net loss for the nine month
period -- -- -- (667,236) -- -- (667,236)
---------- -------- ---------- ----------- -------- ----- --------
Balance at September 30, 1999
(unaudited) 13,673,390 $136,734 $5,741,379 $(5,835,547) $(32,210) $(158) $ 10,198
---------- -------- ---------- ----------- -------- ----- --------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 35
INTERNATIONAL FOAM SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(NOTE 11)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
NINE MONTHS NINE MONTHS YEARS ENDED
ENDED ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------
1999 1998 1998 1997
------------- ------------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) $ (667,236) $ (475,928) $ (580,966) $ (1,136,605)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation and amortization 43,067 57,935 68,502 31,945
Issuance of common stock in exchange for
professional services 50,454 80,409 78,999 4,500
Stock option and warrant compensation 82,000 -- -- 71,472
Loss on disposal of fixed assets and leasehold improvements -- 5,000 5,000 72,202
Issuance of common stock in connection with a legal
settlement agreement -- -- -- 2,060
(Increase) in accounts receivable (1,623) (15,513) (18,529) (7,076)
Decrease (increase) in inventories 53,443 (82,228) (22,491) (205,470)
Decrease (increase) in prepaids and other -- 30,202 27,542 (17,053)
Decrease (increase) in deposits and other (761) 9,179 6,402 187,536
(Decrease) increase in accounts payable (61,960) 58,418 29,755 101,279
Increase in accrued expenses and other 73,276 200,595 239,365 14,936
-------------- ---------- ---------- ------------
Total adjustments 237,896 343,997 414,545 256,331
-------------- ---------- ---------- ------------
Cash used in operating activities (429,340) (131,931) (166,421) (880,274)
-------------- ---------- ---------- ------------
INVESTING ACTIVITIES:
Capital expenditures (20,428) -- -- (192,524)
Acquisition of patents -- -- -- (9,036)
-------------- ---------- ---------- ------------
Cash used in investing activities (20,428) -- -- (201,560)
-------------- ---------- ---------- ------------
FINANCING ACTIVITIES:
Proceeds from notes payable -- 208,714 208,714 408,372
Payments of notes payable (105,093) (100,579) (107,657) (14,379)
Purchase of treasury stock -- (158) (158) --
Proceeds from issuance of common stock 618,670 22,353 63,454 125,245
-------------- ---------- ---------- ------------
Cash provided by financing activities 513,577 130,330 164,353 519,238
-------------- ---------- ---------- ------------
Net increase (decrease) in cash and cash equivalents (Note 12) 63,809 (1,601) (2,068) (562,596)
Cash at beginning of period 1,145 3,213 3,213 565,809
-------------- ---------- ---------- ------------
Cash at end of period $ 64,954 1,612 $ 1,145 $ 3,213
============== ========== ========== ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 36
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT Organization and Business
ACCOUNTING POLICIES
International Foam Solutions, Inc, ("the
Company"), was incorporated in May of 1993
to distribute a patented recycling
technology for polystyrenes. Pursuant to the
patent, IFS, Inc. has developed a product
called "Styro Solve" which reduces
polystyrenes. Additionally, IFS, Inc. has
developed a variety of machines for the
application of Styro Solve, and methods of
recycling both the Styro Solve and the
"polygel" which results from the reduction
of polystyrenes.
Substantially all IFS, Inc.'s 1997 sales
have been to two companies located in Japan,
one of which has entered into an exclusive
distribution agreement. In addition, all of
IFS, Inc.'s 1998 sales have been to two
companies located in the U.S.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
At September 30, 1999, a significant portion
of inventory is in excess of IFS, Inc.'s
requirements based on the recent level of
sales. Management has developed a program to
reduce this inventory to desired levels over
the near term and believes no loss will be
incurred on its disposition. No estimate can
be made of a range of amounts of loss that
are reasonably possible should the program
not be successful.
Interim Financial Statements
The financial statements for the nine months
ended September 30, 1999 and 1998 are
unaudited. In the opinion of management, such
financial statements include all adjustments
(consisting only of normal recurring
accruals) necessary for a fair presentation
of financial position and the results of
operations. The results of operations for the
nine months ended September 30, 1999 and 1998
are not necessarily indicative of the results
to be expected for the full year.
Cash and Cash Equivalents
IFS, Inc. considers all highly liquid
investments with an initial maturity of three
months or less when purchased to be cash
equivalents.
Inventories
Inventories consist principally of finished
goods and are stated at the lower of cost or
market. Cost is determined using the average
cost method.
Property and Equipment
Property and equipment is stated at cost
less accumulated depreciation and
amortization. Depreciation and amortization
are calculated on a straight line basis
based on the estimated useful lives of the
respective assets, generally 5 to 15 years.
F-7
<PAGE> 37
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
Patents
Patent costs consist principally of
associated legal fees and are capitalized
and amortized over their expected useful
lives not to exceed estimated legal lives of
17 years.
Fair Value of Financial Instruments
IFS, Inc.'s financial instruments consist
principally of cash, accounts and notes
payable and accrued expenses. The carrying
amounts of such financial instruments as
reflected in the accompanying balance sheets
approximate their estimated fair value. The
estimated fair value is not necessarily
indicative of the amounts IFS, Inc. could
realize in a current market exchange or of
future earnings or cash flows.
Revenue Recognition
Product sales revenue is generally
recognized when goods are shipped. License
fees are recognized over the period that the
Company is obligated to perform services, if
any.
Income Taxes
IFS, Inc. accounts for income taxes
pursuant to the provisions of Statement of
Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which
requires, among other things, a liability
approach to calculating deferred income
taxes. The asset and liability approach
requires the recognition of deferred tax
liabilities and assets for the expected
future tax consequences of temporary
differences between the carrying amounts and
the tax bases of assets and liabilities.
Earnings Per Share
IFS, Inc. has adopted Statement of
Financial Accounting Standards ("SFAS") No.
128 "Earnings Per Share". Under SFAS No. 128,
primary earnings per share has been replaced
F-8
<PAGE> 38
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
with a presentation of basic earnings per
share and fully diluted earnings per share
has been replaced with diluted earnings per
share. Basic earnings per share excludes
dilution and is computed by dividing income
or loss available to common shares
outstanding for the period by the weighted
average of common shares outstanding.
Diluted earnings per share is computed
similarly to fully diluted earnings per
share in accordance with the Accounting
Principles Board ("APB") Opinion No. 15. The
impact of the adoption of SFAS No. 128 has
not been material.
IFS, Inc.'s potentially issuable shares of
common stock pursuant to outstanding stock
purchase options and warrants are excluded
from IFS, Inc.'s diluted computation as
their effect would be antidilutive to the
Company's net loss.
Asset Impairment
IFS, Inc. periodically reviews the carrying
value of certain of its assets in relation to
historical results, current business
conditions and trends to identify potential
situations in which the carrying value of
assets may not be recoverable. If such
reviews indicate that the carrying value of
such assets may not be recoverable, the
Company would estimate the undiscounted sum
of the expected future cash flows of such
assets to ascertain if a permanent impairment
exists. If a permanent impairment exists, the
Company would determine the fair value using
quoted market prices, if available, for such
assets, or if quoted market prices are not
available, IFS, Inc. would discount the
expected future cash flows of such assets.
Impairments are recognized as a charge to
operations when the expected future operating
cash flows to be derived from such intangible
assets are less than their carrying values.
F-9
<PAGE> 39
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
Recent Accounting Pronouncements
In June 1998, the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes
accounting and reporting standards for
derivative instruments and for hedging
activities. It requires that an entity
recognizes all derivatives as either assets
or liabilities in the statement of financial
position and measures those instruments at
fair value. The statement applies to all
entities and is effective for all fiscal
quarters of fiscal years beginning after
June 15, 2000. IFS, Inc. has not engaged in
derivative instruments or hedging activities
in any periods presented in the financial
statements and management does not expect
this statement to have a material impact on
IFS, Inc.'s financial position, results of
operations, or cash flows.
2. LIQUIDITY The accompanying financial statements have
been prepared assuming IFS, Inc. will
continue as a going concern. This basis of
accounting contemplates the recovery of the
Company's assets and the satisfaction of its
liabilities in the normal course of
operations.
During the latter part of 1997 and 1998 the
Company experienced protracted litigation
which diverted management's efforts from its
core business, and effectively curtailed the
Company's marketing programs. IFS, Inc.
has been in settlement negotiations to
reduce the quantity of outstanding
litigation and the threat of any potentially
adverse findings. Management believes that
resolving many of these matters through
settlements will enable it to focus much
more of its attention on sales and to spend
more of its time on sales activities.
Management believes that with the increased
time spent on marketing efforts, increased
sales will result. Since it will be mostly
an increase of time spent by management
which will be utilized in marketing and
sales activities as opposed to increased
costs for, among other things, advertising,
IFS, Inc. does not foresee the need for
substantial, additional capital to perform
such increased marketing and sales
activities. In the event that substantial,
additional capital is required, however, the
Company would be required to seek outside
funding mechanisms, of which no assurances
are given that any funding would be made
available to IFS, Inc. or if made
available, on terms satisfactory to the
Company. In summary, during 1999 certain
aspects of the previously mentioned
litigation were resolved and IFS, Inc. was
able to refocus and continue its marketing
efforts.
IFS, Inc. anticipates, based on current
plans and assumptions relating to revenues
from operations, that revenues from
operations and additional third party
funding or investment, if available, will be
sufficient to satisfy IFS, Inc.'s
estimated cash requirements to continue its
operations. IFS, Inc. has no firm current
F-10
<PAGE> 40
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
arrangements with respect to, or sources of,
additional financing. There can be no
assurance that any such additional financing
will be available to IFS, Inc., and if
available, will enable IFS, Inc. to attain
profitable operations or continue as a going
concern. Through September 30, 1999 and
December 31, 1998, IFS, Inc. has incurred
losses totaling $5,835,547 and $5,168,311.
Negative working capital aggregated $256,025
at September 30, 1999 and $441,330 for
December 31, 1998. In addition, IFS, Inc.
is in violation of certain of its loan
covenants.
3. PROPERTY AND EQUIPMENT Property and equipment is comprised of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- -----------
<S> <C> <C>
Warehouse equipment $ 111,869 $ 111,869
Office furniture 64,415 64,415
Computer hardware and equipment 50,118 47,951
Field demonstration units 63,261 45,000
Vehicles 24,353 24,353
-------------- -------------
314,016 293,588
Less accumulated depreciation (120,697) (87,965)
-------------- -------------
$ 193,319 $ 205,623
============== =============
</TABLE>
4. INCOME TAXES At September 30, 1999 and December 31, 1998,
IFS, Inc. had Federal net operating loss
carryforwards of approximately $4,790,000
and $4,137,000 respectively, for income tax
purposes. The net operating losses expire in
varying amounts to 2019. Realization of any
portion of the approximate $1,988,000 or
$1,740,000 deferred tax asset at September
30, 1999 and December 31, 1998,
respectively, resulting from the net
operating loss carryforwards, is not
considered more likely than not and,
accordingly, a valuation allowance has been
established for the full amount of such
asset.
The net deferred tax asset is comprised of the following:
September 30, December 31,
1999 1998
- ----------------------------------------------------------------------------
(Unaudited)
Deferred tax assets:
Net operating loss carryforward 1,802,000 1,557,000
Allowance for bad debts 50,000 50,000
Accrued expenses 48,000 78,000
Other 88,000 55,000
- -----------------------------------------------------------------------------
1,988,000 1,740,000
Deferred tax liability:
Depreciation (11,000) (11,000)
- -----------------------------------------------------------------------------
Net deferred tax asset 1,977,000 1,729,000
Deferred tax asset valuation allowance (1,977,000) (1,729,000)
- -----------------------------------------------------------------------------
Net deferred tax asset -- --
F-11
<PAGE> 41
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
5. NOTES PAYABLE IFS, Inc.'s notes payable consists of the
following:
<TABLE>
<CAPTION>
September 30,
1999
(Unaudited) December 31, 1998
----------------- -----------------
<S> <C> <C>
Equipment note payable in monthly
installments of $3,030 including
principal and interest at a fixed rate
of 6.5%, maturing July 1, 2004,
collateralized by equipment. IFS,
Inc. is in default under the terms
of this loan and in violation of certain
covenants. $ 177,800 $ 200,000
Shareholder loan payable in monthly
principal installments of $5,000 and
interest computed at prime rate
(8.25% at September 30, 1999 and
7.75% at December 31, 1998)
due on March 1, 2001. 70,746 111,553
Equipment loan payable in monthly
installments of $3,555 including
principal and interest, maturing in
June 2003. (42% at September 30, 1999
and December 31, 1998) 90,513 97,052
Shareholder loan principal and
interest due 90 days after date of
note. All loans are past due and
accrue interest at a 10% annual
fixed rate. 30,898 66,445
Related party loan, principal and
interest due 90 days after date of
note. Loan is past due and accrues
interest at a 10% annual fixed rate 20,000 20,000
------------- --------------
Total 389,957 495,050
Less current portion (302,017) (326,649)
------------- --------------
87,940 168,401
============= ==============
</TABLE>
At September 30, 1999 annual maturities of
long term debt approximates the following:
Amount
-----------
1999 $ 247,000
2000 70,000
2001 21,000
2002 29,000
2003 22,000
-----------
$ 389,000
===========
As discussed in Note 7, IFS, Inc. is a
guarantor for a shareholder's loan to the
bank. During 1999, both the shareholder and
IFS, Inc. (as guarantor) were in default.
In this connection, IFS, Inc. and its
shareholder's entered in a forbearance
agreement with the bank on June 19, 1999.
Among other things, the forbearance
agreement provides for the collaterization
of all of IFS, Inc.'s assets and a
rescheduling of the amounts due. The
attached financial statements give effect to
the forbearance agreement.
F-12
<PAGE> 42
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
6. COMMITMENTS AND IFS, Inc. occupies premises under a
CONTINGENCIES month-to-month lease for $1,000 a month
with HKI, Inc., a related party.
Rent expense for the nine months ended
September 30, 1999 and 1998 and the years
ended December 31, 1998 and 1997 was $34,745,
44,426, $52,188, and $214,439, respectively.
During May 1998 IFS, Inc.'s old lease for
its facility and office space was terminated,
and IFS, Inc. entered into a new
month-to-month lease of $1,000 per month. In
connection with IFS, Inc.'s lease
termination, IFS, Inc. settled with the
landlord for the balance of the rent relating
to the unexpired lease term.
On October 1, 1996, IFS, Inc. entered into
employment agreements with two officers of
IFS, Inc. Each agreement provides for a
term of five years renewable annually upon
mutual consent, with base annual salaries
for the two officers aggregating
approximately $250,000. These employment
agreements provide that the officers may
receive an incentive bonus based upon
performance. In October 1997, such agreements
were modified to reduce annual salaries to
$160,000.
On April 5, 1999, IFS, Inc. entered into
an employment agreement with its chief
operating officer. The agreement provides
for a term of three years with base annual
salary of $50,000. Under the terms of the
agreement, the chief operating officer is
entitled to a performance bonus based on
sales and earnings (as defined). In
connection with this agreement, IFS, Inc.
issued 1,150,000 options to purchase
Company's common stock over five years at
exercise prices ranging from $0.10 to $1.00
through 2004. During 1999, 450,000 options
were granted.
F-13
<PAGE> 43
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
In May 1997, IFS, Inc. and certain
stockholders executed a settlement agreement
with an individual. IFS, Inc. agreed to
issue the individual his proportionate share
of the 1995 stock dividend and certain
stockholders of IFS, Inc. agreed to
transfer their ownership of 230,125 shares
of IFS, Inc.'s common stock to the
individual in settlement of the lawsuit. The
$345,188 fair value of the shares of common
stock to be transferred by the stockholders
in settlement of the litigation against the
Company had been recorded in selling,
general and administrative expenses and
additional paid-in capital in the 1995
financial statements.
IFS, Inc. is involved in several legal
proceedings for which the accompanying
balance sheets as of September 30, 1999
(unaudited) and December 31, 1998, includes
accrued legal settlement cost of $83,000.
The proceedings are as described below:
(1) Greenfield v. International Foam
Solutions, Inc., et al., case no.
98-005083 in Palm Beach Circuit Court,
Palm Beach County, Florida. Leo
Greenfield is an alleged Company
stockholder who sued IFS, Inc. for,
among other things, breach of fiduciary
duty and related causes of action. He
has also sought to appoint a receiver
of the corporation. He claims that many
IFS transactions involved conflicts of
interest and seeks to void same. The
matter is in the discovery phase of the
litigation. No trial dates have been
set. IFS, Inc. and Mr. Greenfield
have reached a verbal agreement to
fully resolve the matter, however, no
written agreements have been executed
although same have been sent to Mr.
Greenfield for his signature several
months ago. IFS, Inc. intends to
continue to vigorously defend this
matter in the event that settlement
documents are not executed. No amount
of claim has been asserted, IFS, Inc.
and counsel believes that IFS will be
successful in defending this matter.
(2) A.L. Garey v. International Foam
Solutions, Inc., et al., case no.
97-18073 COCE 53 in Broward County
Court, Broward County, Florida. A.L.
Garey was a prior manufacturer of the
Solution Machines. The plaintiff claims
it is owed approximately $10,000 for
parts which it allegedly purchased in
connection with the fulfillment of the
Company's order, but which were
unassembled by it because of a mutual
termination of their agreement for the
plaintiff to manufacture the Solution
Machines. IFS, Inc. alleges that the
plaintiff caused damages in excess of
$10,000 by negligently designing and
constructing the machines. IFS, Inc.
recently settled this matter.
(3) Florida First Capital Finance
Corporation v. International Foam
Solutions, Inc., et al., case no.
C1099-371-35, Orange County Circuit
Court, Orange County, Florida. In
January 1999, the plaintiff sued the
Company alleging that it is in default
of a promissory note in the principal
amount of $200,000. IFS, Inc.
contends it does not owe the full
amount allegedly past due. The
proceeding is in the discovery phase.
No trial dates have been set. The
Company has recorded the outstanding
amount of the promissory note on the
balance sheet.
(4) Northcutt, et al. v. International Foam
Solutions, Inc., et al., case number
98-001836 AB, Palm Beach County Florida
Circuit Court. The plaintiffs are
shareholders of IFS, Inc. and alleged
certain causes of action substantially
similar to, and to IFS, Inc.'s belief
in cooperation with, Mr. Greenfield's
litigation against IFS, Inc. (see
(#1) above). However, this case was
dismissed with leave to amend and the
plaintiffs failed to amend their
complaint within the time allowed by
the judge. Accordingly, the matter is
ripe for dismissal; and IFS, Inc.
will move the court for dismissal;
accordingly no liability has been
accrued.
(5) Keefer v. International Foam Solutions,
Inc., case no. 98-006525, Palm Beach
County Florida Circuit Court. Mr.
