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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1994
or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
------- -------
Commission File No.: 0-16372
KIMMINS ENVIRONMENTAL SERVICE CORP.
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(Exact name of registrant as specified in its charter)
Delaware 59-2763096
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1501 Second Avenue - Tampa, Florida 33605
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (813) 248-3878
Securities registered pursuant to Section 12(b) of the Act:
Common Stock New York Stock Exchange
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(Title of each class) (Name of each exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES (X) NO ( )
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Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The number of shares of Common Stock outstanding
on March 24, 1995, was 13,328,992
The number of shares of Class B Common Stock outstanding
on March 24, 1995, was 6,874,706
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$13,584,370
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Aggregate market value of voting stock (Common Stock) held by
non-affiliates as of March 24, 1995.
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PART I
Item 1. Business
THE COMPANY
Kimmins Environmental Service Corp. and its subsidiaries
(collectively, the "Company") is a solid waste management and specialty
contracting company that, through its subsidiaries, provides a full range of
solid waste handling services and project-oriented services for infrastructure
development and the remediation of sites and facilities.
The Company's services are as follows:
- SOLID WASTE MANAGEMENT SERVICES - Transfer, resource recovery,
transportation, disposal of non-hazardous waste, and
demolition of residential and commercial facilities.
- SPECIALTY CONTRACTING
- ENVIRONMENTAL AND UTILITY CONTRACTING - Environmental
and utility contracting, including infrastructure
services such as sewer lines, water lines, and roads.
- INDUSTRIAL DEMOLITION, DISMANTLING, AND ABATEMENT -
Dismantling of facilities or structures including
offshore oil platforms; draining liquid wastes from
pipes and tanks; asbestos removal, cleanup, disposal,
and reinsulation; removal of above- and below-ground
tanks; removal and disposal or sale of other
equipment; and sale of scrap materials.
- HAZARDOUS WASTE SERVICES - On-site treatment,
containment, incineration, and excavation and removal.
The Company's surety services were spun-off from the Company through
the distribution of equity securities of the holding company of the surety
subsidiaries to its stockholders during October 1992.
The Company's services may be used individually or in combination as
required to meet the specific needs of customers. The Company's business
strategy is to draw upon its solid waste management and contracting experience
to perform complex projects requiring a broad range of services. Although each
of the Company's business lines can operate independently from the other
related services, the Company believes that integration of these services gives
it a competitive advantage by relieving the customer of the burden of
coordinating activities of multiple contractors.
During its first years of operation, the Company emphasized, among
other services offered, a broad range of contracting services. As the need for
waste-related and specialty contracting services has grown in response to
heightened public concern and government regulation, the Company has used its
capabilities in facilities demolition and dismantling and in the management of
complex construction projects to become increasingly involved in solid waste
management and project-oriented activities.
The Company's services are provided to industrial, commercial,
institutional and governmental customers, which have included Shell Oil
Company, Mobil Oil Corporation, the City of Tampa, the United States Air Force,
and the U.S. Army Corps of Engineers. Operations and marketing efforts are
managed through the Company's subsidiaries, which are located in the south and
northeast.
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The Company's strategy is to continue to focus on solid waste
management services and specialty contracting projects for large manufacturing
and governmental customers. To further this strategy, the Company intends to
expand the range of solid waste management services offered. To date, the
Company's activities in the area of solid waste management have consisted of
opening and operating resource recovery and transfer facilities in various
cities in Florida and bidding on and obtaining industrial, commercial, and
municipal solid waste management contracts.
SERVICES
SOLID WASTE MANAGEMENT SERVICES:
The Company, through its majority-owned subsidiary, TransCor Waste
Services, Inc. ("TransCor"), provides solid waste management services to
commercial, industrial, residential, and municipal customers. In connection
with such services, the Company currently owns and operates fully-permitted
construction and demolition ("C&D") transfer and recycling ("T&R") facilities
in four of the largest metropolitan regions in the state of Florida. The
Company had also, pursuant to several municipal contracts, commenced the
residential curbside collection of a variety of already segregated recyclable
forms of solid waste, including such materials as newspapers, cardboard,
plastic, metals, and glass. In addition to its T&R operations, the Company
collects and disposes of all types of non-hazardous solid waste for industrial
and commercial customers in its T&R regions, and it provides residential
garbage collection services for several municipalities in Pinellas County and
St. Lucie County, Florida, areas. The Company also provides demolition and
other related services in conjunction with, and as an economic complement to,
its solid waste management services.
The Company's permits allow it to segregate and recycle part of the
C&D debris and yard waste accepted at its T&R facilities (thereby decreasing
the Company's landfill disposal costs), and the Company has the capability to
economically haul the non-recyclable waste to outlying rural landfills (where
disposal fees are significantly lower than those charged by urban landfills).
Consequently, the Company can charge lower rates at its T&R facilities than
those charged by landfill operators in the same vicinities. In addition,
disposal of debris at the Company's T&R facilities generally requires less time
and results in less damage to waste collection vehicles than landfill disposal.
As a result, waste haulers, including those in competition with the Company's
own collection services, are provided strong economic and other incentives for
disposing of their C&D debris and yard waste at the Company's T&R facilities.
The Company provides demolition services for commercial and
residential customers. Its demolition services include the razing and
dismantling of facilities and structures, the recovery of demolished material
for reuse and recycling, and the disposal of non-recycled demolition debris.
The typical demolition projects of the Company are single and multi-story urban
buildings and small warehouses, manufacturing plants, and other facilities.
Typically, the Company enters into separate demolition contracts for each
project, which are usually for a term of less than six months.
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SPECIALTY CONTRACTING:
INFRASTRUCTURE AND UTILITY CONTRACTING SERVICES
Prior to mid-1988, the Company's contracting business was directed
primarily at lower-margin general contracting for industrial, commercial,
institutional and governmental customers, including schools, apartments and
shopping centers. During 1988, the Company redirected its focus toward
environmental and utility contracting, including infrastructure and
reconstructive service work.
The Company, through its subsidiary, Kimmins Contracting Corp.,
continues to provide comprehensive non-environmental contracting services,
including infrastructure services such as water and sewer line installation,
replacement and repair to private and government customers primarily in the
State of Florida. Related infrastructure development includes road
installation, repair and widening, and installation, repair and enhancement of
drainage and wastewater services.
INDUSTRIAL DEMOLITION, DISMANTLING, AND ABATEMENT SERVICES
The Company, through its subsidiaries, Kimmins Industrial Service
Corp., Kimmins Abatement Corp., and Kimmins International, offers demolition
and dismantling of facilities or structures; asbestos removal; cleanup,
disposal, and reinsulation; removal of above- and below-ground storage tanks;
removal and disposal or sale of industrial equipment; and the sale of equipment
and scrap materials.
Demolition and dismantling projects result from the closing or
retooling of facilities due to such factors as technological obsolescence of
facilities, corporate mergers and consolidations of operations, and the
relocation of manufacturing operations to low-cost labor areas or areas subject
to less stringent regulation, primarily in foreign countries. In addition,
site remediation, particularly in the case of environmental contamination of a
site, frequently requires demolition or dismantling of a contaminated facility.
Dismantling is the precise disassembly of a manufacturing or
production facility on a piece-by-piece basis in order to recover equipment as
complete operating units that can be reinstalled at another location.
Dismantling enhances the value of the facility above scrap market values. The
Company is paid a fee for dismantling services and, usually, a commission on
the sale of non-relocated equipment.
Demolition usually requires wrecking services for which the Company is
paid a fee by the customer. In certain projects, the Company may also receive
additional revenue from selling the scrap material. The Company's services in
these areas include dismantling large structures (including refineries, utility
plants, and offshore oil platforms); draining liquid wastes from pipes and
tanks; removing above- and below-ground tanks; cleaning and disposing of
contaminated equipment; and controlled demolition.
Certain demolition projects also involve asbestos removal, cleanup and
disposal. The Company is de-emphasizing asbestos abatement services and
generally will only perform these services in conjunction with other
environmental demolition activities.
HAZARDOUS WASTE SERVICES
The Company, through its subsidiary, ThermoCor Kimmins, Inc., offers a
full range of services for the removal, treatment, and disposal of hazardous
materials. The services offered include on-site incineration
(thermo-destruction) of hazardous waste, as well as other on-site treatment
methods, construction of containment systems, and the excavation and removal of
contaminated material.
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On-site treatment. On-site remediation involves treating hazardous
materials at a customer's site to reduce or eliminate the need for off-site
transportation and disposal of hazardous materials, thus decreasing the cost to
and potential liability of the customer. On-site treatment includes a variety
of techniques which either eliminate the substance permanently, reduce its
toxicity or volume, or stabilize its constituents for disposal on-site or
off-site at a permitted disposal facility. Treatment and disposal methods used
by the Company include incineration, stabilization and fixation,
dechlorination, filtration, dewatering, air stripping and carbon adsorption,
precipitation, and bioremediation.
Containment. Containment systems are constructed to prevent the
migration of hazardous materials from a site to the surrounding groundwater,
surface water, soil or air. While containment can be a permanent remedial
solution, it is also used as an interim step followed by excavation and removal
or on-site treatment. The types of containment systems that the Company
installs include containment cells, surface caps and slurry walls.
Excavation and removal. Excavation and removal involve the excavation
of contaminated materials for containment, on-site treatment or off-site
disposal. When off-site disposal is required, the Company subcontracts with
licensed third parties for the transportation of the material for off-site
disposal. As part of its quality control program, the Company regularly
samples and analyzes excavated materials to verify that the contaminants are
consistent with those identified in the remediation plan.
SURETY SERVICES
The Company, prior to October 1, 1992, through its subsidiaries,
Cumberland Holdings, Inc. ("Cumberland"), Cumberland Casualty & Surety Company
and Surety Specialists, Inc., provided reinsurance for other specialty sureties
and performance and payment bonds (surety bonds) for contractors, principally
in the environmental industry. The surety services provided include brokerage
and, to a lesser extent, direct surety. The Company filed with the Securities
and Exchange Commission ("Commission") a registration statement for the shares
of common stock of Cumberland to spin-off Cumberland into a stand-alone,
publicly-held company. The registration statement became effective by
operation of law on February 10, 1992, and the spin-off was effected on October
1, 1992.
SEGMENT INFORMATION
See Note 18 of Notes to Consolidated Financial Statements of the
Company for the years ended December 31, 1992, 1993, and 1994 for the Company's
financial segment information.
PERFORMANCE BONDS
The Company is required to post performance bonds in connection with
certain asbestos abatement, waste remediation, demoli- tion, and construction
contracts. For the year ended December 31, 1994, a majority of the Company's
revenue was derived from contracts or projects which required the Company to
post performance bonds. The Company's current bonding coverage for non-
environmental projects is $30 million for an individual project ($100 million
aggregate). The Company has been able to obtain bonding coverage in amounts up
to $8.5 million for environmental projects. However, the Company has
experienced difficulties in prior years in obtaining bonding coverage for
environmental projects in excess of this amount. However, some environmental
projects either do not require a bond or require a bond for less than the
complete contract price of the project value. The Company has generally been
able to obtain bonding coverage for environmental projects in excess of $8.5
million as a result of personal surety bonds or collateral furnished by Francis
M. Williams, President of the Company, and one of his affiliates. Neither Mr.
Williams nor his affiliates or any other party has any obligation to provide
surety bonds, collateral or to otherwise assist the Company in connection with
bonding coverage.
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In addition to performance bond requirements, some jurisdictions in
the future may require the posting of substantial bonds or require companies
engaged in solid waste management and related activities to provide other
financial assurances covering the closure, post-closure monitoring and
corrective activities for certain solid waste management facilities.
MARKETING
The Company, through its majority-owned subsidiary, TransCor Waste
Services, Inc., generally obtains solid waste collection contracts for its
services or for the operation of certain solid waste management facilities
through the process of competitive bidding, purchase orders, or negotiations.
The Company's marketing efforts include door-to-door sales, monitoring trade
journals and other industry sources for bid solicitations by various entities,
including government authorities and related instrumentalities, and responding
to such bid solicitations, which may include requests for proposals ("RFPs")
and requests for qualifications ("RFQs"). The Company also endeavors to be
included on lists of qualified bidders frequently contained in RFPs and RFQs.
In response to an RFP or RFQ, the soliciting entity requires a written response
within a specified period. Generally, in the case of an RFP, a bidder submits
a proposal detailing its qualifications, the services to be provided, and the
cost of the services to the soliciting entity; then, such entity, based on its
evaluation of the proposals submitted, awards the contract to the successful
bidder. In the case of an RFQ, a bidder submits a response describing its
experience and qualifications, the soliciting entity then selects the bidder
believed to be the most qualified, and then negotiates all of the terms of the
contract, including the cost of the services. The Company's single largest
solid waste collection contract was derived through competitive bidding, and
the Company expects that future significant contracts will be obtained through
competitive bidding. The Company has also obtained customers through
recommendations and referrals from existing customers.
The Company's specialty contracting business results primarily from
customers for whom the Company has previously provided services, prior customer
references, and from direct marketing efforts. In particular, the Company
believes its national reputation as a leading demolition and dismantling
contractor has contributed significantly to its ability to attract specialty
service business.
The Company's specialty contracting subsidiaries direct their
marketing activities through regional offices in Tampa, Florida; Houston,
Texas; and Niagara Falls, New York. All of the offices are located in areas
with a high concentration of industrial facilities. The Company believes
that accurate bidding is crucial in securing new contracting projects and
completing them profitably. The Company uses computerized bidding systems in
conjunction with site visits to develop bids for contracting projects. While
bid price is an important factor in obtaining contracts, potential clients also
consider the reputation, experience, safety record and financial strength of
the bidders in awarding contracts.
CUSTOMERS
Customers for the Company's solid waste management services include
local and regional contractors, municipalities, institutions, other waste
haulers, and local businesses. The primary private customers for the Company's
specialty contracting services are Fortune 500 corporations engaged in heavy
manufacturing, such as chemical, petroleum, petrochemical, paper, and steel
companies as well as public utilities and federal, state and local government
agencies. For the year ended December 31, 1994, 66 percent and 34 percent,
respectively, of the Company's gross revenue were derived from private and
governmental customers, respectively.
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A substantial portion of the Company's gross revenue is derived from
services provided to federal, state and local government agencies including the
EPA. Government contracts are subject to legislation mandating a balanced
budget; delays in funding; lengthy review processes for awarding contracts;
delay or termination of contracts at the convenience of the government;
termination, reduction or modification of contracts in the event of changes in
the government's policies or because of budgetary constraints. Furthermore,
increased or unexpected costs could result in losses or reduced profits under
fixed-price government as well as commercial contracts.
BACKLOG
As of December 31, 1994, the Company had a backlog of uncompleted
projects under contract aggregating approximately $88,806,000, (compared to
approximately $83,971,000 as of December 31, 1993) of which approximately
$28,320,000 is attributable to environmental and utility contracting services,
approximately $6,282,000 is attributable to demolition and dismantling
services, approximately $454,000 is attributable to asbestos abatement
services, approximately $13,250,000 is attributable to site remediation
services, and approximately $40,500,000 is attributable to solid waste
management services. The Company anticipates that it will recognize
approximately $55,800,000 of revenues from these projects by the end of 1995
with the remaining revenue to be recognized through 1999.
COMPETITION
Although developments in the solid waste management industry have
resulted in the emergence of large private and public solid waste management
companies and in consolidating trends in the industry, the solid waste
management business is characterized by intense competition. The Company
believes that no single company has a dominant market share of the solid waste
management business in the United States or Florida. Although competition
varies by locality and type of services, the Company's principal sources of
competition are local and regional solid waste management companies of varying
size, which primarily provide collection or disposal services to customers in a
limited geographic area; large regional and national solid waste management
companies which operate over more extensive geographic areas, provide
completely integrated solid waste management services, own or operate disposal
sites and engage in various transfer and resource recovery activities; and
counties and municipalities that maintain their own solid waste collection and
disposal services for residents and businesses in the locality. National
companies which compete against the Company include, among others, Waste
Management, Inc., and Browning-Ferris Industries, Inc.
The Company believes that the principal competitive factors in the
solid waste management industry are price, reputation, services, managerial
experience, financial assurance capability (particularly as it relates to
municipal contracts), and range of services offered.
The Company believes that its ability to offer a broad range of
specialty contracting services provides it with significant competitive
advantage. Nevertheless, the Company faces substantial competition from
national, regional and local competitors, many of which are well established
and have substantially greater marketing, financial, technological and other
resources than the Company. Furthermore, some of the Company's competitors
possess certain hazardous materials handling capabilities which the Company
does not possess, including engineering, laboratory and off-site transportation
and storage and disposal. However, it has been the Company's experience that
subcontractors are available to provide these services.
The Company believes the principal competitive factors in the
specialty contracting services industry are safety, reputation, technical
proficiency, surety bonding capability, managerial experience, price, and
breadth of services offered.
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INSURANCE COVERAGE
The Company, consistent with industry trends, has experienced
difficulties in obtaining adequate insurance coverage against liabilities that
may be incurred in connection with the conduct of certain aspects of its
specialty contracting services business. Such coverage is often a prerequisite
to obtaining government and commercial contracts. The Company currently
maintains comprehensive general liability insurance, with total coverage of
$16,000,000 for any single occurrence and $18,000,000 for aggregate claims
relating to damage to persons or property. These policies cover all activities
of the Company and its subsidiaries except for its asbestos-related activities
and certain non-asbestos related liabilities such as pollution liability damage
(sudden or gradual) caused by the discharge or release of any irritant or
contaminant. In addition, the Company has comprehensive general liability
coverage which covers, among other things, specific asbestos-related risks up
to $10,000,000. In addition, the Company has obtained a $1,000,000 per
occurrence/$2,000,000 aggregate blanket policy for contractors pollution
liabilities and can obtain additional coverage of up to a total of $6,000,000
as required on a project-by-project basis.
GOVERNMENT REGULATION
The Company is subject to an extensive and frequently evolving
statutory and regulatory framework of federal, state, and local environmental,
health, safety, and transportation authorities, which framework imposes
significant compliance burdens and risks upon the Company. The Company
believes it is in substantial compliance with all material federal, state, and
local laws governing its material business operations. Nevertheless,
amendments to existing statutes and regulations, adoption of new statutes and
regulations and the Company's expansion into other jurisdictions and types of
operations could result not only in the additional risk of noncompliance, but
also in the increase in regulatory burden which could cause related increases
in costs and expenses.
Two of the statutes very important to the Company are the Resource
Conservation and Recovery Act of 1976, as amended, and the EPA's implementing
regulations of that statute (collectively, "RCRA"), and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"). RCRA establishes a comprehensive framework for state and federal
regulation of hazardous waste management. It seeks to prevent the release into
the environment of hazardous wastes through the development of solid waste
management plans and the regulation of the generation, transportation,
treatment, storage and disposal of hazardous wastes.
While RCRA was implemented to prevent the release of hazardous wastes
into the environment, CERCLA was designed to establish a national strategy to
remedy existing hazardous environmental conditions. CERCLA establishes
liability for clean up costs and environmental damages for owners and operators
of disposal sites, as well as for persons who generate, transport or arrange
for transportation of wastes to a particular site. While CERCLA generally
exempts responsible contractors from liability arising from the release or
threatened release to which the contractor is responding, it can impose
liability on a responsible contractor for that contractor's negligent and
grossly negligent acts.
On October 9, 1991, the EPA promulgated substantial revisions to its
existing RCRA Subtitle D implementing regulations. The revisions set forth
minimum national "open dump" criteria for publicly and privately owned
municipal solid waste landfills. They include location restrictions, design
and operating criteria, groundwater monitoring and corrective action standards,
closure and post closure care requirements, and financial assistance criteria.
Most revisions have become effective October 9, 1993, and states have revised
their own laws and regulations to be consistent with the RCRA criteria. Some
revisions (i.e., groundwater monitoring requirements) are being phased in over
a five-year period which began on October 9, 1991, and others relating to
financial responsibility became effective April 9, 1994.
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Many states have enacted statutes similar to RCRA and CERCLA
regulating the handling of hazardous substances and wastes. The Company could
be subject to substantial liability under these statutes to private parties and
government entities for fines or penalties, in some instances without any fault
on the part of the Company, because of the mishandling or release of any
hazardous substances.
PERMITS AND LICENSES
Many states license such areas of the Company's operations as asbestos
abatement and general contracting. Licensing requires that workers and
supervisors receive training from EPA approved and state certified
organizations and pass required tests. The Company is currently licensed to
perform its services in a majority of the 50 states and has applied for
licensing in several states in which it is not currently licensed. The Company
also operates in certain states that do not have a special asbestos abatement
or general contracting license requirement; however, these states have adopted
regulations regarding worker safety with which the Company must comply.
The Company may need additional licenses to expand its operations.
Although there can be no assurance, based upon the level of training of its
employees and its experience, the Company currently believes that it will be
able to obtain all such required licenses.
EMPLOYEES
At March 24, 1995, the Company had approximately 725 employees, of
which 8 were employed in executive capacities, 50 in professional capacities,
77 in administrative capacities, 80 as field supervisors and 510 in field
operations. A total of 35 of the Company's employees are union members,
covered by various collective bargaining agreements. The Company has not
experienced any strikes or work stoppages and considers its relationship with
its employees to be satisfactory.
The Company, through its subsidiaries, has implemented employee safety
programs which require each employee to complete a general training and safety
program. Training topics include approved work procedures and instruction on
personal safety and the use of protective equipment. In addition, all
employees engaged in asbestos abatement activities are required to attend a
minimum three- to four-day course approved by the EPA and Occupational Safety
and Health Administration, and all supervisors of abatement projects are
required to attend a 40-hour safety course on an annual basis. Moreover,
employees are issued detailed training materials and are required to attend
ongoing safety seminars. The Company's subsidiaries also conduct job safety
analysis in the job bidding stage. Besides the precautions taken with respect
to projects, the Company takes additional measures to protect its asbestos and
site remediation workers, including providing them with additional protective
equipment and sponsoring periodic medical examinations.
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Item 2. Properties
The Company owns its principal executive offices which are located in
approximately 20,600 square feet of office space at 1501 and 1502 Second
Avenue, East, Tampa, Florida 33605. The offices are subject to a mortgage,
securing indebtedness evidenced by a promissory note with an outstanding
principal amount at December 31, 1994, of $1,975,000. The note matures on
August 1, 1999, and bears interest at 1.75 percent above the prime rate.
The Company leases the following offices:
<TABLE>
<CAPTION>
Location Lease Expiration Date Annual Rental
-------------------------- --------------------- -------------
<S> <C> <C>
2609 Allen-Genoa Road
Pasadena, Texas Month-to-month $3,240
256 Third Street
Niagara Falls, New York Month-to-month $18,300
</TABLE>
Item 3. Legal Proceedings
The Company's industry involves potentially significant risks of
statutory, contractual and common law liability. As a result, the Company's
business is characterized by involvement in litigation and administrative or
other proceedings initiated by governmental authorities and private parties;
companies are also frequently subject to fines and penalties. The Company is a
party to certain legal proceedings. Set forth below is information concerning
certain material litigation in which the Company is involved.
Two of the Company's subsidiaries, Kimmins Industrial Service Corp.
("KISC") and Kimmins Abatement Corp. ("KAC") were named defendants in lawsuits
which were filed in the United States District Court, located in the western
district of New York in February 1991, by two former employees injured while at
work. The plaintiffs in the suit sought damages of $12,500,000 from KISC, KAC,
and the owner of the job site where the work was performed, alleging negligence
and violations of New York's labor law relating to the provision of a safe and
properly equipped workplace. In 1994, KISC and KAC agreed to an out-of-court
settlement with the plaintiffs in response to the claims. Other than a
$250,000 deductible paid in a prior year under its insurance policy, the
balance of the payments due to the plaintiffs pursuant to the settlement
agreement was paid by KISC and KAC's insurance carriers.
The Company and one of its subsidiaries, Kimmins Abatement Corp.
("KAC"), were named defendants in an administrative com- plaint filed by the
United States Department of Labor ("DOL"), Office of Administrative Law Judges,
during September 1994. The plaintiff alleged that the Company and KAC violated
certain contractual obligations with regards to Equal Employment Opportunity
("EEO") regulations and sought a 180-day debarment against the Company and its
subsidiaries from bidding on all federal and federally assisted contracts. In
addition, the DOL sought the cancellation of the Company's present federal and
federally assisted contracts.
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In December 1994, the Company and KAC agreed to an out-of-court
settlement from the alleged EEO violations. The terms of the settlement
agreement included no cancellation of present federal and federally assisted
contracts. The Company agreed not to bid on government contracts for
demolition and asbestos abatement work for a period of 180 days, with the
exception of Kimmins Contracting Corp., which will continue to contract within
the state of Florida. In addition, KAC and KISC were debarred from entering
into any contracts with the United States government for a minimum of 180 days.
Another subsidiary, ThermoCor Kimmins, Inc. ("TCI"), was debarred from entering
into any contracts with the United States government involving demolition and
asbestos abatement work; however, TCI was able to continue to bid on contracts
for hazardous waste remediation. In addition, KAC, KISC, and TCI agreed to
comply with certain remedial actions which include proper notice of future
employment positions and the hiring of an EEO director. Management is of the
opinion that the 180 day debarment period will not have a material adverse
effect on the consolidated financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
The Company's common stock has been traded on the New York Stock
Exchange (symbol "KVN") since March 30, 1990. From May 19, 1987, until March
30, 1990, the Company's common stock traded in the over-the-counter market and
was quoted on NASDAQ's National Market System. The following table sets forth
for the periods indicated high and low sales prices of the Company's common
stock as reported by the New York Stock Exchange:
<TABLE>
<S> <C> <C>
1994 High Low
-------------- ------ -----
First Quarter 2 3/4 2 1/8
Second Quarter 2 3/8 1 3/4
Third Quarter 2 1/8 1 1/2
Fourth Quarter 1 7/8 1 3/8
1993 High Low
-------------- ------ -----
First Quarter 3 2 1/8
Second Quarter 3 1/4 2
Third Quarter 3 1/8 2 1/8
Fourth Quarter 3 2 1/8
</TABLE>
On March 24, 1995, there were approximately 1,500 holders of record of
the common stock. A number of such holders are brokers and other institutions
holding shares in "street name" for more than one beneficial owner.
Dividends
The payment by the Company of dividends, if any, in the future is
within the discretion of its Board of Directors and will depend upon the
Company's earnings, capital requirements (including working capital needs), and
financial condition, as well as other relevant factors. Certain agreements
between the Company and its lending institutions prohibit the Company from
paying cash dividends without the lenders' consent. Other than a three and
one-third cent per share of common stock cash dividend paid in July 1989, the
Company has not paid any cash dividends since its inception, and the Board of
Directors has no current plans to declare or pay any cash dividends in the
future.
11
<PAGE> 13
Item 6. Selected Financial Data
During February 1990, the Board of Directors declared a three-for-two
split of the Company's common stock and Class B common stock, effected in the
form of a stock dividend, payable on February 19, 1990, to stockholders of
record on February 1, 1990. All share and per share information has been
adjusted to reflect the stock split on a retroactive basis.
