<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
[MARK ONE]
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
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. 1-10489
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KIMMINS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 59-2763096
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(State of Incorporation) (I.R.S. Employer
Identification No.)
1501 Second Avenue, East, Tampa, Florida 33605
(Address of registrant's principal executive offices,
including zip code)
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(Registrant's telephone number, including area code):
(813) 248-3878
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Each Class on Which Registered
------------------------------- -------------------------------
Common Stock, $.001 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by a 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 [ ] No [X]<PAGE>
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/A or any amendment to this Form 10-K/A. [ ]
As of March 31, 1998, there were outstanding 4,447,397 shares of
Common Stock and 2,291,569 shares of Class B common stock. The aggregate
market value of the voting stock held by non-affiliates of the registrant
as of March 31, 1998, was $10,851,000.
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DOCUMENTS INCORPORATED BY REFERENCE:
NONE<PAGE>
KIMMINS CORP.
Form 10-K/A
TABLE OF CONTENTS
Page
No.
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PART I
Item 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 8
Item 4 Submission of Matters to a vote of Security Holders . . . . . 9
PART II
Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . 8
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . 9
Item 7 Management s Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 10
Item 8 Financial Statements and Supplementary Data . . . . . . . . 20
PART III
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures . . . . . . . . . . . 34
Item 10 Directors and Executive Officers of the Registrant . . . . 34
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . 51
Item 12 Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . 55
Item 13 Certain Relationships and Related Transactions . . . . . . 56
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . . . . . . 57<PAGE>
Note: The discussions in this Form 10-K/A contain forward looking
statements that involve risks and uncertainties. Statements contained in
this Form 10-K/A that are not historical facts are forward looking
statements that are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. A number of important factors
could cause future results of Kimmins Corp. and its subsidiaries to
differ materially and significantly from those expressed or implied in
past results and in any forward looking statements made by, or on behalf
of, the Company. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in
"Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as well as those discussed
elsewhere in this Form 10-K/A. These factors include, without limitation,
those listed in "Risk Factors" in the Company's Registration Statement on
Form S-1 (File No. 33-12677).
PART I
Item 1. Business
THE COMPANY
Kimmins Corp. and its subsidiaries (collectively, the "Company")
operates two business segments: solid waste management services and
specialty contracting services. The Company provides solid waste
management services through its TransCor Waste Services, Inc., subsidiary
to commercial, industrial, residential, and municipal customers in the
state of Florida. The Company provides specialty contracting services in
the south, including infrastructure development; underground
construction; road work; site remediation services such as excavation,
removal and disposal of contaminated soil; facilities demolition and
dismantling; and asbestos abatement.
The Company's services are as follows:
* Solid waste management services - Transfer, collection,
resource recovery, transportation, disposal of non-hazardous
waste, and demolition of residential and commercial facilities.
* Specialty contracting services
- Earthwork and utility contracting - Earthwork activities
including commercial and residential site work and
earthwork activities for the phosphate mining industry.
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 - Containment and excavation and
removal.<PAGE>
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 initial 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 strategy is to continue to focus on solid waste
management services, through its TransCor Waste Services, Inc.
subsidiary, and specialty contracting projects for private and
governmental customers. To date, the Company's activities in 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. The Company does not consider its business to be highly
seasonable.
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 has 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. The Company also provides residential
garbage collection services for several municipalities located in Lee
County and Hillsborough County, Florida. In addition, the Company
provides demolition and other related services with, and as an economic
complement to, its solid waste management services.<PAGE>
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). The Company has the
capability to haul the non-recyclable waste economically to outlying
rural landfills (where disposal fees generally are much 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, third-
party waste hauling organizations, 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. These 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 multistory
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.
Specialty Contracting:
Earthwork and Utility Contracting Services
Since 1988, the Company has directed 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-hazardous contracting
services, including infrastructure services such as water and sewer line
installation, replacement and repair to private and governmental
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.
Kimmins Contracting Corp. has recently broadened its array of
services by adding earthwork operations. These operations are mainly
directed toward the private sector in the state of Florida and include
land reclamation, dam construction and other earthwork operations for the
phosphate mining industry, and residential and commercial site work
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.<PAGE>
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 the demolition
or dismantling of a contaminated facility.
Dismantling is the precise disassembly of a manufacturing or
production facility on a piece-by-piece basis 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, and utility plants); 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 continuing to de-emphasize its asbestos
abatement services and generally will only perform these services in
conjunction with other environmental demolition activities.