Keefer is a former employee who has
sued IFS, Inc. for alleged breach of
an employment contract. Mr. Keefer
claims he is entitled to a severance
pay in the amount of approximately
$56,000.00 under the employment
contract because he alleges he was
terminated without cause. However, it
is IFS, Inc.'s position that Mr.
Keefer walked off the job and
effectively quit, and accordingly, not
entitled to any severance under the
employment agreement. IFS, Inc.
recently settled this matter. The
settlement requires that IFS, Inc.
issue restricted stock to the Plaintiff
and make certain payments over the
course of less than one year. The exact
terms of the agreement are confidential
by agreement of the parties.
(6) D'Agostino v. International Foam
Solutions, Inc., case no. 98-6523 AB,
Palm Beach County, Florida Circuit
Court. Mr. D'Agostino is a former
employee who has sued IFS, Inc. for
breach of an employment contract.
D'Agostino claims he is entitled to a
severance pay in the amount of
approximately $42,000 under an
employment contract because he alleges
he was terminated without cause.
However, IFS, Inc. terminated
D'Agostino with cause and accordingly,
D'Agostino was not entitled to the
severance under the employment
agreement. IFS, Inc. recently settled
this matter. The settlement requires
that IFS, Inc. issue restricted stock
to the Plaintiff and make certain
payments over the course of less than
one year. The exact terms of the
agreement are confidential by agreement
of the parties.
(7) DiChiara v. International Foam
Solutions, Inc., case number CL 98-9930
AH, in the Palm Beach County Florida
Circuit Court. Mr. Dichiara is a former
employee who has sued IFS, Inc. for,
among other things, alleged breach of
an employment contract. Dichiara claims
he is entitled to a severance pay in
the amount of approximately $80,000
under the employment contract because
he alleges he was terminated without
cause. However, IFS, Inc. contends
that it entered into a new agreement
with Dichiara to be employed in a
different capacity, which was treated
as a novation of the former agreement
with Dichiara, and as such Dichiara was
not entitled to the severance under the
former employment agreement. A trial is
scheduled for February 22, 2000 and
will be vigorously defended by the
Company.
(8) Ecological Technologies, Inc. v.
International Foam Solutions, Inc.,
case number 98-003218 in the Palm Beach
County Florida Circuit Court. The
plaintiff sued IFS, Inc. for breach
of a promissory note and is attempting
to foreclose on certain Japanese patent
rights of IFS, Inc. which were
pledged as collateral for the note. A
judgment was entered against the
Company in the amount of approximately
$11,000. However, IFS, Inc. has
satisfied this in full. The plaintiff
also sued IFS, Inc. for damages due
to its allegation that IFS, Inc. is
doing business in Japan, where the
plaintiff claims it has exclusive
territorial rights, a claim which the
Company denies. No trial date has been
set and the parties will engage in
discovery on this separate claim for
damages. IFS, Inc. will vigorously
defend this lawsuit.
(9) Robert Kauffman v. International Foam
Solutions, Inc., et al., case number
99012968, in the Broward County Florida
Circuit Court. Mr. Kauffman, who has
alleged that he was the former CEO of
IFS, Inc. has sued IFS, Inc. for,
among other things, breach of an
employment agreement, claiming damages
in excess of $150,000 resulting from
IFS, Inc.'s alleged breach of the
employment agreement. It is the
Company's position that Mr. Kauffman,
although he executed the agreement,
never activated the contract or assumed
the role of CEO and otherwise materially
failed to perform under the agreement.
This case is in the discovery phase and
IFS, Inc. intends to vigorously defend
this matter. In this connection, IFS,
Inc. does not believe it has any
obligations to Mr. Kauffman.
Accordingly, it is too early for counsel
to assess the likelihood of success,
therefore no amounts have been accrued.
(10) Sovis & Scholl v. International Foam
Solutions, Inc., case number MC
99-14670 RE, in the Palm Beach County
Florida Circuit Court. The Plaintiffs
claimed they were mislead by a former
Company employee when they purchased
IFS, Inc.'s stock. They sought to
rescind their stock purchase. The
plaintiffs and IFS, Inc. have
verbally agreed to settle the case and
the parties are in the process of
executing settlement agreements. The
Company, without admitting the
allegations of the complaint, will pay
the plaintiffs a sum over a three month
period; such amount was accrued at
December 31, 1998 and September 30,
1999.
(11) Waterview Resolution Corp. ("WRC"). WRC
has sent IFS, Inc. a demand letter
seeking the payment of $11,166.79 which
WRC claims is a deficiency balance owed
by IFS, Inc. when WRC sold certain
equipment in connection with an alleged
default of an equipment lease. The
Company denies that any sums are due
under any lease agreement. The parties
have not engaged in any settlement
discussions and no litigation has been
filed, although WRC still claims such
amount is due. Accordingly, it is too
early for counsel to assess the
likelihood of success, therefore no
amounts have been accrued.
IFS, Inc. is or may become involved in
various lawsuits, claims and proceedings in
the normal course of its business, including
those pertaining to product liability,
environmental, safety and health, and
employment matters. IFS, Inc. records
liabilities when loss amounts are determined
to be probable and reasonably estimatable.
Insurance recoveries are recorded only when
claims for recovery are settled. Although
generally the outcome of litigation cannot
be predicted with certainty and some
lawsuits, claims or proceedings may be
disposed of unfavorably to IFS, Inc.,
management believes, based on facts
presently known, that the outcome of such
legal proceedings and claims, other than
those previously disclosed, will not have a
material adverse effect on IFS, Inc.'s
financial position, liquidity, or future
results of operations.
F-14
<PAGE> 44
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
7. RELATED PARTY TRANSACTIONS IFS, Inc. entered into an agreement with
HKI, Inc. ("HKI") in a prior year, a company
related through common ownership. Under the
agreement, HKI acquired and resold the Styro
Solve solution to IFS, Inc. In
consideration for the solution HKI received a
bottling fee of 5% to 10% of the cost of the
solution depending on the volume of the
purchases. Included in cost of sales are the
gross purchases for the nine months ended
September 30, 1999 and 1998 and the years
ended December 31, 1998 and 1997 of
approximately $0, $4,000, $4,000 and
$441,000, respectively, pursuant to this
agreement. $5,900 and $28,000 was owed to HKI
at September 30, 1999, and December 31, 1998
respectively.
IFS, Inc. has borrowed funds from two
shareholders with balances at September 30,
1999 and December 31, 1998 of $30,898 and
$66,450, respectively. The notes accrue
interest at a rate of 10% and are currently
past due. Additionally, the same shareholders
loaned IFS, Inc. money they received from a
line of credit with a commercial bank. At
September 30, 1999 and December 31, 1998, the
balance of the loan was $71,000 and $112,000,
respectively. Under the terms of the
agreement with the commercial bank, the
Company is guarantor of the amounts due to
the bank by the two shareholders. In
addition, substantially all assets of the
Company are collateral for the loan.
F-15
<PAGE> 45
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
8. STOCKHOLDERS' EQUITY During 1996, IFS, Inc. sold 1,548,663
(DEFICIT) units (of which 1,363,333 units were sold in
connection with a private placement)
consisting of 1 share of common stock and a
warrant to purchase 1 share of common stock
for $2.50 expiring May 31, 2001. The sales
of the units raised net proceeds of
$2,076,106. In connection with this private
placement, in January 1997, agents of the
underwriters were issued warrants to
purchase 411,333 shares of common stock,
exercisable at $1.50 per share through May
31, 2001.
During the year ended December 31, 1997, the
Company issued 447,971 shares of common stock
to the officers of IFS, Inc. in
satisfaction of accrued compensation of
$671,956 that was recorded in 1996. The
Company also granted warrants to purchase
569,504 shares of common stock between $2.50
and $3.75 per share expiring on May 31, 2001
to certain employees and consultants (of
which 86,533 were granted to consultants). In
connection with the issuance of the warrants
to consultants, IFS, Inc. recorded a charge
to consulting fees with a corresponding
credit to additional paid in capital in the
amount of $71,472. IFS, Inc. valued these
warrants using the Black-Scholes Method.
During 1997, IFS, Inc. issued an
additional 55,401 shares of common stock
raising proceeds of $125,245, in connection
with this issuance, IFS, Inc. granted
warrants to purchase 13,000 shares of common
stock at $2.50 per share, expiring on May
31, 2001.
During 1998, IFS, Inc. issued 139,211
shares of common stock raising proceeds of
$63,454. IFS, Inc. issued 270,000 shares of
stock to individual and consultants for
services rendered. In connection with the
issuance of the stocks, IFS, Inc. rendered
a charge to consulting fees with a
corresponding credit to paid in capital in
the amount of $78,999. Additionally, 25,000
shares of common stock were issued at $0.40
per share; such amount is recorded as a
subscription receivable of $10,000.
During the nine month period ended September
30, 1999, IFS, Inc. issued 3,594,759
shares of common stock raising proceeds of
$573,670. Additionally, 600,000 shares of
stock were issued to two officers for
services rendered aggregating $160,000.
Between April 1, 1999 and July 31, 1999, the
Company issued to an officer, options to
purchase 1,150,000 shares of IFS, Inc.'s
common stock at prices ranging from $.10 to
$1.00. The options vest from April 1999 to
April 2000 and have expiration dates ranging
from July 1999 to April 2002. IFS, Inc.
valued these options using the Black-Scholes
Method. 450,000 options were exercised
during the nine month period ended September
30, 1999.
F-16
<PAGE> 46
9. STOCK BASED COMPENSATION IFS, Inc. applies Accounting Principles
Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related
interpretations in accounting for warrants
issued to employees. Under APB Opinion 25,
because the exercise price of IFS, Inc.'s
employee warrants was equal to or greater
than the market price of the underlying
stock on the date of grant, no compensation
cost was recognized.
SFAS No. 123, Accounting for Stock-Based
Compensation, requires IFS, Inc. to
provide pro forma information regarding net
income (loss) as if compensation costs for
the warrants issued to employees had been
determined in accordance with the fair value
based method prescribed in SFAS No. 123. The
Company estimates the fair value of each
warrant issued at the grant date by using
the Black-Scholes option-pricing model with
the following weighted-average assumptions
used for grants for the periods below:
<TABLE>
<CAPTION>
For the years
For the nine ended
months ended December 31,
September 30, ----------------------
1999 1998 1997
---------------- -----------------------
(Unaudited)
<S> <C> <C> <C>
Dividend yield None not applicable None
Expected volatility 46.10% not applicable 46.10%
Risk-free interest rates 5.58% not applicable 6.25%
</TABLE>
Under the accounting provisions of FASB
Statement No. 123, IFS, Inc.'s net loss
and loss per share would have been as
follows:
<TABLE>
<CAPTION>
For the years
ended
For the nine December 31,
months ended -------------------------------
September 30, 1999 1998 1997
------------------------- -------------------------------
(Unaudited)
<S> <C> <C> <C>
Pro forma net loss
As reported $ (667,236) $(580,966) $(1,136,605)
Pro forma (715,236) (580,966) (1,352,050)
---------- -------- -----------
Pro forma net loss per
common share - basic and
dilutive
As reported $ (.06) $ (.07) $ (.14)
Pro forma (.06) (.07) (.16)
========== ======== ===========
</TABLE>
F-17
<PAGE> 47
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
A summary of the status of IFS, Inc.'s warrants
as of September 30, 1999 (unaudited) and December
31, 1998 and 1997, and changes during the periods
ending on those dates, is presented below:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998 December 31, 1997
(Unaudited)
--------------------- --------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------ ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of the
period 2,993,154 $ 2.37 2,993,154 $ 2.37 2,103,317 $ 2.44
Granted -- -- -- -- 993,837 2.10
Exercised -- -- -- -- (4,000) 2.50
Forfeited -- -- -- -- (100,000) 1.25
---------- --------- --------- ---------- -------- ---------
Outstanding at the
end of the period 2,993,154 $ 2.37 2,993,154 $ 2.37 2,993,154 $ 2.37
---------- --------- --------- - --------- -------- ---------
Warrants exercisable
at the end of the 2,993,154 $ 2.37 2,993,154 $ 2.37 2,993,154 $ 2.37
period
Weighted average fair
value of warrants
granted during the
period -- -- -- -- $ .59 --
========== ========= ========= ========== ======== =========
</TABLE>
F-18
<PAGE> 48
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
The following table summarizes information
about the warrants outstanding at September
30, 1999 (unaudited) and December 31, 1998.
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
---------------------------- ------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Number Exercise
Prices Life Price Exercisable Price
-------------- ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
September 30, 1999 $1.50 - $3.75 1.67 $ 2.37 2,993,154 $ 2.37
December 31, 1998 $1.50 - $3.75 2.33 $ 2.37 2,993,154 $ 2.37
</TABLE>
11. LICENSING FEE On or about January 11, 1997, IFS, Inc.
entered into an agreement with Styro Japan
Co., Ltd., a Japanese corporation ("SJC"),
whereby IFS, Inc. sold SJC an exclusive
license to utilize and develop IFS, Inc.'s
patented process for polystyrenes in Japan.
Under the terms of the agreement, among
other things, IFS, Inc. was paid an
initial nonrefundable fee of $1,000,000, of
which IFS, Inc. paid a commission totaling
$250,000 to a sales representative. The
license differs from a distribution
agreement, that was entered into in May 1998
as the former grants the use of the patented
recycling process, whereas the latter grants
the right to sell IFS, Inc.'s products,
such as the Solution Machines and Styro
Solve. The distribution agreement expires in
2008. In addition, pursuant to the
distribution agreement, SJC is obligated to
purchase a minimum of $500,000 in product by
December 31, 1998. SJC is in default with
respect to the minimum order provision of
its distribution agreement with IFS, Inc..
According to the distribution agreement, in
the event that SJC does not order a minimum
of $500,000, IFS, Inc. is entitled to a
$100,000 premium from SJC. During 1998, the
Company recorded the $100,000 premium as
other income. No other sales occurred in
1997, 1998 or 1999 between IFS, Inc. and
SJC.
F-19
<PAGE> 49
INTERNATIONAL FOAM SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
12. NON-CASH FINANCING During the year ended December 31, 1997, IFS,
Inc. issued 447,971 shares of common
stock in satisfaction of accrued 1996
officers' compensation of approximately
$672,000. Cash paid for interest aggregated
$19,238 and $30,759 in December 31, 1997 and
1998, respectively and $23,070 and $35,342
for the nine months ended September 30, 1998
(unaudited) and 1999 (unaudited),
respectively.
During the nine month period ended September
30, 1999, IFS, Inc. issued 600,000 shares
of common stock as satisfaction of accrued
1998 officers' compensation of approximately
$160,000.
13. Subsequent Event Effective November 15, 1999, IFS, Inc. was
no longer in compliance with the National
Association of Securities Dealers, Inc.
(NASD(R)) filing requirements. Accordingly,
the letter "E" was appended to the trading
symbol. Once the NASD receives notification
that IFS, Inc. complies with the filing
requirement, the fifth character "E" will be
removed. IFS, Inc.'s common stock
currently trades on the "Pink Sheets". The
Company expects to be compliant in the near
future.
F-20
<PAGE> 1
Exhibit 99.3
LESSOR:
COMMERCIAL MONEY CENTER
27092 Banbury Drive NOTICE: THIS IS A NONCANCELABLE,
Valley Center, CA 92082 BINDING CONTRACT CONSISTING OF ALL TERMS ON
(760) 749-0323 BOTH SIDES. IT CONTAINS IMPORTANT TERMS AND
FAX (760) 749-5935 CONDITIONS AND HAS LEGAL AND FINANCIAL
CONSEQUENCES TO YOU. PLEASE READ IT CAREFULLY;
FEEL FREE TO ASK QUESTIONS BEFORE SIGNING.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT LEASE AGREEMENT 980307
DESCRIPTION OF EQUIPMENT (Include all attachments) SERIAL NUMBER
See Attached Exhibit "A" Hereto* And Made A Part Hereof
VENDOR'S NAME
- ------------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF RENTAL PAYMENTS
TERM OF LEASE (IN MONTHS) TOTAL NUMBER OF RENTAL PAYMENTS AMOUNT OF EACH PAYMENT ADVANCE RENTAL
63 63 $3,555.24 $10,665.72
PAYMENT FREQ. Monthly (Includes Tax)
LEASING CUSTOMER (Lessee): (Complete Legal Name. If a corporation, use EXACT registered corporate name.)
Company Name INTERNATIONAL FOAM SOLUTIONS, Inc.
Billing Address 430 Congress Dr. 50-E
Del Ray Beach, FL 33445
County Palm Beach
Equip Location Same
YOU (THE LEASING CUSTOMER) ARE REQUESTING THE LEASING COMPANY ("WE", "US" OR
"OUR") TO PURCHASE THE ABOVE EQUIPMENT FOR YOUR USE. TO INDUCE US TO MAKE THIS
PURCHASE, YOU HAVE AGREED TO THE FOLLOWING IMPORTANT TERMS AND CONDITIONS.
1. LEASE. You agree to lease from us and we agree to lease to you the equipment
identified above together with any replacement parts, additions or repairs (the
"Equipment") under the terms stated in this Equipment Lease Agreement (the
"Lease"). You authorize us to correct obvious errors in this Lease and to insert
the Lease number, the serial numbers and other data identifying the Equipment
and other missing terms above (if any) following your execution of this Lease.
LEASE AGREEMENT CONTINUES ON REVERSE SIDE
By Signing this Lease, you acknowledge and agree that: (i) you have had an
opportunity to discuss the terms and conditions in this Lease with us before
signing this document; (ii) you have read and understand the terms and
conditions on the front and back of this Lease; (iii) this Lease is a Net LEASE
that cannot be terminated or canceled; (iv) you have an unconditional obligation
to make all payments due under this lease and you cannot withhold, set-off or
reduce such payments for any reason; (v) the person signing below is a corporate
officer, partner, member or proprietor of yours and is authorized to sign this
lease and bind you; (vi) this Lease contains the entire agreement between the
parties and no other oral or written agreements are in effect; and (vii) this
Lease may not be amended except by a written agreement signed by both parties,
their successors and assigns.