The Company filed with the Securities and Exchange Commission
("Commission") a registration statement for the shares of common stock of
Cumberland Holdings, Inc. ("Cumberland"), a wholly-owned subsidiary which was a
holding company for the Company's surety operations, to spin-off Cumberland
into a stand-alone, publicly-held company. The registration statement became
effective by operation of law on February 10, 1992, and the spin-off was
effected on October 1, 1992. The historical balance sheet information
presented on the following pages has been restated to present the surety
operations as a discontinued operation. (See Note 2 of Notes to Consolidated
Financial Statements.)
12
<PAGE> 14
HISTORICAL INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data)
-------------------------------------------------------------------
1990 1991 1992 1993 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenue $99,312 $100,646 $87,442 $83,609 $96,755
Net revenue 60,941 73,741 78,614 77,405 85,353
Operating income 2,645 5,012 1,782 3,666 2,670
Litigation settlements (1) (4,230) 296 (379) - -
Income (loss) from continuing
operations before provision for income
taxes (3,477) 4,216 99 3,196 1,533
Income (loss) from continuing
operations (2,154) 2,593 61 1,753 797
Income (loss) from discontinued
operations (2) 364 (271) 124 - -
Net income (loss) (1,790) 2,322 185 1,753 797
Income (loss) from continuing
operations per share - primary (.17) .19 - .13 .06
Income (loss) from discontinued
operations per share - primary .03 (.02) .01 - -
Net income (loss) per share - primary (.14) .17 .01 .13 .06
Weighted average number of common
shares outstanding - primary 12,760 13,324 13,327 13,329 13,329
Income (loss) from continuing
operations per share - fully diluted (.17) .19 - .13 .06
Income (loss) from discontinued
operations per share - fully diluted .03 (.02) .01 - -
Net income (loss) per share - fully
diluted (.14) .17 .01 .13 .06
Weighted average number of common
shares outstanding - fully diluted 12,760 13,324 13,327 13,423 13,347
Cash dividends per share None None None None None
</TABLE>
(1) See Note 5 of Notes to Consolidated Financial Statements for the
Company's litigation settlement information.
(2) See Note 2 of Notes to Consolidated Financial Statements for the
Company's distribution of its surety services.
13
<PAGE> 15
HISTORICAL BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As of December 31,
(In thousands)
-------------------------------------------------------------
1990 1991 1992 1993 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current assets $40,423 $36,880 $33,068 $33,716 $36,200
Working capital 2,329 14,034 8,253 12,041 11,205
Total assets 76,095 70,712 68,381 70,192 72,689
Long-term debt 18,075 23,680 21,206 19,454 17,032
Stockholders' equity 19,879 22,527 20,783 23,102 24,514
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
INTRODUCTION
The Company conducts its business in two segments: specialty
contracting services and solid waste management services. The specialty
contracting services segment provides comprehensive services including
facilities demolition and dismantling, mobile incineration, excavation, removal
and disposal of contaminated soil, groundwater treatment and asbestos
abatement. The solid waste management services segment offers storage,
collection, transfer, transportation, resource recovery and disposal of
non-hazardous waste.
The Company filed with the Securities and Exchange Commission
("Commission") a registration statement for the shares of common stock of
Cumberland Holdings, Inc. ("Cumberland"), a wholly-owned subsidiary which was a
holding company for the Company's surety operations, to spin-off Cumberland
into a stand-alone, publicly-held company. The registration statement became
effective by operation of law on February 10, 1992, and the spin-off was
effected on October 1, 1992.
During March 1993, the initial public offering of the Company's
subsidiary, TransCor, became effective. The offering consisted of 1,000,000
shares of TransCor's common stock, at a price of $5.00 per share. This
offering resulted in the Company owning 74 percent of TransCor.
14
<PAGE> 16
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the
percentage of net revenue represented by certain items in the financial
statements of the Company, and (ii) the percentage change in the dollar amount
of such items from period to period.
<TABLE>
<CAPTION>
==========================================================================================================
Percentage Increase
Percentage of Net Revenue (Decrease)
Year Ended December 31, Year ended December 31,
-------------------------------------------------------------------
1993 vs. 1994 vs.
1992 1993 1994 1992 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross revenue 111.1% 108.0% 113.4% (4.4%) 15.7%
Outside services 11.1% 8.0% 13.4% (29.7%) 83.8%
---------- --------- ---------
Net revenue 100.0% 100.0% 100.0% (1.5%) 10.3%
Cost of revenue earned 85.0% 82.6% 85.8% (4.3%) 14.5%
---------- --------- ---------
Gross profit 15.0% 17.4% 14.2% 14.3% (9.9%)
Selling, general and
administrative expense 12.7% 12.6% 11.1% (2.0%) (3.4%)
---------- --------- ---------
Operating income 2.3% 4.7% 3.1% 105.7% (27.2%)
Litigation settlement (0.5%) 0.0% 0.0% -% -%
Non-operating gain 0.0% 1.1% 0.0% 100.0% (100.0%)
Minority interest in net income
of subsidiary 0.0% (0.3%) 0.0% -% -%
Interest expense, net (1.7%) (1.4%) (1.3%) (18.5%) 1.3%
---------- --------- ---------
Income from continuing
operations before provision for
income taxes 0.1% 4.1% 1.8% 3140.6% (52.0%)
Provision for income taxes 0.0% 1.8% 0.9%
---------- --------- ---------
Income from continuing
operations 0.1% 2.3% 0.9% 2788.2% (49.0%)
Income from discontinued
surety operations, net of taxes 0.1% 0.0% 0.0% -% -%
---------- --------- ---------
Net income 0.2% 2.3% 0.9% 846.3% (54.5%)
========== ========= =========
==========================================================================================================
</TABLE>
15
<PAGE> 17
YEAR ENDED DECEMBER 31, 1994, COMPARED TO YEAR ENDED DECEMBER 31, 1993
During the year ended December 31, 1994, net revenue increased by 10
percent to $85,353,000 from $77,405,000 for the year ended December 31, 1993.
The increase is primarily due to the growth of the Company's utility
contracting services ($10,700,000 increase in net revenue) and to the continued
growth of the Company's solid waste management services ($4,098,000 increase in
net revenue). This increase offsets certain decreases in the Company's
industrial demolition services ($2,789,000 decrease in net revenue) and
hazardous waste services ($2,729,000 decrease in net revenue).
Outside services, which primarily consist of payments to
subcontractors, increased as a percentage of net revenue from 8 percent during
the year ended December 31, 1993, to 13 percent during 1994. The Company will
utilize the services of a subcontractor when it determines that an economic
opportunity exists with regards to internally providing the services.
Cost of revenue earned increased to $73,235,000 for the year ended
December 31, 1994, from $63,959,000 for the comparable period of 1993. As a
result, gross profit during the year ended December 31, 1994, decreased to
$12,117,000 (14 percent of net revenue) from $13,496,000 (17 percent of net
revenue) in 1993. The decrease in gross profit is primarily associated with
losses on two utility contracting projects during the fourth quarter of 1994
that failed to perform to the Company's original projections and lower profit
margins earned on certain solid waste management services.
During 1994, selling, general and administrative expenses decreased to
$9,447,000 (11 percent of net revenue) from $9,780,000 (13 percent of net
revenue) for the year ended December 31, 1993. The dollar and percentage
decreases were primarily a result of consolidation of certain field offices and
the corresponding reduction of the Company's administrative functions.
As a result of the foregoing, operating income decreased to $2,760,000
(3 percent of net revenue) during the year ended December 31, 1994, from
$3,666,000 (5 percent of net revenue) during the same period in 1993.
Minority interest in net income of subsidiary was $61,000 for the year
ended December 31, 1994, compared to $287,000 for the year ended December 31,
1993. The minority interest in net income of subsidiary reflects approximately
26 percent of TransCor's earnings as a result of the March 25, 1993, initial
public offering of TransCor's common stock. The decrease in TransCor's
earnings between years is attributable to the lower profit margins earned on
certain solid waste management services and to the effects of a fire at its
Jacksonville facility.
Net interest expense increased slightly to $1,077,000 from $1,063,000.
The average amount of interest-bearing debt outstanding was consistent
between periods.
The Company's effective tax rate was 48.0 percent for the year ended
December 31, 1994, compared to a tax rate of 45.2 percent for the year ended
December 31, 1993. The increase in the effective tax rate was primarily due to
higher state income taxes and additional taxes on the income of TransCor.
As a result of the foregoing, net income for the year ended December
31, 1994, was $797,000 (less than 1 percent of net revenue) compared to a net
income of $1,753,000 (2 percent of net revenue) during the same period in 1993.
16
<PAGE> 18
YEAR ENDED DECEMBER 31, 1993, COMPARED TO YEAR ENDED DECEMBER 31, 1992
During the year ended December 31, 1993, net revenue decreased by 2
percent to $77,405,000 from $78,614,000 for the year ended December 31, 1992.
The decrease is due primarily to lower revenue generated from the Company's
remediation services.
Outside services, which primarily consist of payments to
subcontractors, declined as a percentage of net revenue from 11 percent during
the year ended December 31, 1992, to 8 percent during 1993. The decrease is
related primarily to a reduction of reliance on subcontractors as the Company
performs a substantial portion of its contract work.
Cost of revenue earned decreased to $63,959,000 for the year ended
December 31, 1993, from $66,847,000 for the comparable period of 1992. The
decrease in cost of revenue earned corresponds with the decrease in the
Company's net revenue. Gross profit during the year ended December 31, 1993,
increased to $13,446,000 (17 percent of net revenue) from $11,767,000 (15
percent of net revenue) in 1992. The increase in gross profit is associated
primarily with increased revenue volume from the Company's solid waste
management segment, which generates a higher gross margin return than the
Company's other operating segments.
During 1993, selling, general and administrative expenses decreased to
$9,780,000 (13 percent of net revenue) from $9,985,000 (13 percent of net
revenue) for the year ended December 31, 1992. The dollar decrease was
primarily a result of consolidation of certain field offices and the
corresponding reduction of the Company's administrative functions, partially
offset by an increase in bad debt expense of TransCor. (See Note 17 of Notes
to Consolidated Financial Statements.)
As a result of the foregoing, operating income increased to $3,666,000
(5 percent of net revenue) during the year ended December 31, 1993, from
$1,782,000 (2 percent of net revenue) during the same period in 1992.
During the year ended December 31, 1993, the Company recognized a
$880,000 non-operating gain relating to the public offering of 1,000,000 shares
of the common stock of the Company's majority-owned subsidiary, TransCor. (See
Note 17 of Notes to Consolidated Financial Statements)
Minority interest in net income of the subsidiary was $287,000 for the
year ended December 31, 1993 (none for 1992). The minority interest in net
income of the subsidiary reflects 26 percent of the earnings of the Company's
consolidated subsidiary, TransCor, since March 25, 1993, the date of the
initial public offering of TransCor's common stock.
Net interest expense decreased to $1,063,000 from $1,304,000 primarily
due to the net proceeds associated with the sale of TransCor's common stock
being used to decrease the amount of interest-bearing debt.
The Company's effective tax rate was 45.2 percent for the year ended
December 31, 1993, compared to a tax rate of 38.5 percent for 1992. The
increase in the effective tax rate was partially due to the Company's ownership
of TransCor dropping below 80 percent, which precludes the inclusion of
TransCor in the consolidated tax return. Accordingly, the Company has provided
for additional income tax on its share of TransCor's earnings. (See Note 14 of
Notes to Consolidated Financial Statements.)
As a result of the foregoing, the Company's income from continuing
operations for the year ended December 31, 1993, was $1,753,000 (2 percent of
net revenue) compared to income from continuing operations of $61,000 (less
than 1 percent of net revenue) during the same period in 1992.
Income from discontinued operations was $125,000 for the year ended
December 31, 1992 (none for 1993). The income from discontinued surety
operations was due primarily to the successful operating performance of the
surety business.
As a result of the foregoing, net income for the year ended December
31, 1993, was $1,753,000 (2 percent of net revenue) compared to $185,000 (less
than 1 percent of net revenue) during the same period in 1992.
17
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $3,678,000, $2,145,000, and
$3,884,000 in 1992, 1993, and 1994, respectively. For 1994, the cash provided
by operating activities of $3,884,000 is due primarily to cash provided by net
income plus the effect of depreciation and amortization, net of changes in
certain operating assets and liabilities (primarily accounts receivable,
accounts payable, and accrued expenses). For 1993, the cash provided by
operating activities of $2,145,000 is due primarily to cash provided by net
income plus the effect of depreciation and amortization, net of changes in
certain operating assets and liabilities (primarily costs and estimated
earnings on uncompleted contracts, accounts receivable, and accounts payable).
For 1992, the cash provided by operating activities of $3,678,000 is primarily
due to cash provided by net income plus the effect of depreciation and
amortization, net of changes in certain operating assets and liabilities
(primarily costs and estimated earnings on uncompleted contracts, accounts
receivable, and accounts payable). The Company had cash requirements related
to capital expenditures of $2,917,000, $4,574,000, and $5,804,000 in 1992,
1993, and 1994, respectively.
As of December 31, 1994, the Company has not borrowed any portion of
its term bank line of credit, with $1,500,000 available for future
borrowings. The Company is subject to a variety of restrictive covenants under
various debt agreements with its institutional lenders. In 1994, the Company
failed to meet the consolidated debt service coverage ratio with regards to its
ESOP loan. At December 31, 1994, $2,400,000 of this loan is classified as
long-term debt since it is the Company's intent to refinance the debt on a
long-term basis. Refinancing under similar terms and maturities is guaranteed
by the President of the Company. Inability to achieve future compliance with
the loan covenants could affect the Company's access to further borrowings or
require it to secure additional equity by other means. Current financial
resources and anticipated funds from operations are expected to be adequate to
meet cash requirements in the year ahead and the foreseeable future. At
December 31, 1994, the Company had cash of $479,000.
During the years ended December 31, 1994 and 1993, the Company's
average contract and trade receivables were outstanding for 80 and 99 days,
respectively. Both averages were based on fourth quarter gross revenue
annualized and compared to year end contract and trade receivables. Management
believes that the number of days outstanding for its receivables approximates
industry norms. A portion of the Company's contracting operations are
subcontracted, and any delay in collections of receivables relating to primary
contracts will generally result in a delay of payment to subcontractors.
On June 30, 1993, Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships (collectively,
the "Apartments"), the Company, Citicorp Real Estate, Inc. ("Citicorp"), and
Francis M. Williams entered into a settlement and note renewal agreement
whereby the Apartments' Chapter 11 bankruptcy filings were voluntarily
dismissed. In accordance with the terms of the settlement agreement,
$3,638,696 of the accounts receivable-affiliates balance recorded by the
Company was converted into a note receivable. The note receivable bears
interest at prime plus 1 3/8 percent, increasing to prime plus 2 percent on
July 1, 1995, with principal and interest payable in monthly installments
through December 31, 1998, and is guaranteed by Mr. Williams. Citicorp also
renewed their mortgage notes with the Apartments through December 31, 1998.
Management of the Company believes that this note receivable balance is fully
collectible since an independent appraisal showed the appraised value of the
properties exceeded all recorded liabilities and all monthly obligations of the
Apartments, including debt, are being met. The Company will also receive
reimbursement for substantially all legal fees and costs incurred related to
this matter.
At December 31, 1993 and 1994, $4,830,000 and $4,937,000,
respectively, of the contract and trade-affiliates balance is due from
corporate affiliates of the Company's president. Amounts due from the
partnerships discussed above at December 31, 1993 and 1994, are approximately
$3,626,000 and $3,588,000, respectively. The affiliated receivables relate to
contract services performed and are guaranteed by Mr. Williams.
During March 1993, the Company's solid waste management subsidiary,
TransCor Waste Services, Inc., completed an initial public offering of
1,000,000 shares, at a public offering price of $5.00 per share, of its common
stock, thereby decreasing the Company's percentage of ownership of such
subsidiary to approximately 74 percent.
18
<PAGE> 20
Historically, the Company has been able to obtain bonding coverage in
amounts up to $8.5 million for environmental projects. However, the Company
has experienced difficulties in obtaining bonding coverage for environmental
projects in excess of this amount. Although each project has its own distinct
and separate bond requirements, the Company may be unable to competitively bid
on projects which require a bond in excess of $8.5 million.
At December 31, 1994, the Company had no material commitments for
major capital expenditures.
See Note 18 of Notes to Consolidated Financial Statements for the
Company's business segment information.
EFFECTS OF CHANGE IN METHOD OF ACCOUNTING
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes," which is effective for fiscal years beginning
after December 15, 1992. This statement establishes revised financial
accounting and reporting standards for the effects of income taxes. The
revised standards require, among other things, an asset and liability approach
for financial accounting and reporting for deferred income taxes. In addition,
the deferred tax liabilities and assets are required to be adjusted for the
effect of any future changes in the tax law or rates. Effective January 1,
1992, the Company adopted SFAS No. 109. There was no cumulative effect of that
accounting change on operations nor did the change affect income for 1992.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact
upon the Company's operations.
Item 8. Financial Statements and Supplementary Data
See Item 14., Financial Statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
19
<PAGE> 21
PART III
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
----------------------- ------ --------------------------
<S> <C> <C>
Francis M. Williams 53 President and Director
Joseph M. Williams 38 Secretary and Treasurer
Michael Gold 46 Director
George Chandler 65 Director
</TABLE>
All directors of the Company hold office until the next annual meeting
of stockholders and the election and qualification of their successors.
Officers of the Company are elected annually by the Board of Directors and hold
office at the discretion of the Board of Directors.
Francis M. Williams has been President and Chairman of the Board of
the Company since its inception. For more than five years prior to November
1988, Mr. Williams had been Chairman of the Board and Chief Executive Officer
of Kimmins Corp. and its predecessors and sole owner of K Management Corp.
From June 1981 until January 1988, Mr. Williams was also the President and a
Director of College Venture Equity Corp., a small business investment company.
Mr. Williams has also been a Director of the National Association of Demolition
Contractors and a member of the Executive Committee of the Tampa Bay
International Trade Council.
Joseph M. Williams has been the Secretary and Treasurer of the Company
since October 1988. Since November 1991, Mr. Williams has served as
President and has been a Director of Cumberland Holdings, Inc., a holding
company whose wholly-owned subsidiaries provide reinsurance and specialty
sureties and performance and payment bonds. Since June 1986, Mr. Williams has
served as President and Vice President and has been a Director of Cumberland
Real Estate Holdings, Inc., the corporate general partner of Sunshadow
Apartments, Ltd. ("Sunshadow") and Summerbreeze Apartments, Ltd.
("Summerbreeze"), both of which are limited partnerships. In June 1992, both
Sunshadow and Summerbreeze filed voluntary petitions under Chapter 11 of the
United States bankruptcy law, and each entity submitted a prepackaged plan of
reorganization. In June 1993, Sunshadow and Summerbreeze entered into a
settlement and note renewal agreement and the bankruptcy filings were
voluntarily dismissed. Mr. Williams has been employed by the Company and its
subsidiaries in various capacities since January 1984. From January 1982 to
December 1983, he was the managing partner of Williams and Grana, a firm
engaged in public accounting. From January 1978 to December 1981, Mr. Williams
was employed as a senior tax accountant with Price Waterhouse & Co. Joseph M.
Williams is the nephew of Francis M. Williams.
Michael Gold has been a Director of the Company since November 1987.
For more than the past five years, Mr. Gold has been a partner in the Niagara
Falls, New York law firm of Gold and Gold.
George Chandler has been a Director of the Company since January 1990.
Since November 1989, Mr. Chandler has been a business consultant. Mr. Chandler
was Chairman of the Board from July 1986 to November 1989, and President and
Chief Executive Officer from October 1985 to November 1989 of Aqua-Chem, Inc.,
a manufacturer of packaged boilers and water treatment equipment. From May
1983 to October 1985, he was President, Chief Executive Officer and a Director
of American Ship Building Co., which is engaged in the construction, conversion
and repair of cargo vessels. Mr. Chandler is also a Director of The Allen
Group Inc., and DeVlieg Bullard, Inc.
20
<PAGE> 22
Set forth below is information regarding certain key employees of the
Company:
Thomas C. Andrews, 54, a registered professional engineer, has been
employed as President of ThermoCor Kimmins, Inc., the Company's subsidiary
engaged in site remediation, since January 1989. From November 1985 to January
1989, Mr. Andrews was employed as Vice President of Operations for ENSCO
Environmental Services, Inc., a company engaged in hazardous waste incineration
and remediation. From September 1981 to November 1985, Mr. Andrews served as
Operations Manager of Cecos Environmental Services, Inc., a company engaged in
treatment, transportation and disposal of hazardous waste. From December 1964
to September 1981, Mr. Andrews provided construction management services to
contractors throughout the eastern United States. Mr. Andrews has over 25
years experience in all phases of hazardous waste and construction management.
Charles A. Baker Jr., 52, has been employed as Vice President of
TransCor Waste Services, Inc., the Company's subsidiary engaged in solid waste
management, since November 1989. From June 1981 to November 1989, Mr. Baker
was employed as Vice President of Kimmins Contracting Corp., one of the
Company's principal operating subsidiaries.
Norman S. Dominiak, 50, has been employed by the Company as its Chief
Financial Officer since January 1994 and served as controller of ThermoCor
Kimmins, Inc., a subsidiary of the Company, from October 1991 until January
1994. From May 1988 until September 1991, Mr. Dominiak served as senior vice
president of Creative Edge, a company engaged in the manufacturing and
distribution of educational products. From October 1982 until April 1988, Mr.
Dominiak served as senior vice president of Cecos Environmental Services, Inc.,
a company engaged in treatment, transportation, and disposal of hazardous
waste. From 1965 until 1982, Mr. Dominiak was employed in various financial
capacities for the Carborundum Company.
Michael D. O'Brien, 44, has been employed by TransCor Waste Services,
Inc. (including its predecessor) as Vice President since October 1992. From
June 1987 to October 1992, Mr. O'Brien served as Vice President of Kimmins
Industrial Service Corp., a subsidiary of the Company. From July 1983 to June
1987, Mr. O'Brien served as Vice President of Jordan Foster Scrap Corporation
in Buffalo, New York, a company specializing in demolition and preparation of
scrap for sale. From November 1972 to July 1983, Mr. O'Brien was employed by
a national demolition contractor.
John V. Simon Jr., 39, has been President and General Manager of
Kimmins Contracting Corp., responsible for supervising utility construction,
since May 1981, and served as a Vice President of the Company from 1981 until
the Merger in October 1988. From January 1978 to May 1981, Mr. Simon owned
Simon Construction Company, a company which performed site work and utilities
and demolition projects.
21
<PAGE> 23
Item 11. Executive Compensation
Summary Compensation Table. The following table provides certain
summary information concerning compensation paid or accrued by the Company and
its subsidiaries to officers whose salary and bonus exceeded $100,000 for the
year ended December 31, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------- --------
Securities
Other Restricted Underlying All Other
Name and Annual Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts sation
- - -------------------- ----- --------- ----- ------------ --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Francis M. Williams 1994 $171,139 $0 $0 $0 $0 $0 $ 977(*)
Chairman of the 1993 $171,137 $0 $0 $0 $0 $0 $ 498(*)
Board, President 1992 $172,120 $0 $0 $0 $0 $0 $ 794(*)
and Chief
Executive Officer
John V. Simon, Jr. 1994 $110,759 $0 $0 $0 $0 $0 $1,635(*)
President of 1993 $108,193 $0 $0 $0 $0 $0 $1,069(*)
Kimmins 1992 $ 87,459 $0 $0 $0 $0 $0 $1,245(*)
Contracting Corp.
</TABLE>
(*) Represents the Company's contribution to the employee's account of
the Company's 401(k) Plan and premiums paid by the Company for term
life insurance and long-term disability. These plans, subject to the
terms and conditions of each plan, are available to all employees.
Stock Options Granted in the Last Fiscal Year. No stock options or
stock appreciation rights were granted to Francis M. Williams during the year
ended December 31, 1994, and Mr. Williams does not have any stock options or
stock appreciation rights that were granted in the previous years.
AGGREGATE OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at Options at
Shares Year-End Year-End (1)
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
----------------------- ---------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
John V. Simon, Jr. 0 0 18,200/36,800 $3,510/$0
</TABLE>
(1) Value is calculated using the Company's closing stock price on
December 31, 1994, of $1.50 per share less the exercise price for
such shares.
Compensation of Directors. During the year ended December 31, 1994,
the Company paid non-officer Directors an annual fee of $5,000 and $1,000 per
board meeting attended. Directors are reimbursed for all out-of-pocket
expenses incurred in attending Board of Directors and committee meetings.
22
<PAGE> 24
Stock Option and Other Plans
1987 STOCK OPTION PLAN
The Company adopted a stock option plan (the "Plan") pursuant to which
865,200 shares of common stock were originally reserved for issuance to persons
upon exercise of options designated as "incentive stock options", within the
meaning of Section 422A of the Internal Revenue code of 1986 (the "Code"), and
non-qualified stock options. The purpose of the Plan is to attract, retain,
and motivate officers and other full-time employees of the Company, and certain
other persons instrumental to the success of the Company, and to provide them
with a means to acquire a proprietary interest in the Company. The Plan is
administered by a committee consisting of three members of the Board of
Directors. The exercise price of an incentive stock option granted under the
Plan may not be less than the fair market value of the common stock at the time
the option is granted (110 percent of fair market value in the case of an
incentive stock option granted to an employee owning more than 10 percent of
the voting stock of the Company). The exercise price of a non-qualified stock
option granted under the Plan may not be less than par value. Options granted
under the Plan must, in general, expire no later than ten years from the date
of the grant (five years from the date of grant in the case of an incentive
stock option granted to an employee owning more than 10 percent of the voting
stock of the Company). All options granted to date provide that the grantees'
rights vest over five years from the date of grant. At December 31, 1994,
Joseph M. Williams held 40,000 options to purchase the Company's stock at
between $1.11 and $1.50 per share of which 15,200 are exercisable. At December
31, 1994, John V. Simon, Jr., held 55,000 options to purchase the Company's
stock at between $1.11 and $1.50 per share, of which 18,200 are exercisable.
SAVINGS AND PROFIT-SHARING PLAN
The Company offers a savings and profit-sharing plan (the "401(k)
Plan"), which qualifies under Sections 401(a) and (k) of the Code. Employees
of the Company and certain affiliates who have been employed for a specified
period of time are eligible to participate in the 401(k) Plan. All
contributions made by the employees vest immediately. Amounts contributed by
the Company vest 20 percent after three years of service and 20 percent each
year thereafter.