Hazardous Waste Services
The Company offers a range of services for the removal and disposal
of hazardous materials. The services offered include construction of
containment systems and the excavation and removal of contaminated
material. The Company has de-emphasized its hazardous waste services and
will only perform these services in conjunction with other environmental
demolition activities.
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 Company installs
containment systems that include containment cells, surface caps, and
slurry walls.
Excavation and removal. Excavation and removal involve the excavation
of contaminated materials for containment 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.<PAGE>
SEGMENT INFORMATION
See Note 20 of the Notes to Consolidated Financial Statements of the
Company for the years ended December 31, 1995, 1996, and 1997, 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, demolition, and
construction contracts. For the year ended December 31, 1997, most of the
Company's revenue was derived from contracts or projects that required
the Company to post performance bonds. The Company's current bonding
capacity for qualification purposes is $60,000,000 for individual
projects and $120,000,000 in the aggregate. This capacity is not intended
to be a limitation nor a commitment as to the Company's bond capacity,
but rather guidelines for qualification purposes. It is customary for
surety bond companies to underwrite each surety obligation individually;
therefore, the potential for more or less capacity exists based on the
merits of the obligation. Historically, the Company has obtained surety
bond support for individual projects in the $53,000,000 range while the
aggregate approached $100 million. The Company has obtained bonding
coverage in amounts up to $8,500,000 for environmental projects. 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 obtained bonding coverage for environmental projects more
than $8,500,000 as a result of personal surety bonds or collateral
furnished by Mr. Francis M. Williams, President of the Company. Mr.
Williams has no obligation to provide surety bonds, collateral or
otherwise to assist the Company in connection with bonding coverage.
Management believes that bonding coverages are adequate for the size and
scope of projects being performed.
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 attempts 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<PAGE>
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 the home office in Tampa, Florida. This
office is located in an area 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
third-party waste hauling organizations, 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 mining, petroleum, petrochemical, paper, and steel
companies as well as public utilities and federal, state and local
government agencies. For the years ended December 31, 1995, 1996 and
1997, the Company's specialty contracting services segment earned gross
revenue of approximately $3,953,000, $14,884,000, and $10,648,000,
respectively, on contracts with the Florida Department of Transportation.
For the years ended December 31, 1995, 1996 and 1997, the Company's
specialty contracting services segment earned gross revenue of
approximately $3,999,000, $2,562,000 and $25,061,000, respectively, on
contracts with IMC-Agrico Company, a phosphate mining company with
operations on Florida's west coast. These were the only customers whose
purchases aggregated more than 10 percent of the Company's revenues.
For the year ended December 31, 1997, 56 percent and 44 percent,
respectively, of the Company's gross revenue were derived from private
and governmental customers, respectively. Government contracts, which
represent a significant portion of the Company's gross revenue, 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.<PAGE>
BACKLOG
As of December 31, 1997, the Company had a backlog of uncompleted
projects under contract aggregating approximately $119,220,000 (compared
to approximately $137,372,000 as of December 31, 1996), of which
approximately $48,826,000 is attributable to earthwork and utility
contracting services, approximately $2,709,000 is attributable to
demolition and dismantling services, approximately $1,100,000 is
attributable to asbestos abatement services, and approximately
$66,010,000 is attributable to solid waste management services. The
Company anticipates that it will recognize approximately $66,000,000 of
revenues from these projects by the end of 1998 with the remaining
revenue to be recognized through the year 2004.
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, including
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 that primarily provide
collection or disposal services to customers in a limited geographic
area, large regional and national solid waste management companies that
operate over more extensive geographic areas and 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 that compete against the Company include,
among others, U.S.A. Waste, 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 much greater marketing, financial, technological and
other resources than the Company.
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.<PAGE>
INSURANCE COVERAGE
The Company currently maintains comprehensive general liability
insurance, with total coverage of $51,000,000 for any single occurrence
and $53,000,000 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 that covers, among other things, specific asbestos-related risks
up to $1,000,000. In addition, the Company has obtained a $2,000,000 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 changing
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 that 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. 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 became 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) have been phased in over a five-year
period that began on October 9, 1991, and others relating to financial
responsibility became effective April 9, 1994.<PAGE>
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.
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 33 states. 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
can obtain all such required licenses.