- ------------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE TELEPHONE NO. (Area Code)
X /s/
International Foam Solutions, Inc. 3/23/98 561-272-6900
- ------------------------------------------------------------------------------------------------------------------------------
PERSONAL GUARANTY
To induce the above leasing company ("Leasing Company") to make this Lease and
purchase the equipment for the above leasing customer ("customer"), knowing that
the Leasing Company is relying on this guaranty as a precondition to making this
Lease, I (or if more than one, then all of us, jointly and severally)
INDIVIDUALLY, PERSONALLY, ABSOLUTELY AND UNCONDITIONALLY GUARANTY to the Leasing
Company (and any person or firm the Leasing Company may transfer its interest
to) all payments and other obligations owed by the Customer to the Leasing
Company under the Lease and any add-on leases and future leases between Leasing
Company and Customer, including but not limited to the Leasing Company's
attorneys fees and legal costs incurred in enforcing the Lease. I will also pay
all reasonable costs and fees incurred by the Leasing Company in enforcing this
Guaranty. Accounts settled between the Leasing Company and the Customer will
bind me. I waive notice of acceptance hereof and all other notices or demands of
any kind to which I may be entitled and consent to the granting of extensions of
time of payments to Lessee and other obligors and guarantors and to any other
amendments or adjustments in the terms of this lease. I waive notice of demand
and notice of default, and I agree that the Leasing Company may proceed directly
against me first proceeding against the Customer or the security (including the
equipment). This guaranty shall be governed by the state where the Lessor is
located. I FREELY CONSENT TO PERSONAL JURISDICTION OF THE APPLICABLE
JURISDICTION AND I WAIVE TRIAL BY JURY. This Guaranty will bind my heirs,
representatives and successors.
- ------------------------------------------------------------------------------------------------------------------------------
SIGNATURE (INDIVIDUALLY; NO TITLES) DATE SIGNATURE (INDIVIDUALLY; NO TITLES) DATE
X /s/ Harvey Katz /s/ IOVINO, CLAUDIA 3/23/98
- ------------------------------------------------------------------------------------------------------------------------------
Harvey Katz 3/23/98 IOVINO, CLAUDIA
SIGN
</TABLE>
WITNESS: X /s/
DATE: 3/23/98
LEASE AGREEMENT CONTINUES ON NEXT PAGE
<PAGE> 2
2. TERM. You agree this lease will not start until we sign it. Once it starts,
you agree it will continue for the full term shown on the reverse side and any
extension term ("Term").
3. RENT. You agree to pay us monthly rent for the full Term in the amount
shown on the reverse side. That amount is based on the estimated cost of all
Equipment and you agree it may be adjusted upward or downward if the actual cost
exceeds or is less than this estimate. The monthly due date and the due date for
the first payment will be set by us but will not be more than 30 days from the
day you accept delivery of the Equipment. We may charge you a partial payment
for the time between the delivery date and the date the first regular payment is
due. If all or any part of a payment is late, we may charge you a late fee of
$10.00 or 12% of the amount that is late, whichever is more. Time is of the
essence with respect to all payments due and all of your other obligations under
the Lease. You have no right of prepayment.
4. ADVANCE RENT. To secure your obligations to us, you will pay the advance
rent amount shown on the reverse side at the time you sign this Lease. If the
Lease is never finalized for reasons that are not our fault, we may keep the
deposit to pay for our administrative costs. If any part of the deposit is
remaining at the end of the Term and you have complied with all of your
obligations, we will return the remainder to you without interest.
5. DELIVERY. You agree that we are not responsible for delivery or
installation of the Equipment. You will not have any claim against us if the
manufacturer or supplier (collectively called "Vendor" in this Lease) delays in
delivery or installation, or if the Equipment is unsatisfactory for any reason.
6. SELECTION AND PURCHASE OF EQUIPMENT. You understand and agree that: (A) WE
DID NOT SELECT, MANUFACTURE, SUPPLY OR INSPECT THE EQUIPMENT AND HAVE NO
EXPERTISE REGARDING THE EQUIPMENT; (B) YOU SELECTED THE VENDOR AND THE EQUIPMENT
BASED ON YOUR OWN JUDGMENT; (C) WE ARE BUYING THE EQUIPMENT AT YOUR REQUEST ONLY
FOR THE PURPOSE OF LEASING IT TO YOU; (D) YOU AGREE THAT THIS LEASE QUALIFIES AS
A "FINANCE LEASE" AS THAT TERM IS DEFINED IN ARTICLE 2A OF THE UNIFORM
COMMERCIAL CODE ("UCC"); (E) Before signing this Lease, you approved the supply
contract (if any) between us and the Vendor; and (F) You have been advised in
writing (or are now advised in this Lease) that you may have rights against the
Vendor under the supply contract (if any) and that you may contact the Vendor to
find out what these rights against the Vendor are (if any).
7. IMPORTANT CONDITIONS. You understand and agree that:
(A) THE LEASE CANNOT BE CANCELED BY YOU AT ANY TIME FOR ANY REASON;
(B) YOUR DUTY TO MAKE THE PAYMENTS IS UNCONDITIONAL DESPITE EQUIPMENT FAILURE,
DAMAGE, LOSS OR ANY OTHER PROBLEM;
(C) WE ARE LEASING THE EQUIPMENT TO YOU "AS IS" AND WE HAVE MADE NO
REPRESENTATION, GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) REGARDING THE
EQUIPMENT. WE DISCLAIM ALL SUCH WARRANTIES OR GUARANTEES OF ANY KIND. We agree
to transfer to you all warranties IF ANY made by the Vendor to us:
(D) WE WILL NOT BE LIABLE FOR ANY LOSS OR INJURY TO YOU OR ANY OTHER PERSON OR
PROPERTY (including lost profits and consequential, incidental or special
damages) CAUSED BY THE EQUIPMENT OR ITS FAILURE TO OPERATE;
(E) To the extent permitted by applicable law, YOU WAIVE ANY RIGHTS WHICH WOULD
ALLOW YOU TO: (1) cancel or repudiate the Lease; (2) reject or revoke acceptance
of the Equipment; (3) grant a security interest in the Equipment; (4) accept
partial delivery of the Equipment; (5) "cover" by making any purchase or lease
of substitute equipment; and (6) seek specific performance against Leasing
Company.
(F) YOU UNDERSTAND THAT WE AND THE VENDOR ARE TWO SEPARATE AND INDEPENDENT
COMPANIES AND THAT NEITHER THE VENDOR NOR ANY OTHER PERSON IS OUR AGENT. YOU
AGREE THAT NO REPRESENTATION, GUARANTEE OR WARRANTY BY THE VENDOR OR OTHER
PERSON IS BINDING ON US, AND NO BREACH BY THE VENDOR OR OTHER PERSON WILL EXCUSE
YOUR OBLIGATIONS TO US. YOU ALSO UNDERSTAND THAT ONLY AN OFFICER IS AUTHORIZED
TO WAIVE OR ALTER ANY OF THE TERMS OF THIS LEASE.
(G) IF THE EQUIPMENT DOES NOT WORK AS REPRESENTED BY THE VENDOR, OR IF THE
VENDOR OR ANY OTHER PERSON FAILS TO PROVIDE ANY SERVICE, OR IF THE EQUIPMENT IS
UNSATISFACTORY FOR ANY OTHER REASON, YOU WILL MAKE ANY SUCH CLAIM SOLELY AGAINST
THE VENDOR OR OTHER PERSON AND WILL MAKE NO CLAIM AGAINST US.
8. REPAIRS AND SERVICE. You understand that we are not responsible for repairs
or service to the Equipment. You will keep the Equipment in good condition and
will service the Equipment as and when needed. All replacement parts and
additions will become our property.
9. USE. YOU CERTIFY THAT THE EQUIPMENT WILL BE USED SOLELY FOR BUSINESS,
COMMERCIAL OR AGRICULTURAL PURPOSES AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES. You will not (a) make any alterations to the Equipment, (b) will not
allow it to be used by anyone but your employees; or (c) move it to any other
location without our written permission. You will not attach the Equipment to
any real estate.
10. RISK OF LOSS; DAMAGE; INSURANCE. You are responsible for any loss,
destruction or damage to the Equipment from any cause at all, whether or not
insured, from the time the Equipment is shipped to you until it is returned to
us. NO SUCH LOSS OR DAMAGE SHALL IMPAIR YOUR OBLIGATIONS UNDER THIS LEASE, WHICH
SHALL CONTINUE IN FULL FORCE AND EFFECT. You will keep the equipment insured
against all risks of loss in an amount not less than the replacement cost, and
will list us as the loss payee. If required, you will also carry public
liability insurance listing us as additional insured in amounts acceptable to
us. You agree to provide us with satisfactory written evidence of all such
insurance. YOU AGREE THAT IF YOU FAIL TO OBTAIN SUCH INSURANCE, WE MAY (BUT ARE
NOT OBLIGATED TO) OBTAIN IT AND CHARGE YOU A FEE IN WHICH CASE, WE WILL BE THE
SOLE INSURED PARTY AND YOU WILL HAVE NO RIGHTS UNDER THE INSURANCE POLICY. In
addition, because of the increased risk of loss to us when the equipment is not
insured, you agree to pay us each month a risk charge stipulated at 0.25% of our
original cost of the Equipment until you provide adequate proof of insurance;
however, you agree that while you have no right to any insurance benefits from
us, you are still liable for all losses, and such risk charge is not a
substitute for the insurance requirements under this Lease.
YOU HEREBY GIVE US POWER OF ATTORNEY TO APPLY FOR INSURANCE BENEFITS AND TO
ENDORSE CHECKS RECEIVED IN PAYMENT.
11. TAXES AND OTHER FEES. You agree this is a "net" lease and agree to pay us
upon demand for all taxes (including sales, use, personal property and other
taxes) and other fees of any kind which may be charged regarding the leasing,
use or ownership of the Equipment. With regard to yearly taxes and fees, such as
personal property tax, we may charge you once a year or estimate the amount of
the yearly charge and bill you monthly for a portion.
12. INDEMNITY. You agree to defend us against and indemnify (reimburse) us for
all claims, liabilities, costs and legal fees arising out of the leasing, use or
possession of the Equipment, including claims for property damage or injury to
persons. This promise will continue after the end of the Lease Term.
13. TITLE. You understand that we will have sole title to the Equipment during
the entire Lease Term, and you agree this is a "true lease" and not one intended
as security for purposes of Section 1-20(37) of the Uniform Commercial Code. YOU
HEREBY GIVE US POWER OF ATTORNEY TO SIGN AND FILE FINANCING STATEMENTS, AND YOU
AGREE TO PAY OUR FILING FEES. If this Lease is ever determined to be other than
a true lease, you hereby grant to us a security interest in the Equipment and
agree that the financing statements will create a perfected security interest in
our favor. You will not allow any liens or encumbrances to be placed on the
Equipment.
14. DEFAULT. You agree that we may declare you in default if you (a) fail to
make any payment for a period of 20 days after the due date; (b) do not comply
with any other term of this Lease or any other agreement you have with Leasing
Company; (c) any action is brought against you causing the Equipment to be taken
or encumbered; (d) you die, become insolvent, make or consent to an assignment
for the benefit of creditors, file or have filed against you a bankruptcy, sell
all or substantially all your assets, make or consent to the appointment of a
receiver or trustee, or go out of business. If any of these defaults occurs, you
agree that we may take one or both of the following actions, in addition to
other actions available under law
(A) terminate the Lease and/or sue for; (1) past due rent and all future rent to
become during the unexpired Term; (2) the residual value placed on the Equipment
by us at the commencement of the Lease; (3) all late fees and any other charges
due and to become due; and (4) the costs listed in Section 15 below; AND
(B) enter the Equipment site and repossess the Equipment or sue for a
repossession court order. Following repossession; (1) All of your rights to the
equipment will end; (2) we may remarket the Equipment without advance notice to
you; and (3) we may also sue for the amounts listed in Section 14(A) above
without first remarketing the Equipment. You agree that we are not required to
repossess and remarket the equipment, and you waive any rights under any law
that provides otherwise.
15. RECOVERY COSTS. You agree to pay all of our recovery costs after a
default, including (1) attorney's fees equal to 25% of the amount of our claim
or $1,500, whichever is greater; (2) reasonable attorney's fees for getting a
repossession order; (3) costs of suit; (4) $250 to cover our internal collection
overhead; (5) $225 to cover our internal repossession and remarketing overhead
if an internal repossession is made or attempted; and (6) all other reasonable
out-of-pocket costs. You agree now that the above amounts are good and
reasonable predictions of what our actual costs and overhead will be and are not
penalties.
16. RETURN OF EQUIPMENT. At the end of the Lease term, or if you are in
default and we make a written request, you will, at your expense, return the
Equipment to us at a reasonable place to be designated by us. You agree to have
the risk of loss during transit. If you fail to return the Equipment within 10
days after the end of the Term, you agree that we will have the option of
extending the Lease on an additional month-to-month basis under the same terms
stated in this document. You agree to pay us for any damage done to the
Equipment during the Term beyond "ordinary wear and tear". You understand that
any person who refuses to return or prevents us from repossessing the Equipment
may be personally liable for conversion.
17. ASSIGNMENT; SUBLEASE. BECAUSE THIS LEASE WAS GRANTED TO YOU ON THE
STRENGTH OF YOUR OWN CREDIT, YOU AGREE THAT YOU MAY NOT SELL OR ASSIGN
(TRANSFER) ANY OF YOUR INTEREST UNDER THE LEASE TO ANY OTHER PERSON OR SUB-LEASE
ANY OF THE EQUIPMENT. You agree that we may assign (transfer) any or all of its
interest under this Lease and/or the Equipment to a new owner or a secured party
at any time without prior notice to you, and such new owner or secured party may
also assign its rights. If that happens, you agree that the new owner or secured
party will have the same rights we had under this Lease but will not have to
perform any of our obligations (in which case we will keep those obligations).
You also agree that the rights of the new owner or secured party will not be
subject to any claims, defenses or set-offs that you may have against us or any
other person. You agree that any transfer by us would not materially change your
obligations under the lease or substantially increase your risks.
18. GOVERNING LAW. AS USED IN THIS PARAGRAPH 18, "APPLICABLE JURISDICTION"
MEANS THE STATE, AS THE SAME MAY CHANGE FROM TIME TO TIME, WHERE THE HOLDER OF
THE LESSOR'S INTEREST IN THIS LEASE MAINTAINS ITS PRINCIPAL OFFICE RESPONSIBLE
FOR ADMINISTERING THIS LEASE. THIS LEASE AND ANY GUARANTY HEREOF SHALL BE
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
APPLICABLE JURISDICTION APPLICABLE TO LEASE AND GUARANTY AGREEMENTS
RESPECTIVELY, MADE AND TO BE FULLY PERFORMED IN THE APPLICABLE JURISDICTION.
19. LESSEE'S REPRESENTATIONS. You represent to us that (1) you have complete
power and are properly authorized to enter into this Lease; (2) the Lease is
legal, valid, binding on you and enforceable against you in accordance with its
terms; (3) all information supplied by you or your agents (for example, the
Vendor) to us, including all financial information is true, correct and
complete. YOU HEREBY AUTHORIZE LEASING COMPANY TO SHARE AND EXCHANGE WITH ANY OF
ITS AFFILIATES CREDIT AND OTHER INFORMATION IT HAS OBTAINED ON YOU AND YOUR
BUSINESS.
20. FAXED AND COPIED DOCUMENTS. The parties intend and agree that a carbon
copy, photocopy or facsimile of this document with their signature thereon shall
be treated as an original and shall be deemed to be as binding, valid, genuine
and authentic as an original-signature document for all purposes, including all
matters of evidence and the "best evidence" rules.
21. Lessee understands and agrees that Lessor at their option may obtain a
surety bond from an insurance company that guarantees Lessees obligation in this
lease. All costs for the bond(s) shall be paid by the Lessor to execute such
instruments in the place and stand of Lessee as may be necessary to obtain such
surety bond. Lessee hereby authorizes lessor to execute such instruments in the
place and stead of lessee as may be necessary to obtain such surety bond. Lessee
specifically authorizes lessor to execute and deliver a nonrevocable indemnity
agreement to the surety obligating the lessee to the surety for monies due in
this lease.
22. I HAVE READ AND UNDERSTAND THE ABOVE PARAGRAPH. INITIALS /s/
-----------------
HARVEY KATZ & IOVINO, CLAUDIA
INITIALS /s/
------
ACCEPTED BY LESSOR:
By: /s/ Harvey Katz Title: CEO Date: 3-23-98 Lease #:
---------------- --- -------- ---------------
<PAGE> 3
DELIVERY AND ACCEPTANCE RECEIPT
LESSEE: INTERNATIONAL FOAM SOLUTIONS, INC.
VENDOR:
Lessee hereby represents, warrants and certifies:
1. All the equipment described on the Lease Agreement or on any attached
schedule has been delivered to the Lessee and properly installed; the Equipment
has been inspected and tested by Lessee and is in good and satisfactory
operating order and the Equipment is therefore irrevocably accepted by Lessee
for all purposes under the Equipment Lease Agreement.
2. Lessee unconditionally accepts the Equipment and acknowledges that it has not
been accepted on a "trial" basis.
3. Lessee has read and agrees to all terms and conditions of the Lease,
including all attachments and addendums thereto, if any. As more particularly
stated in the Lease, Lessee understands that the Equipment is leased to Lessee
"as is"; that Lessor disclaims all warranties, express and implied; that Lessor
is not responsible for installation, service, training or repairs; that the
Lease cannot be cancelled for any reason, and that Lessee's obligation to make
the lease payments and perform its other obligations under the Lease are
absolute, unconditional, independent and not subject to any counterclaim, setoff
or defense. This paragraph shall not be construed to alter or limit the terms
and conditions of the Lease.
We now request that you sign the lease and pay the equipment vendor. We
understand the importance of this certification to you prior to paying the
vendor, and we understand we will be precluded from denying the trust of this
certification in the future.
X /s/ Harvey Katz
------------------------------------
Lessee Authorized Signature
International Foam Solutions, Inc.
/s/ Harvey Katz CEO
------------------------------------
Print Name and Title
3/23/98
------------------------------------
Date
================================================================================
Prior to actual starting of your Lease, we will contact you to verify that your
equipment is in acceptable working order.
Should you wish to authorize someone else in your office to do this, please
complete and sign the section below.
Otherwise, we will assume that we must speak directly to you for this purpose.
================================================================================
I, Harvey Katz, authorize Harvey Katz or Claudia Iovino who holds the position
of CEO or President, to conduct a telephone audit in my absence with the Leasing
Company. I authorize him/her to accept the equipment with regards to Lease #
980307 and to agree to release funds to the vendor.
X /s/ Harvey Katz
-------------------------------
Lessee Authorized Signature
International Foam Solutions, Inc.
/s/ Harvey Katz CEO
------------------------------------
Print Name and Title
3/23/98
------------------------------------
Date
<PAGE> 4
AUTHORIZATION TO CHARGE ACCOUNT
TERMS:
Premises
The authorization to charge our account at our bank shall be the same
as if we had personally signed a check to Commercial Money Center, Inc. or its
assigns. This authorization shall remain in effect until we notify Commercial
Money Center, Inc. and our bank in writing that we wish to end this agreement
and Commercial Money Center, Inc. or our bank has sent us ten (10) days written
notice that they will end this agreement.
A record of our payment will be included in our bank statement and will
serve as our receipt. In the event of an error, we have the right to reverse any
transfer. However, we must notify our bank within 15 days of the date of our
bank statement or within 45 days after the transfer was made.