PROFIT AND EQUITY PARTICIPATION PLAN
The Company's Profit and Equity Participation Plan (the "Profit
Participation Plan"), a defined contribution plan, covers employees of the
Company and certain affiliates who have been employed for a specified period of
time. Contributions to the Profit Participation Plan are made at the
discretion of the Board of Directors. Employees' rights in the Profit
Participation Plan vest 20 percent after three years of service and 20 percent
each year thereafter. The Profit Participation Plan was merged into The
Kimmins Environmental Service Corp. Employee Stock Ownership Plan Trust
("ESOP") on January 1, 1989.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1989, the Company formed the ESOP for the benefit
of the employees of the Company to purchase shares of the Company's common
stock from time to time on the open market or in negotiated transactions at
prices deemed to be attractive and, simultaneously, the Profit Participation
Plan was merged into the ESOP. Contributions to the ESOP are made at the
discretion of the Board of Directors and, for the year ended December 31, 1989,
was $200,000. During 1989, the ESOP acquired from the Company's President
approximately 772,000 shares of common stock at a cost of $5,100,000. The
shares were acquired in exchange for a note payable to the President.
Simultaneously with such purchase, the President purchased certain receivables
and interests in certain investments from the Company for a purchase price of
$5,100,000, which was paid by the assignment to the Company of the note
received from the ESOP. The note was funded, during March 1990, through a
long-term bank financing agreement guaranteed by the Company. Expenses with
respect to the ESOP include the recognition of interest expense relating to the
ESOP debt and to earned compensation. For the year ended December 31, 1994,
interest expenses and compensation expenses relating to the ESOP were $274,519
and $600,000, respectively. As of December 31, 1994, the unpaid ESOP debt (net
of the $228,094 accrued contribution) is also reflected as a reduction in
stockholders' equity.
23
<PAGE> 25
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of March 24, 1995, by (i) persons known by
the Company to own more than 5 percent of the Company's outstanding common
stock, (ii) by each named executive officer and director of the Company, and
(iii) all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Percent of
Name and Address of Percent Total
Beneficial Owner of Voting
(1) Title of Class Number of Shares Class Power
--------------------------- -------------------------- ---------------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Francis M. Williams Common Stock 5,566,495 (2) 41.8% 61.5%
Class B Common Stock 6,874,706 100.0%
Joseph M. Williams Common Stock 1,099,017 (3) 8.2% 5.4%
Michael Gold Common Stock 36,569 (4) * *
George Chandler Common Stock 14,141 * *
All directors and Common Stock 6,716,222 (2)(3) 50.4%
executive officers (4)(5)
67.3%
as a group Class B Common Stock 6,874,706 100.0%
(four persons)
</TABLE>
(l) The addresses of all officers and directors of the Company above are
in care of the Company at 1501 Second Avenue, East, Tampa, Florida
33605.
(2) Includes 4,437,408 shares owned directly by Mr. Francis M. Williams;
400,000 shares owned by Summerbreeze and 365,250 shares owned by
Sunshadow, both of which Mr. Williams is the sole shareholder of the
corporate general partner and the sole limited partner; 146,726 shares
owned by Mr. Williams' wife; 91,481 shares held by Mr. Williams as
Trustee for his wife and children; 113,739 shares held by Mr. Williams
as Custodian under the New York Uniform Gifts to Minors Act for his
children; 8,691 shares held by the Company's 401(k) and ESOP Plans of
which Mr. Williams is fully vested; and 3,200 shares held by Kimmins
Realty Investment, Inc., of which is owned 100 percent by Mr.
Williams.
(3) Includes 54,000 shares owned by Mr. Joseph M. Williams; 15,200 shares
issuable upon exercise of currently exercisable stock options; 6,155
shares held by the Company's 401(k) and ESOP Plans of which Mr.
Williams is fully vested; and 1,023,662 shares held by the Company's
401(k) Plan and ESOP of which Mr. Williams is a trustee with shared
voting and investment power.
(4) Includes 3,450 shares owned by Mr. Gold; 17,325 shares currently owned
by Mr. Gold's wife; 8,694 held by Mr. Gold as trustee for Mr. Gold's
minor children; 5,100 shares issuable upon exercise of currently
exercisable stock options; and 2,000 shares owned by Gold & Gold, a
general partnership. Mr. Gold shares voting and investing power with
respect to those shares owned by Gold & Gold.
(5) Includes 25,100 shares issuable upon exercise of currently exercisable
stock options; 14,846 shares held by the Company's 401(k) and ESOP
Plans of which certain officers of the Company are fully vested; and
1,023,662 shares held by the Company's 401(k) and ESOP Plans of which
an officer of the Company is a trustee.
* Less than one percent.
24
<PAGE> 26
Item 13. Certain Relationships and Related Transactions
During 1993 and 1994, the Company paid landfill fees of approximately
$288,000 and $28,000, respectively, to a company which is primarily owned by
the brother of Mr. Francis M. Williams. The amount paid approximated fair
market rates for the type of services involved.
On June 30, 1993, Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships (collectively,
the "Apartments"), the Company, Citicorp Real Estate, Inc. ("Citicorp"), and
Francis M. Williams entered into a settlement and note renewal agreement
whereby the Apartments' Chapter 11 bankruptcy filings were voluntarily
dismissed. In accordance with the terms of the settlement agreement,
$3,638,696 of the accounts receivable-affiliates balance recorded by the
Company was converted into a note receivable. The note receivable bears
interest at prime plus 1 3/8 percent, increasing to prime plus 2 percent on
July 1, 1995, with principal and interest payable in monthly installments
through December 31, 1998, and is guaranteed by Mr. Williams. Citicorp also
renewed their mortgage notes with the Apartments through December 31, 1998.
Management of the Company believes that this note receivable balance is fully
collectible since a recently completed independent appraisal showed the
appraised value of the properties exceeded all recorded liabilities and all
monthly obligations of the Apartments, including debt, are being met. The
Company will also receive reimbursement for substantially all legal fees and
costs incurred related to this matter.
At December 31, 1993 and 1994, $4,830,000 and $4,937,000,
respectively, of the contract and trade-affiliates balance is due from
corporate affiliates of the Company's president. Amounts due from the
partnerships discussed above at December 31, 1993 and 1994, are approximately
$3,626,000 and $3,588,000, respectively. The affiliated receivables relate to
contract services performed and are guaranteed by Mr. Williams.
25
<PAGE> 27
Item 14. Exhibits, Financial Statements, Schedule, and Reports on Form 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K
1. Financial Statements
- Report of Independent Certified Public Accountants
- Consolidated balance sheets at December 31, 1993 and
1994
- Consolidated statements of operations for each of the
three years in the period ended December 31, 1994
- Consolidated statements of stockholders' equity for
each of the three years in the period ended December
31, 1994
- Consolidated statements of cash flows for each of the
three years in the period ended December 31, 1994
- Notes to consolidated financial statements
2. Financial statement schedule
II - Valuation and qualifying accounts
All other Schedules are omitted since the required information
is not present or is not present in amounts sufficient to require
submission of the Schedules, or because the information required is
included in the financial statements and notes thereto.
3. The following documents are filed as exhibits to this Annual
Report on Form 10-K:
3 (a) ** -- Restated Certificate of Incorporation of
Registrant, as amended.
3 (b) * -- By-laws of Registrant
10.1 -- Mortgage to SouthTrust Bank on principal
executive office building.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Ernst & Young
27 -- Financial Data Schedule (for SEC use only)
28.1 *** -- Stock Option Plan
______________
* Previously filed as part of Registrant's Registration
Statement on Form S-1, File No. 33-12677, and incorporated
herein by reference thereto.
** Previously filed as part of Registrant's Registration
Statement on Form S-1, File No. 33-18787, and incorporated
herein by reference thereto.
*** Previously filed as part of Registrant's Form S-8, File No.
33-29612, and incorporated herein by reference thereto.
(b) Reports on Form 8-K.
None
(c) See item 14(a)(3) above.
(d) See item 14(a)(2) above.
26
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunder duly authorized.
Kimmins Environmental Service Corp.
Date: March 30, 1995 By: /s/ Francis M. Williams
-------------------- ------------------------
Francis M. Williams
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 30, 1995 /s/ Francis M. Williams
-------------------- ------------------------------
Francis M. Williams
President and Director
(Chief Executive Officer)
Date: March 30, 1995 /s/ Joseph M. Williams
-------------------- ------------------------------
Joseph M. Williams
Secretary and Treasurer
Date: March 30, 1995 /s/ Norman S. Dominiak
-------------------- ------------------------------
Norman S. Dominiak
(Chief Financial Officer;
Chief Accounting Officer)
Date: March 30, 1995 /s/ Michael Gold
-------------------- ------------------------------
Michael Gold, Director
Date: March 30, 1995 /s/ George Chandler
-------------------- ------------------------------
George Chandler, Director
27
<PAGE> 29
KIMMINS ENVIRONMENTAL SERVICE CORP.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
(Item 14(a))
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated balance sheets at December 31, 1993 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated statements of operations for each of the three years
in the period ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated statements of stockholders' equity for each of the three
years in the period ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Consolidated statements of cash flows for each of the three years
in the period ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Financial statement schedule:
Schedule II - Valuation and qualifying accounts
</TABLE>
All other schedules are omitted since the required information is not present
in amounts sufficient to require submission of the schedule or because the
information required is included in the financial statements and notes thereto.
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kimmins Environmental Service Corp.
We have audited the accompanying consolidated balance sheets of
Kimmins Environmental Service Corp. as of December 31, 1993 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule listed in the index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule 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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Kimmins Environmental Service Corp. at December 31, 1993 and 1994,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Tampa, Florida
March 16, 1995
F-2
<PAGE> 31
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1993 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 2,530,428 $ 479,106
Accounts receivable:
Contract and trade 18,001,291 22,081,973
Contract and trade - affiliates 21,275 -
Other receivables - affiliates
1,203,023 1,464,369
Note receivable - affiliate 38,333 54,167
Costs and estimated earnings in excess of billings on
uncompleted contracts 9,777,749 10,166,227
Income tax refund receivable 933,501 679,538
Other current assets 1,210,609 1,274,469
----------- -----------
Total current assets 33,716,209 36,199,849
----------- -----------
Property and equipment, net 26,326,780 26,815,429
Accounts receivable - affiliates 1,608,314 1,349,058
Note receivable - affiliate 3,587,863 3,533,696
Term note from affiliate (including accrued interest of
$117,361 and $409,785 at December 31, 1993 and 1994,
respectively) 4,408,410 4,343,032
Other assets 544,364 447,716
----------- -----------
$70,191,940 $72,688,780
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE> 32
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
----------------------------------
1993 1994
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable - trade $12,480,248 $13,303,408
Deferred income taxes 115,000 73,708
Accrued expenses 2,553,681 3,473,775
Billings in excess of costs and estimated earnings on
uncompleted contracts 1,030,712 1,375,548
Current portion of long-term debt 4,895,358 6,168,006
Current portion of Employee Stock Ownership Plan
Trust debt 600,000 600,000
----------- -----------
Total current liabilities 21,674,999 24,994,445
----------- -----------
Long-term debt 16,454,183 14,632,115
Employee Stock Ownership Plan Trust debt 3,000,000 2,400,000
Deferred income taxes 2,788,408 2,914,597
Minority interest in subsidiary 3,172,797 3,233,421
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value; 32,500,000 shares
authorized; 13,328,992 shares issued and outstanding 13,329 13,329
Class B common stock, $.001 par value; 10,000,000
shares authorized, 6,874,706 shares issued and
outstanding 6,875 6,875
Capital in excess of par value 18,696,909 18,696,909
Retained earnings 7,772,031 8,569,023
Unearned employee compensation from Employee
Stock Ownership Plan Trust (3,387,591) (2,771,934)
----------- -----------
Total stockholders' equity 23,101,553 24,514,202
----------- -----------
$70,191,940 $72,688,780
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE> 33
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1992 1993 1994
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Gross revenue $87,441,742 $83,608,764 $ 96,755,001
Outside services, at cost (8,827,531) (6,203,454) (11,402,286)
----------- ----------- ------------
Net revenue 78,614,211 77,405,310 85,352,715
Costs and expenses:
Cost of revenue earned 66,847,076 63,959,362 73,235,439
Selling, general and administrative
expenses 9,984,644 9,779,815 9,447,064
----------- ----------- ------------
Operating income 1,782,491 3,666,133 2,670,212
Litigation settlements (379,402) - -
Non-operating gain relating to the public
offering of subsidiary - 879,797 -
Minority interest in net income of
subsidiary - (286,519) (60,624)
Interest expense (net of interest income of
approximately $769,000, $848,000, and
$1,060,000 for the years ended December
31, 1992, 1993, and 1994, respectively) (1,304,459) (1,063,201) (1,076,911)
----------- ----------- ------------
Income from continuing operations
before provision for income taxes 98,630 3,196,210 1,532,677
Provision for income taxes (benefit):
Current (420,408) 360,107 650,788
Deferred 458,355 1,083,440 84,897
----------- ----------- ------------
37,947 1,443,547 735,685
----------- ----------- ------------
Income from continuing operations 60,683 1,752,663 796,992
Discontinued operations:
Income from discontinued surety
operations net of income tax expense of
$77,422, for the nine months ended
September 30, 1992 124,533 - -
----------- ----------- ------------
Net income $ 185,216 $ 1,752,663 $ 796,992
=========== =========== ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE> 34
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(continued)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE DATA
--------------
Income per share from continuing
operations $ - $ .13 $ .06
Income per share from
discontinued operations .01 - -
----------- ----------- -----------
Income per share $ .01 $ .13 $ .06
=========== =========== ===========
Weighted average number of shares
outstanding used in computation 13,326,992 13,328,992 13,328,992
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE> 35
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994
<TABLE>
<CAPTION>
Unearned
Employee
Compensation
from
Class B Capital Employee
Common Stock Common Stock in Stock Total
--------------------- ------------------- Excess of Retained Ownership Stockholders'
Shares Amount Shares Amount Par Value Earnings Plan Trust Equity
-------- ------ ------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1992 13,324,192 $13,324 6,874,706 $6,875 $18,683,315 $ 8,213,985 ($4,390,988) $22,526,511
Stock options exercised 4,800 5 - - 13,594 - - 13,599
Distribution of surety
operations - - - - - (2,379,833) - (2,379,833)
Employee compensation
from Employee Stock
Ownership Trust - - - - - - 437,829 437,829
Net income - - - - - 185,216 - 185,216
---------- ------- --------- ------ ----------- ----------- ----------- -----------
Balance at
December 31, 1992 13,328,992 13,329 6,874,706 6,875 18,696,909 6,019,368 (3,953,159) 20,783,322
Employee compensation
from Employee Stock
Ownership Trust - - - - - - 565,568 565,568
Net income - - - - - 1,752,663 - 1,752,663
---------- ------- --------- ------ ----------- ----------- ----------- -----------
Balance at
December 31, 1993 13,328,992 13,329 6,874,706 6,875 18,696,909 7,772,031 (3,387,591) 23,101,553
Employee compensation
from Employee Stock
Ownership Plan - - - - - - 615,657 615,657
Net income - - - - - 796,992 - 796,992
---------- ------- --------- ------ ----------- ----------- ----------- -----------
Balance at
December 31, 1994 13,328,992 $13,329 6,874,706 $6,875 $18,696,909 $ 8,569,023 ($2,771,934) $24,514,202
========== ======= ========= ====== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE> 36
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 185,216 $ 1,752,663 $ 796,992
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,039,746 3,681,120 3,890,325
Provision for uncollectible
accounts receivable 360,241 961,325 495,375
Gain from sale of subsidiary's
common stock - (879,797) -
Minority interest in income of
subsidiary - 286,519 60,624
(Gain) loss on disposal of property
and equipment (50,648) 6,940 407,325
Earnings of discontinued surety
business, less dividends paid (124,533) - -
Accrued interest on term
note/surplus debenture (186,496) (117,361) 65,378
Deferred income taxes 458,355 1,083,440 84,897
Unearned employee compensation
from Employee Stock Ownership Plan
Trust 437,829 565,568 615,657
Changes in operating assets and
liabilities:
Accounts receivable (5,080,533) 3,541,902 (4,518,539)
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,009,089 (4,837,773) (388,478)
Income tax refund receivable (327,498) (606,003) 253,963
Other assets 565,964 (433,785) 32,788
Accounts payable 3,408,163 (2,073,920) 823,160
Income taxes payable (220,330) - -
Accrued expenses 278,611 (379,563) 920,094
Billings in excess of costs and
estimated earnings on
uncompleted contracts (1,075,110) (405,858) 344,836
----------- ----------- -----------
Total adjustments 3,492,850 392,754 3,087,405
----------- ----------- -----------
Net cash provided by operating activities 3,678,066 2,145,417 3,884,397
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-8
<PAGE> 37
KIMMINS ENVIRONMENTAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(CONTINUED)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------
1992 1993 1994
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures (2,917,359) (4,574,263) (5,803,781)
Proceeds from sale of property and
equipment 344,713 318,100 1,017,482
Proceeds from sale of investments in
fixed maturity securities 4,723,631 - -
----------- ----------- ------------
Net cash provided (used) by investing
activities 2,150,985 (4,256,163) (4,786,299)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from long-term debt 7,086,764 7,094,085 16,604,165
Repayments of long-term debt (9,792,263) (8,447,818) (17,153,585)
Repayments of Employee Stock
Ownership Plan Trust debt (435,000) (550,000) (600,000)
Proceeds from subsidiary's issuance of
its common stock - 3,766,075 -
Proceeds from stock options 13,599 - -
----------- ----------- ------------
Net cash provided (used) by financing
activities (3,126,900) 1,862,342 (1,149,420)
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents 2,702,151 (248,404) (2,051,322)
Cash and cash equivalents, beginning of
year 76,681 2,778,832 2,530,428
----------- ----------- ------------
Cash and cash equivalents, end of year $ 2,778,832 $ 2,530,428 $ 479,106
=========== =========== ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-9
<PAGE> 38
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Kimmins Environmental Service Corp. ("Kimmins") and its
subsidiaries (collectively, the "Company") is a solid waste management and
specialty contracting company that provides a full range of solid waste
handling, demolition, and project-oriented services. The Company provides
specialty contracting services including infrastructure development,
underground construction, roadwork, site remediation services such as mobile
incineration; excavation, removal and disposal of contaminated soil; facilities
demolition and dismantling; and asbestos abatement.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Kimmins and its subsidiaries, including TransCor Waste
Services, Inc. ("TransCor"), a 74 percent owned subsidiary after March 25, 1993
(see Note 2). All material intercompany transactions have been eliminated.
REVENUE RECOGNITION - Contracts generally range from 6 to 18 months in
duration, and earnings from contracting operations (including contracts with
affiliates) are reported under the percentage-of-completion method for
financial statement purposes. The estimated earnings for each contract
reflected in the accompanying financial statements represent the percentage of
estimated total earnings that costs incurred to date bear to estimated total
costs, based on the Company's current estimates. With respect to contracts
which extend over one or more accounting periods, revisions in costs and
earnings estimates are reflected in the period the revisions become known.
When current estimates of total contract costs indicate a loss, provision is
made for the entire estimated loss. Revenue from claims against owners and
proceeds from negotiated settlements are recognized when realization is
probable and the amount can be reliably estimated. Outside services represent
subcontractor costs for which the Company is typically reimbursed on a
dollar-for-dollar basis.
Fees arising from services other than contracting activities are
recognized when the negotiated services are provided.
EARNINGS PER SHARE - Earnings per common share are computed based on
the weighted average number of shares outstanding. Those shares of Class B
common stock which are eligible for conversion (none for 1992, 1993, and 1994)
are included in the computation of earnings per share. The effect of common
stock equivalents is not material.
STATEMENTS OF CASH FLOWS -
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------
1992 1993 1994
---------- ----------- -----------
<S> <C> <C> <C>
Cash paid:
Interest $2,530,000 $1,881,000 $2,007,000
Income taxes $ 543,000 $ 642,000 $ 499,000
</TABLE>
F-10
<PAGE> 39
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. DISTRIBUTION OF SUBSIDIARIES AND SALE OF COMMON STOCK OF SUBSIDIARIES
On March 25, 1993, the initial public offering of the subsidiary,
TransCor, became effective. The offering consisted of 1,000,000 shares of
TransCor's common stock at $5 per share. The net proceeds from the stock
offering were received on April 2, 1993. The Company's 1993 statement of
operations includes a gain of $879,797 resulting from this transaction. In
connection with this offering, TransCor issued a convertible subordinated term
note to Kimmins, which is eliminated in consolidation, that may be converted
into 400,652 shares (586,524 shares at December 31, 1993) of TransCor's common
stock.
On October 1, 1992, the Company spun-off its surety business to its
stockholders in a distribution (the "Distribution") of shares of common stock
of Cumberland Holdings, Inc. ("Cumberland"). In connection with the spin-off,
two former subsidiaries of the Company, Cumberland Casualty & Surety Company
("CCS") and Surety Specialists, Inc. ("SSI"), were transferred to Cumberland.
All of Cumberland's outstanding common stock was distributed to stockholders of
the Company on the basis of one share of common stock of Cumberland for each
five shares of the Company's common stock and Class B common stock owned. No
gain or loss was recognized from the distribution, and the net book value of
the surety business of $2,379,833 at October 1, 1992, was treated as a
distribution to stockholders. Cumberland's results of operations are reported
separately in the Company's consolidated statements of operations for the
periods presented as discontinued operations. Revenue for the surety business
for the nine months ended September 30, 1992, was approximately $3,450,000
(none for 1993 and 1994).
3. RELATED PARTY TRANSACTIONS
During 1992, 1993, and 1994, the Company paid landfill fees of
approximately $426,000, $288,000, and $28,000, respectively, to a company which
is primarily owned by the brother of the Company's president. The amounts paid
approximated the fair market rate for the type of services involved.
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
December 31,
--------------------------------
1993 1994
----------- -----------
<S> <C> <C>
Contract and trade:
Billed contract receivables:
Completed and uncompleted contracts $11,257,863 $12,241,873
Retainage 3,336,919 5,407,372
Trade receivables 3,844,525 5,095,725
----------- -----------
18,439,307 22,744,970
Less allowance for doubtful accounts (438,016) (662,997)
----------- -----------
$18,001,291 $22,081,973
=========== ===========
Contract and trade - affiliates:
Billed contract receivables $ 1,629,589 $ 1,349,058
Less current portion 21,275 -
----------- -----------
Amounts expected to be collected after one year $ 1,608,314 $ 1,349,058
=========== ===========
</TABLE>
F-11
<PAGE> 40
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. ACCOUNTS RECEIVABLE (CONTINUED)
All unbilled receivables relate to work performed or material shipped
by the balance sheet date and are billed as soon as is administratively
feasible.
Accounts receivable are comprised primarily of amounts due on
specialty contracting contracts and from solid waste management customers.
Credit is extended based on an evaluation of the customer's financial
condition. Collateral is generally not required; however, the Company usually
is able to file for a mechanic's lien to protect their interest in contract
accounts receivable. Credit losses are provided for in the financial
statements and have been within management's expectations.
On June 30, 1993, Sunshadow Apartments, Ltd., and Summerbreeze
Apartments, Ltd., two Florida real estate limited partnerships (collectively,
the "Apartments"), the Company, Citicorp Real Estate, Inc. ("Citicorp"), and
Francis M. Williams entered into a settlement and note renewal agreement
whereby the Apartments' Chapter 11 bankruptcy filings were voluntarily
dismissed. In accordance with the terms of the settlement agreement,
$3,638,696 of the accounts receivable - affiliates balance recorded by the
Company was converted into a note receivable. The note receivable bears
interest at prime plus 1 3/8 percent, increasing to prime plus 2 percent on
July 1, 1995, with principal and interest payable in monthly installments
through December 31, 1998, and is guaranteed by Mr. Williams. Citicorp also
renewed their mortgage notes with the Apartments through December 31, 1998.
Management of the Company believes that this note receivable balance is fully
collectible since an independent appraisal showed the appraised value of the
properties exceeded all recorded liabilities and all monthly obligations of the
Apartments, including debt, are being met. The Company will also receive
reimbursement for substantially all legal fees and costs incurred related to
this matter.
At December 31, 1993 and 1994, $4,830,000 and $4,937,000,
respectively, of the combined accounts receivable - affiliates and note
receivable - affiliate balances are due from corporate affiliates of the
Company's president. Amounts due from the Apartments discussed above at
December 31, 1993 and 1994, are approximately $3,626,000 and $3,588,000,
respectively. The affiliated receivables relate to contract services performed
and are guaranteed by Mr. Williams.
5. LITIGATION SETTLEMENT
During 1992, the Company received approximately $2,015,000 from the
settlement of two separate contract claims for work performed in excess of the
original contract amounts due to changes in conditions. Amounts applied
against the settlements included legal fees and other direct costs. In
addition, the Company reached a settlement in a lawsuit brought against one of
its subsidiaries. Pursuant to the settlement agreement signed between the
parties, all claims were dismissed and the Company paid $300,000. The net
result of these settlement items was a loss of approximately $379,000 that has
been recorded as a non-operating expense for 1992.
F-12
<PAGE> 41
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1993 1994
------------ ------------
<S> <C> <C>
Expenditures on uncompleted contracts $102,705,679 $ 92,911,600
Estimated earnings on uncompleted contracts 12,011,552 17,028,013
------------ ------------
114,717,231 109,939,613
Less actual and allowable billings on uncompleted
contracts 105,970,194 101,148,934
------------ ------------
$ 8,747,037 $ 8,790,679
============ ============
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 9,777,749 $ 10,166,227
Billings in excess of costs and estimated earnings
on uncompleted contracts (1,030,712) (1,375,548)
------------ ------------
$ 8,747,037 $ 8,790,679
============ ============
</TABLE>
During the years ended December 31, 1992, 1993, and 1994, the Company
recognized revenue from contract claims of approximately $635,000, $50,000
and $1,189,000, respectively. In addition, as of December 31, 1993 and 1994,
the costs and estimated earnings in excess of billings on uncompleted contracts
includes unbilled contract costs claimed from customers of $2,041,000 and
$1,648,000, respectively.
7. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
----------------------------------
1993 1994
------------ ------------
<S> <C> <C>
Land $ 5,028,106 $ 4,699,480
Buildings and improvements 5,396,443 6,275,216
Construction and recycling equipment 28,977,787 31,170,987
Furniture and fixtures 1,097,765 1,258,249
Construction in progress 669,886 486,128
------------ ------------
41,169,987 43,890,060
Less accumulated depreciation (14,843,207) (17,074,631)
------------ ------------
$ 26,326,780 $ 26,815,429
============ ============
</TABLE>
Property and equipment is recorded at cost. Depreciation is provided
using the straight-line method over estimated useful lives ranging from 3 to 30
years. Construction in progress will be depreciated over the estimated useful
lives when placed into service.
F-13
<PAGE> 42
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. TERM NOTE FROM AFFILIATE
In 1988, CCS issued a surplus debenture to the Company that bears
interest at 10 percent per annum in exchange for $3,000,000. In 1992, the
debenture due to the Company from CCS was assigned to Cumberland. Cumberland
entered into a term note agreement with the Company for the outstanding amount
of the debenture, including accrued interest at September 30, 1992, as part of
the Distribution. The term note is pari passu with the other debts of
Cumberland, bears interest at 10 percent, and is due on October 1, 2002.