We understand and agree that our bank is not responsible for an
error in the amount of any transferred payment. In the event of such an error,
we will reconcile directly with Commercial Money Center, Inc.
IMPORTANT INFORMATION ON YOUR PRE-AUTHORIZED LEASE PAYMENT
A MUST READ!!
IN THE EVENT A PAYMENT DEBIT IS NOT HONORED BY YOUR BANK FOR INSUFFICIENT FUNDS,
ACCOUNT CLOSED, STOP PAYMENT OR ANY OTHER REASON, AND COMMERCIAL MONEY CENTER,
INC. HAS NOT BEEN NOTIFIED, AS AGREED, AN AUTOMATIC SERVICE CHARGE OF $10.00
WILL BE ASSESSED AND BILLED TO YOU.
I hereby authorize our bank to charge our account each month and to pay
Commercial Money Center, Inc. or its assigns the amount shown below. I have
read, understand and agree with the terms on this form.
Monthly Payments: $3,354.00 + 201.24 = 3,555.24 due on the 1st day of
each month.
LESSEE: International Foam Solutions, Inc.
Bank Name: First Union By: /s/ Harvey Katz
Address: Atlantic & Military Title: CEO
City, State: Delray Beach Date: 3/23/98
Account No. 2090001287966
ABA Routing No. 067006432
<PAGE> 5
CERTIFICATE OF INCUMBENCY
(If Corporation)
I, Harvey Katz (Name) as SECRETARY (Title) OF INTERNATIONAL FOAM SOLUTIONS, INC.
(Lessee), hereby certify that the following Officer(s) of this Corporation on
the date hereof and at all times since ____________, 19____ is (are) authorized
and directed to negotiate, execute and deliver on behalf of the Corporation all
Lease Agreements and related documents with COMMERCIAL MONEY CENTER, INC.
("Lessor") whereby this Corporation will lease from time to time various items
of property to be used in the operation in the business of the Corporation on
terms and conditions which shall be determined by said Officer(s) to be
advisable and in the best interests of this Corporation, and that the execution
of such Lease Agreements by said Officer(s) shall be conclusive evidence of
their approval(s) thereof and that the signature(s) set forth opposite the
name(s) of the Officer(s) below is (are) the genuine signature(s) of said
persons(s).
Section 1
- --------------------------------------------------------------------------------
Harvey Katz CEO /s/ Harvey Katz
- ----------------------- ------------------- ---------------------------------
(TYPE NAME) (TITLE) (SPECIMEN AUTHORIZED SIGNATURE)
Claudia Iovino President /s/ Claudia Iovino
- ----------------------- ------------------- ---------------------------------
(TYPE NAME) (TITLE) (SPECIMEN AUTHORIZED SIGNATURE)
Section 2 (specimen signatures of Secretary of Corporation and the person
authorized to sign these documents)
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, I have affixed my name as SECRETARY (Title) of said
Corporation and have caused the Corporate Seal of said Corporation to be
hereunder affixed.
(SEAL) INTERNATIONAL FOAM SOLUTIONS, INC.
(Lessee)
By /s/ Harvey Katz
-----------------------------------
Title: SECRETARY
Date: 3-23-98
This document must be signed by the Secretary of the Corporation. If authorized
signer is also the Secretary, please include Articles of Incorporation.
Section 3
<PAGE> 6
REQUEST FOR CERTIFICATE OF INSURANCE
See Attached Exhibit "A" for Equipment List
To: Insurance Agent: Ron Daddao Phone: 561-395-1435
Address: 2100 N. Dixie Hwy. Fax: 561-395-4755
City: Boca Raton State: FL ZIP: 33431
Insurance Co.: M F Hawly Policy #:
Lessee: International Foam Solutions, Inc.
We have entered into a lease agreement for the above listed equipment with a
value of $100,000.00
This is a net lease and we are responsible for the insurance cost. Please see
that we have immediate coverage and notify below parties at once, in the form
of a copy of the insurance policy or a certificate of insurance. If the latter
is sent please include herein the standard ten-day notice of cancellation
clause.
LOSS PAYEE ENDORSEMENT:
Lessor: Commercial Money Center, Inc. and or their Assigns (760) 749-0383
27092 Banbury Drive (760) 749-5935 (fax)
Valley Center, CA 92082
Lessor must be named as additional insured under a certificate of insurance so
indicating and further acknowledging that said policy may not be canceled for a
period of 30 days following written notice by insurance carrier.
PHYSICAL DAMAGE: Insurance is to be provided for fire, extended coverage,
vandalism and malicious mischief for the full value of the equipment.
LIABILITY: Coverage should be written with minimum limits of $100,000/$300,000
of BODILY INJURY and $50,000 property damage.
By: /s/ Harvey Katz
--------------------
Lessee
Date: 3-23-98
PLEASE NOTE: Unless the requested Certificate of Insurance is received within
10 days, Lessor will be forced to acquire coverage through their carrier and
bill the Lessee for the premium.
<PAGE> 7
10% PURCHASE OPTION/FMV
Lease #980307 between COMMERCIAL MONEY CENTERS, INC., Lessor and International
Foam Solutions, Inc. Lessee. Provided the Lease has not terminated early, Lessee
shall have the following option at the end of the original term.
BUY: Purchase the Equipment for 10% (10,000.00) of Lessors cost of the equipment
or the Fair Market Value, whichever is greater.
This amount payable in a single sum immediately upon expiration of the
lease.
OR
RENEW: Renew the lease contract.
COMMERCIAL MONEY CENTERS, INC. International Foam Solutions, Inc.
- ------------------------------ ---------------------------------
Lessor Lessee
/s/
- ------------------------------ ---------------------------------
Authorized Representative
/s/
- ------------------------------ ---------------------------------
Title Title
3-23-98
- ------------------------------ ---------------------------------
Date Date
NOTE: SIGNATURE MUST BE SAME AS ON LEASE
<PAGE> 8
ADDENDUM A
PG. 1 of 2
This Addendum is made part of that certain Lease Agreement No. 980307 dated
March 23, 1998 between International Foam Solutions, Inc. as Lessee ("Lessee")
and Commercial Money Center as Lessor (the "Lease Agreement").
To secure the prompt payment, performance and observance in full of all of
Lessee's obligations under and pursuant to the Lease Agreement and the schedules
thereto. Lessee hereby pledges, transfers, sets over and assigns to Lessor, its
successors and assigns, and grants to Lessor a first priority and continuing
general security interest in, and a lien upon and a right of setoff against (a)
all of Lessee's accounts, accounts receivables, contract rights, instruments,
documents, notes, chattel paper, other forms of obligations, and general
intangibles, arising from the use, from time to time, by Lessee or by third
parties under an employment or service contract with Lessee, of any item of
equipment which is the subject matter of the Lease Agreement or otherwise
arising in connection with any item of equipment, whether secured or unsecured,
whether now existing or hereafter created or arising, and whether or not
specifically assigned to Lessor or not (hereinafter the "Receivables"), (b) all
guaranties, mortgages on real or personal property, agreements or other property
relating to any of the Receivable or acquired for the purpose of securing and
enforcing any of such Receivables, (c) all books, records, ledger cards,
computer tapes, disks and software relating thereto, and other property and
general intangibles at any time evidencing or relating to Receivables
("Records") and (d) all proceeds of any of the foregoing in whatever form,
including, without limitation, any claims against third parties related to the
foregoing (hereafter all of the foregoing referred to collectively as
"Collateral"). Records reflecting the Receivables shall, until delivered to or
removed by Lessor, be kept by Lessee in trust for Lessor, and without cost to
Lessor, in appropriate containers in safe places. Each confirmatory assignment,
schedule or other form of assignment at any time executed by Lessee shall be
deemed to include the foregoing whether or not the same appears therein.
Lessee will, at such intervals as Lessor may from time to time require,
provide Lessor with confirmatory assignment schedules of outstanding
Receivables, copies of all document evidencing any Receivable, and such further
lists and/or information as Lessor may reasonably require including monthly
accounts receivable aging reports. The items to be provided under this paragraph
are to be in form satisfactory to lessor and are executed and delivered to
Lessor for its convenience in maintaining records of the Collateral. Lessee's
failure to give any of such items to Lessor or otherwise comply with the
provisions hereof shall not affect, terminate, modify or otherwise limit
Lessor's lien or security interest in the Collateral.
In connection with the foregoing, Lessee hereby irrevocably constitutes and
appoints Lessor and any agent and designee (collectively and individually
"Agent") as its true and lawful agent and attorney in fact, coupled with an
interest with the power to do any or all of the following: 1. At Agent's sole
discretion, Agent may require Lessee to direct all accounts receivable,
including all of Lessee's accounts, contract rights, instruments, documents,
notes chattel paper, other forms of obligations and general intangibles of
Lessee to a Lock Box Account to be established at Lessee's primary bank. Such
account will inure to the benefit of Lessor and Lessee. Any proceeds of this
Lock Box Account, of which Lessor is not then entitled to, under the terms of
the Lease Agreement, shall then be available to Lessee; 2. To endorse any and
all checks, drafts or items payable to bearer or to the order of Lessee, and to
receive, and use the proceeds thereof;
<PAGE> 9
ADDENDUM A PG. 2 OF 2
3. To enter into, execute, or deliver all instructions, agreements,
contracts, documents, receipts and other instruments necessary or convenient in
the exercise of the foregoing power; 4. To delegate any or all of the powers
contained herein to one or more sub-attorneys and to revoke all or part of this
delegation while as Lessee could have taken but for this Agreement. All acts of
Agent are hereby ratified and approved and Agent shall not be liable for any
acts of omission or commission, nor for any error of judgement or mistake of
law or fact. The powers of Agent granted herein shall commence in full as of
the date hereof and shall remain in effect until all obligations of Lessee to
Agent, under the Contract or under any other agreement, now existing or
executed hereafter, between Agent and Lessee have been discharged by
performance.
Lessee agrees that any and all payments due by Lessee to Lessor will be
made and all other monthly obligations under the Lease Agreement met before any
cash distribution, compensation including salaries, commissions, bonus, fees,
dividends and earnings and income generated or other payments are made to the
investors and or principals of Lessee. To the extent such payments are not made
in accordance with the foregoing and to the extent that insufficient funds are
available to pay amounts owed to Lessor for any schedule under the Lease
Agreement, the entire Lease Agreement and all schedules thereunder will be
deemed in default pursuant to Section 11 of the Lease Agreement and such
delinquent payments will be subject to a late charge of 5% of the amount of
such payment, or such other lesser sum as permitted by applicable law, for each
month or part thereof for which said payments will be delinquent."
The powers and authorities granted herein shall not be affected, impaired
or exhausted by any non-exercise thereof or by any one or more exercises
thereof.
No person relying upon this Power of Attorney shall be required to see to
the application and disposition of any moneys, or other property paid to or
delivered to the Agent pursuant to the provisions hereof.
Reproductions of this executed original (with reproduced signatures and a
certificate of acknowledgement signed by Agent) shall be deemed to be original
counterparts of this Power of Attorney.
Agent agrees that it will not exercise its powers as agent unless Lessee
is in default of the Contract, this agreement or any other agreement, between
Lessee and Lessor, whether now existing or entered into hereafter.
Lessee agrees it is liable for all costs and expenses, including without
limitation attorney's fees and court costs, incurred by Lessor, either as
assignee or as Agent, in enforcing its rights under this agreement.
IN WITNESS WHEREOF, the parties have hereunto placed their hand and seal the
day written above.
<TABLE>
<C> <C>
Accepted and Agreed to: Accepted and Agreed to:
Commercial Money Center, Inc. International Foam Solutions, Inc.
- -------------------------------- ----------------------------------
(Lessor) (Lessee)
By: By: /s/ HARVEY KATZ
----------------------------- -------------------------------
Harvey Katz
- -------------------------------- ----------------------------------
(Please Print Name) (Please Print Name)
Title: Title: CEO
-------------------------- ----------------------------
Date: Date: 3-23-98
-------------------------- ----------------------------
</TABLE>
<PAGE> 10
BILL OF SALE
PURCHASER: COMMERCIAL MONEY CENTERS, INC.
SELLER: International Foam Solutions, Inc.
AGREEMENT NUMBER 980307
Seller, in consideration for sums paid to Seller by Purchaser, hereby sells,
transfers, and assigns to the Purchaser all of its right, title, and interest
(legal or equitable) in and to all the property ("Property") described in the
Agreement between Seller and Purchaser identified by the Agreement Number
specified above.
The Property is sold with the absence of liens, claims, or other encumbrances
by, through, or under Seller.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the date
specified below:
LESSEE: International Foam Solutions, Inc.
- ----------------------------------------
BY: SELLER AUTHORIZED SIGNATURE
TITLE: CEO
----------------------------------
DATE EXECUTED: 3-23-98
--------------------------
<PAGE> 11
EXHIBIT "A"
<TABLE>
<CAPTION>
QUANTITY PRODUCT DESCRIPTION
- -----------------------------------------------------------------------
<S> <C>
1 Forklift
1 Emptying Equip. Sys. To handle removing drums from pallet,
emptying polygel bags, slitting bags and placing on the
conveyor
1 Storage Rack and shelving sys.
1 Sys. To move polygel to dissolution tank
1 600g stainless steel tank w/heaters & immersible shredder &
dissolver, screen basket filter to remove bag pieces &
large contaminants & a paddle stirring apparatus to
complete dissolution of the polygel, also included is an
opening, filling and closing sequencer
1 Pump & filtering Sys., stainless steel heat jacketed
variable screw drive pos. displacement pump & a comb
double/quadruple stainless steel filter apparatus
1 Manifold Distribution Sys. Combo spinaratta/ribbon forming
apparatus for shaping the hot polygel for the alcohol
extraction of the polysolv solvent
1 Alcohol Extraction Tank Sys. includes two stainless steel
heated counterflow tanks, a 2500 gal polysolv/alcohol
recovery storage tank and three 500 gal tanks for storage
of reclaimed polysolv and alcohol
1 Double Conveyor system semi-immersed in alcohol extraction
tanks for transport to infra-red drying sys.
1 Solvent Recovery System separation & reclamation of the
polysolv/alcohol blend to its constituents for reuse in the
process by vacuum &/ heat distillation
1 Drying Sys. Conveyorized infrared drying table for the
removal of residual solvent, sys. is safety vented and
enclosed
1 Cut-off Saw
1 Cleated Belt Conveyor
1 Granulator System
1 Cyclone Filter/Filter System
1 Gaylord Handling System
1 System Accessories
1 CO2 fire extinguishing system for process line from drum
empty to cut off saw
1 Overhead water sprinkler sys. for entire line
</TABLE>
This Exhibit "A" is attached to and a part of Commercial Money Center, Inc.,
lease number 980307 and constitute a true accurate description of the equipment.
LESSEE: International Foam Solutions, Inc.
Signature: /s/
--------------------------------
Date: 3/23/98
-------------------------------------
<PAGE> 12
STATE OF FLORIDA 1423738-41-1
UNIFORM COMMERCIAL CODE FINANCING STATEMENT FORM UCC-1 (REV. 1993)
The Financing Statement is presented to a filing officer for filing pursuant to
the Uniform Commercial Code: 92316 Commercial
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1. Lessee (Last Name First if an Individual) 1a. Date of Birth or FE#
International Foam Solutions, Incorporated
- ----------------------------------------------------------------------------------------------------------------------------------
1b. Mailing Address 1c. City, State 1d. Zip Code
430 Congress Dr. 50-E Del Ray Beach, FL 33445
- ----------------------------------------------------------------------------------------------------------------------------------
2. Additional Lessee or Trade Name (Last Name First if an Individual) 2a. Date of Birth or FE#
- ----------------------------------------------------------------------------------------------------------------------------------
2b. Mailing Address 2c. City, State 2d. Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
3. Lessor (Last Name First if an Individual)
Commercial Money Center, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
3a. Mailing Address 3b. City, State 3c. Zip Code
5648 South Mojave Road Las Vegas, NV 89120
- ----------------------------------------------------------------------------------------------------------------------------------
4. Assignee of Lessor (Last Name First if an Individual)
- ----------------------------------------------------------------------------------------------------------------------------------
4a. Mailing Address 4b. City, State 4c. Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
5. This Financing Statement covers the following types or items of property [Include description of real property on which
located and owner of record when required. If more space is required, attach additional sheet(s)]
See Attached Exhibit A
980000108939-4
-05/18/98-01088-006
*****28.00
- ----------------------------------------------------------------------------------------------------------------------------------
6. Check only if Applicable: [ ] Products of collateral [x] Proceeds of collateral [ ] xxxx is transmitting
are also covered. are also covered. utility.
- ----------------------------------------------------------------------------------------------------------------------------------
7. Check appropriate box: [ ] All documentary stamp taxes due and payable or to become due and payable pursuant to
(One box must be marked) a.201.22.F.S. have been paid.
[x] Florida Documentary Stamp Tax is not required.
- ----------------------------------------------------------------------------------------------------------------------------------
8. In accordance with s.678.402(2), F.S., this statement is filed 9. Number of additional sheets presented: 1
without the Lessee's signature to perfect a security interest
in collateral: -----------------------------------------------------------
[ ] already subject to a security interest in another jurisdiction This Space for Use of Filing Officer
when it was brought into this state or lessee's location
changed to this state.
[ ] which is the proceeds of the original collateral described
above in which a security interest was perfected.
[ ] as to which the filing has lapsed. Date filed__________________
and previous UCC-1 file number_________________________________
[ ] acquired after a change of name, identity, or corporate
structure of the lessee.
- --------------------------------------------------------------------- FILED
10. Signature(s) of Lessee(s) MAY 18, 1998 08:00 AM
International Foam Solutions, Incorporated SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ATTORNEY-IN-FACT - /s/ PBS 980000108939 MT
- ---------------------------------------------------------------------
11. Signature(s) of Lessor or if Assigned, by Assignee(s)
Commercial Money Center, Inc.
ATTORNEY-IN-FACT
- ---------------------------------------------------------------------
12. Return Copy to:
Name Data Filing Services
Address P.O. Box 275
Address
City, State, Zip Van Nuys CA 91408-0275
- ----------------------------------------------------------------------------------------------------------------------------------
FILING OFFICER COPY Prepared with UCC xxxx for Windows Data File Services, Inc., P.O. Box 215, Van Nuys, CA, 91408-0275
Tel (419) 909-2200
</TABLE>
<PAGE> 1
Exhibit 99.4
PROMISSORY NOTE
$200,000.00
June 27, 1997
1. BORROWER'S PROMISE TO PAY
For value received, the undersigned ("Borrower") promises to pay to the
order of Florida First Capital Finance Corporation, Inc., its successors and
assigns ("Lender") the principal sum of Two Hundred Thousand dollars U.S.
($200,000.00) together with interest on the unpaid balance as provided for
herein.
2. INTEREST
Interest will be charged on the unpaid principal until the full amount of
principal has been paid. Borrower agrees to pay interest at an annual rate of
8.5%.