Interest and principal are due quarterly for five years, with minimum interest
payments equal to one-half of annual net earnings before interest and income
taxes. Payments for the second five years are due quarterly and are payable in
equal installments to amortize the remaining balance. Each of these payments
will be credited first to the accrued interest and then to principal. Interest
accrued on the term note at December 31, 1994, is $409,785 ($117,361 at
December 31, 1993).
9. ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
---------------------------------
1993 1994
---------- ----------
<S> <C> <C>
Deferred revenue $1,124,126 $1,285,112
Accrued insurance 714,902 1,249,858
Other 714,653 938,805
---------- ----------
$2,553,681 $3,473,775
========== ==========
</TABLE>
F-14
<PAGE> 43
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
10. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
--------------------------------
1993 1994
----------- -----------
<S> <C> <C>
Revolving term bank line of credit, $1,500,000
maximum ($6,500,000 during 1993) due
August 31, 1996, interest at prime plus 1 3/4
percent (prime plus 3 percent during 1993) $ 6,000,000 $ -
Bank note payable, interest at prime plus 1 percent 1,074,775 -
Equipment bank notes, principal and interest
payable in monthly installments, interest at prime
plus 1/2 percent, collateralized by equipment 299,841 -
Notes payable, principal and interest payable in
monthly installments through October 1, 1999, interest
at varying rates up to 13 percent, collateralized
by equipment 9,837,245 10,220,373
Bank note payable, varying principal and interest
payments through August 1, 1996, interest at prime
plus 1 3/4 percent, collateralized by equipment - 5,500,000
Mortgage notes, principal and interest payable in
monthly installments through August 1, 1999,
interest at prime plus 1 1/2 percent to prime plus 1
3/4 percent, collateralized by land and buildings 2,737,680 3,679,748
Mortgage notes - $500,000 with related parties,
interest payable in quarterly installments at 10
percent, plus a performance based return not to
exceed 6 percent, principal due January 9, 1997,
collateralized by land and buildings 1,400,000 1,400,000
----------- -----------
21,349,541 20,800,121
Less current portion 4,895,358 6,168,006
----------- -----------
$16,454,183 $14,632,115
=========== ===========
</TABLE>
F-15
<PAGE> 44
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. LONG-TERM DEBT (CONTINUED)
Annual principal maturities subsequent to December 31, 1994, are as
follows:
<TABLE>
<S> <C>
1995 $ 6,168,006
1996 5,114,448
1997 4,541,485
1998 2,186,808
1999 2,789,374
-----------
$20,800,121
===========
</TABLE>
The lenders' prime rate under the bank line at December 31, 1993 and
1994, was 6 percent and 8.5 percent, respectively. At December 31, 1994, there
was $1,500,000 of borrowings available under the revolving term bank line of
credit. The Company was also contingently liable for letters of credit in the
amount of approximately $3,500,000 at December 31, 1994.
The revolving term bank line of $1,500,000 and the letter of credit
facility of $3,500,000 are secured by a pledge of all of the Company's
subsidiaries, the Cumberland term note, and substantially all of the assets of
Kimmins. The use of funds under these lines is limited among certain
subsidiaries.
The debt agreements contain certain covenants, the most restrictive of
which require maintenance of a consolidated tangible net worth, as defined, of
not less than $15,900,000, maintenance of a debt to consolidated tangible net
worth ratio of no more than 3.0 to 1, consolidated debt service coverage ratio
of at least 1.0 to 1, and a fixed charge coverage ratio of not less than 1.0 to
1. In addition, the covenants prohibit the ability, without lender approval,
of the Company to pay dividends. As of December 31, 1994, the Company was in
compliance with or obtained waivers for all loan covenants, and the Company
expects to comply with each of the covenants in 1995.
11. EMPLOYEE STOCK OWNERSHIP PLAN TRUST DEBT
In March 1990, the Company's Employee Stock Ownership Plan Trust
("ESOP") (Note 13) was funded from a $5,100,000 loan. The loan bears interest
at prime plus 2 percent, with varying principal and interest payments through
September 1996. The loan is guaranteed by the Company as to payment of
principal and interest and, therefore, the unpaid balance of the borrowing is
reflected as debt of the Company. An equivalent amount representing unearned
employee compensation, less the Company's accrued contribution (Note 13), is
recorded as a deduction from stockholders' equity.
Annual principal maturities for each of the next two years are as
follows:
<TABLE>
<S> <C>
1995 $ 600,000
1996 2,400,000
----------
$3,000,000
==========
</TABLE>
The loan agreement contains certain covenants, the most restrictive of
which require maintenance of a consolidated tangible net worth, as defined, of
not less than $9,000,000, maintenance of a debt to consolidated tangible net
worth ratio of no more than 3.0 to 1, and a consolidated debt service coverage
ratio of at least 1.0 to 1. In 1994 the Company failed to meet the
consolidated debt service coverage requirement. At December 31, 1994,
$2,400,000 of the loan is classified as long-term debt since it is the
Company's intent to refinance the debt on a long-term basis. Refinancing under
similar terms and maturities is guaranteed by the President of the Company.
F-16
<PAGE> 45
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. LEASING ARRANGEMENTS
The Company rents equipment, machinery, and office space for varying
periods. Rental expense for the years ended December 31, 1992, 1993, and 1994,
was approximately $7,906,000, $7,855,000, and $9,500,000, respectively.
At December 31, 1994, minimum rental payments applicable to
non-cancellable operating leases were as follows:
<TABLE>
<S> <C>
1995 $735,778
1996 6,095
1997 5,252
--------
$747,125
========
</TABLE>
13. PENSION AND OTHER BENEFIT PLANS
Employee Stock Ownership Plan. On January 1, 1989, the Company, for
the benefit of its employees, formed the ESOP to purchase shares of the
Company's common stock from time to time in the open market or in negotiated
transactions at prices deemed to be attractive. Contributions to the ESOP are
made at the discretion of the Board of Directors. During 1989, the ESOP
acquired from the Company's president 772,114 shares of common stock at a cost
of $5,100,000. The shares were acquired in exchange for a note payable to the
Company's president. Simultaneous with this purchase, the Company's president
purchased certain receivables and interests in certain investments from the
Company for a purchase price of $5,100,000, which was paid by the assignment to
the Company of the note received from the ESOP. The note was funded, during
March 1990, through a long-term bank financing agreement guaranteed by the
Company (Note 11). As the debt is repaid, shares are released from collateral
and allocated to active employees, based on the proportion of debt service paid
in the current year. Debt of the ESOP is recorded as debt, and the shares
pledged as collateral are reported as unearned employee compensation in the
balance sheet. For financial statement purposes, as of December 31, 1993 and
1994, the unearned employee compensation (net of accrued contributions of
approximately $212,000 and $228,000, respectively) was reflected as a reduction
in stockholders' equity.
Interest and compensation expenses relating to the ESOP are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1992 1993 1994
---------------------------------------------
<S> <C> <C> <C>
Interest $328,565 $287,577 $274,519
Compensation $437,829 $565,568 $615,657
</TABLE>
F-17
<PAGE> 46
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. PENSION AND OTHER BENEFIT PLANS (CONTINUED)
The ESOP shares were as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1993 1994
---------- --------
<S> <C> <C>
Allocated shares 225,000 315,000
Shares released for allocation - -
Unreleased shares 540,000 450,000
---------- --------
Total ESOP shares 765,000 765,000
========== ========
Market value of unreleased shares $1,282,500 $675,000
========== ========
</TABLE>
Stock Option Plan. The Company originally reserved 865,200 shares of
its common stock for issuance upon the exercise of options to be granted under
the Company's 1987 Stock Option Plan (the Company Plan). The exercise price of
an incentive stock option granted under the Company Plan may not be less than
the fair market value of the common stock at the time the option is granted.
The exercise price of a non-qualified stock option granted under the Company
Plan may not be less than par value of the common stock on the date of the
grant. Options granted under the Company Plan must, in general, expire no
later than ten years from the date of the grant.
All options granted to date provide that the grantees' rights therein
vest over five years from the date of the grant. At December 31, 1994, options
to purchase 615,429 shares of the Company's common stock have been granted
under the Company Plan, of which approximately 177,100 are currently
exercisable at prices ranging from $1.11 to $1.50 per share. No options were
exercised during 1993 and 1994.
The following is a summary of stock option transactions:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1993 1994
------------- -------------
<S> <C> <C>
Options outstanding at beginning of the year 615,929 618,429
Options granted 2,500 547,929
Options cancelled - (550,929)
Options exercised - -
------------- -------------
Options outstanding at end of year 618,429 615,429
============= =============
Options eligible at end of year
383,372 177,086
Options available for future grants at end of year 132,171 135,171
Option price range:
Options granted $2.38 $1.50
Options exercised N/A N/A
Options outstanding at end of year $1.11 - $4.58 $1.11 - $1.50
</TABLE>
F-18
<PAGE> 47
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. PENSION AND OTHER BENEFIT PLANS (CONTINUED)
Options cancelled during 1994 include 520,429 options with exercise
prices ranging from $2.00 to $4.58 that were subsequently reissued with an
exercise price of $1.50.
The Company makes payments to collectively bargained, multi-employer
defined contribution plans covering Company union employees. Under the
Multi-Employer Pension Plan Amendment Act, a withdrawing employer is required
to continue funding its share of the plan's unfunded vested benefits. The
Company does not possess sufficient information to determine its portion of the
unfunded vested benefits, if any. Contributions to such plans for the years
ended December 31, 1992, 1993, and 1994, were not significant.
14. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 109, "Accounting for Income Taxes."
Under the asset and liability method required by Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
As of December 31, 1994, the Company has utilized all net operating
loss carryforwards. However, the Company has alternative minimum tax credit
carryforwards of approximately $339,000 available to offset future regular tax
liabilities.
As a result of TransCor's sale of its common stock in March 1993 (Note
2), it is no longer consolidated with the Company for income tax purposes. The
Company has provided deferred income taxes with respect to differences between
its book and tax basis in TransCor. These differences result from income
recognized for book, not tax, for the gain on the sale of TransCor and
TransCor's post-offering earnings, which are collectively referred to as the
outside basis difference. The rate used to provide taxes on the outside basis
difference is the statutory rate for the first $785,000 which represents the
Company's share of TransCor's accumulated deficit at the date of the sale of
its common stock. The rate for the remaining difference assumes the dividend
received deduction because the Company expects to recover its investment
through dividends.
F-19
<PAGE> 48
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1993 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 168,600 $ 254,200
Deferred costs for tax expensed for books - 162,000
Alternative minimum tax credit carryforwards 330,000 339,000
---------- ----------
498,600 755,200
---------- ----------
Deferred tax liabilities:
Excess of tax over book depreciation 2,893,408 2,986,105
Uncompleted long-term contracts 142,600 395,400
Outside basis difference in TransCor 366,000 362,000
---------- ----------
3,402,008 3,743,505
---------- ----------
Net deferred tax liability 2,903,408 2,988,305
Less current portion (115,000) (73,708)
---------- ----------
$2,788,408 $2,914,597
========== ==========
</TABLE>
Factors causing the effective tax rate to differ from the statutory
rate are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1992 1993 1994
--------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 35.0%
State income taxes 4.5% 4.5% 7.5%
Additional tax on the Company's
shares of TransCor's earnings
after March 25, 1993 - 2.0% 4.0%
Other - 4.7% 1.5%
--------------------------------
Effective tax rate 38.5% 45.2% 48.0%
================================
</TABLE>
F-20
<PAGE> 49
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. STOCKHOLDERS' EQUITY
The Company's Class B common stock has the same voting rights as
common stock and is not entitled to participate in cash dividends. Upon
liquidation or dissolution of the Company, the holders of common stock are
entitled to receive up to $4.50 per share, after which the holders of Class B
common stock are entitled to receive up to $4.50 per share. Thereafter, all
assets remaining for distribution shall be distributed pro rata to the holders
of common stock and Class B common stock. The right to convert Class B common
stock to common stock occurs in any fiscal year in which the Company achieves
net earnings equal to a specified amount (currently $.28 per share), which is
calculated by adding the total shares outstanding at fiscal year end to the
number of shares which could be converted during the fiscal year. The holders
of the Class B common stock shall thereafter have the right to convert up to
1,875,000 shares of Class B common stock into common stock on a share for share
basis. Each cumulative incremental increase in net earnings in any subsequent
year of $.07 per share above the specified level of earnings previously
obtained will afford holders the right to convert up to an additional 1,875,000
shares of Class B common stock into common stock on a share for share basis.
Holders of Class B common stock will not be entitled to convert more than
1,875,000 of such shares in any fiscal year unless the Company achieves
earnings of $.48 per share of common stock in any fiscal year, which will
entitle holders to convert all shares of Class B common stock into common
stock. No shares of Class B common stock became eligible for conversion into
common stock during the years ended December 31, 1992, 1993, and 1994.
The Company has authorized 1,000,000 shares of preferred stock with a
par value of $.001, none of which is presently outstanding. Such preferred
stock may be issued in series and will have such designations, rights,
preferences, and limitations as may be fixed by the Board of Directors.
16. CONTINGENCIES
The Company and one of its subsidiaries, Kimmins Abatement Corp.
("KAC"), were named defendants in an administrative complaint filed by the
United States Department of Labor ("DOL"), Office of Administrative Law Judges,
during September 1994. The plaintiff alleged that the Company and KAC violated
certain contractual obligations with regards to Equal Employment Opportunity
("EEO") regulations and sought a 180-day debarment against the Company and its
subsidiaries from bidding on all federal and federally assisted contracts. In
addition, the DOL sought the cancellation of the Company's present federal and
federally assisted contracts.
In December 1994, the Company and KAC agreed to an out-of-court
settlement from the alleged EEO violations. The terms of the settlement
agreement included no cancellation of present federal and federally assisted
contracts. The Company agreed not to bid on government contracts for
demolition and asbestos abatement work for a period of 180 days, with the
exception of Kimmins Contracting Corp., which will continue to contract within
the state of Florida. In addition, KAC and KISC were debarred from entering
into any contracts with the United States government for a minimum of 180 days.
Another subsidiary, ThermoCor Kimmins, Inc. ("TCI"), was debarred from entering
into any contracts with the United States government involving demolition and
asbestos abatement work; however, TCI was able to continue to bid on contracts
for hazardous waste remediation. In addition, KAC, KISC, and TCI agreed to
comply with certain remedial actions which include proper notice of future
employment positions and the hiring of an EEO director. Management is of the
opinion that the 180 day debarment period will not have a material adverse
effect on the consolidated financial position of the Company.
The Company is involved in various legal actions and claims arising in
the ordinary course of its business. After taking into consideration legal
counsel's evaluation of such actions and claims, management is of the opinion
that their outcome will not have a material adverse effect on the consolidated
financial position of the Company.
F-21
<PAGE> 50
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
During the fourth quarter of 1993, TransCor refined its estimate of
bad debt expense, with the Company's share of the expense being $442,000.
18. BUSINESS SEGMENTS AND MAJOR CUSTOMERS
The Company conducts business in two segments: specialty contracting
services and solid waste management services. The specialty contracting
services segment provides comprehensive services including infrastructure
development, underground utility construction, roadwork, dismantling, asbestos
abatement, mobile incineration, excavation, removal and disposal of
contaminated soil. The solid waste management services segment offers storage,
collection, transfer, transportation, resource recovery and disposal of
non-hazardous waste and demolition services.
For the years ended December 31, 1992, 1993 and 1994, the Company's
specialty contracting services segment earned gross revenue of approximately
$9,220,000, $5,325,000, and $5,887,000, respectively, on contracts with the
United States Government.
F-22
<PAGE> 51
KIMMINS ENVIRONMENTAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. BUSINESS SEGMENTS AND MAJOR CUSTOMERS (CONTINUED)
A summary of information about the Company's segments for the years
ended December 31, 1992, 1993 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
==============================================================================================
Specialty Solid Waste
1992 Contracting Services Management Services Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue:
Unaffiliated customers $69,801 $17,637 $87,438
Affiliated customers 4 - 4
------- ------- -------
Total gross revenue $69,805 $17,637 $87,442
======= ======= =======
Operating income $ 387 $ 1,395 $ 1,782
Litigation settlement (379) - (379)
Interest income 769 - 769
Interest expense 1,188 886 2,074
------- ------- -------
Income (loss) before income taxes $ (411) $ 509 $ 98
======= ======= =======
Identifiable assets $46,780 $21,601 $68,381
======= ======= =======
Depreciation and amortization $ 2,693 $ 1,346 $ 4,039
======= ======= =======
Capital expenditures $ 2,488 $ 429 $ 2,917
======= ======= =======
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Specialty Solid Waste
1993 Contracting Services Management Services Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue:
Unaffiliated customers $58,679 $24,909 $83,588
Affiliated customers 21 - 21
------- ------- -------
Total gross revenue $58,700 $24,909 $83,609
======= ======= =======
Operating income $ 414 3,252 $ 3,666
Interest income 848 - 848
Interest expense 1,096 814 1,910
Non-operating gain 879 - 879
Minority interest - (287) (287)
------- ------- -------
Income (loss) before income taxes $ 1,045 $ 2,151 $ 3,196
======= ======= =======
Identifiable assets $38,737 $31,455 $70,192
======= ======= =======
Depreciation and amortization $ 2,242 $ 1,439 $ 3,681
======= ======= =======
Capital expenditures $ 1,045 $ 3,529 $ 4,574
======= ======= =======
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Specialty Solid Waste
1994 Contracting Services Management Services Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenue:
Unaffiliated customers $67,748 $29,007 $96,755
Affiliated customers - - -
------- ------- -------
Total gross revenue $67,748 $29,007 $96,755
======= ======= =======
Operating income $ 1,853 $ 817 $ 2,670
Interest income 1,060 - 1,060
Interest expense 1,590 547 2,137
Minority interest - (61) (61)
------- ------- -------
Income (loss) before income taxes $ 1,323 $ 210 $ 1,533
======= ======= =======
Identifiable assets $42,448 $30,241 $72,689
======= ======= =======
Depreciation and amortization $ 2,024 $ 1,866 $ 3,890
======= ======= =======
Capital Expenditures $ 3,365 $ 2,439 $ 5,804
======= ======= =======
==============================================================================================
</TABLE>
F-23
<PAGE> 52
KIMMINS ENVIRONMENTAL SERVICE CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Charged Deductions
Balance at to Costs from
Beginning of and Allowances Balance at
Description Period Expenses (A) End of Period
------------------------------------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1992 $506,233 $360,241 $ (221,567) $644,907
Year ended December 31, 1993 $644,907 $961,325 $(1,168,216) $438,016
Year ended December 31, 1994 $438,016 $495,375 $ (270,394) $662,997
</TABLE>
(A) Balance represents the write-off of uncollectible accounts.
<PAGE> 53
The following documents are filed as exhibits to this Annual
Report on Form 10-K:
Exhibit No. Description
----------- -----------
3 (a) ** -- Restated Certificate of Incorporation of
Registrant, as amended.
3 (b) * -- By-laws of Registrant
10.1 -- Mortgage to SouthTrust Bank on principal
executive office building.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Ernst & Young
27 -- Financial Data Schedule (for SEC use only)
28.1 *** -- Stock Option Plan
______________
* Previously filed as part of Registrant's Registration
Statement on Form S-1, File No. 33-12677, and incorporated
herein by reference thereto.
** Previously filed as part of Registrant's Registration
Statement on Form S-1, File No. 33-18787, and incorporated
herein by reference thereto.
*** Previously filed as part of Registrant's Form S-8, File No.
33-29612, and incorporated herein by reference thereto.
<PAGE> 1
EXHIBIT 10.1
================================================================================
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
_________________________
LOAN TO
KIMMINS ENVIRONMENTAL SERVICE CORP.
TRANSCOR WASTE SERVICES, INC.
KIMMINS RECYCLING CORP.
FOURTH AVENUE HOLDINGS, INC.
LANTANA EIGHTH AVENUE CORP.
KIMMINS CONTRACTING CORP.
THERMOCOR KIMMINS, INC.
KIMMINS INTERNATIONAL CORPORATION
40TH STREET, INC.
FACTORY STREET CORPORATION
KIMMINS LTD.
KIMMINS INDUSTRIAL SERVICE CORP.
KIMMINS ABATEMENT CORP.
KIMMINS INCORPORATED
_________________________
LOAN AGREEMENT
August 26, 1994
================================================================================
<PAGE> 2
LOAN AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Defined Terms
1.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Borrower or Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Cash Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Capitalized Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Common Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Contractual Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.18 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Environmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 Fleet Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 General Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.31 Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.35 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 Loan or Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.39 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.41 Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.42 Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.43 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.44 Note(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45 Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
1
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<TABLE>
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1.46 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.47 Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.48 Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.49 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.50 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.51 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.52 Prohibited Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.53 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.54 Real Estate Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.55 Reportable Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.56 Requirement of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.57 Revolving Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.58 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.59 Solvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.60 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.61 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.62 Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.63 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.64 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.65 Certain Other Words . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.66 Directly and Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. The Loans
2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Real Estate Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Terms Governing All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Limitation on Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Conditions of Lending
3.1 Conditions Precedent to Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Conditions Precedent to Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Security for Loan
4.1 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Representations, Warranties, and General Covenants
5.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Corporate Power and Authorization; Compliance with Law . . . . . . . . . . . . . . . . . . . . . 18
5.3 Enforceability; No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Pending Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
2
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<TABLE>
<S> <C> <C>
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 SEC Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Labor Law Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.13 Judgment Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.16 Borrowers' Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.17 Existing Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.18 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.19 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.21 Environment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.22 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.23 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.24 Representations True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6. Affirmative Covenants
6.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Corporate Existence; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Collateral Reports; Job Status Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.9 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.10 Visits and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.11 Payments on Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.12 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.13 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.14 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.15 Notice to Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.16 Subordination of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.17 Collection of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.18 Landlord and Storage Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.19 Auditors' Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.20 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.21 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.22 Physical Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.23 Subsidiary Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7. Negative Covenants
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Liens and Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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<TABLE>
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7.4 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.5 Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 Destruction of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.8 Liquidation, Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.9 Loans or Advances and Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.11 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.12 Prepayment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.13 Lease Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.14 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.15 Change in Business; Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.16 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.17 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.19 Amendment to Articles or Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8. Environmental Provisions
8.1 Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Environmental Assessment and Remediation Obligation of Borrowers . . . . . . . . . . . . . . . . 31
8.3 Escrow for Assessment and Remediation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.5 Environmental Management of Mortgaged Property Facility . . . . . . . . . . . . . . . . . . . . 32
9. Additional Representations, Covenants, and Agreements Relating to Collateral
9.1 Affirmation of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Discharge of Taxes and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5 Complete Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 U.C.C. Financing Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10. Events of Default
10.1 Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.3 Certain Agreement Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.4 Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.5 Representations False . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.6 Financial Difficulties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.7 Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.9 Cancellation of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.10 Default on Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.11 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.12 Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.13 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.14 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.15 Subordination Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.16 Priority of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<TABLE>
<S> <C> <C>
10.17 Loss of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.18 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11. Indemnification
11.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12. Costs and Expenses
12.1 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.2 Headings; Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.4 Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.5 Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.6 Venue and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.7 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.8 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.9 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.10 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.11 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.12 Limitation of Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.13 Waiver of Right to Trial By Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
EXHIBITS:
A Initial List of Equipment
B Form of Borrower's Legal Opinion
C Liens and Encumbrances
D Places of Business and Ownership Information
E Subsidiaries and Subsidiary Stock
F Use of Proceeds
SCHEDULES:
5.4 Litigation
5.9 Pension Plans
5.16 Name Changes
5.17 Existing Debt
5.21 Environmental Matters
6.16 Subordination of Debt
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LOAN AGREEMENT
This Loan Agreement (this "Agreement"), dated August 26, 1994, is
between KIMMINS ENVIRONMENTAL SERVICE CORP., a Delaware corporation, and all of
its undersigned partially and wholly-owned subsidiaries, as Borrowers, and
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, with its principal office in
Birmingham, Alabama, as lender.
R E C I T A L S:
Borrowers have requested that Bank make available to Borrowers three
credit facilities in the aggregate amount of up to $14,000,000 allocated as
follows: (1) a Revolving Loan in the amount of $5,000,000; (2) a Term Loan in
the amount of $7,000,000; and (3) a Real Estate Loan of $2,000,000. Bank is
willing to make these credit facilities available to Borrowers on the terms and
conditions set forth in this Agreement.
OPERATIVE TERMS
The recitals set forth above are incorporated into this Agreement and
Bank and Borrowers agree as follows:
1. Define Terms. As used in this Agreement, the following terms shall
have the following meanings:
1.1 Accounts. This has the meaning set forth in the Security
Agreement.
1.2 Affiliate. Any director or officer of Borrowers or any Person
who directly, indirectly or beneficially, owns 5 percent or more of the capital
stock of any Borrower, or 5 percent of the voting stock or rights of any
Borrower, or any member of the immediate family of any such officer, director,
or stockholder, or any corporation or other entity which is controlled by,
controls, or is under common control with, any Borrower, including the
Guarantor.
1.3 Agreement. This Loan Agreement.
1.4 Bank. SouthTrust Bank of Alabama, National Association, and
its successors and assigns, a party to this Agreement.
1.5 Base Rate. The rate of interest designated by Bank
periodically as its Base Rate. The Base Rate is not necessarily the lowest
interest rate charged by Bank.
1.6 Borrower or Borrowers. Kimmins Environmental Service Corp., a
Delaware corporation, Kimmins Contracting Corp., a Florida corporation, Kimmins
Ltd., a Canadian corporation, Kimmins Industrial Service Corp., a Delaware
corporation, Kimmins Abatement Corp., a Delaware corporation, ThermoCor
Kimmins, Inc., a Florida corporation, TransCor Waste Services, Inc., a Florida
corporation, Kimmins Recycling Corp., a Florida corporation, Kimmins
Incorporated, a Texas corporation, Kimmins International Corporation, a Florida
<PAGE> 8
corporation, Fourth Avenue Holdings, Inc., a Florida corporation, 40th Street,
Inc., a Florida corporation, Lantana Eighth Avenue Corp., a Florida
corporation, and Factory Street Corporation, a Tennessee corporation, each a
party to this Agreement, and other Subsidiaries that from time to time become
parties to this Agreement.
1.7 Cash Capital Expenditures. Cash expenditures made for the
acquisition of any fixed assets or improvements, replacements, substitutions,
or additions thereto which have a useful life of more than one year.
1.8 Capitalized Lease Obligations. Any Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP. The amount of such Debt shall be
the capitalized amount of such obligations determined in accordance with GAAP.
1.9 Chattel Paper. This has the meaning set forth in the Security
Agreement.
1.10 Code. The Uniform Commercial Code, as in effect in Florida
from time to time.