This interest rate is the rate Borrower agrees to pay both before and
after any default described in Section 6(B) of this Promissory Note ("Note").
3. PAYMENTS
A. TIME AND PLACE OF PAYMENTS
Borrower agrees to pay principal and interest by making payments monthly.
Borrower agrees to make monthly payments on the first day of each month
beginning on August 1, 1997. Borrower agrees to make these payments every month
until Borrower has paid all of the principal and interest and any other charges
described below that Borrower may owe under this Note. Borrower's monthly
payments will be applied to interest before principal. If, on June 27, 2004,
Borrower still owes amounts under this Note, Borrower will pay such amounts in
full on that date, which is the "maturity date."
Borrower will make monthly payments at P.O. Box 1787, Orlando, FL
32802-1787, or at a different place if required by the Lender.
B. AMOUNT OF MONTHLY PAYMENTS
Borrower's monthly payment will be $3,168.00 U.S.
4. BORROWER'S RIGHT TO PREPAY
Borrower shall have the right to make payments of principal any time
before they are due. A payment of principal only is hereafter referred to as a
"prepayment." When making a prepayment, Borrower will advise Lender in writing
of Borrower's intent to prepay.
Borrower may make a full prepayment or partial prepayments without any
prepayment charge. The Lender will apply all such prepayments to reduce the
amount of principal due under this Note. In the event Borrower makes a partial
prepayment, there will be no change in the due date or in the amount of monthly
payment unless the Lender agrees in writing to any requested changes.
5. SAVINGS CLAUSE
In the event a law, which applies to this loan and which sets maximum loan
charges, is finally interpreted so that the interest or other loan charges
collected or to be collected in connection with this loan exceed the permitted
limits, then: (i) any such interest or loan charge shall be reduced by the
amount necessary
----------
Initials
<PAGE> 2
to reduce the interest or loan charge to the permitted limit; and (ii) any sums
already collected from Borrower which exceed permitted limits will be refunded
to Borrower. The Lender may choose to make this refund by reducing the principal
then owed under this Note or by making a direct payment to Borrower. If a
refund reduces principal, the reduction will be treated as a partial prepayment.
6. BORROWER'S FAILURE TO PAY AS REQUIRED
A. LATE CHARGE FOR OVERDUE PAYMENTS
If the Lender has not received the full amount of any monthly payment by
the end of 15 calendar days after the due date, Borrower will pay a late charge
to the Lender. The amount of the charge will be 5% of each overdue payment of
principal and interest. Borrower will pay this late charge promptly but only
once on each late payment.
B. DEFAULT
If the full amount of each monthly payment is not paid on the date it is
due, Borrower will be in default.
C. NOTICE OF DEFAULT
In the event of a default, the Lender may send Borrower a written notice
telling Borrower that if payment of the overdue amount is not made by a certain
date, the Lender may require Borrower to pay immediately the full amount of
principal which has not been paid and all interest then due. That date will be
at least 30 days after the date on which the notice is delivered or mailed to
Borrower.
D. NO WAIVER BY LENDER
If the Lender does not require Borrower to pay immediately in full as
described above, the Lender will still have the right to do so if Borrower is in
default at a later time.
E. PAYMENT OF LENDER'S COSTS AND EXPENSES
If the Lender has required Borrower to pay immediately in full as described
above, the Lender will have the right to be repaid by Borrower for all of its
costs and expenses in enforcing this Note to the extent not prohibited by
applicable law. Those expenses include, for example, reasonable attorneys' fees.
7. NOTICES
Unless applicable law requires a different method, any notice that must be
given to Borrower under this Note will be given by delivering it or by mailing
it by first class mail to Borrower at his address herein or at a different
address if Borrower gives the Lender a notice of different address.
Any notice that must be given to the Lender under this Note will be given
by mailing it by first class mail to the Lender at the address stated in Section
3(A) above or at a different address if Borrower receives a notice of that
different address.
8. OBLIGATIONS OF PERSONS UNDER THIS NOTE
If more than one person or entity signs this Note, each person or entity is
fully and personally obligated to keep all of the promises made in this Note,
including the promise to pay the full amount owed. Any person who is a
guarantor, surety or endorser of this Note is also obligated to do these things.
Any person who assumes these obligations, including the obligations of a
guarantor, surety or endorser of this Note, is also obligated to keep all of the
promises made in this Note. The Lender may enforce its rights under this Note
2
/s/
---------
Initials
<PAGE> 3
against each person individually or against all persons together. This means
that any Borrower or guarantor may be individually required to pay all of the
amounts owed under this Note.
9. WAIVERS
Borrower and any other person who has obligations under this Note waive
the rights of presentment and notice of dishonor. "Presentment" means the right
to require the Lender to demand payment of amounts due. "Notice of dishonor"
means the right to require the Lender to give notice to other persons that
amounts due have not been paid.
10. UNIFORM SECURED NOTE
In addition to the protections given to the Lender under this Note, a
Mortgage, Deed of Trust, Loan and Security Agreement or Security Deed (the
"Security Instruments"), given by Borrower or guarantors and dated the same
date as this Note, protects the Lender from possible losses which might result
if Borrower does not keep the promises which have been made in this Note. The
Security Instrument describes how and under what conditions Borrower may be
required to make immediate payment in full of all amounts due under this Note.
WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED AS OF THE DATE ABOVE.
International Foam Solutions, Inc.
By: /s/ Harvey Katz
---------------------------------
HARVEY KATZ
AS VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER
3
<PAGE> 4
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), is dated as of June 27, 1997,
between INTERNATIONAL FOAM SOLUTIONS, INC., ("BORROWER") AND FLORIDA FIRST
CAPITAL FINANCE CORPORATION, a Florida non-profit corporation ("LENDER"). The
parties hereto agree as follows:
ARTICLE 1. LOAN TERM AND PROCEEDS
SECTION A. TERM LOAN. Lender agrees to make a loan ("Term Loan") to Borrower in
the principal amount of Two Hundred Thousand dollars ($200,000.00) on the terms
as set forth in the Loan Commitment Letter dated November 13, 1996 evidenced by
a promissory note ("Note") of even date herewith and on the terms and
conditions set forth herein. This Agreement, the Note, and any Guaranty
executed in connection with this transaction are hereinafter referred to as
"Loan Documents".
SECTION B. USE OF PROCEEDS. The proceeds of the Term Loan hereunder shall be
used by Borrower to purchase the equipment listed on Schedule "A" attached
hereto.
ARTICLE 2. SECURITY INTEREST
SECTION A. For value received, Borrower agrees to and does hereby grant to the
Lender, a security interest on all such property hereinafter referred to as
"Collateral" and described below, as security to secure the payment of
principal, interest, and other sums due, or to become due, under any and all
extensions, modifications, or renewals of the Note, all present and future
indebtedness, obligations, and liabilities contained in or referred to, or
which may hereafter arise in connection with or as contemplated by those
certain assets securing the Note.
SECTION B. THE COLLATERAL PROPERTY IS AS FOLLOWS:
The equipment listed on Schedule "A" attached hereto, which items now
are or will be hereafter owned by Borrower and which shall be located
in and upon Borrower's premises or are under Borrower's control,
whether the same be attached or unattached, and whether the same be
detached or detachable.
SECTION C. USE OF COLLATERAL:
The Collateral has and/or shall be acquired and is and shall be used
primarily for business use. The Collateral shall be kept at and on the
real property described herein or at locations described in Borrowers
records a copy of which shall be provided Lender on a quarterly basis.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
SECTION A. EXISTENCE, GOOD STANDING, AND DUE QUALIFICATION. The Borrower, if a
corporation is duly incorporated, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its assets and to transact the business in which it is now
engaged or proposed to be engaged. If a partnership, the partnership is validly
existing and in good standing under the laws of Florida and has full authority
to engage in the business in which it engages or proposes to engage and has
completed all actions necessary to authorize such activities.
/s/
-------------
Initials
Page -1-
<PAGE> 5
SECTION B. FINANCIAL INFORMATION. All financial statements, income tax returns
and other financial documents and information submitted to Lender are correct
and complete to the extent necessary to give the Lender an accurate and full
understanding of the financial picture and understanding of the Borrower and the
Guarantors of the Borrower.
SECTION C. LITIGATION. There is no pending or threatened litigation or
proceeding against or affecting the Borrower or the Guarantors of the Borrower.
SECTION D. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. The Borrower and the
Guarantors have satisfied any and all judgments, if any, entered against
Borrower or Guarantors, and neither the Borrower nor the Guarantors are in
default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board, bureau, agency, or instrumentality,
domestic or foreign.
SECTION E. ERISA. The Borrower is in compliance in all material respects with
all applicable provisions of ERISA.
SECTION F. OPERATION OF BUSINESS. The Borrower and, if applicable, the
Guarantors possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and the Borrower and the Guarantors are not in violation of any valid
rights of others with respect to any of the foregoing.
SECTION G. TAXES. The Borrower and the Guarantors have filed all tax returns
(federal, state, and local) required to be filed and have paid all taxes,
assessments, and governmental charges and levies thereon to be due, including
interest and penalties.
SECTION H. ENVIRONMENT. The Borrower has duly complied with, and its businesses,
operations, assets, equipment, property, leaseholds, or other facilities are in
compliance with, the provisions of all federal, state, and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder. The Borrower has been issued and will maintain all
required federal, state, and local permits, licenses, certificates, and
approvals relating to all environmental issues and concerns.
SECTION I. PERMITS. The Borrower has obtained all permits, licenses, and any
other consents which must be obtained to operate the Collateral and all are
still valid and in effect.
SECTION J. EXECUTIVE COMPENSATION. For the fiscal year ended December 31, 1996,
total compensation payable to Harvey Katz by the Company for the same period was
$150,000.00 of which $71,500 was paid in cash and $78,500.00 was deferred.
Total compensation payable to Claudia A. Iovino by the Company for the same
period was $120,000.00 of which $52,000.00 was paid in cash and $68,000.00 was
deferred. Neither of these corporate officers received any other direct or
indirect compensation from the Company.
ARTICLE 4. AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or the Lender shall have any commitment
from Borrower under this Agreement, the Borrower will:
SECTION A. PRESERVATION OF EXISTENCE. Preserve and maintain, if a corporation,
its corporate existence and good standing in the jurisdiction of its
incorporation and to pay all fees or taxes associated therewith. If a
partnership, preserve and maintain the good standing and existence of the
partnership.
SECTION B. MAINTENANCE OF RECORDS. Keep, adequate records and books of account,
in which complete entries will be made in accordance with generally accepted
accounting principles ("GAAP") consistently applied, reflecting all financial
transactions of the Borrower.
/s/
---------
Initials
Page -2-
<PAGE> 6
SECTION C. MAINTENANCE OF INSURANCE. Maintain insurance with financially sound
and reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof. To keep the Collateral continuously insured
against loss by fire, theft, tornado, windstorm, and such other hazards as may
from time to time be required by the Lender, but in no case in amounts less
than the amounts due under this Agreement with companies and in amounts in
each company as may be approved by and acceptable to the Lender; the form of
all such insurance policies shall be in form acceptable to the Lender with loss
payable to the Lender as its interest may appear, and each and every policy
shall be promptly delivered to and held by the Lender. Not less than thirty
days in advance of the expiration of such policy, the Borrower shall deliver to
the Lender a renewal thereof, together with the receipt, or copy thereof, for
the premium for such renewal. Any insurance proceeds, or any part thereof, may
be applied by the Lender, at its option, either to the indebtedness secured
hereby or to the restoration, repair or replacement of the Collateral damaged.
SECTION D. REPRESENTATIONS & PERFECTION OF SECURITY INTEREST. Borrower is or
will be the owner of the Collateral free and clear from any lien, security
interest or encumbrance. No financing statement covering any of the Collateral
is on file in any public office. Borrower will from time to time, at the
request of the Lender, execute one or more financing statements and such other
documents (and pay the costs of filing or recording the same in all public
offices deemed necessary or desirable by the Lender) and do such other acts and
things all as the Lender may request to establish and maintain a valid
perfected security interest in the Collateral to secure the payment and
performance of the obligations. From time to time, upon the request of the
Lender, Borrower will furnish an inventory of the Collateral to the Lender,
which inventory shall specifically describe the Collateral by make, model and
serial number insofar as possible.
SECTION E. COOPERATION REGARDING LOAN DOCUMENTS. Cooperate with the Lender in
any amendments to or re-executions needed with respect to any of the Loan
Documents to the extent as may be needed, but not involving any material
substantive changes.
SECTION F. COMPLIANCE WITH LAWS AND PERMITTING REQUIREMENTS. Comply, in all
respects, with all applicable laws, rules, regulations, and orders, as well as
all permitting and other governmental requirements imposed with respect to the
development and use of the Collateral.
SECTION G. TAXES, INSURANCE, INDEPENDENT CONTRACTORS. Borrower shall pay all
payroll taxes, state and federal income tax payments, all workman's compensation
insurance premiums, unemployment taxes and all independent contracts in a timely
fashion, and shall provide proof of such payments to Lender if requested.
SECTION H. RIGHT OF INSPECTION. At any reasonable time, and from time to time,
permit the Lender or any agent or representative thereof to examine and make
copies of any of the records and books of account of, and visit the properties
of, the Borrower and to discuss the affairs, finances, and accounts of the
Borrower with any of their respective officers and directors and the Borrower's
independent accountants.
SECTION I. REPORTING REQUIREMENTS. Furnish to the Lender;
I. FINANCIAL STATEMENTS. Within ninety (90) after the end of each fiscal year
of the Borrower, compiled annual financial statements of the Borrower as of the
end of such fiscal year, prepared by a Certified Public Accountant in
accordance with GAAP, and in form acceptable to the Lender. Borrower and
Guarantors agree to answer any and all questions to the best of their ability
that Lender may have concerning such statements.
II. PURCHASE RECORDS. Within thirty days (30) after the end of each fiscal
year, purchase records showing the volume of recovered materials and other
feedstock used; up-to-date purchase records and projections.
III. SALES RECORDS. Within thirty days (30) after the end of each fiscal year,
sales records reporting the quantity of recycled content products sold;
up-to-date quarterly sales records and projections.
/s/
--------
Page -3- Initials
<PAGE> 7
iv. PROOF OF INSURANCE. Within thirty days (30) after the end of each fiscal
year, records and receipts showing proof of liability and hazard insurance.
v. BORROWER TAX RETURNS. Within thirty days (30) after the filing of its tax
returns with the Internal Revenue Service, the income tax returns of Borrower;
provided however, that if the tax return is not filed by its due date in the
year in which it is due, Borrower shall provide Lender the supporting
documentation used to compute the income for inclusion in Borrower's income tax
extension request and also a copy of the request and any other relevant
documentation in form acceptable to the Lender, to be delivered to the Lender
within fourteen (14) days after the filing of the extension request, which
Borrower agrees to file in a timely manner.
vi. RECEIPTS FOR TAXES. Within thirty days (30) after the filing of any tax
returns or the payment of any taxes due with any state or governmental agency,
proof of payment for all federal and state income, and payroll taxes if
requested.
vii. NOTICE OR LITIGATION. Promptly after the commencement thereof, notice of
all actions, suits, and proceedings affecting the Borrower.
viii. NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. Within five (5) days after the
occurrence of each Default or Event of Default, a written notice setting forth
the details of such Default or Event of Default as defined herein and the
action which is proposed to be taken by the Borrower with respect thereto.
ix. PROOF OF LICENSING. Proof of proper licensing for existing operations and
the new process/materials handling, if required by law.
x. ERISA REPORTS. As soon as possible, and in any event within thirty (30)
days after the Borrower knows or has reason to know that any circumstances
exist that constitute grounds authorizing the institution of proceedings to
terminate an employee benefit plan subject to ERISA with respect to the
Borrower and Borrower's employees.
xi. GENERAL INFORMATION OF BORROWER AND GUARANTORS. Written notice of any
intended substantive change in the controlling interest or management structure
of Borrower, at least thirty (30) days prior to the proposed effective date of
such change. Borrower shall also provide such other information respecting the
condition or operations, financial or otherwise, of the Borrower and each
Guarantor as the Lender may from time to time reasonably request.
SECTION J. ENVIRONMENT. Be and remain in compliance with the provisions of all
federal, state, and local environmental, health, safety laws, codes and
ordinances, and all rules and regulations issued thereunder.
SECTION K. LOAN MODIFICATION OR SATISFACTION IN THE EVENT OF CORPORATE OR
PARTNERSHIP RESTRUCTURING. If the Borrower is a corporation or partnership, the
Borrower agrees to restructure all outstanding loans with the Lender or pay
them in full, in the event the Borrower undergoes a substantive change in the
controlling interest or management structure of the Borrower, as determined by
the Lender in its sole discretion upon Lender's request to the Borrower.
SECTION L. MAINTENANCE, REMOVAL, & REPLACEMENT RESTRICTIONS. To keep the
Collateral on the property described herein and improvements thereon and not to
remove or permit same to be removed therefrom without the prior written consent
of the Lender, except that the Borrower shall be entitled to dispose of such of
the Collateral as has become unfit for continued use, provided the Borrower
replaces same with property of similar kind and for like use, and provided the
purchase price of such replacements shall have been paid in full, and provided
that the lien of the security agreement shall continue upon such replacements.
To use reasonable care and diligence to preserve and keep the Collateral in
good condition and not to permit or commit any waste, impairment or
deterioration thereof and to use the same only for the purpose for which same
is now agreed upon to be used in connection with said improvements.
/s/
--------
Initials
Page -4-
<PAGE> 8
ARTICLE 5. NEGATIVE COVENANTS
So long as any Note shall remain unpaid or the Lender shall have any Commitment
under this Agreement, the Borrower will not without the prior written consent of
the Lender:
SECTION A. LIENS. Create, incur, assume, or cause to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:
I. LENDER LIENS. Liens in favor of the Lender;
II. UNMATURED TAX LIENS. Liens for taxes or assessments or other government
charges or levies if not yet due and payable. For purposes of this Agreement the
term "Lien" shall mean any Security Instrument, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement, or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitations any conditional sale or other title
retention agreement, any financing lease having priority under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
SECTION B. DEBT. Create, incur, assume or suffer to exist, any additional Debt
in excess of the aggregate of $100,000 other than disclosed to the Lender at and
prior to the execution of this Agreement without the written consent of Lender.
For purposes of this subsection, the term "Debt" shall mean (1) indebtedness or
liability for borrowed money; (2) obligations evidenced by bonds, debentures,
notes, or other similar instruments; (3) obligations for the deferred purchase
price of property or services (including trade obligations); (4) obligations as
lessee under capital leases; (5) current liabilities in respect of unfunded
vested benefits under Plans covered by ERISA; (6) obligations under letters of
credit; (7) obligations under acceptance facilities; (8) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any person or entity, or otherwise to
assure a creditor against loss; and (9) obligations secured by any Liens,
whether or not the obligations have been assumed.