1.11 Collateral. Collectively, Borrowers' Accounts, Instruments,
Documents, Chattel Paper, Equipment, General Intangibles, and Inventory, the
Subsidiary Stock, the Notes Receivable, and Real Estate, and the other property
and interests described in the Collateral Documents and elsewhere in the Loan
Documents, wherever located and whether now owned by Borrowers or hereafter
acquired, and the parts, proceeds, products, profits, replacements, and
substitutions of each, as the case may be.
1.12 Collateral Agent. Bank as the collateral agent under the
Intercreditor Agreement, Bank's successors as collateral Agent under the
Intercreditor Agreement, and Bank, following any termination of the
Intercreditor Agreement and assignment of Collateral Agent's rights to Bank in
accordance with its terms.
1.13 Collateral Documents. The Mortgage, the Pledge Agreement, the
Security Agreement, this Agreement (to the extent it constitutes a security
agreement), and all other documents executed from time to time evidencing
Bank's security interest in the Collateral.
1.14 Common Collateral. Collectively, all of the Collateral,
except for the Real Estate. (The Collateral in which Bank shares a first
perfected security interest with Fleet in accordance with the Intercreditor
Agreement.)
1.15 Contractual Obligation. Any provision of any security issued
by a Person or of any agreement, instrument, or undertaking to which such
Person is a party or by which it or any of its property is bound.
1.16 Current Assets. At any date means the amount at which all of
the current assets of a Person (or Persons on a consolidated basis) would be
properly classified as current assets shown on a balance sheet at such date in
accordance with GAAP, except that amounts due from Affiliates and Subsidiaries
and investments in Affiliates and Subsidiaries shall be excluded.
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<PAGE> 9
1.17 Current Liabilities. At any date means the amount of the
current liabilities of a Person (or Persons on a consolidated basis) that would
be properly classified as current liabilities on a balance sheet at such date
in accordance with GAAP.
1.18 Debt. The sum of (a) indebtedness for borrowed money or for
the deferred purchase price of property or services, (b) Capitalized Lease
Obligations, (c) the aggregate amount of outstanding and unpaid letters of
credit issued by Bank, and (d) all other items which in accordance with GAAP
would be included in determining total liabilities as shown on a balance sheet
of a Person (or Persons on a consolidated basis) as at the date as of which
Debt is to be determined.
1.19 Debt Service Coverage. A ratio in which the initial number is
the sum of the net income (after provision for federal and state taxes and
excluding any extraordinary income) of Borrowers calculated based upon the
12-month period preceding the applicable date, plus the interest expenses of
the Borrowers for said period, plus the unearned employee compensation paid to
the Parent's Employee Stock Ownership Plan Trust, plus the sum of non-cash
expenses or allowances for Borrowers for such period (including amortization or
write-down of intangible assets, depreciation, depletion, and deferred taxes
and expenses), and the second number is the sum of the current Portion of the
long-term debt and Capitalized Lease Obligations of Borrowers as of the
applicable date, plus the interest expenses of Borrowers for the 12-month
period preceding the applicable date. For purposes of determining "current
portion of long-term debt" under the foregoing covenant, Borrowers may exclude
any amount of the Term Loan included in "current portion of long-term debt" by
virtue of the prepayment requirements imposed by Section 2.6(b) that would not
otherwise be so categorized based on the normal amortization requirements of
Section 2.2.
1.20 Default Rate. The highest lawful rate of interest per annum
specified in any Note to apply after a default under such Note or, if no such
rate is specified, a rate equal to the lesser of (a) two percent over the
interest rate specified to be the applicable contract interest rate in this
Agreement or (b) the highest rate of interest allowed by law.
1.21 Documents. This has the meaning set forth in the Security
Agreement.
1.22 Environmental Regulations. All federal, state, and local
laws, rules, regulations, ordinances, programs, permits, guidances, orders, and
consent decrees relating to the environment or to public hearth, safety, and
environmental matters, including the Resource Conversation and Recovery Act,
the Comprehensive Environmental Response Compensation and Liability Act of
1980, the Toxic Substances Control Act, the Clean Water Act, the Clean Air Act,
the River and Labor Act, the Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water
Act, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Insecticide, Fungicide and Rodenticide Act, the Mineral Lands and Leasing Act,
the Surface Mining Control and Reclamation Act, the Oil Pollution Act of 1990,
state and federal super lien and environmental cleanup programs and laws, U.S.
Department of Transportation regulations, laws regulating hazardous,
radioactive and toxic materials and underground petroleum products storage
tanks, and all similar state, federal and local laws and regulations.
3
<PAGE> 10
1.23 Equipment. This has the meaning set forth in the Security
Agreement.
1.24 ERISA. The Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated thereunder.
1.25 Event of Default. Any one of the events enumerated in Article
10 ("Events of Default").
1.26 Fixed Charge Coverage. A fraction in which the numerator is
the sum of the net income of Borrowers (after provision for federal and state
taxes) for the 12-month period preceding the applicable date, plus the
interest, lease, and rental expenses of Borrowers for said period, plus the
unearned employee compensation paid to the Parent's Employee Stock Ownership
Plan Trust, plus the sum of non-cash expenses or allowances for such period
(including amortization or write-down of intangible assets, depreciation,
depletion, and deferred taxes and expenses) and the denominator is the sum of
the current portion of the long-term debt of Borrowers as of the applicable
date, plus the interest, lease, and rental expenses for the 12-month period
preceding the applicable date. For purposes of determining "current portion of
long-term debt" under the foregoing covenant, Borrowers may exclude any amount
of the Term Loan included in "current portion of long-term debt" by virtue of
the prepayment requirements imposed by Section 2.6(b) that would not otherwise
be so categorized based on the normal amortization requirements of Section 2.2.
1.27 Fleet. Fleet Bank, a New York bank and trust company.
1.28 Fleet Loan. The loan in the approximate principal amount of
$3,000,000, from Fleet to the trustees of the Parent's Employee Stock Ownership
Plan, which will remain outstanding after the Closing Date.
1.29 GAAP. Generally accepted accounting principles in the United
States of America as defined by the Financial Accounting Standards Board or its
successor, as in effect from time to time consistently applied.
1.30 General Intangibles. This has the meaning set forth in the
Security Agreement.
1.31 Governmental Authority. This means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
pertaining to government.
1.32 Guarantor. Cumberland Holdings, Inc., a Florida corporation.
1.33 Instrument. This has the meaning set forth in the Security
Agreement.
1.34 Intercreditor agreement. This has the meaning set forth in
section 3.1(r).
1.35 Inventory. This has the meaning set forth in the Security
Agreement.
4
<PAGE> 11
1.36 Lien. Any interest in property (real, personal, or mixed, and
tangible or intangible) securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest is based on the
common law, statute or contract, and including a security interest, security
title or Lien arising from a security agreement, mortgage, deed of trust, deed
to secure debt, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include covenants, conditions, restrictions, leases, and other encumbrances
affecting any property. For the purpose of this Agreement, Borrowers shall be
deemed to be the owners of any property which they have acquired or hold
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
1.37 Loan or Loans. The loans in principal amounts of up to
$5,000,000 (for Revolving Loans), $2,000,000 (for Real Estate Loans), and
$7,000,000 (for Term Loans) advanced by Bank to Borrowers from time to time
evidenced by the Notes described in section 2.1 ("Revolving Loans"), section
2.2 ("Term Loan"), and section 23 ("Real Estate Loan").
1.38 Loan Account. The loan account established on the books of
Bank pursuant to section 2.5 ("Loan Account").
1.39 Loan Documents. This Agreement, and each and every mortgage,
deed of trust, note, security agreement, financing statement or other
instrument executed and delivered to evidence the Loans or any other
Obligation, to constitute collateral for the Loans or any other Obligation, or
to evidence security for the Loans or any other Obligation, and any and all
other agreements, instruments, and documents heretofore, now or hereafter,
executed by Borrowers and delivered to Bank in respect to the transactions
contemplated by this Agreement.
1.40 Material Adverse Effect. With respect to a Person, a material
adverse effect on its business, assets, properties, prospects, results of
operation, or condition financial or other).
1.41 Mortgage. The mortgages executed by Parent granting Bank a
first lien on the Real Estate to secure repayment of the Real Estate Loan.
1.42 Multiemployer Plan. This has the meaning set forth in section
4001(a)(3) of ERISA.
1.43 Net Income. Net income of Borrowers for the relevant period
on a consolidated basis as set forth in Parent's financial statements.
1.44 Note(s). Each promissory note executed and delivered by
Borrowers to Bank evidencing all or part of the Loans, as further described
hereinafter.
1.45 Notes Receivable. The following promissory notes executed in
favor of Parent: (a) Subordinated Note dated March 25, 1993, in the
approximate amount of $1,600,000, executed by TransCor Waste Services, Inc.;
(b) Promissory Note dated June 30, 1993, in the approximate principal amount of
$3,588,000, executed by Sunshadow Apartments, Ltd, and Summerbreeze Apartments,
Ltd,; (c) Promissory Note dated May 1, 1993, in the approximate principal
amount of $1,204,000, executed by Sunforest Apartments, Ltd.; and (d) Term Note
5
<PAGE> 12
dated October 1, 1992, in the approximate initial principal amount of
$4,291,049, executed by Guarantor and all associated collateral guarantees, and
other contract rights.
1.46 Obligations. All Loan and all other advances, debts,
liabilities, obligations, covenants, and duties owing, arising, due or payable
from Borrowers to Bank of any kind or nature, present or future, whether or not
evidenced by any note, guaranty, or other instrument, whether arising under
this Agreement or any of the other Loan Documents or otherwise, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however evidenced or acquired. The term includes, without limitation, all
interest, charges, expenses, fees, attorneys' fees and any other sums
chargeable to Borrowers under any of the Loan Documents and all rights Bank may
at any time or times have to reimbursement in connection with any letter of
credit or guaranty issued for Borrowers' benefit.
1.47 Parent. Kimmins Environmental Service Corp., a Delaware
corporation and a party to this Agreement.
1.48 Permitted Lien. Any Lien of a kind specified as permitted in
section 7.2 ("Liens and Security Interests").
1.49 Person. An individual, partnership, corporation, joint stock
company, firm, land trust, business trust, unincorporated organization, limited
liability company, or other business entity, or a government or agency or
political subdivision thereof.
1.50 Plan. An employee benefit plan now or hereafter maintained
for employees of Borrowers that is covered by Title IV of ERISA.
1.51 Pledge Agreement. The Pledge Security Agreement dated April
30, 1993, executed by Parent in favor of Fleet, as amended and restated to add
TransCor, Recycling, and Guarantor as pledgor and Bank and Collateral Agent as
secured parties, to add all of the Subsidiary Stock as Collateral, and to
otherwise conform to the terms of this Agreement.
1.52 Prohibited Transaction. Any transaction set forth in section
406 of ERISA or section 4975 off the Internal Revenue Code of 1986.
1.53 Real Estate. The improved real property of Parent and
described in and encumbered by the Mortgage.
1.54 Real Estate Loan. This has the meaning set forth in Section
2.3 ("Real Estate Loan").
1.55 Reportable Event. Any of the events set forth in section
4043(b) of ERISA.
1.56 Requirement of Law. As to any Person, the articles of
incorporation and bylaws or other organizational or governing documents of the
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each
6
<PAGE> 13
case applicable to or binding on the Person or any of its property or to which
the Person or any of its property is subject.
1.57 Revolving Loan. This has the meaning set forth in section 2.1
("Revolving Loan").
1.58 Security Agreement. The General Security Agreement dated
April 30, 1993, executed by certain Borrowers in favor of Fleet, as amended and
restated pursuant to the Amended and Restated General Security Agreement dated
the same date as this Agreement to add Bank and Collateral Agent as additional
secured parties, to add all of the Borrowers as debtors, and to otherwise
conform with the terms of this Agreement.
1.59 Solvent. As to any Person, means such Person (a) owns
property, real, personal and mixed, whose aggregate fair saleable value is
greater than the amount required to pay all of such Person's Debt and
Contingent Obligations, and (b) is able to pay all of its Debt as such Debt
matures, and (c) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage.
1.60 Subordinated Debt. The Debt of Borrowers owed to any
Affiliate, or to any other Person which is fully subordinated to the Loans
(including principal, interest, and agreed charges) in a manner satisfactory to
Bank (which may be either according to its terms or by separate agreement) and
which debt arises from Borrowers' actual receipt of cash and not from "in kind"
or non-cash consideration.
1.61 Subsidiary. Any corporate entity or partnership, or other
business entity, the controlling interest of which is owned by any Borrower.
Subsidiary includes every Borrower except Parent.
1.62 Subsidiary Stock. The issued and outstanding capital stock of
(i) each Subsidiary held by Parent or a Subsidiary, including all of the stock
listed on the attached "Exhibit E," and (ii) all 2,000,000 shares of
outstanding capital stock of Cumberland Casualty and Surety Company, a Texas
corporation and a wholly-owned subsidiary of Guarantor.
1.63 Tangible Net Worth. For any Person (or Persons on a
consolidated basis), the aggregate of the (a) par or stated value of all
outstanding capital stock; (b) capital surplus; and (c) retained earnings, less
(t) any amounts due from Affiliates; (u) any surplus resulting from any
write-up of assets subsequent to the date of this Agreement; (v) deferred
assets (including deferred development costs) other than prepaid insurance and
prepaid taxes; (w) goodwill or other amounts representing the excess of the
purchase price of assets or stock over the value assigned to them on the books
of such Person; (x) the book value of any patents trademarks, trade names,
copyrights, non-compete agreements, franchises, experimental expenses, and
other intangible assets; (y) the amount paid for any treasury stock reflected
as a reduction of the capital surplus or retained earnings accounts; and (z)
any other amounts classified as intangible assets under GAAP. For purposes of
calculating Tangible Net Worth, cumulative unearned employee compensation from
Parent's Employee Stock Ownership Plan Trust may be eliminated as a reduction
of shareholders' equity.
7
<PAGE> 14
1.64 Term Loan. This has the meaning set forth in section 2.2.
1.65 Certain Other Words. All accounting terms used herein have
the respective meanings attributed to them under, and shall be construed in
accordance with GAAP. The terms "herein, "hereof," and "hereunder," and other
words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronouns used shall be
deemed to cover all genders. As used in this Agreement, (a) the word
"including" is always without limitation; (b) words in the singular number
include words of the plural number and vice versa; (c) the word "costs"
includes all out-of-pocket expenses, fees, costs, and expenses of experts and
collection agents, supersedeas bonds, and all attorneys' fees, costs, and
expenses, whether incurred before, during, or after demand or litigation, and
whether pursuant to trial appellate arbitration, bankruptcy, or
judgment-execution proceedings; and (d) the word "property" includes both
tangible and intangible property, unless the context otherwise requires. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements, including references to any of the Loan Documents,
shall include any and all modifications or amendments thereto and any and all
extensions or renewals thereof. All other terms contained in this Agreement
shall, unless otherwise defined herein or unless the context otherwise
indicates, have the meanings provided for by the Uniform Commercial Code of the
State of Florida.
1.66 Directly and Indirectly. When any provision of this Agreement
or any Loan Document requires or prohibits action to be taken by a Person, the
provision applies regardless of whether the action is taken directly or
indirectly by the Person.
2. The Loans
2.1 Revolving Loans
(a) Subject to the terms and conditions of this Agreement
and provided no Event of Default exists, Bank agrees to loan to Borrowers on a
revolving credit basis for working capital and letter of credit financing, when
requested by Parent or TransCor Waste Services, Inc., Revolving Loans in
principal amounts aggregating up to $5,000,000.
8
<PAGE> 15
(b) The Borrowers shall execute and deliver to Bank one
promissory note ("the Revolving Note") in the aggregate face amount of the
Revolving Loan payable to the order of Bank, evidencing Borrowers' joint and
several obligation to repay the Revolving Loan. The principal amount of the
Revolving Loans outstanding from time to time under this Agreement shall bear
interest at floating annual rates that vary, depending on the balance of the
Term Loan, as follows:
<TABLE>
<CAPTION>
Balance of
Term Loan Applicable Interest Rate
--------- ------------------------
<S> <C>
Zero Base Rate Plus Three Quarters
(3/4%) Percent
Up to $2,500,000 Base Rate Plus One and One
Quarter (1 1/4%) Percent
Over $2,500,000 Base Rate Plus One and Three
Quarters (1 3/4%) Percent
</TABLE>
Borrowers shall pay interest to Bank on the amount of the Revolving Loan
outstanding monthly in arrears on the first day of each month beginning with
the later of October 1, 1994, or the first day of the first month following the
date of the initial advance under the Revolving Loan, and continuing on the
same day of each month thereafter until the unpaid principal balance of the
Revolving Loan has been paid in full. The applicable interest rate on the
Revolving Loan shall change as and when the Base Rate changes from time to
time. The Base Rate on the date of this Agreement is 7.75 percent. Interest
shall be calculated based on a 360-day year.
(c) The aggregate amount of Bank's outstanding
obligations for outstanding and unpaid letters of credit issued for the account
of all Borrowers will be limited to $3,560,000. The total availability of
advances under the Revolving Loan will be reduced by the aggregate amount of
outstanding and unpaid letters of credit.
(d) For at least 30 consecutive days during each calendar
year of the term of this Agreement, Borrowers shall reduce to zero the
outstanding balance of the Revolving Loan (excluding the amount of outstanding
and unpaid letters of credit that have not been drawn).
(e) Borrowers shall repay on April 30, 1996, all
outstanding principal and accrued interest with respect to the Revolving Loan
not previously paid.
2.2 Term Loan
(a) Subject to the terms and conditions of this Agreement
and provided that no Event of Default exists, Bank agrees to loan to Borrowers
a Term Loan of $7,000,000 to refinance Borrowers' revolving line of credit with
Fleet and Borrowers' outstanding balance on their loan from Chase Bank the
approximate principal amount of $500,000.
9
<PAGE> 16
(b) The Borrowers shall execute and deliver to Bank one
promissory note (a "Term Note") payable to Bank, evidencing Borrowers' joint
and several obligation to repay the Term Loan. The principal amount of the
Term Loan outstanding from time to time under this Agreement shall bear
interest at floating annual rates that vary, depending on the balance of the
Term Loan, as follows:
<TABLE>
<CAPTION>
Balance of
Term Loan Applicable Interest Rate
--------- ------------------------
<S> <C>
Up to $2,500,000 Base Rate Plus One and One
Quarter (1 1/4%) Percent
Over $2,500,000 Base Rate Plus One and Three
Quarters (1 3/4%) Percent
</TABLE>
Borrowers shall pay interest to Bank on the amount of the Term Loan outstanding
monthly in arrears on the first day of each month beginning with October 1,
1994, and continuing on the same day of each month thereafter until the unpaid
principal balance of the Term Loan has been paid in full. Borrowers shall pay
principal under the Term Loan in seven quarterly installments of $500,000 on
the first business day of each calendar quarter, beginning on January 2, 1995,
and continuing on April 1, July 1, October 1, and January 2 of each year, and
in a final installment of $3,500,000 on the first day of the 24th month
following the Closing Date. Notwithstanding this schedule, Borrowers shall
further comply with the mandatory prepayment provisions set forth in section
2.6(b) ("Prepayment").
2.3 Real Estate Loan
(a) Subject to the terms and conditions of this Agreement
and provided no Event of Default exists, Bank agrees to loan to Borrowers a
Real Estate Loan of $2,000,000.
(b) The Borrowers shall execute and deliver to Bank one
promissory note (the "Real Estate Note") in the face amount of the Real Estate
Loan payable to the order of Bank, evidencing Borrowers' joint and several
obligation to repay the Real Estate Loan. The outstanding principal amount of
the Real Estate Loan shall bear interest at varying floating annual rates,
depending on the balance of the Term Loan, as follows:
<TABLE>
<CAPTION>
Balance of
Term Loan Applicable Interest Rate
--------- ------------------------
<S> <C>
Zero Base Rate Plus Three
Quarters (3/4%) Percent
Up to $2,500,000 Base Rate Plus One and One
Quarter (1 1/4%) Percent
Over $2,500,000 Base Rate Plus One and Three
Quarters (1 3/4%) Percent
</TABLE>
10
<PAGE> 17
Borrowers shall pay to Bank 59 equal monthly principal installments of
$8,333.33, plus accrued interest, based on a 240-month principal-only
amortization period, on the first day of each month beginning with October 1,
1994. Borrowers shall pay to Bank all unpaid principal and interest under the
Real Estate Loan on or before the first day of the 60th month following the
Closing Date.
2.4 Terms Governing All Loans
(a) Each borrowing under a Loan shall be effected by
crediting the amount thereof to the regular checking account of a Borrower
maintained with Bank or with another bank approved by Bank.
(b) Any payments not made as and when due with respect to
any Loan (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate from the date due until paid, payable on demand.
(c) If the outstanding principal amount of the Loans at
any time exceeds the respective maximum principal amounts specified for them,
Borrowers shall immediately pay Bank such excess as a reduction of the
principal amount of the Loan. Borrowers may request and Bank may be willing in
its sole and absolute discretion to make advances in excess of such maximum
principal amounts. Bank shall enter any such advances as debits in the Loan
Account. All such advances in excess of the maximum principal amount shall be
payable on demand, bear interest as provided in this Agreement for Revolving
Loans generally, and be secured by the Collateral, excluding the Real Estate,
unless the parties otherwise agree in writing.
2.5 Loan Accounts. Amounts due under the Revolving Note, under
the Term Note, under the Real Estate Note, and under this Agreement and the
other Loan Documents shall be reflected in the Loan Account. Bank shall enter
disbursements hereunder or under a Note as debits to the Loan Account and shall
also record in the Loan Account all payments made by Borrowers and all proceeds
of Collateral which are finally paid to Bank, and may record therein, in
accordance with customary accounting practice, all charges and expenses
properly chargeable to Borrowers hereunder.
2.6 Prepayment
(a) Generally. Subject to the provisions hereof,
Borrowers shall have the right at any time and from time to time to prepay any
Loan, in whole or in part, without premium or penalty but with accrued interest
to the date of such prepayment on the amounts prepaid. Such prepayments shall
be made to Bank in immediately available funds and, shall be applied to the
last of the installment(s) to mature. Any such prepayment shall not affect or
vary the obligation of Borrowers to pay any installment when due.
(b) Mandatory Prepayment and Reduction of Term Loan
Principal Balance. Before the first anniversary of the Closing Date, Borrowers
shall have paid (through both regularly scheduled payments and through
prepayments) at east $4,500,000 of the original principal balance of the Term
Note, reducing its outstanding principal balance to not more than $2,500,000.
11
<PAGE> 18
2.7 Use of Proceeds. Borrowers shall use the proceeds of the
Revolving Loan to provide working capital support and to facilitate issuance of
letters of credit of up to $3,560,000 for bid and performance bonds and for
workers' compensation and casualty insurance programs, or other corporate
purposes approved by Bank. Borrowers shall use the proceeds of the Term Loan
to refinance the existing revolving line of credit with Fleet in the amount of
$5,000,000 and the outstanding balance of the loan to Borrowers from Chase Bank
in the appropriate amount of $464,000, and to provide additional working
capital for all Borrowers. Borrowers shall use the proceeds of the Real Estate
Loan to refinance the existing real estate mortgage loan with NationsBank of
Florida, the equipment line of credit with Fleet, and any other credit
obligations for which Borrowers submit a refinancing request before closing
that is accepted by Bank. Borrowers shall not use proceeds of the Loan for any
other purposes. The use of proceeds as approved by Bank is further described
in Exhibit "F" to this Agreement. Borrowers may use up to $270,000 of the Loan
proceeds designated for repayment of the Amplicon Debt for payment of other
existing Equipment financing Debt or to purchase Equipment, provided such
payments are made within 60 days following the Closing Date.
2.8 Term. This Agreement shall remain in force and effect until
all Loans, and any renewals or extensions, and all interest thereon and costs
provided for herein with regard to either of them have been indefeasibly paid
or satisfied in full and until Bank has no further obligation to advance funds
to Borrowers hereunder. The indemnities provided for in Article 11
("Indemnification") shall survive the payment in full of all Loans and the
other Obligations and the termination of this Agreement.
2.9 Payments. All sums paid to Bank by Borrowers hereunder shall
be paid directly to Bank in immediately available funds. Bank shall send
Parent statements of all amounts due hereunder, which statements shall be
considered correct and conclusively binding on Borrowers unless Parent notifies
Bank to the contrary within twenty (20) days of its receipt of any statement
which it deems to be incorrect. Bank may, in its sole discretion, (a) charge
against any deposit account of any Borrower all or any part of any amount due
hereunder and (b) advance to Borrowers, and charge to the respective Loan, a
sum sufficient each month to pay all interest accrued on the respective Loan
and fees due under this Agreement during or for the immediately preceding
month. Borrowers shall be deemed to have requested an advance under the
Revolving Loan, upon the occurrence of an overdraft in any of Borrowers'
checking accounts maintained with Bank or another bank owned by SouthTrust
Corporation.
2.10 Fees. Borrowers shall pay to Bank annually in advance on the
date of this Agreement and on each anniversary of it a commitment fee of
one-quarter percent (1/4%) per annum of the maximum committed amount of the
Revolving Loan credit facility (whether or not outstanding). For the partial
year preceding maturity of the Revolving Loan, Borrowers shall pay to Bank on
the Closing Date an origination fee of one-half percent (1/2%) on each of the
amounts of the Term Loan and the Real Estate Loan.
2.11 Limitation on Interest Charges. Bank and Borrowers intend to
comply strictly with applicable law regulating the maximum allowable rate or
amount of interest that Bank may charge and collect on the Loans to Borrowers
pursuant to this Agreement. Accordingly, and notwithstanding anything in the
Note or in this Agreement to the contrary, the maximum aggregate amount of
interest and other charges constituting interest under applicable law that are
12
<PAGE> 19
payable, chargeable, or receivable under the Note and this Agreement shall not
exceed the maximum amount of interest now allowed by applicable law or any
greater amount of interest allowed because of a future amendment to existing
law. Borrowers are not liable for any interest in excess of the maximum lawful
amount, and any excess interest charged or collected by Bank will constitute an
inadvertent mistake and, if charged but not paid, will be cancelled
automatically, or, if paid, will be either refunded to Borrowers or credited
against the outstanding principal balance of the Note, at the election of
Borrowers.
2.12 Letters of Credit
(a) Standby Letter of Credit Financing. Subject to the
terms and conditions of this Agreement, Bank agrees to issue, extend, or renew
standby letters of credit for the account of Borrowers. The aggregate amount
available for standby letter of credit financing will be subject to limitations
set forth in section 2.1 ("Revolving Loan").
(b) Payment. All payments made by Bank under such
letters of credit (whether or not a Borrower is the account party or drawer)
and all fees, commissions, discounts and other amounts owed or to be owed to
Bank in connection therewith (unless otherwise paid or reimbursed to Bank by
Borrowers), shall be deemed to be advances under the Revolving Note, and shall
be repaid and bear interest in accordance with its terms and the terms of this
Agreement. On the termination or maturity date of the Revolving Loan (whether
at stated maturity, by acceleration, or otherwise), Borrowers shall, on demand,
deliver to bank good funds equal to 100 percent of Bank's maximum liability
under all outstanding letters of credit, to be held as cash collateral for
Borrowers' reimbursement obligations and other Indebtedness.