SECTION C. LOANS, DIVIDENDS OR DISTRIBUTIONS TO SHAREHOLDERS. Not to make loans
to, declare dividends or other distributions to shareholders without the prior
consent of the Lender.
SECTION D. AGREEMENT NOT TO SELL OR ENCUMBER. Not to sell or attempt to sell any
of the Collateral and not to create or permit any other security interest or
other lien or encumbrance upon such Collateral without the prior written consent
of the Lender.
SECTION E. EXECUTIVE COMPENSATION. Increase the amount of actual compensation
paid in cash to Harvey Katz or Claudia A. Iovino, either directly or indirectly,
by more than seven percent (7%) per year compounded annually. In the event that
the Borrower's debt coverage ratio, (defined as net profit before Federal and
state income taxes and interest on debt obligations divided by interest on debt
obligations) exceeds 1.25% in any fiscal year, Borrower may, with the written
consent of Lender, pay cash compensation to Harvey Katz and Claudia A. Iovino
in an amount not to exceed "Industry standards" as long as such payments do not
reduce the debt coverage ratio below 1.25%. The burden of proving "Industry
standards" compensation rests with the Borrower, and such proof must be
acceptable to Lender.
SECTION F. AFFILIATE DEBT REPAYMENT. Not to repay in part or in full any debt
to any affiliate or related parties prior to the repayment in full of the loan
to Lender.
ARTICLE 6. EVENTS OF DEFAULT
SECTION A. EVENTS OF DEFAULT. If any of the following events shall occur:
I. FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower should fail to pay the
principal or interest on, the Notes, or any amount of a commitment or other fee,
as and when due and payable;
Page -5-
/s/
--------
Initials
<PAGE> 9
II. INCORRECT OR MISLEADING REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Borrower in this Agreement, or any of the
Loan Documents, or by any Guarantor in any Guaranty, or which is contained in
any certificate, document, opinion, or financial or other statement furnished
at any time under or in connection with any Loan Document shall prove to have
been incorrect, incomplete, or misleading in any material respect on or as of
the date made or deemed made;
III. FAILURE TO PERFORM COVENANTS. The Borrower or any Guarantor shall fail to
perform or observe any terms, covenant, or agreement contained in this
Agreement or the Loan Documents;
IV. GUARANTY ISSUES AND RESULTING REMEDIES IN EVENT OF ANY TYPE OF DEFAULT.
Any Guaranty shall at any time after its execution and delivery for any reason
cease to be in full force and effect, or shall be declared null and void, or
the validity or enforceability thereof shall be contested by any Guarantor, or
any Guarantor shall deny it has any further liability or obligation under, or
shall fail to perform its obligations, under any Guaranty;
V. ASSIGNMENT FOR BENEFIT OF CREDITORS. if the Borrower shall make an
assignment for the benefit of creditors;
VI. APPOINTMENT OF RECEIVER FOR BORROWER. if a receiver is appointed for the
Borrower or any part of the Collateral;
VII. BANKRUPTCY. if the Borrower files a Petition in Bankruptcy, is
adjudicated as bankrupt, or files any petition or institutes any proceedings
under the Federal Bankruptcy Act with respect to the Borrower's assets and
liabilities;
VIII. DEFAULT OR BREACH OF COVENANTS OR AGREEMENT. if the Borrower defaults in,
breaches or fails to perform any one or more of the covenants and agreements
contained in the Loan Documents or assignment of rents, leases and contracts
executed on even date by the Borrower.
then, and in any such event, the Lender may, by Notice to the Borrower (1)
declare its obligation to make loans to be terminated, whereupon the same shall
forthwith terminate, and (2) declare the outstanding Notes, all interest
thereon, and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon all such interest, and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by the Borrower.
Upon the occurrence and during the continuance of any Event of Default, the
Lender is hereby authorized at any time and from time to time, without notice to
the Borrower (any such notice being expressly waived by the Borrower), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement or the Notes or any other Loan Document, irrespective of whether or
not the Lender shall have made any demand under this Agreement or the Notes or
such other Loan Document and although such obligations may be unmatured. The
Lender agrees promptly to notify the Borrower after any such set off and
application, provided that the failure to give such notice shall not affect the
validity of such set off and application. The rights of the Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set off) which the Lender may have.
SECTION B. FORBEARANCE NOT WAIVER. No forbearance or waiver by the Lender of
any default shall operate as a waiver of any other default or of the same
default on a future occasion. No delay or omission on the part of the Lender in
exercising any right or remedy shall operate as a waiver thereof or the
exercise of any other right of remedy. Time is of the essence of the agreement.
SECTION C. JURISDICTION AND VENUE. This Agreement shall be governed by, and
enforced according to, the laws of the State of Florida. The invalidity of any
provision shall be automatically reformed to the extent permitted by applicable
law and shall not affect the enforceability of the remaining provisions hereof.
The parties agree that venue will be located in Orange County, Florida.
/s/
--------
Initials
Page -6-
<PAGE> 10
ARTICLE 7. MISCELLANEOUS
SECTION A. ASSIGNMENT. In the event of any assignment hereof by the Lender, the
Borrower covenants and agrees that the Borrower will not assert against any
assignee hereof any claim or defense which the Borrower may have against the
Lender, except the Borrower may assert against any such assignee any defense of
a type which may be asserted against a holder in due course of a negotiable
instrument under the Uniform Commercial Code of the State of Florida.
SECTION B. RIGHTS - DISTINCT & CUMULATIVE. The provisions of this Agreement are
cumulative and in addition to the provisions of the promissory note secured
by this Agreement and the provisions of the other instruments securing the Note,
and the Lender shall have all the benefits, rights and remedies of and under
the Note secured hereby and any other instrument securing same. All rights of
the Lender hereunder shall inure to the benefit of its successors and assigns,
and all obligations of the Borrower hereunder shall bind the successors and
assigns of the Borrower.
SECTION C. AMENDMENTS, ETC. No amendment, modification, termination, or waiver
of any provision of any Loan Document to which the Borrower is a party, nor
consent to any departure by the Borrower from any Loan Document to which it is
a party, shall in any event be effective unless the same shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION D. ACKNOWLEDGEMENT AS TO FIXTURES. Notwithstanding any other provision
hereof, Borrower by the execution and delivery hereof, and the Lender, by the
acceptance hereof, recognize and agree that certain items or portions of the
Collateral may be now or hereafter attached to the buildings and improvements
so as to become fixtures or a part of the realty. Nothing herein shall be
considered as an agreement or an implication that any such item of the
Collateral, which is or may hereafter be attached to and become part of the
realty, is not part of the Collateral securing the Note.
SECTION E. NOTICES, ETC. All notices and other communications provided for under
this Agreement ad under the other Loan Documents to which the Borrower is a
party shall be in writing (including telegraphic, telex, and facsimile
transmissions) and mailed or transmitted or delivered, if:
to the Borrower: International Foam Solutions, Inc.
430 South Congress
Suite 50E
Delray Beach, Florida 33445
to the Lender: Florida First Capital Finance Corporation
P.O. Box 1787
Orlando, Florida 32802-1787
or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this Section.
SECTION F. COSTS, EXPENSES, AND TAXES. The Borrower agrees to pay on demand all
costs and expenses incurred by the Lender in connection with the preparation
and administration of the Loan Documents. The Borrower also agrees to pay all
such costs and expenses, including court costs and reasonable attorney's fees,
incurred in connection with enforcement of all of the Loan Documents. This
provision shall survive termination of this Agreement.
SECTION G. INTEGRATION. This Agreement and the other Loan Documents contain the
entire agreement between the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto.
/s/
--------
Initials
Page -7-
<PAGE> 11
fees and court costs now or hereafter arising from the aforesaid enforcement
of this clause) arising directly or indirectly from the activities of the
Borrower, its predecessors in interest, or third parties with whom it has a
contractual relationship, or arising directly or indirectly from the violation
of any environmental protection, health, or safety law, whether such claims are
asserted by any governmental agency or any other person. This indemnity shall
survive termination of this Agreement.
SECTION I. GOVERNING LAW. This Agreement and the other Loan Documents shall be
governed by, and construed in accordance with, the law of the State of Florida.
SECTION J. SEVERABILITY OF PROVISIONS. Any provision of any Loan Document
which is prohibited or unenforceable shall be ineffective to the extent of such
unenforceability without invalidating the remaining provisions.
SECTION K. HEADINGS. Article and section headings in the Loan Documents are
included in such Loan Documents for convenience of reference only and shall not
constitute a part of the applicable Loan Documents for any other purpose.
SECTION L. JURY TRIAL WAIVER. THE LENDER AND THE BORROWER HEREBY WAIVE TRIAL
BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE LOAN DOCUMENTS. NO OFFICER OF THE LENDER HAS AUTHORITY TO
WAIVE, CONDITION, OR MODIFY THIS PROVISION.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers hereunder duly authorized, as of the date
first above written.
INTERNATIONAL FOAM SOLUTIONS, INC.
Witnesses to Borrower:
/s/ Mark W. Garrett /s/ Harvey Katz
- ---------------------------- ---------------------------------------------
Print: /s/ Mark W. Garrett HARVEY KATZ
---------------------- AS VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Carol A. Murphy
- ----------------------------
Print: /s/ Carol A. Murphy
----------------------
FLORIDA FIRST CAPITAL FINANCE CORPORATION
Witnesses to Lender:
/s/ Mark W. Garrett /s/ Alan N. Singer
- ---------------------------- ---------------------------------------------
Print: /s/ Mark W. Garrett ALAN N. SINGER
--------------------- AS ASSISTANT SECRETARY
/s/ Carol A. Murphy
- ----------------------------
Print: /s/ Carol A. Murphy
----------------------
Page -8-
<PAGE> 12
<TABLE>
Seminole Form UCC-1
STATE OF FLORIDA
UNIFORM COMMERCIAL CODE FINANCING STATEMENT FORM UCC-1 (REV. 1993)
<S> <C> <C>
This Financing Statement is presented to a filing officer for filing pursuant to the Uniform Commercial Code:
1. Debtor (Last Name First if an individual) 1a. Date of Birth or FEI#
International Foam Solutions, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
1b. Mailing Address 1c. City, State 1d. Zip Code
430 South Congress, Suite 50E Delray Beach, Florida 33445
- ------------------------------------------------------------------------------------------------------------------------------------
2. Additional Debtor or Trade Name (Last Name First if an Individual) 2a. Date of Birth or FEI#
- ------------------------------------------------------------------------------------------------------------------------------------
2b. Mailing Address 2c. City, State 2d. Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
3. Secured Party (Last Name First if an Individual)
Florida First Capital Finance Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
3a. Mailing Address 3b. City, State 3c. Zip Code
P. O. Box 1787 Orlando, Florida 32802-1787
- ------------------------------------------------------------------------------------------------------------------------------------
4. Assignee of Secured Party (Last Name First if an Individual)
- ------------------------------------------------------------------------------------------------------------------------------------
4a. Mailing Address 4b. City, State 4c. Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
5. This Financing Statement covers the following types of items or property [include description of real property on which located
and owner of record when required. If more space is required, attach additional sheet(s)].
See Schedule "A" attached hereto and by reference made a part hereof.
970000149954--6
-07/07/97--01096--022
*****28.00
- ------------------------------------------------------------------------------------------------------------------------------------
6. Check only if Applicable: [ ] Products of collateral are [X] Proceeds of collateral are [ ] Debtor is transmitting utility.
also covered. also covered.
- ------------------------------------------------------------------------------------------------------------------------------------
7. Check appropriate box: [X] All documentary stamp taxes due and payable or to become due and payable pursuant to s.201.22 F.S.,
(One box must be marked) have been paid.
[ ] Florida Documentary Stamp Tax is not required.
- ------------------------------------------------------------------------------------------------------------------------------------
8. In accordance with s. 679.402(2), F.S., this statement is filed without 9. Number of additional sheets presented: 1
the Debtor's signature to perfect a security interest in collateral: -------------------------------------------------------
[ ] already subject to a security interest in another jurisdiction when it This space for use of Filing Officer
was brought into this state or debtor's location changed to this state.
[ ] which is proceeds of the original collateral described above in which
a security interest was perfected.
[ ] as to which the filing has lapsed. Date filed and previous
----------
UCC-1 file number
--------------------------------.
[ ] acquired after a change of name, identity, or corporate structure of the
debtor.
- ----------------------------------------------------------------------------
10. Signature(s) of Debtor(s)
International Foam Solutions, Inc.
By: /s/ Harvey Katz
------------------------------------------------------------------
Harvey Katz, Vice President & Chief Executive Officer
- ----------------------------------------------------------------------------
11. Signature(s) of Secured Party or If Assigned, by Assignee(s)
Florida First Capital Finance Corporation
By: /s/ Alan N. Singer
------------------------------------------------------------------
Alan N. Singer, Assistant Secretary
- ----------------------------------------------------------------------------
12. Return Copy to:
Name Mark W. Garrett, Esquire
Address Igler & Dougherty, P.A.
Address 1211 Orange Avenue
City, State, Zip Winter Park, Florida 32789
- ----------------------------------------------------------------------------
FILING OFFICER COPY STANDARD FORM-FORM UCC-1 *Approved by Secretary of State,
State of Florida
</TABLE>
<PAGE> 13
SCHEDULE "A"
BORROWERS: INTERNATIONAL FOAM SOLUTIONS, INC.
LENDER: FLORIDA FIRST CAPITAL FINANCE CORPORATION, INC.
CLOSING DATE: JUNE 27, 1997
EQUIPMENT SCHEDULE FOR INTERNATIONAL FOAM SOLUTIONS, INC.
Granulator System - Kawaguchi Fu Chew Shin Extruder 34:1 & Venter 150 HP 115
RPMA
Granulator System is a Mitts & Merrill Model No. CDX-13, 125 h.p.
with a h.p. blower.
2 - Kawaguchi units, in pieces
Egan Extruder, which is 90% assembled
Pump & Filtration Tank Stainless Steel with Heating Jacket
Pump, Filter, tank with jacket
Dissolution Tank System - 2300 Gal Stainless Steel with Mixer Paddles, Shafts &
Heater
Manifold Distribution System Normag Polymer Pump PC Drive
Manifold - NOR-240-001
Baker Electric Forklift - 6,000 lb. Unit
Model FTD-055 Serial Number - 0-1907-38
Rolling Jack and Attachment for Drum Handling
Attachment - Model 6145 0395, Valley Craft
Store Racks and Shelving
10 units
Alcohol Extraction System
Flat Belt Conveyor (described on Schedule A as Cleated Belt Conveyor)
3 units - assembled together
Recovery Unit - Solvent Recovery System
Dryer - Drying System
Cut-Off Saw
This is a Cumberland 6" Pelletizer, Serial NO. 226240-7518,
Misc.-Filter System & Gaylord Handling System
The Filter System is not fabricated yet. Part is attached to the
Granulator System.
The Gaylord Handling System
Accessories - CO2 System & Sprinkler System
<PAGE> 14
PROMISSORY NOTE MODIFICATION AGREEMENT
This Promissory Note Modification Agreement ("Agreement") is made as of
September 1, 1997, by and between Florida First Capital Finance Corporation,
Inc. ("Lender") and International Foam Solutions, Inc. ("Borrower").
WITNESSETH
WHEREAS, Lender is the owner of a note (the "Note") executed by and between
Lender and Borrower in connection with the Florida Recycling Development Fund
loan; and
WHEREAS, the Note dated 7-27-97 was in the original amount of $200,000.00,
plus interest at an annual rate of 8.5%; and
WHEREAS, the current monthly payment on the Note is $3,168.00 per month; and
WHEREAS, the Lender has agreed to make certain modifications to the Note.
NOW THEREFORE, in consideration of the mutual promises set forth herein, the
parties agree as follows:
1. RECITALS. The above preambles are all made a part of this Agreement as if
they were more specifically set forth below.
2. MODIFICATIONS. The terms of the note are hereby modified, amended, and
supplanted as follows:
(A) Beginning September 1, 1997 the interest rate under the Note shall
accrue at the rate of six and one-half percent (6.5%) per annum.
(B) Beginning October 1, 1997, the monthly principal and interest payments
due under the Note shall be in the amount of $3,030.00.
(C) The entire principal balance due and payable under the Note, together
with any accrued interest, shall be due and payable on July 1, 2004.
3. NO OTHER MODIFICATION. Except as expressly modified and amended hereby,
all of the terms and conditions of the Note shall remain unmodified and in full
force and effect.
4. ANTI-NOVATION. The party of the first part and the party of the second
part further agree that this Agreement modifies certain terms and conditions of
a valid, existing obligation evidenced by the Note, and the parties hereto
agree that this Agreement is not intended to substitute or extinguish such
valid, existing debt obligation and shall not constitute a novation of the
indebtedness evidenced by the Note and shall in no way adversely affect or
impair the lien priority of the collateral that secures payment of the Note, and
in the event of any default on payment of principal or interest under the note
as modified or in the event of any other default as set forth in the Note, the
Loan and Security Agreement, or this Agreement, the Lender shall have the same
right to proceed against the property
<PAGE> 15
subject to the Loan and Security Agreement as if the Loan and Security
Agreement had initially secured this Agreement.
IN WITNESS HEREOF, Lender and the Borrower have caused this Agreement to be
executed on the dates indicated below.
Signed by the parties hereto on the dates indicated below:
<TABLE>
<S> <C>
Signed and Sealed in Presence of: Florida First Capital Finance Corporation, Inc.
DATE: September 27, 1997
----------------------------
/s/ Alan N. Singer by: /s/ David Franklin
- -------------------------------------------- --------------------------------------------
David Franklin
Secretary, Treasurer
International Foam Solutions, Inc.
/s/ Claudia Iovino by: /s/ Harvey Katz
- -------------------------------------------- --------------------------------------------
Harvey Katz
Vice President and Chief Executive
Officer
DATE: 9-15-97
----------------------------
</TABLE>
(LOGO) CLAUDIA IOVINO
COMMISSION # CC 402436
EXPIRES AUG 23, 1998
BONDED THRU
ATLANTIC BONDING CO., INC.
<PAGE> 1
Exhibit 99.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of, October l
1996 by and between INTERNATIONAL FOAM SOLUTIONS, INC., a Florida corporation
(the "Company") and HARVEY KATZ (Katz).
WHEREAS, the Company desires to secure the services of Katz, and Katz
desires to furnish such services to the Company upon the terms and conditions
set forth in this Agreement.