(c) Applications and Supplemental Forms. Borrowers shall
complete and sign such applications and supplemental agreements and provide
such other documentation as Bank may require. The form and substance of all
letters of credit shall be subject to Bank's approval. Among other
requirements, the tenor of any letter of credit will not extend beyond one
year.
(d) Commissions and Fees. Borrowers shall pay as a
commission in connection with the issuance of letters of credit an amount
negotiated by the parties when the letter of credit is issued, of not less than
one percent (1%) of the aggregate amount available to be drawn under the letter
of credit. In addition to these fees, Borrowers shall pay or reimburse Bank
for such normal and customary costs and expenses that are incurred or charged
by Bank in issuing, effecting payment, or administering any letter of credit
(including, without limitation, amendment fees, corresponding bank fees,
reissuance costs, and cancellation fees).
(e) Requirement of Law. If any Requirement of Law or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof shall either (i) impose,
modify, assess or deem applicable any reserve, special deposit, assessment or
similar requirement against letters of credit issued by Bank or (ii) impose on
Bank any other condition regarding any letter of credit, and the result of any
event referred to in clauses (i) or (ii) above shall be to increase the cost to
Bank of issuing or maintaining such letter of credit, or its participation
therein, as the case may be (which increase in cost shall be the result of
Bank's reasonable allocation of the aggregate of such cost increases resulting
from such events), then, upon demand by Bank, Borrowers shall immediately pay
to
13
<PAGE> 20
Bank such events), then, upon demand by Bank, Borrowers shall immediately pay
to Bank from time to time as specified by Bank additional amounts which shall
be sufficient to compensate Bank for such increased cost, together with
interest on each such amount from the date demanded until payment in full
thereof at the Base Rate. A certificate as to the fact and amount of such
increased cost incurred by Bank as a result of any event mentioned in clauses
(i) or (ii) above, submitted by Bank to Borrowers, shall be conclusive, absent
manifest error.
(f) Nature of Obligations. To induce Bank to issue
letters of credit, Borrowers agree that neither Bank nor its agents or
correspondents will be liable or responsible for, and Borrowers' unconditional
obligation to reimburse Bank for the obligations shall not be affected by, any
event or circumstance, including: (i) the validity, enforceability, genuineness
or sufficiency of documents or of any endorsement thereon existing in
connection with any letter of credit, even if such documents should in fact
prove in any or all respects to be invalid, unenforceable, insufficient,
fraudulent or forged; (ii) any breach of contract or other dispute between
Borrower and any beneficiary of a letter of credit or holder of a draft
accepted by Bank; (iii) payment by Bank upon presentation of a draft or
documents which do not comply in any respect with the terms of such letter of
credit or draft; (iv) loss of or damage to any collateral; (v) the invalidity
or insufficiency of any endorsements; (vi) delay in giving or failure to give
notice of arrival or any other notice; (vii) failure of any instrument to bear
any reference or adequate reference to the letter of credit or draft or to
documents to accompany any instrument at negotiation; (viii) failure of any
person to note the amount of any payment on the reverse of the letter of credit
or to surrender to or take up the letter of credit or draft or to forward
documents in the manner required by the letter of credit or draft; or (ix) any
other matter whatsoever; except that Borrowers shall have a claim against Bank
and Bank shall be liable to Borrowers, to the extent, but only to the extent,
of any direct, as opposed to consequential damages suffered by Borrower that
Borrowers prove was caused by the gross negligence or willful misconduct of
Bank or its agent. Borrowers agree that any action taken or permitted to be
taken by Bank or its agent under or in connection with any letter of credit,
including related drafts, documents, or property, unless constituting gross
negligence or willful misconduct on the part of Bank or its agent, shall be
binding on Borrowers and shall not create any resulting liability to Borrowers
on the part of Bank or its agent. Borrowers will immediately examine a copy of
the letter of credit (and any amendments thereof) or draft sent to it by Bank
or its agent, and Borrowers will immediately notify Bank in writing of any
claim or irregularity.
In furtherance and extension and not in limitation of the foregoing,
(i) any action taken or omitted by Bank or by any of its correspondents in
connection with any of the letters of credit, if taken or omitted in good
faith, shall be binding upon Borrowers and not cause the Bank or its
correspondents to incur liability to Borrowers, and (ii) Bank may accept
documents that appear on their face to be in order, without further
investigation, regardless of any notice or information to the contrary.
(g) Any letter of credit issued hereunder shall be
governed by the Uniform Customs of Practice for Documentary Credit (1994 Rev.),
International Chamber of Commerce Publication No. 500, as revised from time to
time, except as otherwise provided in this Agreement or in any other Loan
Document.
3. Conditions of Lending
14
<PAGE> 21
3.1 Conditions Precedent to Initial Advance. In addition to any
other requirements set forth in this Agreement, Bank will not make the Term
Loan or the Real Estate Loan or make the initial Loan under the Revolving Loan
unless the following conditions have been met:
(a) Corporate Proceedings. All proper corporate
proceedings shall have been taken by Borrowers to authorize this Agreement and
the transactions contemplated hereby.
(b) Documentation. All instruments and proceedings in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Bank, and Bank shall have received on the
date of this Agreement copies of all documents including records of corporate
proceedings, which it may have requested in connection therewith, including
certified copies of resolutions adopted by the Board of Directors of Borrowers,
certificates of good standing, and certified copies of the Certificate of
Incorporation or Articles of Incorporation and Bylaws, and all amendments
thereto, of Borrowers.
(c) Loan Documents. Bank shall have received executed
copies of all instruments evidencing security for the Loans and copies of the
insurance policies and related certificates of insurance referred to in
sections 6.1 ("Insurance") and 9.5 ("Insurance").
(d) No Default. No event shall have occurred or be
continuing which constitutes an Event of Default or which would constitute an
Event of Default with the giving of notice or the lapse of time or both.
(e) Security Documentation. Fleet's collateral
documentation evidencing its liens on the Common Collateral, including the
Security Agreement and the Pledge Agreement, shall have been amended to add all
Borrowers as debtors, to add Bank and Collateral Agent as additional secured
parties, and otherwise to be in form and substance satisfactory to the parties.
(f) Perfection of Liens. UCC-1 financing statements
naming Bank and the Collateral Agent as secured parties, and, if applicable,
certificates of title covering the Collateral executed by Borrowers shall have
been duly recorded or filed (endorsed and delivered to Bank or Collateral Agent
in the case of certificates of title) in the manner and places required by law
to establish, preserve, protect, and perfect the interests and rights created
or intended to be created by this Agreement and any other security agreement.
The Collateral Agent shall have received the original Notes Receivable,
endorsed in favor of the Collateral Agent. The Collateral Agent shall have
received certificates evidencing the Subsidiary Stock, together with blank
stock transfer powers assigning the Subsidiary Stock to the Collateral Agent.
(g) Real Estate Mortgage. Bank shall have received the
Mortgage duly executed by Parent granting to Bank a first lien on the Real
Estate and rents and leases arising from the Real Estate.
(h) Title Insurance. Bank shall have received a
commitment for the issuance of a standard ALTA mortgagee title insurance policy
from a company approved by Bank. The commitment for title insurance shall
provide coverage of not less than the amount of the Real Estate Loan, insuring
the Mortgage as valid first lien on the Real Estate, subject only to exceptions
approved by Bank. The commitment shall specify such affirmative coverages and
15
<PAGE> 22
endorsements as Bank or Bank's counsel deems appropriate and specify Bank, as
well as its successors and/or assigns, as the insured party.
(i) Surveys. Bank shall have received two sealed copies
of a current survey of the Real Estate, prepared and certified within 60 days
of the Closing Date by a Florida registered surveyor or a licensed professional
Florida engineer, which complies with all requirements set forth in the loan
commitment and is otherwise in form and substances satisfactory to Bank and its
counsel.
(j) Appraisals and Environmental Assessments. Bank shall
have received current appraisals of the Real Estate expressing an opinion of
the Real Estate's market value that are satisfactory to Bank. Bank also shall
have received a Phase I Environmental Assessment Report concerning the Real
Estate satisfactory in form, scope, and substance to Bank and Bank's counsel
and providing evidence satisfactory to Bank and Bank's counsel that the Real
Estate does not contain asbestos or any other material or substance that is
regulated or prohibited by local state, or federal environmental laws or
regulations or that are known to pose a hazard to the environment or to human
health, except those materials or substances that are disclosed in writing to,
and approved in writing by, Bank. The environmental consultant shall have been
ordered directly by Bank at the sole cost of Borrowers.
(k) Reports. Bank shall have received all reports and
information from Borrowers called for under the Agreement as and when due.
(l) Opinion of Counsel. Bank shall have received on the
date of this Agreement an opinion from counsel to Borrowers' satisfactory to
Bank which is in the form of Exhibit "B" hereto and with respect to such other
matters relating to the transactions contemplated hereby as Bank may reasonably
request.
(m) Incumbency Certificate. Bank shall have received an
incumbency certificate, dated as of the date of this Agreement, executed by the
Secretary or Assistant Secretary of Borrowers, which shall identify by name and
title and bear the signature of the officer of such Borrowers authorized to
sign this Agreement and the Notes on behalf of Borrowers. Bank shall be
entitled to rely upon such incumbency certificate in completing the
transactions contemplated herein or in any Loan Document.
(n) Consents. Bank shall have received consents and
agreements of the landlords of each of the premises leased by Borrowers on
which the Collateral is located as provided in section 4.1 ("Security"), all in
form satisfactory to Bank.
(o) Lien Search. Bank shall have received a report from
the Florida Department of State and any other jurisdiction in which any of the
Collateral is located or in which Borrowers are located indicating that there
are no Liens against that portion of the Collateral constituting personal
property, except the Liens permitted by section 7.2 ("Liens and Security
Interests").
(p) No Adverse Change. There shall have been no material
adverse change in the condition, financial or otherwise, of any Borrower, from
such condition as it existed on
16
<PAGE> 23
the date of the most recent financial statements of such Person delivered prior
to the date of this Agreement.
(q) Fees and Expenses. Bank has received all amounts
required to be paid by Borrowers or another Person pursuant to the commitment
letter delivered by Bank to Borrowers in connection with the Loan.
(r) Intercreditor Agreement. Bank, Fleet, Collateral
Agent, and Borrower shall have executed the Intercreditor Agreement pursuant to
which: (a) Bank is appointed Collateral Agent with respect to the Common
Collateral, and (b) Fleet and Bank agree to allocation of certain prepayments
and the liquidation proceeds of the Common Collateral.
(s) Registration Rights Agreement. The Registration
Rights Agreement dated April 30, 1993, between Fleet and TransCor Waste
Services, Inc., providing for registration of the shares of common stock of
TransCor pledged by Parent to Fleet as collateral for the Fleet Loan shall have
been amended to add Bank or Collateral Agent, at Bank's option, as an
additional beneficiary of the registration rights provided for in the
Agreement.
(t) Additional Documents. Bank shall have received such
additional legal opinions, certificates, proceedings, instruments, and other
documents as Bank or its counsel may reasonably request to evidence (a)
compliance by Borrowers with legal requirements, (b) the truth and accuracy, as
of the date of this Agreement, of the representations of Borrowers contained
herein, and (c) the due performance or satisfaction by Borrowers, at or prior
to the date hereof, of all agreements required to be performed and all
conditions required to be satisfied by Borrowers pursuant hereto.
3.2 Conditions Precedent to Each Advance. The following
conditions, in addition to any other requirements set forth in this Agreement,
must have been met or performed before each advance under the Revolving Loan.
(a) Borrowing Request. To the extent required by Bank,
Borrowers have delivered to Bank a written borrowing request.
(b) Supplementary Corporate Proceedings. Any
supplementary corporate proceedings necessary to authorize the transaction have
been taken by Borrowers.
(c) Accuracy of Representations. All representations and
warranties made by Borrowers in this Agreement or otherwise in writing in
connection with this Agreement are true and correct as if made on and as of the
proposed date of the advance of Loan proceeds, and to the extent requested by
Bank. Borrowers have so certified in writing.
(d) No Default. No Event of Default has occurred and is
continuing, and to the extent requested by Bank. Borrowers have so certified
in writing.
(e) Further Assurances. Borrowers have delivered such
further documentation or assurances that Bank reasonably requires.
17
<PAGE> 24
4. Security for Loan
4.1 Security. The Revolving Loan, Term Loan, and Real Estate Loan
and each Note shall be secured by each of the following:
(a) A first-priority security interest in Borrowers'
Accounts, Equipment, Instruments, Documents, Chattel Paper, General
Intangibles, Inventory, the Subsidiary Stock, and the Notes Receivable, and
other properties and interests as provided for in the Collateral Documents; and
(b) The unconditional guarantee of Guarantor limited to
$2,250,000 of the Term Loan and to be released by its terms on receipt by Bank
of full payment of the Term Loan or cash repayment of the Cumberland Holdings
note in the amount of $4,291,049 described in the Security Agreement or the
sale of the Cumberland Holdings note for cash of at least $3,000,000, provided
that in either case the proceeds of which are paid to Collateral Agent for
application against the Obligations and the Fleet Loan pursuant to the
Intercreditor Agreement.
To the extent the foregoing Collateral constitutes Common Collateral
and so long as the Fleet Loan remains outstanding, Bank consents to Fleet
sharing the first Lien on the Common Collateral and sharing pari passu in
certain proceeds of the Common Collateral as further described in the
Intercreditor Agreement.
The Real Estate Loan shall be further secured by a first-priority
mortgage lien on the Real Estate pursuant to the Mortgage.
Borrowers agree to execute and deliver, or cause the execution and
delivery of, such security agreements, deeds of trust, mortgages, assignments,
guaranties, consents, subordination agreements, and financing statements as may
be required by Bank to evidence such security, all in form satisfactory to
Bank, as well as such consents and agreements of the landlords of each of the
premises leased by Borrowers on which the Collateral is located, all in form
satisfactory to Bank.
5. Representations, Warranties, and General Covenants
Borrowers jointly and severally represent, warrant, and covenant to
and with Bank, which representations, warranties, and covenants shall survive
until the Obligations are indefeasibly satisfied in full, that:
5.1 Organization and Qualification. Each Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, has the corporate power to own its
properties and to carry on its business as now being conducted; and is duly
qualified to do business and is in good standing in every jurisdiction in which
the character of the properties owned by it or in which the transaction of its
business makes its qualification necessary.
5.1 Corporate Power and Authorization: Compliance with Law. Each
Borrower has full power and authority to enter into this Agreement, to borrow
hereunder, to execute and
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<PAGE> 25
deliver the Notes and the other Loan Documents, and to incur the obligations
provided for herein, all of which have been authorized by all proper and
necessary corporate action. Each Borrower further (a) is in compliance with
all Requirements of Law applicable to it and (b) possesses all governmental
franchises, licenses, and permits that are necessary to own or lease its assets
and to carry on its business as now conducted.
5.3 Enforceability: No Legal Bar. This Agreement has been, and
each other Loan Document to which it is a party will be, duly executed and
delivered to Bank on behalf of each Borrower. This Agreement and each of the
other Loan Documents constitute, and each Note when executed and delivered for
value received will constitute, a valid and legally binding obligation of each
Borrower enforceable in accordance with their respective terms. The execution,
delivery, and performance by Borrowers of this Agreement and the other Loan
Documents to which it is a party, each Borrower's borrowings pursuant to this
Agreement, and use of the loan proceeds, will not violate any Requirement of
Law applicable to Borrowers or constitute a breach or violation of, a default
under, or require any consent under (except for consents that have been
obtained), any of its Contractual Obligations, and will not result in a breach
or violation of, or require the creation or imposition of any Lien on any of
its properties or revenues pursuant to, any Requirement of Law or Contractual
Obligation.
5.4 Pending Actions. Except as disclosed in schedule 5.4, no
action or investigation is pending or, so far as Borrowers' officers and
directors know, threatened, before or by any court or administrative agency
against any Borrower or against any of its businesses, properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated by them, or (b) which might result in any Material Adverse Effect
on any Borrower.
5.5 Financial Statements. The financial statements of Borrowers
dated June 30, 1994 (unaudited) (the "Financial Statement Date"), December 31,
1993, December 31, 1992, and December 31, 1991, heretofore delivered to Bank,
and all other financial statements and reports furnished by each Borrower to
Bank are complete and correct and fairly present the financial condition of the
Borrower and the results of its operations and transactions as of the dates and
for the periods referred to and have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved. There are no
liabilities, direct or indirect, fixed or contingent, of any Borrower as of the
date of such financial statements which are not reflected therein or in the
notes thereto. Neither said financial statements nor any other financial
statements, reports, and information furnished by Borrower to Bank, when
considered with the SEC filings referenced in section 5.7 ("SEC Filings"),
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or herein not misleading.
There is no fact which Borrowers have failed to disclose to Bank in writing
which materially affects adversely or, so far as Borrower can now foresee, will
materially affect adversely the Collateral, business, prospects, profits, or
conditions (financial or otherwise) of any Borrower or the ability of any
Borrower to perform this Agreement.
5.6 No Change. Since the Financial Statement Date, there has not
been: (a) any material adverse change in the assets, liabilities, business, or
condition (financial or other) of any Borrower; (b) any loss, damage, or
destruction, whether or not covered by insurance, that materially adversely
affected the assets or property of any Borrower; (c) any distribution by any
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<PAGE> 26
Borrower to its shareholders in cash, securities, or other property; (d) any
change in any of Borrowers' accounting methods, practices, or principles or
depreciation and amortization rates or policies, except as required by law or
to conform with GAAP; or (e) except in the usual and ordinary course of
business, any of the following: (i) any breach, execution, extension,
modification, or termination by any Borrower of any Contractual Obligation;
(ii) any disposition by any Borrower of, or the imposition of a Lien on, any
asset of the Borrower, except for a Lien permitted under section 5.8 ("Title to
Properties"); (iii) any cancellation of a debt owed to, or a claim held by, any
Borrower; or (iv) any Event of Default. No Contractual Obligation of any
Borrower and no Requirement of Law materially adversely affects, or to the
extent that the Borrower can reasonably foresee might so affect, the business,
operations, property, or condition (financial or other) of any Borrower.
5.7 SEC Filings. Each of Parent, Guarantor, and TransCor Waste
Services, Inc., previously has furnished or made available to Bank accurate and
complete copies of its forms, reports, and documents filed with the Securities
and Exchange Commission ("SEC") since January 1, 1993 (the "SEC Documents"),
which include all reports, schedules, proxy statements, and registration
statements filed or required by it to be filed with the SEC since January 1,
1993. As of their respective dates, the SEC Documents did not contain any
untrue statements of a material fact or omit to state a material fact required
to be stated in those documents or necessary to make the statements in those
documents not misleading, in light of the circumstances in which they were
made.
5.8 Title to Properties. Each Borrower has good and marketable
title to all of its assets, other than (including the Collateral), subject to
no Lien, except inchoate Liens arising by operation of law for obligations
which are not yet due and except for the Liens and security interests described
on Exhibit "C" to this Agreement. Except for the security interests granted
herein or reflected on Exhibit "C" to this Agreement, Borrowers will be the
sole owner of the Collateral to be acquired after the date hereof free from any
adverse Liens, security interests or other encumbrances. Borrowers shall
defend the Collateral against all claim and demands of all other parties who at
any time claim any interest in the Collateral. Borrowers enjoy peaceable and
undisturbed possession under all leases under which they are operating, and
none of such leases contain any provisions which may materially and adversely
affect or impair the operations of Borrowers, and all of such leases are valid
and subsisting and in full force and effect.
5.9 Pension Plans. Except as set forth on schedule 5.9, Borrowers
have not established and are not parties to any Plan or to any stock option or
deferred compensation plan or contract for the benefit of its employees or
officers, any pension, profit sharing or retirement plan, stock redemption
agreement, or any other agreement or arrangement with any officer, director, or
stockholder, members of their families, or trust for their benefit. Borrowers
are in compliance with all applicable provisions of ERISA. Neither any
Borrower nor any Subsidiary of a Borrower has received any notice to the effect
that it is not in full compliance with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could result in
a material adverse change in the financial condition of any Borrower, including
but not limited to, any Reportable Event or Prohibited Transaction, exists in
connection with any Plan. Neither any Borrower nor any Subsidiary of a
Borrower has any withdrawal liability in connection with a Multiemployer Plan.
20
<PAGE> 27
5.10 Taxes. Borrowers have filed all federal, state, and local tax
returns which are required to be filed and has paid, or made adequate provision
for the payment of, all taxes which have or may become due pursuant to said
returns or to assessments received by Borrowers. No Contractual Obligation of
any Borrower and no Requirement of Law materially adversely affects, or to the
extent that any Borrower can reasonably foresee might so affect, the business,
operations, property, or condition (financial or other) of any Borrower.
Borrowers have paid all withholding, FICA and other payments required by
federal state or local governments with respect to any wages paid to employees.
5.11 Collateral. The security interests granted to Bank or
Collateral Agent herein and pursuant to any other security agreement (a)
constitute and, as to subsequently acquired property included in the Collateral
covered by the security agreement, will constitute, a security interest under
the Code entitled to all of the rights, benefits and priorities provided by the
Code and (b) are, and as to such subsequently acquired Collateral will be,
fully perfected, superior and prior to the rights of all third persons, now
existing or hereafter arising, subject only to Liens permitted pursuant to
section 5.8 ("Title to Properties"). All of the Collateral is intended for use
solely in Borrowers' business.
5.12 Labor Law Matters. No goods or services have been or will be
produced by Borrowers in violation of any applicable labor laws or regulations
or any collective bargaining agreement or other labor agreements or in
violation of any minimum wage, wage-and-hour, or other similar laws or
regulations. No collective bargaining agreement concerning any of Borrowers'
employees exists or is being negotiated.
5.13 Judgment Liens. Neither Borrowers nor any of their assets are
subject to more than $50,000 in the aggregate of unpaid judgments (whether or
not stayed) or judgment liens in any jurisdiction.
5.14 Place of Business. Each Borrower's chief executive office is
located at 1502 Second Avenue, Tampa, Florida 33605, and it has not changed the
location of its chief executive office from a location in a different state
within the last five (5) years. Borrowers' places of business are set forth on
the attached Exhibit "D." Except as indicated on said exhibit, the real estate
constituting each said location is owned by Borrowers. With respect to
locations not owned by Borrowers, said exhibit sets forth the name and address
of each landlord, the location of the property, and the remaining term of the
lease. Borrowers have separately furnished to Bank true and correct copies of
the lease agreements for each said parcel.
5.15 Full Disclosure. All information furnished by Borrowers to
Bank concerning Borrowers, their financial condition, the Collateral or
otherwise for the purpose of obtaining credit or an extension of credit, is, or
will be at the time the same is furnished, accurate and correct in all material
respects and complete insofar as completeness may be necessary to give Bank a
true and accurate knowledge of the subject matter. The books of account,
minute books, and stock record books of Borrowers are complete and correct and
have been maintained in accordance with good business practices, and there have
been no transactions adversely affecting the business of Borrowers that should
have been set forth therein and have not been so set forth.
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<PAGE> 28
5.16 Borrowers Name. Except as set forth in schedule 5.16,
Borrowers have not changed their names or been known by any other names within
the last five (5) years (except for TransCor Waste Services, Inc., which has
changed its name during the past five years, but always from a name that
commenced with "TransCor"), nor have they been the surviving corporations in a
merger effected within the last five (5) years.
5.17 Existing Debt. Except as set forth on schedule 5.17, (a)
Borrowers are not in default with respect to any of their existing Debt or with
respect to any Contractual Obligation to which Borrowers are a party, (b)
Borrowers are not subject to any federal, state or local tax Liens, nor has
such Person received any notice of deficiency or other official notice to pay
any taxes, and (c) each Borrower has paid all sales and excise taxes payable by
it.
5.18 Insolvency. Each Borrower is now and, after giving effect to
the transactions contemplated hereby, at all time will be, Solvent.
5.19 Intellectual Property. Each Borrower owns or is licensed to
use, all trademark trade names, copyrights, technology, know-how, and processes
necessary for the conduct of its business as currently conducted (the
"Intellectual Property"). Borrower does not hare any material licenses of
Intellectual Property. No claim has been asserted and is pending by any Person
with respect to the use of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any such Intellectual Property and
Borrowers do not know of any valid basis for any such claim. The use of the
Intellectual Property by Borrowers does not infringe on the rights of any
Person.
5.20 Subsidiaries. Borrowers have no Subsidiaries, except as
indicated on Exhibit "E" to this Agreement.
5.21 Environmental Matters. Except as set forth in schedule 5.21
and except for matters that are not known to Borrowers' officers and that will
not have a Material Adverse Effect on any Borrower, Borrowers are in compliance
with all Environmental Regulations and with all other federal, state, and local
laws and regulations relating to the environment and pollution, including such
laws and regulations regulating hazardous, radioactive and toxic material and
underground petroleum products storage tanks. Except as set forth in schedule
5.21 no assessment, notice of (primary or secondary) liability or notice of
financial responsibility, or the amount thereof, or to impose civil penalties
has been received by Borrowers, and there are no facts, conditions, or
circumstances known to Borrowers which could result in any investigation or
inquiry if all such facts, conditions, and circumstances, if any, were fully
disclosed to the applicable governmental authority. Borrowers have paid any
environmental excise taxes due and payable, including without limitation, those
imposed pursuant to sections 4611, 4661, 4681 of the Internal Revenue Code of
1986, as amended from time to time. Borrowers represent and warrant that
Borrowers have obtained any permits, licenses, or similar authorizations
required to construct, occupy, operate, or use any buildings, improvements,
fixtures, or equipment in connection with their businesses by reason of any
Environmental Regulations. Borrowers represent and warrant that no oil, toxic
or hazardous substances, or solid wastes have been disposed of or released by
Borrowers in connection with the operation of its business and that Borrowers
will not dispose of or release oil, toxic or hazardous substances, or solid
wastes at any time in its operation of its business, except in full compliance
22
<PAGE> 29
with all the foregoing laws (the terms "hazardous substance" and "release"
shall have the meanings specified in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and the terms
"solid waste" and "disposal," "dispose," or "disposed" shall have the meanings
specified in the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), except that if such acts are amended to broaden the meanings thereof,
the broader meaning shall apply herein).
5.22 Ownership. All issued and outstanding capital stock of
Borrowers is owned as set forth in Exhibit "E." Except as set forth in the
foregoing schedule, there are not outstanding any warrants, options, or rights
to purchase any shares of capital stock of Borrowers, nor does any Person have
a Lien upon any of the capital stock of Borrowers.
5.23 Inventory. All Inventory is marketable in the ordinary course
of business. All Inventory has been produced, and during the term hereof will
be produced, in compliance with the requirements of the Federal Fair Labor
Standards Act. No Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party without
Bank's prior written consent and, if Bank gives such consent, Borrowers will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Bank, in form and substance acceptable to Bank, warehouse
receipts therefor in Bank's name. No Inventory is or will be consigned to any
Person without Bank's prior written consent, and, if such consent is given,
Borrowers shall, prior to the delivery of any Inventory on consignment, (a)
provide Bank with all consignment agreements to be used in connection with such
consignment, all of which shall be acceptable to Bank, (b) prepare, execute,
and file appropriate financing statements with respect to any consigned
Inventory, showing Bank as assignee, (c) conduct a search of all filings made
against the consignee in all jurisdictions in which any consigned Inventory is
to be located and deliver to Bank copies of the results of all such searches,
and (d) notify, in writing, all the creditors of the consignee which are or may
be holders of Liens in the Inventory to be consigned that Borrowers expect to
deliver certain Inventory to the consignee, all of which Inventory shall be
described in such notice by item or type.
5.24 Representations True. No representation or warranty by
Borrowers contained herein or in any certificate or other document furnished by
Borrowers pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such representation or
warranty not misleading in light of the circumstances under which it was made.
6. Affirmative Covenants. Borrowers agree and covenant that until the
Obligations have been indefeasibly paid in full and until Bank has no further
obligation to make advances under the loan, each Borrower shall:
6.1 Insurance. Maintain insurance with insurance companies
satisfactory to Bank on such of its properties, in such amounts and against
such risks as is customarily maintained in similar businesses operating in the
same vicinity, and shall file with Bank upon request, from time to time, a
detailed list of the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, dates of
expiration thereof, and the properties and risks covered thereby, and, within
10 days after notice in writing from Bank, shall obtain such additional
insurance as Bank may reasonably request. All such policies shall
23
<PAGE> 30
provide that any losses payable thereunder shall (pursuant to loss payable
clauses, in form and content acceptable to Bank, to be attached to each policy)
be payable to Bank to the extent of its interest in the Collateral, and provide
that the insurance provided thereby, as to the interest of Bank, shall not be
invalidated by any act or neglect of Borrowers, nor by the commencing of any
proceedings by or against Borrowers in bankruptcy, insolvency, receivership, or
any other proceedings for the relief of a debtor, nor by any foreclosure,
repossession, or other proceedings relating to the property insured, nor by any
occupation of such property or the use of such property for purposes more
hazardous than permitted in the policy. Borrowers hereby assign to Bank all
right to receive proceeds of the Collateral, direct any insurer to pay all
proceeds directly to Bank, and authorize Bank to endorse any check or draft for
such proceeds and apply the same toward satisfaction of the Obligations.
Borrowers shall furnish to Bank insurance certificates, in form and substance
satisfactory to Bank, evidencing compliance by it with the terms of this
section and, upon the request of Bank at any time, Borrowers shall furnish Bank
with photostatic copies of the policies required by the terms of this section.
Borrowers will cause each insurer under each of the policies to agree (either
by endorsement upon such policy or by letter addressed to Bank) to give Bank at
least 10 days' prior written notice of the cancellation of such policies in
whole or in part or the lapse of any coverage thereunder. Borrowers agree that
they will not take any action or fail to take any action which action or
inaction would result in the invalidation of any insurance policy required
hereunder. At renewal or no later than 10 days following the date each such
policy or policies shall expire, Borrowers shall furnish to Bank evidence of
renewal. Borrowers shall furnish to Bank such evidence of insurance as Bank
may require.
6.2 Corporate Existence: Qualification. Maintain its corporate
existence and, in each jurisdiction in which the character of the property
owned by it or in which the transaction of its business makes its qualification
necessary, maintain good standing.
6.3 Taxes. During its fiscal year, accrue all current tax
liabilities of all kinds, all required withholding of income taxes of
employees, all required old age and unemployment contributions, all required
payments to employee benefit plans, and pay the same when they become due.
6.4 Compliance with Laws. Comply with all Requirements of Law,
including Environmental Regulations, and pay all taxes, assessments, charges,
claims for labor, supplies, rent, and other obligations which, if unpaid, might
give rise to a Lien against the property, except claims being contested in good
faith by appropriate proceedings (provided the Borrower promptly notifies Bank
in writing of such contest), and against which reserves deemed adequate by Bank
have been set up. Specifically, each Borrower shall pay when due all taxes and
assessments upon the Collateral, this Agreement, the Notes, or any Loan
Document, including, without limitation, any stamp taxes or intangibles taxes
imposed by virtue of the transactions outlined herein.
6.5 Annual Financial Statements. Within 90 days after the close
of each fiscal year, furnish Bank with annual audited financial statements of
Borrowers on a consolidated and consolidating basis, consisting of balance
sheets, operating statements and such other statements as Bank may reasonably
request, for the period(s) involved, prepared in accordance with GAAP
24
<PAGE> 31
consistently applied for the period involved and for the preceding fiscal year
and certified as correct by independent certified public accountants acceptable
to Bank.
6.6 Interim Financial Statements. Within 45 days after the close
of each calendar quarter, furnish bank with unaudited quarterly and
year-to-date financial statements of Borrowers on a consolidated and a
consolidating basis and of Guarantor on a consolidated and consolidating basis,
consisting of balance sheets and operating statements and a listing of all
contingent liabilities of Borrowers and Guarantor for the periods involved and
such other statements as Bank may request, prepared in accordance with GAAP
applied on a basis consistent with the financial statement(s) previously
furnished to Bank, taken from the books and records of Borrowers and Guarantor,
and certified as correct by the Chief Financial Officer of Parent and
Guarantor, respectively. Borrowers shall also deliver to Bank statutory
statements for Guarantor and its subsidiaries.
6.7 Certificates: Other Information. Furnish to Bank:
(a) concurrently with the delivery of the financial
statements referred to in sections 6.5 and 6.6, a certificate from the
President or Chief Financial Officer of Parent and Guarantor (i) containing
computations confirming Borrowers' compliance with section 6.21 ("Affirmative
Financial Covenants"); (ii) stating that after diligent investigation, they
have determined that Borrowers and Guarantors, respectively, during the period
have observed or performed all of their covenants in this Agreement and in the
other Loan Documents; and (iii) stating that the officers do not know of any
default or Event of Default by any Borrower or Guarantor, respectively, under
this Agreement or the other Loan Documents; and
(b) all other information regarding the affairs of
Borrowers and Guarantor that Bank from time to time reasonably requests.
6.8 Collateral Reports: Job Status Reports. Furnish to Bank for
each Borrower whenever requested by Bank a detailed accounts receivable aging
report as of the last day of the previous month, a detailed accounts payable
aging report, and an inventory report, all in form and substance, and
containing such detail and information as Bank shall request, and furnish to
Bank copies of all physical inventory listings when prepared by Borrower.
Borrowers shall also furnish to Bank job status reports for each Borrower,
whenever requested by Bank.
6.9 SEC Filings. Within ten (10) days following the date each of
Parent, Guarantor, and TransCor Waste Services, Inc., makes the filing with the
SEC, (a) a copy of its Annual Report on Form 10-K, as filed with the SEC; (b) a
copy of its Quarterly Report on Form 10-Q; and (c) promptly on becoming
available, any other report or statement that it files with the SEC or mails to
its shareholders. Each of the foregoing reports shall be filed with the SEC
when due as specified by the applicable instruction to the report (for example,
Instruction A to the Form 10-K and Form 10-Q).
6.10 Visits and Inspections. (a) give agents and representatives
of Bank full and unrestricted access from time to time during normal business
hours to its business premises, offices, properties, books, records, and
information; (b) permit agents and representatives of Bank to make such audit
and examination thereof (including an examination of the Equipment),
25
<PAGE> 32
and conduct such other investigation, as they consider appropriate to determine
and verify it business properties, operation, or condition (financial or other)
and to consummate the transactions contemplated by this Agreement; and (c)
furnish to Bank and its agents and representatives such additional information
with respect to its business and affairs as Bank or they reasonably request
from time to time. Borrowers shall bear the costs of such audits, reports, and
inspections.
Each Borrower shall keep true books, records, and accounts that
completely, accurately, and fairly reflect all dealings and transactions
relating to its assets, business, and activities and shall record all
transactions in such manner as is necessary to permit preparation of its
financial statements in accordance with GAAP.
6.11 Payments on Note. Duly and punctually pay the principal and
interest on the Notes, in accordance with the terms of this Agreement and of
the Notes, and pay all other Debt of the Borrower reflected on the financial
statements delivered to Bank and referred to in section 5.5 ("Financial
Statements") and all other Debt incurred after the date hereof in accordance
with the terms of such debt.
6.12 Conduct of Business. Conduct its business as now conducted
and do all things necessary to preserve, renew, and keep in full force and
effect its rights, patents, permits, licenses, franchises, and trade names
necessary to continue its business. Each Borrower shall comply with all
Contractual Obligations applicable to it and its business and properties.
6.13 Maintenance of Properties. Keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all needed and proper repairs, renewals, replacements,
additions, and improvements thereto and comply with the provisions of all
leases to which it is a party or under which it occupies property so as to
prevent any loss or forfeiture thereof or thereunder.
6.14 Additional Documents. Join Bank in executing any security
agreements, assignments, consents, financing statements or other instruments,
in form satisfactory to Bank, as Bank may from time to time request in
connection with the Collateral and the other security for the Loan.
6.15 Notice to Bank. Promptly notify Bank of: (a) any default or
Event of Default, (b) the acceleration of the maturity of any Debt or
Contractual Obligation; (c) a default in the performance of, or compliance
with, any Requirement of Law or Environmental Regulation, or Contractual
Obligation of any Borrower that might have a Material Adverse Effect on any
Borrower; (d) any litigation, dispute, or proceeding that is pending or known
by any Borrower's officers to be threatened against the Borrower and that might
involve a claim for damages or a request for injunctive, enforcement, or other
relief that, if granted, might reasonably be expected to have a Material
Adverse Effect on the Borrower; (e) a change in either the name or the
principal place of business of any Borrower or the office where its books and
records are kept; (f) any change in its accounting methods, policies, or
practices for financial reporting purposes or any material change in its
accounting method, policies, or practices for tax reporting purposes; (g) a
material adverse change in the business, operations, assets, property, or
condition (financial or other) of any Borrower; and (h) any matter regarding
which Borrowers
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<PAGE> 33
are required to notify Fleet pursuant to the Fleet Loan. Each Borrower shall
provide with each notice pursuant to this section a statement of an officer of
the Borrower setting forth details of the occurrence referred to in the notice
and stating what action the Borrower proposes to take with respect to it.
6.16 Subordination of Debt. Except for any Debt set forth on
schedule 6.6, provide Bank with a debt subordination agreement, in form and
substance satisfactory to Bank, executed by each Borrower and any Person who is
an officer, director, shareholder, or Affiliate of the Borrower to whom the
Borrower is or hereafter becomes indebted, subordinating in right of payment
and claim all of such Debt and any future advances thereon to the full and
final payment of the Obligations.
6.17 Collection of Accounts. Diligently pursue collection of all
Accounts and other amounts due any Borrower from others, including Affiliates
of Borrower.
6.18 Landlord and Storage Agreements. Provide Bank with copies of
all agreements between any Borrower and any landlord or warehouseman which owns
any premises at which any Inventory or other Collateral may, from time to time,
be kept.
6.19 Auditors' Letters. Furnish Bank with a copy of each letter
written to any Borrower by its independent certified public accountant
concerning internal controls and management review immediately upon receipt of
same.
6.20 ERISA Compliance
(a) At all times make prompt payment of contributions
required to meet the minimum funding standards set forth in ERISA with respect
to each Plan;
(b) Promptly after the filing thereof, furnish to Bank
copies of an annual report required to be filed pursuant to ERISA in connection
with each Plan and any other employee benefit plan of it and its Affiliates;
(c) Notify Bank as soon as practicable of any Reportable
Event and of any additional act or condition arising in connection with any
Plan which any Borrower believes might constitute grounds for the termination
thereof by the Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a trustee to administer the
Plan; and
(d) Furnish to Bank, promptly upon Bank's request
therefor, such additional information concerning any Plan or any other such
employee benefit plan as may be reasonably requested.
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<PAGE> 34
6.21 Financial Covenants. Maintain as of the end of each calendar
quarter: (a) total Tangible Net Worth and Subordinated Debt of not less than
$15.9 million; (b) a ratio of Debt less Subordinated Debt to Tangible Net Worth
plus Subordinated Debt of not more than the following:
<TABLE>
<CAPTION>
Calendar Quarter Ends Ratio
--------------------- -----
<S> <C>
June 30,1994, and September 30, 1994 3.5:1
December 31 1994, and March 31, 1995 3.0:1
June 30, 1995, and September 30, 1995 2.5:1
December 31, 1995, and thereafter 2.0:1
</TABLE>
(c) Debt Service Coverage oL. not less than 1:1, beginning with the quarter
ended December 31, 1994, through December 30, 1996, and of not less than 1.25:1
thereafter; (d) Fixed Charge Coverage of not less than 1:1, beginning with the
quarter ended December 31, 1994, through December 30, 1996, and of not less
than 1.25:1 thereafter; and (e) Net Income of at least $1.5 million during each
twelve-month period preceding each calendar quarter end on each March 31, June
30, September 30, and December 31, the cumulative Net Income for the preceding
12 months as reported at the calendar quarter and must equal at least
$1,500,000. Each of the foregoing covenants will be measured on a consolidated
basis for all of Borrowers.
6.22 Physical Inventory. At least one time during each fiscal
year, conduct a physical inventory of all of its equipment, machinery, rolling
stock, and containers and shall promptly certify to Bank the results of such
inventory in detail satisfactory to Bank.
6.23 Subsidiary Stock Ownership. Parent shall continue to own
directly or indirectly 100 percent of the stock of all of its Subsidiaries
(other than TransCor Waste Services, Inc., and its subsidiaries); Parent shall
continue to own directly no less than a majority of the Aggregate Outstanding
Shares (as defined herein) of TransCor Waste Services, Inc.; all of the shares
of stock of TransCor Waste Services, Inc., owned by Parent shall be pledged to
the Collateral Agent as Common Collateral; TransCor Waste Services, Inc., shall
continue to own directly or indirectly 100 percent of the stock of all of its
Subsidiaries; TransCor Waste Services, Inc., shall not issue shares of a
different class of stock from its currently outstanding common stock; and no
shares of the stock of TransCor Waste Services, Inc., shall be issued at a
price less than the fair market of such shares at the time of issuance of such
shares and TransCor Waste Services, Inc., shall grant no warrants or options to
purchase shares of its stock at an exercise price less than the fair market
value of such shares at the time such warrants or options are granted. For the
purposes of this section, "Aggregate Outstanding Shares" shall mean the
aggregate of the issued and outstanding shares of the stock of TransCor Waste
Services, Inc., and the shares of stock that may be purchased currently or in
the future by the exercise of all warrants, options and rights at any time
outstanding.
7. Negative Covenants. Until the Obligations have been indefeasibly
repaid in full and until Bank has no further obligation to make advances under
the Loan, without the prior written consent of Bank, each Borrower shall not:
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7.1 Indebtedness. Except as permitted or contemplated by this
Agreement, create, incur, assume, or suffer to exist any Debt or obligation for
money borrowed, or guarantee or endorse, or otherwise be or become contingently
liable in connection with the obligations of any person, firm, or corporation
(including any Affiliate), except:
7.1.1 Indebtedness for taxes not at the time due and
payable or which are being actively contested in good faith by appropriate
proceedings and against which reserves deemed adequate by Bank have been
established by Borrowers, but only if the non-payment of such taxes does not
result in a Lien upon any property of the Borrower that has priority over the
Lien held by Bank;
7.1.2 Contingent liabilities arising out of the endorsement
of negotiable instruments in the ordinary course of collection or similar
transactions in the ordinary course of business;
7.1.3 Debt, other than for borrowed money, incurred in the
ordinary course of business, including that evidenced by trade promissory notes
with a maturity of less than one year;
7.1.4 Debt to third parties other than Bank for borrowing
incurred in connection with the purchase money financing of capital assets used
in the business of Borrowers or to reimburse Borrowers for purchases of capital
assets made within six months of the time the debt is incurred, not to exceed
$5 million on a consolidated basis during any fiscal year of Borrowers;
7.1.5 Debt for money borrowed from Bank;
7.1.6 Debt incurred prior to the date of this Agreement and
reflected on the financial statements referred to in section 5.5 ("Financial
Statements") which is not to be repaid with the proceeds of the Loans,
including the Fleet Loan;
7.1.7 Debt, the proceeds of which are used to repay the
Debt described in sections 7.1.4 and 7.1.6.
7.2 Liens and Security Interests. Create, incur, assume, or
suffer to exist any Lien (including charges on property purchased under
conditional sales or other title-retention agreement) on any of its property or
assets, now owned or hereafter acquired, except:
7.2.1 Liens for taxes not yet due or which are being
contested in good faith by appropriate proceeding and against which reserves
deemed adequate by Bank have been set up (excluding any Lien imposed pursuant
to any of the provisions of ERISA);
7.2.2 Other Liens incidental to the conduct of its business
or the ownership of its property and assets;
7.2.3 Liens created to secure the Debt permitted by section
7.1.4 or to secure Debt that refinances the Debt permitted by section 7.1.4, so
long as in each case the Liens
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encumber only the capital assets acquired with the proceeds of the permitted
purchase money Debt;
7.2.4 Lien in favor of Bank;
7.2.5 Liens on the Common Collateral in favor of the
Collateral Agent that are permitted under and governed by the Intercreditor
Agreement; and
7.2.6 Liens reflected on Exhibit "C" to this Agreement.
7.3 Dividends and Distributions. Except for transactions
benefitting another Borrower as shareholder, declare any dividends on any
shares of any class of its capital stock, or apply any of its property or
assets to the purchase, redemption or other retirement of, or set apart any sum
for the payment of any dividends on, or for the purchase, retirement of, or
make any other distribution by reduction of capital or otherwise in respect of,
any shares of any class of capital stock of any Borrower.
7.4 Affiliate Transactions. Purchase, acquire or lease property
from, or sell, transfer or lease any property to, or engage in any other
transaction or arrangement with, any Affiliate of any Borrower, except for such
transactions with other Borrowers and except in the ordinary course of
Borrowers' business and under terms and conditions which would apply if
disinterested parties were involved.
7.5 Financing Statements. Permit any financing statement to be on
file with respect to the Collateral except for a financing statement that
pertains to a Permitted Lien.
7.6 Location of Collateral. Change the locations at which the
Collateral is maintained to a location outside of the United States; change the
name, identity, or corporate structure of Borrowers or change the location of
its chief executive office.
7.7 Destruction of Collateral. Waste or destroy the Collateral or
use it in violation of any statute or ordinance.
7.8 Liquidation, Merger or Consolidation. Liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), or enter into any
merger or consolidation, or acquire all or substantially all of the assets of
any Person; or sell lease, or otherwise dispose of any of its assets in an
aggregate amount exceeding $100,000 during any fiscal year, except for sales of
assets associated with the Tennessee operations of TransCor Waste Services,
Inc., disposition of the Lantana site by ins Recycling Corporation, sales of
Equipment in accordance with the Security Agreement, and sales of Inventory in
the ordinary course of its business, or disposition of the Note Receivable
payable by Guarantor or of the assets or outstanding stock of ThermoCor
Kimmins, Inc., in accordance with section 6.10 of the Security Agreement and
section 5(c) of the Pledge Agreement.
7.9 Loans or Advances and Other Investments. Make or permit to
remain outstanding loans or advances or pay any management or similar fees to
any Person other than another Borrower, except for such loans, advances, or
payments that do not exceed $100,000 in the
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aggregate during any calendar year; or until the Term Loan has been paid in
full own, purchase or make any commitment to purchase any stock, bonds, notes,
debentures or other securities of, or any stock, bonds notes, debentures or
other securities of, or any interest in, or make any capital contributions to
(all of which are sometimes collectively referred to herein as "Investments")
any Person (other than the securities of another Borrower) except for (a)
purchases of direct obligations of the federal government, (b) deposits in
commercial banks, (c) commercial paper of any U.S. corporation having the
highest ratings then given by Moody's Investors Service, Inc., or Standard &
Poor's Corporation, (d) endorsement of negotiable instruments for collection in
the ordinary course of business; (e) trade credit advanced in the ordinary
course of business; (f) advances to employee in the ordinary course of
business; (g) any other Investment outstanding on the date of this Agreement
and disclosed to Bank; (h) other Investments approved in writing by Bank; and
(i) any renewals or extensions of the foregoing Investments.
7.10 Capital Expenditures. Make any Cash Capital Expenditures in
any fiscal year exceeding a total of $500,000 on a consolidated basis, that are
not financed within six months.
7.11 Acquisitions. Purchase or acquire the obligations or stock of
or any other interest in any Person, except direct obligations of the United
States of America, certificates of deposit or other investments issued by Bank
or by any bank designated in writing by Bank, or other purchases or
acquisitions that do not exceed $100,000 on a consolidated basis in the
aggregate during any calendar year.
7.12 Prepayment of Debt. If an Event of Default or an event that
with notice or the passage of time would constitute a default has occurred,
prepay any Debt, except Debt to Bank.
7.13 Lease Transactions. Enter into any sale and lease-back
arrangement.
7.14 Subordinated Debt. Make any payment (principal or interest)
with respect to Subordinated Debt to any Person not a Borrower, or with respect
to any Debt that would be Subordinated Debt but for the absence of a
subordination agreement in effect with respect thereto.
7.15 Change in Business: Fiscal Year. Enter into any business
which is substantially different from the business or businesses in which it is
presently engaged or change the fiscal year of any Borrower.
7.16 Accounts. Sell, assign, or discount any of its Accounts,
Chattel Paper, or any promissory notes held by it other than discount of such
Accounts, Chattel Paper, or notes in the ordinary course of business for
collection.
7.17 Margin Stock. Use any proceeds of the Loan to purchase or
carry any margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or extend credit to others for the
purpose of purchasing or carrying any margin stock.
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7.18 Subsidiaries. Acquire, form or dispose of any Subsidiaries,
or permit any Subsidiary to issue capital stock except to its parent. Each
Borrower shall maintain at least the percentage ownership of each Subsidiary
shown on the attached Exhibit "E."
7.19 Amendment to Articles or Bylaws. Amend the Articles of
Incorporation or Bylaws of any Borrower in any manner that adversely affects
the rights or interests of Bank.
8. Environmental Provisions
8.1 Contamination. Borrowers acknowledge that certain soil and
groundwater in (i) the northwestern portion of the parcel of Real Estate having
a street address of 1501 2nd Avenue ("Area One"), (ii) the vicinity of the
underground storage tank formerly located on the parcel of Real Estate having a
street address of 1617 2nd Avenue ("Area Two"), and (iii) the vicinity of the
maintenance building situated on the parcel of Real Estate having a street
address of 1616 2nd Avenue ("Area Three"), may have been impacted by petroleum
hydrocarbon and/or other contaminant substances (collectively, the
"Contamination"). Borrowers further acknowledge that, as of the date of this
Agreement, Bank's knowledge concerning the Contamination is limited to the
information set forth in the Phase I Environmental Site Assessment prepared in
August 1994 by EnviroAssessments, Inc. (the "Report"). Without limiting the
generality of Borrowers' obligation under this Agreement to maintain the Real
Estate in compliance with applicable Environmental Regulations, Borrowers
specifically agree to conduct such assessment and remediation work as may be
necessary to bring Area One, Area Two, and Area Three into compliance with
applicable Environmental Regulations and otherwise satisfy the requirements of
the Florida Department of Environmental Protection, the Hillsborough County
Environmental Protection Commission, or any other local, state, or federal
agency with jurisdiction regarding the environmental condition of the Real
Estate (collectively, "the Regulating Agencies").
8.2 Environmental Assessment and Remediation Obligation of
Borrowers. Borrowers agree to promptly undertake and diligently proceed with
the assessment and remediation of the Contamination at their sole cost and
expense. Borrowers shall select and utilize only qualified engineers,
contractors, and consultants (collectively, the "Consultants") to conduct the
assessment and remediation required under this Agreement. All Consultants must
be approved in writing by Bank before they initiate work in connection with the
Contamination. For purposes of this Agreement, the term "assessment" shall
mean the identification of the types and concentrations of contaminants present
in the soil and groundwater, the delineation of the horizontal and vertical
extent of those contaminants, and the evaluation of the appropriate remedial
action necessary to bring Area One, Area Two, and Area Three, as well as any
other property impacted by the Contamination, into compliance with applicable
Environmental Regulations or comply with the requirements of the Regulating
Agencies. For purposes of this Agreement, the term "remediation" shall mean
any response, removal, or other remedial action required by or initiated
pursuant to the mandate of any Environmental Regulation or Regulating Agency.
Borrowers shall initiate Contamination assessment within 30 day of the date of
this Agreement and shall diligently and continuously pursue those assessment
efforts and any required remediation in good faith to completion in accordance
with this section. Borrowers shall keep Bank fully apprised at all times of
the status of the assessment and remediation of the Contamination. Without
limiting the generality of the foregoing, Borrowers shall provide to Bank
within ten days after receipt copies of all reports and testing data generated
by or on behalf
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of Borrowers or the Consultants with respect to the assessment and remediation
of the Contamination. Additionally, Borrowers shall submit monthly written
reports to Bank, in form and substance satisfactory to Bank, apprising Bank of
the status of those activities and all material developments relating to the
Contamination. Bank reserves the right to have an independent environmental
consultant and/or Bank's legal counsel review such reports ant data and
Borrowers agree to pay the reasonable cost of that review. Borrowers further
agree to allow Bank's consultant and other Bank representatives access to the
Real Estate for purposes of conducting site inspections and verifications. For
purposes of this Agreement, Borrowers shall be deemed to have completed all
required assessment and remediation efforts with respect to the Contamination
when all regulatory mandates with respect to the assessment and remediation
have been satisfied as evidenced by the delivery to Bank of (1) a written
certification issued by Borrowers' Consultants in form and substance acceptable
to Bank, and its independent consultant and legal counsel, that all required
assessment or remediation has been completed with respect to the Contamination,
or (2) a "No Further Action Letter" issued by the appropriate Regulatory
Agency, as determined by Bank and its independent consultant and legal counsel.