WHEREAS, Katz, by reason of the nature of Katz's duties, will be
provided access to the Company's trade secrets and other confidential
information and the Company desires to maintain the confidentiality of the
same;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Duties. The Company hereby employs Katz to serve the Company as
Chief Executive Officer of the "Company" "SEE ADDENDUM A". Katz shall be on the
Recycling Plant and Development Team and serve with the President of the
Company. Except with the prior approval of the President of the Company, Katz
agrees to devote his full time and energy toward the performance of the duties
and responsibilities assigned to him, which may be modified from time to time
in accordance with the above. "SEE ADDENDUM A" Katz agrees to refrain from
engaging directly or indirectly in any activity or business transaction for
himself or for any other person, corporation or subsidiary thereof, whether or
not for remuneration, direct or indirect, contingent or otherwise, which in any
way competes with any operation of the Company or which may result in a
conflict of interest or otherwise adversely affects the proper discharge of his
duties with, and responsibilities to, the Company. Such duties and
responsibilities shall be performed in accordance with the Company's rules,
regulation's, instructions and policies which are now in force and as amended
from time to time, or which may be adopted hereafter. However Katz may continue
to serve as President of HKI, Inc.
Any designs, ideas or process improvements by Katz to enhance the
Company's profitability which can be patented or copyrighted, will be patented
or copyrighted by the Company and Katz will assign all rights to the Company as
this falls under his duties as outlined in ADDENDUM "A". Ideas or prior "art"
does not fall under this category.
If the Company directly markets any of Katz's new ideas he will
receive a 2.5% of the net profits attributed to that specific portion of the
total Patents, product or portions that is attributed to Katz patents.
2. Compensation. The Company covenants and agrees that, in
consideration of the services performed hereunder, it will pay to Katz the
starting rate of $150,000.00 per year with annual increases to be determined by
performance of the company as well as all out of pocket expenses.
<PAGE> 2
3. Benefits. Katz shall be entitled to the following benefits:
(a) Katz shall be entitled to participate in all benefit
programs established by the Company from time to time in accordance with
Company's Benefit Package "A".
(b) Katz shall be entitled to vacation from May of 1993 as
follows:
2 weeks after anniversary from year 1 to 3
3 weeks from 4th to 6th year
4 weeks from 7th through 12th year and
6 weeks after 13 years or more
as well as 9 paid holidays, as designated by the Company, and one personal day.
(c) The Company shall reimburse Katz for all reasonable
out-of-pocket expenses incurred by him in connection with the performance of
his duties hereunder upon the presentation of appropriate documentation
therefore in accordance with the Company's regular procedures. Such
reimbursement shall include automobile allowance each month and travel and
entertainment expenses. The following equipment and expenses will be paid or
supplied by the Company and any and all office equipment will be the property
of the Company.
One Cellular Telephone and one dedicated phone line to be billed
directly to the Company.
4. Term. This Agreement shall become effective as of the date set
forth above, and shall expire 5 years hereafter, subject to earlier termination
in accordance with the following paragraphs. This Agreement shall be renewable
and re-negotiated 90 days before the end of Term.
5. Disability. If Katz shall be unable substantially to perform the
duties required of him pursuant to this Agreement due to any injury, illness or
disease as determined by an independent physician mutually acceptable to the
Company and Katz, and such inability shall continue for a period of 90 days,
the Company shall have the right to terminate this Agreement upon written
notice to Katz. Notwithstanding any such termination, Katz shall be entitled to
receive the base salary and benefits accrued or accruable to Katz pursuant
to this Agreement up to the date of this contract or a minimum of two years
salary.
6. Death. In the event of Katz's death during the term of his
employment, this Agreement shall terminate as of the date of death. Katz's
beneficiary or estate shall be entitled to receive any salary, bonuses,
vacation pay, or other benefits which have accrued or are accruable pursuant to
this Agreement through the date of death.
<PAGE> 3
7. Termination for Cause. The Company shall have the right to
terminate the employment of Katz hereunder for cause at any time if:
(a) Katz is convicted by a court of competent and final
jurisdiction of any crime (whether or not involving the Company) which
constitutes a felony in the jurisdiction involved; or
(b) Katz commits any act of embezzlement or similar conduct
against or shall breach a fiduciary obligation to the Company, or shall be
habitually drunk in public or otherwise act in such a manner as to adversely
reflect upon the reputation of the Company; or
(c) Katz unreasonably fails or refuses to perform in any
material respect any of his duties and responsibilities as required by this
Agreement.
Any termination for cause may be effected by delivery to Katz of a
written notice of termination, stating with specificity the reason for
termination, and shall be effective as of the date of such notice. Upon
termination for cause, any salary, bonuses, vacation pay, or other benefits
which have accrued or are accruable through the end of this contract or a
minimum of two (2) years.
8. Termination Without Cause. The Company may terminate Katz's
employment hereunder without cause at any time upon thirty days' prior written
notice. Upon any such termination, Katz shall be entitled to receive a lump sum
payment equal to the base salary and guaranteed bonus which would have been
payable to Katz for the 36 months following the date of termination.
For purposes of this Agreement, the following shall be deemed a
termination of Katz's employment hereunder without cause:
(a) Katz's substantive responsibilities are changed without the
prior approval of Katz.
(b) All or substantially all of the assets of the Company are sold,
or there is a "Change in Control" of the Company, unless in conjunction with
such sale or Change in Control this Agreement is extended through a date at
least three years from the date of the sale or Change in Control.
For purposes of this Agreement, "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A Regulation 14A promulgated under the Securities
Exchange Act of 1934 as in effect on the date of this Agreement. Without
limitation, such a change in control shall be deemed to have occurred if and
when (a) any "person" (as such term is used in Sections 13(d) and 14(d)-II (2)
of the Securities Exchange Act of 1934) other than a person currently holding
such a position, is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of that company's then
<PAGE> 4
outstanding securities, or (b) during any period of 12 consecutive months,
commencing before or after the date of this Agreement, individuals who at the
beginning of such 12 month period were directors of the Company cease for any
reason to constitute at least thirty percent (30%) of the Company's Board of
Directors.
9. Termination by Katz. Katz may terminate his employment hereunder,
subject to the restrictive covenants hereinafter stated, upon giving thirty
days prior written notice to the Company, in which event Katz's salary and
benefits shall be continued through the date of termination and 12 months
thereafter.
10. Certain Restrictive Covenants.
(a) Katz recognizes and acknowledges that confidential
information may exist, from time to time, with respect to the business of the
Company. Accordingly, Katz agrees that he will not disclose any confidential
information relating to the business of the Company to any individual or entity
during his employment or hereafter. The provisions of this paragraph shall not
apply to information which is or shall become generally known to the public or
the trade (except by reason of Katz's breach of his obligations hereunder),
information which is or shall become available in trade or other publications
(except by reason of Katz's breach of his obligations hereunder), and
information which Katz is required to disclose by order of a court of competent
jurisdiction (but only to the extent specifically ordered by such court and,
when reasonably possible, if Katz shall give the Company prior notice of such
intended disclosure so that it has the opportunity to seek a protective order
if it deems appropriate).
(b) As used in this Agreement, "confidential information" shall
mean studies, plans, reports, survey, analyses, sketches, drawing, notes,
records, unpublished memoranda or documents, and all other non-public
information relating to the Company's manufacturing and marketing activities,
including, shop practices, equipment, research data, marketing and sales
information, personnel data, customer lists, employee lists, financial data,
plans and all other techniques, know how and trade secrets which presently or
in the future are in the possession of the Company.
(c) All memoranda, notes, records, reports, sketches,
photographs, drawing, plans, paper or other documents made or compiled by or
made available to Katz in the course of employment hereunder are and shall be
the sole and exclusive property of the Company and shall be promptly delivered
and returned to the Company by Katz immediately upon termination of employment
with the Company.
(d) For so long as he is employed by the Company, and for a
period of two years hereafter, Katz shall not engage (either as principal,
agent or consultant, or through any corporation, firm or organization in which
he may be an officer, director, employee, controlling stockholder, partner,
member, or with which he is otherwise affiliated) directly or indirectly, in
any activity or business anywhere in the world which is engaged in the
recycling or reconversion of polystyrenes.
<PAGE> 5
11. Injunction. Katz acknowledges that the services to be rendered by
him are of a special unique and extraordinary character, and, in connection
with such services, he will have access to confidential information vital to
the Company's business. Accordingly, Katz consents and agrees that if he
violates any of the provisions of paragraph 10 hereof, the Company would
sustain irreparable harm and, therefore, in addition to any other remedies
which may be available to it, the Company shall be entitled to an injunction
restraining Katz from committing or continuing any such violation of this
Agreement. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedy or remedies including, without
limitation, recovery of damages.
12. Modification or Elimination of Restrictions. In the event that any
of the restrictions, contained in paragraphs 10 or 11 hereof shall be held to be
in any way an unreasonable restriction on Katz, then the court so holding may
reduce the territory and/or period of time in which such restriction operates,
or modify or eliminate any such restriction to the extent necessary to render
such paragraphs enforceable.
14. Entire Agreement. This Agreement represents the entire Agreement
between the parties with respect to the subject matter hereof and shall not be
modified or affected by any offer, proposal, statement or representation, oral
or written, made by or for either party in connection with the terms hereof.
This Agreement may not be amended except by an instrument in writing signed by
the Company and Katz.
15. Serviceability. Should any provision or clause hereof be held to
be invalid, such invalidity shall not affect any other provision or clause
hereof which can be given effect without such invalid provision. This Agreement
shall inure to the benefit of and be binding upon the Company, its successors
and assigns and upon Katz and his heirs, executor, administrators, or other
legal representatives.
16. Laws Applicable. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
INTERNATIONAL FOAM SOLUTIONS, INC.
HARVEY KATZ
/s/ Harvey Katz /s/ Claudia Iovino
- ---------------------------- ------------------------------
SS# ###-##-#### CLAUDIA IOVINO,PRESIDENT
-------------------------
/s/
- ----------------------------
WITNESS
<PAGE> 6
IFS
JOB DESCRIPTION
JOB TITLE: Chief Executive Officer
DEPARTMENT:
REPORTS TO: President and Chairman of the Board
FLSA STATUS: Non Exempt
PREPARED BY: Claudia Iovino
PREPARED DATE: 6-23-93
APPROVED BY: Claudia Iovino
APPROVED DATE: 6-25-95
SUMMARY
Manages and directs the organization toward its primary objectives, based on
profit and return on capital, by performing the following duties personally or
through subordinate managers.
ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be
assigned.
Establishes current and long range objectives, plans, and policies, subject to
approval by the Board of Directors.
Dispenses advice, guidance, direction, and authorization to carry out major
plans and procedures, consistent with established policies and Board approval.
Oversees the adequacy and soundness of the organization's financial structure.
Reviews operating results of the organization, compares them to established
objectives, and takes steps to ensure that appropriate measures are taken to
correct unsatisfactory results.
Plans and directs all investigations and negotiations pertaining to mergers,
joint ventures, the acquisition of businesses, or the sale of major assets with
approval of the Board of Directors.
Establishes and maintains an effective system of communications throughout the
organization.
Represents the organization with major customers, shareholders, the financial
community, and the public.
SUPERVISORY RESPONSIBILITIES
Manages six subordinate supervisors who supervise a total of all employees in
the COO, CFO, Facility Mgr, Director of Recycling, Department Head of R&D, and
Executive Assistant. Is responsible for the overall direction, coordination,
and evaluation of these units. Also directly supervises zero non-supervisory
employees. Carries out supervisory responsibilities in accordance with the
organization's policies and applicable laws. Responsibilities include
interviewing, hiring, and training employees; planning, assigning, and
directing work; appraising performance; rewarding and disciplining employees;
addressing complaints and resolving problems.
QUALIFICATIONS To perform this job successfully, an individual must be able to
perform
Page 1
<PAGE> 7
each essential duty satisfactorily. The requirements listed below are
representative of the knowledge, skill, and/or ability required. Reasonable
accommodations may be made to enable individuals with disabilities to perform
the essential functions.
EDUCATION AND/OR EXPERIENCE
Fifth year college or university program certificate; or two to four years
related experience and/or training; or equivalent combination of education and
experience.
LANGUAGE SKILLS
Ability to read, analyze, and interpret common scientific and technical
journals, financial reports, and legal documents. Ability to respond to common
inquiries or complaints from customers, regulatory agencies, or members of the
business community. Ability to write speeches and articles for publication
that conform to prescribed style and format. Ability to effectively present
information to top management, public groups, and/or boards of directors.
MATHEMATICAL SKILLS
Ability to apply advanced mathematical concepts such as exponents, logarithms,
quadratic equations, and permutations. Ability to apply mathematical operations
to such tasks as frequency distribution, determination of test reliability and
validity, analysis of variance, correlation techniques, sampling theory, and
factor analysis.
REASONING ABILITY
Ability to apply principles of logical or scientific thinking to a wide range
of intellectual and practical problems. Ability to deal with nonverbal
symbolism (formulas, scientific equations, graphs, musical notes, etc.,) in its
most difficult phases. Ability to deal with a variety of abstract and concrete
variables.
CERTIFICATES, LICENSES, REGISTRATIONS
PHYSICAL DEMANDS The physical demands described here are representative of
those that must be met by an employee to successfully perform the essential
functions of this job. Reasonable accommodations may be made to enable
individuals with disabilities to perform the essential functions.
While performing the duties of this job, the employee is regularly required to
reach with hands and arms and talk or hear. The employee frequently is required
to stand; sit; use hands to finger, handle, or feel; and climb or balance. The
employee is occasionally required to walk and stoop, kneel, crouch, or crawl.
The employee must occasionally lift and/or move up to 25 pounds. Specific
vision abilities required by this job include depth perception, and ability to
adjust focus.
WORK ENVIRONMENT The work environment characteristics described here are
representative of those an employee encounters while performing the essential
functions of this job. Reasonable accommodations may be made to enable
individuals with disabilities to perform the essential functions.
While performing the duties of this job, the employee is frequently exposed to
fumes or airborne particles. The employee is occasionally exposed to wet and/or
humid conditions, moving mechanical parts, toxic or caustic chemicals, outside
weather conditions, extreme cold, extreme heat, and risk of electrical shock.
The noise level in the work environment is usually quiet.
Page 2
<PAGE> 1
Exhibit 99.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of, October 1
1996 by and between INTERNATIONAL FOAM SOLUTIONS, INC., a Florida corporation
(the "Company") and CLAUDIA IOVINO (Iovino).
WHEREAS, the Company desires to secure the services of Iovino, and
Iovino desires to furnish such services to the Company upon the terms and
conditions set forth in this Agreement.
WHEREAS, Post, by reason of the nature of Iovino's duties, will be
provided access to the Company's trade secrets and other confidential
information and the Company desires to maintain the confidentiality of the
same;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Duties. The Company hereby employs Iovino to serve the Company as
President of the "Company" "SEE ADDENDUM A". Iovino shall be on the Recycling
Plant and Development Team and serve under the supervision of the Chairman of
the Company. Except with the prior approval of the Chairman or Chief Executive
Officer of the Company, Iovino agrees to devote her full time and energy toward
the performance of the duties and responsibilities assigned to her, which may
be modified from time to time in accordance with the above. "SEE ADDENDUM A"
Iovino agrees to refrain from engaging directly or indirectly in any activity
or business transaction for herself or for any other person, corporation or
subsidiary thereof, whether or not for remuneration, direct or indirect,
contingent or otherwise, which in any way competes with any operation of the
Company or which may result in a conflict of interest or otherwise adversely
effects the proper discharge of her duties with, and responsibilities to, the
Company. Such duties and responsibilities shall be performed in accordance
with the Company's rules, regulation S, instructions and policies which are now
in force and as amended from time to time, or which may be adopted hereafter.
However Iovino may continue to serve as CEO of HKI, Inc.
Any designs, ideas or process improvements by Iovino to enhance the
Company's profitability which can be patented or copyrighted, will be patented
or copyrighted by the Company and Iovino will assign all rights to the Company
as this fall under her duties as outlined in ADDENDUM "A". Ideas or prior "art"
does not fall under this category.
If the Company directly markets any of Iovino's new ideas she will
receive a 2.5% of the net profits attributed to that specific portion of the
total Patents, product or portions that is attributed to Iovino patents.
2. Compensation. The Company covenants and agrees that, in
consideration of the services performed hereunder, it will pay to Iovino the
starting rate of $120,000.00 per year with the annual increases to be
determined by performance of company as well as all out of pocket expenses.
<PAGE> 2
3. Benefits. Iovino shall be entitled to the following benefits:
(a) Iovino shall be entitled to participate in all benefit
programs established by the Company from time to time in accordance with
Company's Benefit Package "A".
(b) Iovino shall be entitled to vacation from May of 1993 as
follows:
2 weeks after anniversary from year 1 to 3
3 weeks from 4th to 6th year
4 weeks from 7th through 12th year and
6 weeks after 13 years or more
as well as 9 paid holidays, as designated by the Company, and one personal day.
(c) The Company shall reimburse Iovino for all reasonable
out-of-pocket expenses incurred by her in connection with the performance of
her duties hereunder upon the presentation of appropriate documentation
therefore in accordance with the Company's regular procedures. Such
reimbursement shall include automobile allowance of $550 per month and travel
and entertainment expenses. The following equipment and expenses will be paid
or supplied by the Company and any and all office equipment will be the
property of the Company.
One Cellular Telephone and one dedicated phone line to be billed
directly to the Company.
4. Term. This Agreement shall become effective as of the date set
forth above, and shall expire 5 years hereafter, subject to earlier termination
in accordance with the following paragraphs. This Agreement shall be renewable
and re-negotiated 90 days before the end of Term.
5. Disability. If Iovino shall be unable substantially to perform the
duties required of him pursuant to this Agreement due to any injury, illness or
disease as determined by an independent physician mutually acceptable to the
Company and Iovino, and such inability shall continue for a period of 90 days,
the Company shall have the right to terminate this Agreement upon written
notice to Iovino. Notwithstanding any such termination, Iovino shall be
entitled to receive the base salary and benefits accrued or accruable to
Iovino pursuant to this Agreement up to the date of this contract or a minimum
of two years salary.
6. Death. In the event of Iovino's death during the term of his
employment, this Agreement shall terminate as of the date of death. Iovino's
beneficiary or estate shall be entitled to receive any salary, bonuses,
vacation pay, or other benefits which have accrued or are accruable pursuant
to this Agreement through the date of death.
<PAGE> 3
7. Termination for Cause. The Company shall have the right to
terminate the employment of Iovino hereunder for cause at any time if:
(a) Iovino is convicted by a court of competent and final
jurisdiction of any crime (whether or not involving the Company) which
constitutes a felony in the jurisdiction involved; or
(b) Iovino commits any act of embezzlement or similar conduct
against or shall breach a fiduciary obligation to the Company, or shall be
habitually drunk in public or otherwise act in such a manner as to adversely
reflect upon the reputation of the Company; or
(c) Iovino unreasonably fails or refuses to perform in any
material respect any of his duties and responsibilities as required by this
Agreement.
Any termination for cause may be effected by delivery to Iovino of a
written notice of termination, stating with specificity the reason for
termination, and shall be effective as of the date of such notice. Upon
termination for cause, any salary, bonuses, vacation pay, or other benefits
which have accrued or are accruable through the end of this contract or a
minimum of two (2) years.