8.3 Escrow for Assessment and Remediation Costs. At closing, Bank
may hold back from the amount available to be drawn under the Revolving Loan
the sum of $100,000 to secure the satisfaction of Borrowers' assessment and
remediation obligations under this Agreement. The amounts held back shall not
be used to pay any assessment or remediation costs until an actual estimate of
those costs is prepared by Borrowers' consultants, submitted to Bank, and
approved by Bank's independent consultant. None of amounts held back may be
disbursed to pay any assessment or remediation cost incurred by Borrowers until
the estimated aggregate sum of all remaining assessment and remediation costs
is less than or equal to the remaining amounts held back. Thereafter, Bank
may, at its sole option, (i) disburse all or part of any invoice submitted to
it for services rendered by the consultant in connection with the Contamination
or (ii) require Borrowers to pay such invoices directly, without disbursement
from the amounts held back. At no time shall any draw be made on the amounts
held back that would reduce the balance of the amounts held back below the
actual estimate of the remaining costs to be incurred for the assessment and
remediation of the Contamination. Additionally, if the estimate of the
remaining assessment and remediation costs relating to the Contamination is
found to exceed the amount actually held back then upon demand by Bank,
Borrowers shall repay amounts on the Revolving Loan so that the aggregate
amount reserved and held back is sufficient to remedy that deficiency. Upon
the completion of all assessment and remediation required under the Agreement,
as certified by Borrowers' Consultants and approved by Ban's independent
consultant and legal counsel, any remaining balance held back shall be
available to be disbursed to Borrowers. In no event will the held back amounts
be subject to being disbursed before October 5, 1994, following payment of the
initial payment due under the Real Estate Loan.
8.4 Indemnification. Borrowers, jointly, severally, and
unconditionally, indemnify and hold Bank harmless from and against any and all
loss, cost, claim, damage, expense, liability, or cause of action arising out
of or relating to the Contamination or the breach of any of Borrowers'
obligations under this Agreement relating to the Contamination or the
assessment or remediation of the Contamination, including, without limitation,
all costs of remediation or "clean-up" relating to the Contamination, all costs
of determining whether the Real Estate is in compliance with applicable
Environmental Regulations, all costs of bringing the Real Estate into
compliance with all applicable Environmental Regulations, and all of Bank's
attorneys' fees,
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consultants' fees, and court costs associated with the existence, assessment,
or remediation of the Contamination. The obligations of Borrowers under this
section shall survive any termination of this Agreement.
8.5 Environmental Management of Mortgaged Property Facility. The
parties to this Agreement acknowledge that, as of the date of this Agreement,
Bank has not participated in the operation or management of the Real Estate or
any facilities located on it and has not otherwise been in a position to
influence financial management, environmental remediation, hazardous waste
disposal, or hazardous material treatment affecting or relating to the Real
Estate. Moreover, the parties acknowledge that nothing contained in this
Agreement would grant to Bank the right or ability to meaningfully direct,
influence, or control future decisions regarding environmental remediation on
the Real Estate, the disposal or treatment of hazardous waste delivered to or
otherwise present on the Real Estate, or the financial management of the Real
Estate. The parties also acknowledge that the obligations of Borrowers and the
limited rights of Bank under this Agreement with respect to the assessment and
remediation of the Contamination are intended only to protect the value of the
Collateral securing Bank's Loans.
9. Additional Representations, Covenants, and Agreements Relating to
Collateral
9.1 Affirmation of Representations. Each request for a loan or
advance made by Borrowers pursuant to this Agreement or any of the other Loan
Documents shall constitute (a) an automatic representation and warranty by
Borrowers to Bank that there does not then exist any default or Event of
Default and (b) a reaffirmation as of the date of said request that all of the
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents are true in all material respects, except for any changes
in the nature of Borrowers' business or operations that would render the
information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Bank has consented to such changes or such changes are
expressly permitted by this Agreement.
9.2 Waivers. Borrowers hereby waive any and all causes of action
and claims which they may ever have against Bank as a result of any possession,
collection, settlement, compromise, or sale by Bank of any of the Accounts upon
the occurrence of an Event of Default hereunder, notwithstanding the effect of
such possession, collection, settlement, compromise, or sale upon the business
of Borrowers, except to the extent arising from gross negligence or willful
misconduct. Said waiver shall include all causes of action and claims which
may result from the exercise of the power of attorney conferred upon Bank in
section 8.10 ("Attorney-in-Fact"). The failure at any time or times hereafter
to require strict performance by Borrowers of any of the provisions,
warranties, terms, and conditions contained in this Agreement or any other
agreement, document, or instrument now or hereafter executed by Borrowers, and
delivered to Bank, shall not waive, affect, or diminish any right of Bank
thereafter to demand strict compliance and performance therewith and with
respect to any other provisions, warranties, terms, and conditions contained in
such agreements, documents or instruments, and any waiver of default shall not
waive or affect any other default, whether prior or subsequent thereto, and
whether the same are of a different type. None of the warranties, conditions,
provisions, and terms contained in the Agreement or any other agreement,
documents, or instrument now or hereafter executed by Borrowers and delivered
to Bank shall be deemed to have been waived by any act or knowledge of Bank,
its agents, officers, or
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employees, but only by an instrument in writing signed by an officer of Bank
and directed to Borrowers specifying such waiver.
9.3 Discharge of Taxes and Liens. At its option, Bank may
discharge taxes, Liens, security interests, or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance and
preservation of the Collateral. Borrowers agree to reimburse Bank, on demand,
for any payment made or expense incurred by Bank pursuant to the foregoing
authorization, including, without limitation, attorneys' fees.
9.4 Insurance. Without limiting any other provision hereof, each
Borrower shall keep the Collateral insured in amounts equal to its full
insurable value, with companies, and against such risks as may be satisfactory
to Bank. Borrowers will pay the costs of all such insurance and deliver
policies evidencing such insurance to Bank with mortgagee loss payable clauses
in favor of Bank. Borrowers hereby assign to Bank all right to receive
proceeds, direct any insurer to pay all proceeds directly to Bank, and
authorize Bank to endorse any check or draft for such proceeds and apply the
same toward satisfaction of the Loans and other Obligations secured hereby.
9.5 Complete Records. Borrowers will at all times keep accurate
and complete records of the Collateral and Bank or its agents shall have the
right to call at Borrowers' place or places of business at intervals to be
determined by Bank, upon reasonable notice and during Borrowers' regular
business hours, and without hindrance or delay, to inspect and examine the
Inventory and the Equipment and to inspect, audit, check, and make abstracts
from the books, records, journals, orders, receipts, computer printouts,
correspondence, and other data relating to the Collateral or to any other
transactions between the parties hereto. If requested by Bank, Borrowers agree
to make its books, records, journal, orders, receipts, computer printouts,
correspondence, and other data relating to the Collateral available at Bank's
main office for inspection, audit, and check by Bank or its agents.
9.6 U.C.C. Financing Statement. Borrowers agree that a carbon,
photographic, or other reproduction of this Agreement or of a signed financing
statement with respect to the Collateral shall be sufficient as a financing
statement and may be filed as such by Bank.
10. Events of Default
The occurrence of any one or more of the following events shall
constitute an Event of Default (unless and except to the extent that the same
is cured to the satisfaction of Bank within the applicable cure period, if any,
or, at the sole discretion of Bank, at any time thereafter):
10.1 Payment Default. If Borrowers shall fail to make any payment
of any installment of principal (including a mandatory prepayment under section
2.6(b)) or interest on any Note within ten (10) days after the same shall
become due and payable, whether at stated maturity, by declaration, upon
acceleration, or otherwise;
10.2 Fees and Expenses. If Borrowers shall fail to pay when due
any expense, fee or charge provided for in this Agreement and such failure
shall continue for a period of ten (10) days; or
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10.3 Certain Agreement Defaults. If Borrower defaults in the
observance or performance of any agreement contained in Article 7 of this
Agreement ("Negative Covenants") or in the observance or performance of the
agreements set forth in sections 6.1 ("Insurance"), 6.2 ("Corporate Existence")
(with respect to existence only), 6.4 ("Compliance with Laws"), 6.16
("Subordination of Debt"), 6.17 ("Collection of Accounts"), 6.20 ("ERISA
Compliance"), and 6.21 ("Financial Covenants"); or
10.4 Other Defaults. If Borrowers shall fail to perform, keep, or
observe any other covenant, agreement, or provision of any Note or of this
Agreement not provided for elsewhere in this Article 10 or of any other Loan
Document and any such default is not cured within 30 days after notice from
Bank, except in the case of a default under sections 6.3 ("Taxes"), 6.12
("Conduct of Business"), 6.15 ("Notice to Bank"), and 6.18 ("Landlord and
Storage Agreements"), which must be remedied within 30 days of its occurrence,
even in the absence of notice; or
10.5 Representations False. If any warranty, representation, or
other statement made or furnished to Bank by or on behalf of Borrowers or any
Guarantor or in any of the Loan Documents proves to be false or misleading in
any material respect when made or furnished; or
10.6 Financial Difficulties. If Borrowers shall be involved in
financial difficulties as evidenced -
(a) by its admission in writing of its inability to pay
its debts generally as they become due or of its ceasing to be Solvent;
(b) by its commencing a voluntary case under the United
States Bankruptcy Code or any similar law regarding debtor's rights and
remedies or an admission seeking the relief therein provided;
(c) by its making a general assignment for the benefit of
its creditors; or
(d) by its voluntarily liquidating or terminating
operations or applying for or consenting to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of such Person
or of all or of a substantial part of its assets; or
10.7 Involuntary Proceedings. If without its application,
approval, or consent, a proceeding shall be commenced, in any court of
competent jurisdiction, seeking in respect of such Person any remedy under the
United States Bankruptcy Code, the liquidation, reorganization, dissolution,
winding-up, or composition or readjustment of debt, the appointment of a
trustee, receiver, liquidator or the like of such Person, or of all or any
substantial part of the assets of such Person, or other like relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, which results in the entry of an order for
relief or such adjudication or appointment remains undismissed or undischarged
for a period of 30 days; or
10.8 ERISA. If a Reportable Event shall occur which Bank, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty
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Corporation of any Plan or for the appointment by the appropriate United States
district court of a trustee for any Plan, or if any Plan shall be terminated or
any such trustee shall be requested or appointed, or if Borrowers are in
"default" (as defined in section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrowers complete or partial withdrawal
from such Plan, or
10.9 Cancellation of Guaranty. If the cancellation, termination or
limitation of any guaranty of Borrowers' obligations under this Agreement or
the Loans shall occur, or if any such Guarantor shall be in default under or
breach the terms of any guaranty agreement between Bank and such Guarantor; or
if any such Guarantor should die; or if any Guarantor's financial condition as
represented in the last personal financial statement delivered to and received
by Bank before the date of this Agreement is substantially impaired; or
10.10 Default on Other Obligations. If Borrowers or Guarantor shall
default in payment of amounts due on Debt of Borrowers or Guarantor to others
or Borrowers or Guarantor shall default under the Fleet Loan or any loan or
security agreement with others or under any material lease, and the aggregate
amount of such Debt, agreements, and leases exceeds $50,000 in the aggregate,
and any such default shall not be cured or permanently waived within any
applicable contractual grace period, not to exceed 30 days; or
10.11 Judgments. If a final judgment for the payment of money in
excess of $50,000 shall be rendered against Borrowers and the same shall remain
undischarged for a period of 30 days during which execution shall not be
effectively stayed, unless such judgment is fully covered by collectible
insurance; or
10.12 Actions. If Borrowers or any Guarantor or any officer or
director of a Borrower or Guarantor shall be criminally indicted or convicted
under any law that could lead to a forfeiture of any property of Borrowers or
such Guarantor; or
10.13 Collateral. If a creditor of any Borrower shall obtain
possession of any of the Collateral by any legal means; or
10.14 Change in Control. If Francis M. Williams ceases to control a
majority of the outstanding shares of Parent, or if Parent ceases to control a
majority of the outstanding shares of TransCor Waste Services, Inc.; or
10.15 Subordination Agreements. If a breach or default shall occur
with respect to any subordination agreement executed by any creditor of
Borrowers (including any Affiliate), or if any said agreement shall otherwise
terminate or cease to have legal effect; or
10.16 Priority of Security Interest. If any security interest or
Lien of Bank hereunder or under any other Security Agreement shall not
constitute a perfected security interest of first priority in the Collateral
thereby encumbered, subject only to Permitted Liens; or
10.17 Loss of Collateral. If there shall occur any material loss,
theft, damage or destruction of any of the Collateral, which loss is not fully
insured; or
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10.18 Material Adverse Change. If Borrowers suffer a material
adverse change in their businesses, assets, properties, prospects, results of
operation, or conditions (financial or other);
then and in each and every such case, Bank or the holder of each Note (or the
Collateral Agent with respect to Common Collateral if so provided in the
Collateral Document) may at its option proceed to protect and enforce its
rights by suit in equity, action at law and/or the appropriate proceeding
either for specific performance of any covenant or condition contained in the
Note or in any Loan Document, and/or declare the unpaid balance of the Loans
and Note together with all accrued interest to be forthwith due and payable,
and thereupon such balance shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived.
Borrowers agree that default under any Loan Document shall constitute
default with respect to all Loan Documents.
Without limiting the foregoing, upon the occurrence of any Event of
Default, and at any time thereafter, Bank (or the Collateral Agent with respect
to Common Collateral if so provided in the Collateral Document) shall have the
rights and remedies of a secured party under the Code (and the Uniform
Commercial Code of any other applicable jurisdiction) in addition to the rights
and remedies provided herein or in any other instrument or paper executed by
Borrowers.
In addition to any other remedy available to it, Bank shall have the
right to the extent provided by law, upon the occurrence of an Event of
Default, to seek and obtain the appointment of a receiver to take possession of
and operate and/or dispose of the business and assets of Borrowers and any
costs and expenses incurred by Bank in connection with such receivership shall
bear interest at the Default Rate.
11. Indemnification
11.1 General. Borrowers agree to defend, indemnify and hold
harmless Bank, its directors, officers, employees, accountants, attorneys, and
agents (the "Indemnitees") from and against any and all claims, demands,
judgments, damages, actions, causes of action, injuries, orders, penalties,
costs and expenses (including attorneys' fees and costs of court) of any kind
whatsoever arising out of or relating to any breach or default by Borrowers or
any other Person (including Guarantors) under this Agreement or any Loan
Document or the failure of Borrowers to observe, perform or discharge
Borrowers' duties hereunder or thereunder. Without limiting the generality of
the foregoing, Borrowers' obligation to indemnify Bank shall include indemnity
from any and all claims, demands, judgments, damages, actions, causes of
action, injuries, orders, penalties, costs, and expenses arising out of or in
connection with the activities of Borrowers, its predecessors in interest,
third parties who have trespassed on Borrowers' property, or parties in a
contractual relationship with Borrowers, whether or not occasioned wholly or in
part by any condition, accident or event caused by an act or omission of the
Indemnitees, which: (a) arise out of the actual alleged or threatened
discharge, dispersal, release, storage, treatment, generation, disposal, or
escape of radioactive materials, radioactivity, pollutants or other toxic or
hazardous substances, including any solid, liquid, gaseous, or thermal irritant
or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
and waste (including materials to be recycled, reconditioned or reclaimed); or
(b) actually or
38
<PAGE> 45
allegedly arise out of the use, specification, or inclusion of any product,
material or process containing chemicals or radioactive material, the failure
to detect the existence or proportion of chemicals or radioactive material in
the soil, air, surface water or groundwater, or the performance or failure to
perform the abatement of any pollution source or the replacement or removal of
any soil, water, surface water, or groundwater containing chemicals or
radioactive material; or (c) arises out of or relates to breach by Borrowers of
any of the provisions of section 5.21 ("Environmental Matters").
12. Costs and Expenses
Borrowers shall bear all expenses of Bank (including fees and expenses
of its counsel) in connection with the preparation of this Agreement and the
Loan Documents, and the issuance and delivery of the Notes to Bank and also in
connection with any amendment or modification thereto. Borrowers agree to
indemnify and save Bank harmless against all broker's and finder's fees, if
any. If, at any time or times hereafter, whether before or after the
occurrence of an Event of Default, Bank employs counsel to advise or provide
other representation with respect to this Agreement, or to collect the Balance
of the Loans, or to take any action in or with respect to any suit or
proceeding relating to this Agreement or any of the Loan Documents, or to
protect, collect, or liquidate the Collateral or to attempt to enforce any
security interest or Lien granted to Bank by Borrowers; then in any such
events, all of the reasonable attorneys' fees arising from such services and
any expenses, costs and charges relating thereto shall constitute additional
obligations of Borrowers' payable on demand of Bank. Without limiting the
foregoing, Borrowers shall pay or reimburse Bank for all recording and filing
fees, intangibles taxes, documentary and revenue stamps, other taxes or other
expenses and charges payable in connection with this Agreement, the Notes or
any Loan Document, or the filing of any Loan Document, financing statements or
other instruments required by Bank in connection with the Loans.
12.1 No Waiver. No waiver of any Event of Default hereunder, and
no waiver of any default or Event of Default under any other Loan Document
shall extend to or shall affect any subsequent or other than existing default
or shall impair any rights, remedies or powers of Bank. No delay or omission
of Bank or any subsequent holder of the Notes to exercise any right, remedy,
power or privilege hereunder after the occurrence of such default or Event of
Default shall be construed as a waiver of any such default, or acquiescence
therein.
12.2 Headings; Exhibits. Except for the definitions set forth in
Article 1, the headings of the articles, sections, paragraphs and subdivisions
of this Agreement are for convenience of reference only, are not to be
considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof. Unless otherwise expressly indicated, all references in this
Agreement to a section or an exhibit are to a section or an exhibit of this
Agreement. All exhibits referred to in this Agreement are an integral part of
it and are incorporated by reference in it.
12.3 Right of Setoff. Upon and after the occurrence of any Event
of Default, Bank may, and is hereby authorized by each Borrower, at any time
and from time to time, to the fullest extent permitted by applicable laws and
without advance notice to Borrower (any such notice being expressly waived by
Borrowers), setoff and apply any and all deposits (general or special, time or
demand, professional or final) at any time held and any other indebtedness at
39
<PAGE> 46
any time owing by Bank to, or for the credit or the account of, Borrower
against any or all of the Obligations of any Borrower now or hereafter existing
whether or not such Obligations have matured and irrespective of whether Bank
has exercised any other rights that it has or may have with respect to such
Obligation, including, without limitation, any acceleration rights. The
aforesaid right of setoff may be exercised by Bank against any Borrower or
against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of the creditors, receiver, or execution, judgment or attachment
creditor of Borrowers, or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of setoff shall
not have been exercised by Bank prior to the making, filing or issuance, or
service upon Bank of, or of notice of, any such petition; assignment for the
benefit of creditors; appointment or application for the appointment of a
receiver; or issuance of execution, subpoena, order or warrant. Bank agrees to
notify the relevant Borrower after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of Bank under this section are in addition
to the other rights and remedies (including, without limitation, other rights
of setoff) which Bank may have.
12.4 Survival of Covenants. All covenants, agreements,
representations, and warranties made herein and in certificates or reports
delivered pursuant hereto shall be deemed to hare been material and relied on
by Bank, notwithstanding any investigation made by or on behalf of Bank, and
shall survive the execution and delivery to Bank of any Note or Loan Document.
12.5 Addresses. Any notice or demand which by any provision of
this Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purpose by being delivered in person or by
facsimile to the party to whom the notice or demand is directed or by being
sent as first class mail, postage prepaid, to the following address: If to
Borrowers: Kimmins Environmental Service Corp., 1501 Second Avenue, Tampa,
Florida 33605, Attention: Joseph M. Williams; or if any other address shall at
any time be designated by Borrowers in writing to the holders of record of the
Note at the time of such designation to such other address; and if to Bank:
SouthTrust Bank of Alabama, National Association, P.O. Box 254, Birmingham,
Alabama 35290, Attention: Asset-Based Lending Department (telecopy No.
205-254-4369), and with a copy to: SouthTrust Bank of Alabama, National
Association, 4350 West Cypress Street, Suite 202, Tampa, Florida 33607,
Attention: Sie Kamide (telecopy No. 813-876-5592); or if any other address
shall at any time be designated in writing to Borrowers, to such other address.
12.6 Venue and Jurisdiction. Borrowers agree that any legal action
brought by Bank to collect the Loans or any Obligation or to assert any claim
against Borrowers under any Loan Document, or any part thereof, may be brought
in any court in the State of Alabama having subject matter jurisdiction and
that any such court will have non-exclusive jurisdiction, waives its right to
object to any such action on grounds it is brought in the improper venue, and
irrevocably consents that any legal action or proceeding against it under,
arising out of, or in any manner relating to the Loans, the Obligations, or any
Loan Document may be brought in the Circuit Court of Jefferson County, Alabama,
or in any other Circuit Court of the State of Alabama or in the U.S. District
Court for the Northern District of Alabama. Any judicial proceeding by any
Borrower against Bank under any Loan Document, or any part thereof, shall
40
<PAGE> 47
be brought only in one of the foregoing courts in Alabama. Borrowers, by the
execution of this Agreement, expressly and irrevocably assent and submit to the
non-exclusive personal jurisdiction of any such court in any such action or
proceeding. Borrowers consent to the service of process relating to any such
action or proceeding by mail to the address set forth in this Agreement.
12.7 Benefits. All of the terms and provisions of this Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns. Borrowers may not assign any of their rights or
obligations hereunder without the prior written consent of Bank.
12.8 Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Florida, the laws of such jurisdiction shall govern the method,
manner and procedure for foreclosure of Bank's lien upon such Collateral and
the enforcement of Bank's other remedies in respect of such Collateral to the
extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Florida.
12.9 Participation. Borrowers acknowledge that Bank may, at its
option, sell participation interests in the Loans to participating banks. The
amounts of any such participations shall be determined solely by the Bank.
Borrowers agree with each present and future participant in the Loan, the names
and addresses of which will be furnished to Borrowers, that if an Event of
Default should occur, each present and future participant shall have all of the
rights and remedies of Bank with respect to any deposit due from any
participant to Borrowers. The execution by a participant of a participation
agreement with Bank, and the execution by Borrowers of this Agreement,
regardless of the order of execution, shall evidence an agreement between
Borrowers and said participant in accordance with the terms of this section.
12.10 Miscellaneous. Time is of the essence with respect to this
Agreement. This Agreement and the instruments and agreements referred to
herein or called for hereby supersede and incorporate all representations,
promises, and statements, oral or written, made by Bank in connection with the
Loans. This Agreement may not be varied, altered, or amended except by a
written instrument executed by an authorized officer of Bank. In the event of
a conflict between this Agreement and any other Loan Document, the terms of
this Agreement will control. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but such counterparts shall together constitute one and the same instrument.
Any provision in this Agreement which may be unenforceable or invalid under any
law shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provisions
hereof.
12.11 Joint and Several Liability. All obligations of each Person
named as Borrower shall be joint and several obligations of all such Persons.
The obligations of each Borrower pursuant to this Agreement, the Revolving
Credit Note, the Term Note, the Pledge Agreements, and the Registration Rights
Agreement, and all other instruments, documents and agreements executed in
connection herewith shall be the joint and several obligations thereof and the
obligations of each Borrower hereunder and thereunder shall not be impaired or
avoided due to (i) the unenforceability of such obligations against any other
party which is any Borrower or (ii) the incapacity or lack of authority of any
signatory of any Borrower; and Bank may compromise
41
<PAGE> 48
or settle, extend the time for payment, discharge or waive performance of or
refuse to enforce or release all or any part of any and all of the Obligations
and Collateral and may grant other indulgences to one or more Borrowers in
respect thereof or release or substitute any one or more of Borrowers, all
without otherwise affecting or impairing the joint and several obligations of
Borrowers hereunder and thereunder.
12.12 Limitation of Grant. Nothing in this Agreement, whether
expressed or implied, is intended or should be construed to confer upon, or to
grant to, any person, except Bank and Borrowers, any right, remedy, or claim
under or because of either this Agreement or any provision of it. The rights,
duties, and obligations of Borrowers under this Agreement are not assignable or
delegable.
12.13 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWERS AND BANK HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR
RELATING TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS
AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR IN CONNECTION WITH
THE TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF
EITHER PARTY'S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, BORROWER AND BANK AGREE THAT EITHER OR BOTH OF THEM MAY FILE
A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY AND BARGAINED AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE
TRIAL BY JURY, AND THAT ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM
SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING
WITHOUT A JURY.
IN WITNESS WHEREOF, each Borrower and Bank has caused this instrument
to be executed by its duly authorized officer.
BORROWERS:
KIMMINS ENVIRONMENTAL SERVICE CORP.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Secretary/Treasurer
42
<PAGE> 49
TRANSCOR WASTE SERVICES, INC.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Secretary/Treasurer
KIMMINS RECYCLING CORP.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Secretary/Treasurer
FOURTH AVENUE HOLDINGS, INC.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Vice President
LANTANA EIGHTH AVENUE CORP.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Vice President
KIMMINS CONTRACTING CORP.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
THERMOCOR KIMMINS, INC.
By: /s/ Joseph M. Williams
-----------------------------
Agent
KIMMINS INTERNATIONAL CORPORATION
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
40TH STREET, INC.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Vice President
43
<PAGE> 50
FACTORY STREET CORPORATION
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
KIMMINS, LTD.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
KIMMINS INDUSTRIAL SERVICE CORP.
By: /s/ Joseph M. Williams
------------------------------
Joseph M. Williams
Secretary/Treasurer
KIMMINS ABATEMENT CORP.
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
KIMMINS INCORPORATED
By: /s/ Joseph M. Williams
-----------------------------
Joseph M. Williams
Agent
BANK:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/ Sie Kamide
-----------------------------
Sie Kamide
Vice President
44
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State or Country
Company of Incorporation
------------------------------------ ----------------
<S> <C>
Kimmins Contracting Corp. Florida
Kimmins Ltd. Ontario, Canada
Kimmins Industrial Service Corp. Delaware
Kimmins Abatement Corp. Delaware
ThermoCor Kimmins, Inc. (f/k/a Kimmins Thermal Corp.) Florida
TransCor Waste Services, Inc. Florida
Kimmins Recycling Corp. Florida
Kimmins Incorporated Texas
Kimmins International Florida
Fourth Avenue Holdings, Inc. Florida
40th Street, Inc. Florida
Lantana Eighth Avenue Corp. Florida
Factory Street Corporation Tennessee
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-29612) pertaining to the 1987 Stock Option Plan of Kimmins
Environmental Service Corp. and in the related Prospectus, of our report dated
March 16, 1995, with respect to the consolidated financial statements and
schedule of Kimmins Environmental Service Corp. included in the Annual Report
(Form 10-K) for the year ended December 31, 1994.
ERNST & YOUNG LLP
Tampa, Florida
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 479,106
<SECURITIES> 0
<RECEIVABLES> 24,263,506
<ALLOWANCES> 662,997
<INVENTORY> 0
<CURRENT-ASSETS> 36,199,849
<PP&E> 43,890,060
<DEPRECIATION> 17,074,631
<TOTAL-ASSETS> 72,688,780
<CURRENT-LIABILITIES> 24,994,445
<BONDS> 17,032,115
<COMMON> 13,329
0
0
<OTHER-SE> 24,500,873
<TOTAL-LIABILITY-AND-EQUITY> 72,688,780
<SALES> 96,755,001
<TOTAL-REVENUES> 96,755,001
<CGS> 84,673,725
<TOTAL-COSTS> 84,673,725
<OTHER-EXPENSES> 9,507,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,076,911
<INCOME-PRETAX> 1,532,677
<INCOME-TAX> 735,685
<INCOME-CONTINUING> 796,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 796,992
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