8. Termination Without Cause. The Company may terminate Iovino's
employment hereunder without cause at any time upon thirty days prior written
notice. Upon any such termination, Iovino shall be entitled to receive a lump
sum payment equal to the base salary and guaranteed bonus which would have been
payable to Iovino for the 36 months following the date of termination.
For purposes of this Agreement, the following shall be deemed a
termination of Iovino's employment hereunder without cause:
(a) Iovino's substantive responsibilities are changed without the
prior approval of Iovino.
(b) All or substantially all of the assets of the Company are sold,
or there is a "Change in Control" of the Company, unless in conjunction with
such sale or Change in Control this Agreement is extended through a date at
least three years from the date of the sale or Change in Control.
For purposes of this Agreement, "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 as in effect on the date of this Agreement. Without
limitation, such a change in control shall be deemed to have occurred if and
when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than a person currently holding such
a position, is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of that company's then
<PAGE> 4
outstanding securities, or (b) during any period of 12 consecutive months,
commencing before or after the date of this Agreement, individuals who at the
beginning of such 12 month period were directors of the Company cease for any
reason to constitute at least thirty percent (30%) of the Company's Board of
Directors.
9. Termination by Iovino. Iovino may terminate her employment
hereunder, subject to the restrictive covenants hereinafter stated, upon giving
thirty days prior written notice to the Company, in which event Iovino's salary
and benefits shall be continued through the date of termination and 12 months
thereafter.
10. Certain Restrictive Covenants.
(a) Iovino recognizes and acknowledges that confidential
information may exist, from time to time, with respect to the business of the
Company. Accordingly, Iovino agrees that she will not disclose any confidential
information relating to the business of the Company to any individual or entity
during her employment or hereafter. The provisions of this paragraph shall not
apply to information which is or shall become generally known to the public or
the trade (except by reason of Iovino's breach of her obligations hereunder),
information which is or shall become available in trade or other publications
(except by reason of Iovino's breach of her obligations hereunder), and
information which Iovino is required to disclose by order of a court of
competent jurisdiction (but only to the extent specifically ordered by such
court and, when reasonably possible, if Iovino shall give the Company prior
notice of such intended disclosure so that it has the opportunity to seek a
protective order if it deems appropriate).
(b) As used in this Agreement, "confidential information" shall
mean studies, plans, reports, survey, analyses, sketches, drawing, notes,
records, unpublished memoranda or documents, and all other non-public
information relating to the Company's manufacturing and marketing activities,
including, shop practices, equipment, research data, marketing and sales
information, personnel data, customer lists, employee lists, financial data,
plans and all other techniques, know how and trade secrets which presently or
in the future are in the possession of the Company.
(c) All memoranda, notes, records, reports, sketches, photographs,
drawing, plans, paper or other documents made or compiled by or made available
to Iovino, in the course of employment hereunder are and shall be the sole and
exclusive property of the Company and shall by promptly delivered and returned
to the Company by Iovino immediately upon termination of employment with the
Company.
(d) For so long as he is employed by the Company, and for a period
of two years hereafter, Iovino shall not engage (either as principal, agent or
consultant, or through any corporation, firm or organization in which she may
be an officer, director, employee, controlling stockholder, partner, member, or
with which she is otherwise affiliated) directly or indirectly, in any activity
or business anywhere in the world which is engaged in the recycling or
reconversion of polystyrenes.
<PAGE> 5
11. Injunction. Iovino acknowledges that the services to be rendered
by her are of a special, unique and extraordinary character, and, in connection
with such services, she will have access to confidential information vital to
the Company's business. Accordingly, Iovino consents and agrees that if she
violates any of the provisions of paragraph 10 hereof, the Company would
sustain irreparable harm and, therefore, in addition to any other remedies
which may be available to it, the Company shall be entitled to an injunction
restraining Iovino from committing or continuing any such violation of this
Agreement. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedy or remedies including, without
limitation, recovery of damages.
12. Modification or Elimination of Restrictions. In the event that any
of the restrictions contained in paragraphs 10 or 11 hereof shall be held to be
in any way an unreasonable restriction on Iovino, then the court so holding may
reduce the territory and/or period of time in which such restriction operates,
or modify or eliminate any such restriction to the extent necessary to render
such paragraphs enforceable.
14. Entire Agreement. This Agreement represents the entire Agreement
between the parties with respect to the subject matter hereof and shall not be
modified or affected by any offer, proposal, statement or representation, oral
or written, made by or for either party in connection with the terms hereof.
This Agreement may not be amended except by an instrument in writing signed by
the Company and Iovino.
15. Serviceability. Should any provision or clause hereof be held to
be invalid, such invalidity shall not affect any other provision or clause
hereof which can be given effect without such invalid provision. This
Agreement shall inure to the benefit of and be binding upon the Company, its
successors and assigns and upon Iovino and her heirs, executor, administrators,
or other legal representatives.
16. Laws Applicable. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
CLAUDIA IOVINO INTERNATIONAL FOAM SOLUTIONS, INC.
/s/ Claudia Iovino /s/ Harvey Katz
- --------------------------- ---------------------------
SS# ###-##-#### HARVEY KATZ CEO
-----------
/s/
- ---------------------------
WITNESS
<PAGE> 1
Exhibit 99.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of April 5, 1999,
by and between INTERNATIONAL FOAM SOLUTIONS, INC., a Florida corporation (the
"Company") and Antonio Bianco ("Bianco").
WHEREAS, the Company desires to secure the services of Antonio Bianco,
and Bianco desires to furnish such services to the Company upon the terms and
conditions set forth in this Agreement.
WHEREAS, Bianco, by reason of the nature of Bianco's duties, will be
provided access to the Company's trade secrets and other confidential
information and the Company desires to maintain the confidentiality of the
same;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto agree as follows:
1. Duties. The Company hereby employs Bianco to serve the Company as
Chief Operations Officer (attached as Exhibit A is the Company Job Description
for the position of Chief Operating Officer, which is incorporated herein by
this reference). Bianco shall devote his full time and energy toward the
performance of the duties and responsibilities described in this Agreement and
the Exhibits hereto, which may be modified from time to time by the Company.
Bianco shall refrain from engaging, directly or indirectly, in any activity or
business transaction for himself or for any other person, corporation or
subsidiary thereof, whether or not for remuneration, direct or indirect,
contingent or otherwise, which in any way competes with any operation of the
Company or which may result in a conflict of interest or otherwise adversely
effects the proper discharge of his duties with, and responsibilities to, the
Company. Such duties and responsibilities shall be performed in accordance with
the Company's rules, regulations, instructions and policies which are now in
force and as amended from time to time, or which may be adopted hereafter.
Any designs, ideas or process improvements by Bianco to enhance the
Company's profitability which can or may be patented or copyrighted, will be
patented or copyrighted by the Company and Bianco hereby assigns any and all
rights he may have thereto to the Company.
2. Compensation. (a) Salary and Stock Options. The Company will pay
to Bianco a salary in the amount of fifty thousand dollars ($50,000.00) per
year with annual increases, bonuses, and stock options based on performance as
approved by the compensation committee or Board of Directors. After starting
date and execution of this Agreement by Bianco, Bianco will receive a signing
bonus option to purchase four hundred fifty thousand (450,000) shares of common
stock at ten cents ($.10) per share, exercisable within a ninety (90) day period
starting from the execution date of this Agreement, provided that Bianco has
been performing his services in a manner deemed satisfactory to the Board of
Directors. Subsequent to such ninety
1
<PAGE> 2
(90) day option, Bianco will be granted the following stock options: (i) an
option to purchase one hundred fifty thousand (150,000) shares of common stock
at twenty cents ($.20) per share of common stock to be exercised at any time
after six months (and continuing for a period of two years) has elapsed, from
the date the ninety (90) day option expired; (ii) an option to purchase one
hundred thousand (100,000) shares of common stock at thirty cents ($.30) per
share, to be exercised at any time after twelve months (and continuing for a
period two years) from the date the ninety (90) day option expired; (iii) an
option to purchase one hundred fifty thousand (150,000) shares of common stock
at fifty cents ($.50) per share, such option being exercisable for a two year
period following the one year anniversary of this Agreement; (iv) an option to
purchase one hundred fifty thousand (150,000) shares of common stock at seventy
cents ($.75) per share, exercisable for a two year period at any time following
the two year anniversary (e.g. two years of employment) of this Agreement; and
(v) and an option to purchase one hundred fifty thousand (150,000) shares of
common stock at one dollar ($1.00) per share, exercisable for a two year period
at any time following the three year anniversary (e.g. three years of
employment) of this agreement. Each of the options set forth in this Agreement
are exercisable by Bianco provided that at such time Bianco exercises any of
the options, he is currently employed by the Company or should he cease to be
employed by the company exercise any and all options within sixty (60) days
thereafter and he has, at all times prior to the exercise thereof, faithfully
and diligently performed his services as determined by the Board of Directors.
All stock issued pursuant to this paragraph will be restricted under Rule 144
of the Securities Act of 1933, unless the stock may be validly issued as
unrestricted stock pursuant to an effective registration statement.
(b) Performance Review. The Board of Directors shall review Bianco's
performance after six (6) months of employment and every six (6) months
thereafter for the purpose of reviewing Bianco's base salary for a possible
increase, depending on, among other things, such performance and the
profitability of the Company at that time.
(c) Bonuses. The Company shall pay bonuses to Bianco, which are
payable within ninety (90) days of the Company's year end, in the following
manner:
(i) One percent (1%) of gross sales (excluding actual and
pending sales under existing purchase orders as of the
date hereof) during any one year period upon achieving the
budgeted gross sales revenue which has been approved by
the Board of Directors;
(ii) One percent (1%) of gross sales upon achieving budgeted
earnings before income tax, which has been approved by the
Board of Directors;
(iii) Ten percent (10%) of the earnings before income tax which
exceeds the budgeted earnings before income tax.
(d) Salary and bonus caps. Notwithstanding paragraphs 2(a), (b) and
(c) above, the compensation (salary and bonuses) to Bianco shall not exceed:
Three hundred thousand dollars ($300,000.00) during the first year of this
Agreement; Four hundred thousand dollars ($400,000.00) during the second year
of this Agreement; Four hundred fifty thousand dollars
2
<PAGE> 3
($450,000.00) during the third year of this Agreement.
3. Benefits. After the Trial Period (as defined below), Bianco shall
be entitled to the following benefits:
(a) Bianco shall be entitled to participate in all benefit
programs established by the Company from time to time in accordance with
Company's Benefit Package "B".
(b) Bianco shall be entitled to vacation as follows:
Two (2) weeks each during years two and year three of this
Agreement;
Three (3) weeks each during years four through eight;
Four (4) weeks each from years nine and each year thereafter.
Vacation time may not be accumulated and shall expire after each
year unless the parties hereto agree otherwise in writing.
(c) Bianco shall be entitled to seven (7) paid holidays, as
designated by the Company, and three (3) personal days for each year
of employment.
(d) The Company shall reimburse Bianco for all reasonable
out-of-pocket expenses incurred by him in connection with the
performance of his duties hereunder upon the presentation of
appropriate documentation therefor in accordance with the Company's
regular procedures. Such reimbursement shall include automobile
rentals, hotel, meals, travel and entertainment expenses (but not
personal) based upon approved Company travel itinerary or as may be
established in the Company's policies and procedures manual.
4. Term. This Agreement shall become effective as of the date set
forth above, and shall continue for a term of three (3) years, subject to
earlier termination in accordance with this Agreement. This Agreement shall be
renewable and re-negotiated ninety (90) days before the end of Term.
5. Disability. If Bianco shall be unable to substantially perform the
duties required of him pursuant to this Agreement due to any injury, illness or
disease as determined by an independent physician mutually acceptable to the
Company and Bianco, and such inability shall continue for a period of ninety
(90) days, the Company shall have the right to terminate this Agreement upon
written notice to Bianco and such termination shall be deemed termination for
cause. Notwithstanding any such termination, Bianco shall be entitled to
receive the base salary and benefits accrued or accruable to Bianco pursuant to
this Agreement up to the date of such termination, The Company will provide
insurance disability coverage on the same conditions as other senior
management.
3
<PAGE> 4
6. Death. In the event of Bianco's death during the term of his
employment, this Agreement shall terminate as of the date of death. Bianco's
beneficiary or estate shall be entitled to receive any salary, stock options,
bonuses, vacation pay, or other benefits which have accrued or are accruable
pursuant to this Agreement through the date of death.
7. Termination for Cause. The Company shall have the right to
terminate the employment of Bianco hereunder for cause at any time if:
(a) Bianco is convicted by a court of competent and final
jurisdiction of any crime (whether or not involving the Company) which
constitutes a felony in the jurisdiction involved; or
(b) Bianco commits any act of fraud, embezzlement or similar
conduct against or shall breach a fiduciary obligation to the Company, or shall
be habitually drunk in public or otherwise act in such a manner as to adversely
reflect upon the reputation of the Company; or
(c) Bianco fails or refuses to perform in any material respect
any of his duties and responsibilities as required by this Agreement.
Any termination for cause may be effected by delivery to Bianco of a
written notice of termination, stating with the reason for termination, and
shall be effective as of the date of such notice. Upon termination for cause,
any salary, stock options, bonuses, vacation pay, or other benefits which have
accrued or are accruable through the date of termination shall be paid to
Bianco.
8. Termination Without Cause. The Company may terminate Bianco's
employment hereunder at any time within the first ninety (90) days (the "Trial
Period") with five (5) days prior notice. Subsequent to such Trial Period, the
Company may terminate Bianco's employment hereunder without cause at any time
upon ninety (90) days' prior written notice. Upon any such termination without
cause after two years of continuous employment of Bianco, Bianco shall be
entitled to receive a lump sum payment equal to the base salary and guaranteed
bonus which would have been payable to Bianco for the 12 months following the
date of termination as mutually agreed by the parties in writing.
For purposes of this Agreement, the following shall be deemed a
termination of Bianco's employment hereunder without cause:
(a) Bianco's substantive responsibilities are materially changed
without the prior approval or ratification of Bianco.
(b) All or substantially all of the assets of the Company are sold,
or there is a "Change in Control" of the Company, unless in conjunction with
such sale or Change in Control this Agreement is extended through a date at
least three years from the date of the sale or Change
4
<PAGE> 5
in Control.
For purposes of this Agreement, "Change in Control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 as in effect on the date of this Agreement. Without
limitation, such a change in control shall be deemed to have occurred if and
when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than a person currently holding such
a position, is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of that company's then outstanding securities, or (b)
during any period of twelve (12) consecutive months, commencing before or after
the date of this Agreement, individuals who at the beginning of such twelve
(12) month period were directors of the Company cease for any reason to
constitute at least thirty percent (30%) of the Company's Board of Directors.
9. Termination by Bianco. Bianco may terminate his employment
hereunder, subject to the restrictive covenants hereinafter stated, upon giving
ninety (90) days prior written notice to the Company, in which event Bianco's
salary and benefits shall be continued through the date of termination.
10. Certain Restrictive Covenants.
(a) Bianco recognizes and acknowledges that confidential
information may exist, from time to time, with respect to the business of the
Company. Accordingly, Bianco agrees that he will not disclose any confidential
information relating to the business of the Company to any individual or entity
during his employment or hereafter for a period of two (2) years. The
provisions of this paragraph shall not apply to information which is or shall
become generally known to the public or the trade (except by reason of Bianco's
breach of his obligations hereunder), information which is or shall become
available in trade or other publications (except by reason of Bianco's breach
of his obligations hereunder), and information which Bianco is required to
disclose by order of a court of competent jurisdiction (but only to the extent
specifically ordered by such court and, when reasonably possible, if Bianco
shall give the Company prior notice of such intended disclosure so that it has
the opportunity to seek a protective order if it deems appropriate).
(b) As used in this Agreement, "confidential information" shall
mean studies, plans, reports, survey, analyses, sketches, drawing, notes,
records, unpublished memoranda or documents, and all other non-public
information relating to the Company's manufacturing and marketing activities,
including, shop practices, equipment, research data, marketing and sales
information, personnel data, customer lists, employee lists, financial data,
plans and all other techniques, know how and trade secrets which presently or
in the future are in the possession of the Company.
(c) All memoranda, notes, records, reports, sketches,
photographs, drawing,
5
<PAGE> 6
plans, paper or other documents made or compiled by or made available to Bianco
in the course of employment hereunder are and shall be the sole and exclusive
property of the Company and shall be promptly delivered and returned to the
Company by Bianco immediately upon termination of employment with the Company.
(d) For so long as he is employed by the Company, and for a
period of two years hereafter, Bianco shall not engage (either as principal,
agent or consultant, or through any corporation, firm or organization in which
he may be an officer, director, employee, controlling stockholder, partner,
member, or with which he is otherwise affiliated) directly or indirectly, in
any activity or business anywhere in the State of Florida or in any state in
which the Company transacts business and which is engaged in the recycling or
reconverting of polystyrenes without the Company's prior written consent.
11. Injunction. Bianco acknowledges that the services to be rendered
by him are of a special, unique and extraordinary character, and, in connection
with such services, he will have access to confidential information vital to
the Company's business. Accordingly, Bianco consents and agrees that if he
violates any of the provisions of paragraph 10 hereof, the Company would
sustain irreparable harm and, therefore, in addition to any other remedies
which may be available to it, the Company shall be entitled to an injunction
restraining Bianco from committing or continuing any such violation of this
Agreement. Nothing in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedy or remedies including, without
limitation, recovery of damages.
12. Modification or Elimination of Restrictions. In the event that any
of the restrictions contained in paragraphs 10 or 11 hereof shall be held to be
in any way an unreasonable restriction on Bianco, then the court so holding may
reduce the territory and/or period of time in which such restriction operates,
or modify or eliminate any such restriction to the extent necessary to render
such paragraphs enforceable.
14. Entire Agreement. This Agreement represents the entire Agreement
between the parties with respect to the subject matter hereof and shall not be
modified or affected by any offer, proposal, statement or representation, oral
or written, made by or for either party in connection with the terms hereof.
This Agreement may not be amended except by an instrument in writing signed by
the Company and Bianco.
15. Serviceability. Should any provision or clause hereof be held to
be invalid, such invalidity shall not affect any other provision or clause
hereof which can be given effect without such invalid provision. This Agreement
shall inure to the benefit of and be binding upon the Company, its successors
and assigns and upon Bianco and his heirs, executor, administrators, or other
legal representatives.
6
<PAGE> 7
16. Laws Applicable. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
INTERNATIONAL FOAM SOLUTIONS, INC.
ANTONIO BIANCO
/s/ ANTONIO BIANCO By: /S/ HARVEY KATZ
- ----------------------------------- -----------------------------
SS# ###-##-#### HARVEY KATZ, CEO
Attest
by: /s/
-------------------------------
NAME
7