EMPLOYEES
The Company has approximately 980 employees, of which 9 are employed
in executive capacities, 28 in professional capacities, 76 in
administrative capacities, 166 as field supervisors and 701 in field
operations. A total of 11 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.<PAGE>
The Company, through its subsidiaries, has implemented employee
safety programs that 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-day 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 annually. 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.
Item 2. Properties
The Company owns its principal executive offices that 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, 1997, of $1,675,000. This
variable rate note matures on August 1, 1999, and currently bears
interest at 1.25 percent above the lender's prime rate.
The Company's subsidiary, TransCor Waste Services, Inc., owns and
operates the following facilities:
Clearwater, Pinellas County
The Company's Clearwater facility, located on approximately ten
acres, is zoned heavy industrial and contains a T&R building of
approximately 33,000 square feet with modular office space of
approximately 3,000 square feet. The Clearwater facility is subject
to a mortgage securing indebtedness evidenced by a promissory note
with an outstanding principal amount at December 31, 1997, of
$821,000. The note matures on January 1, 1999, and bears interest at
a rate of 1 percent above the lender's prime rate. As additional
security for the lender, the Company executed an assignment of rents
and leases in the event of a default under the mortgage.
Tampa, Hillsborough County
The Company's Tampa facility is located on approximately four and
one-quarter acres in downtown Tampa. The property is zoned heavy
industrial and contains an approximately 15,000 square foot T&R
building. The Tampa facility is subject to a mortgage securing
indebtedness evidenced by a promissory note with an outstanding
principal amount at December 31, 1997, of $525,000. This note
matures on March 1, 2001, and bears interest at a rate of 1.5 percent
above the lender's prime rate.<PAGE>
Jacksonville, Duval County
The Company's Jacksonville facility is located on approximately ten
acres. The property is zoned light industrial and contains an
approximately 37,500 square foot recycling building, 2,000 square
feet of office space, and a 1,500 square foot maintenance shop. The
Jacksonville facility is subject to a mortgage, securing indebtedness
evidenced by a promissory note with an outstanding principal amount
at December 31, 1997, of $1,314,000. The note matures on January 1,
2012, and bears interest at the rate of 8.75 percent per annum. As
additional security for the payments under the notes and the
Company's performance of its obligations under the mortgage, the
Company executed a modification to the mortgage to assign all rents
from the property or to appoint a receiver in the event of a default
under the mortgage.
Miami, Dade County
The Company's Miami facility is located on approximately four and
one-half acres, is zoned industrial, contains an approximately 60,500
square foot T&R building, and contains an office area of
approximately 2,500 square feet that is used for its Miami collection
operations. The Miami facility is subject to a mortgage, which was
refinanced during 1995, securing indebtedness evidenced by a
promissory note with an outstanding principal amount at December 31,
1997, of approximately $828,000. The note matures on July 30, 2003,
and bears interest at a rate of 1.5 percent above the prime rate of
CitiBank, N.A. As additional security for the lender, the Company
executed a conditional assignment of leases, rents, and profits in
the event of a default under the mortgage.
Fort Pierce, St. Lucie County
The Company's Fort Pierce facility is located on approximately two
acres and is zoned heavy industrial. The facility contains an
approximately 1,000 square foot warehouse and office space of
approximately 1,000 square feet. The Fort Pierce facility is subject
to a mortgage securing indebtedness evidenced by a promissory note
with an outstanding principal amount at December 31, 1997, of
approximately $165,000. The note matures on March 1, 1999, and bears
interest at a rate of 3.75 percent above the lender's prime rate.
The land and building comprising this facility were sold in January
1998. Operations had ceased in this facility on November 1997 when
the contract with St. Lucie County was sold. The mortgage was paid
in full using proceeds from the sale of the facility. The Company
recognized a loss of approximately $90,000 on the sale.<PAGE>
Lantana, Palm Beach County
The Company's Lantana facility is located on approximately five acres
and is zoned industrial. The facility contains an approximately
36,000 square foot building, an office area of approximately 3,900
square feet, and a maintenance shop of approximately 7,000 square
feet. The Lantana facility is subject to a mortgage securing
indebtedness evidenced by a promissory note with an outstanding
principal amount of approximately $883,000 at December 31, 1997. The
note matures on October 18, 2010, and bears interest at the rate
equal to the lender's prime rate. Operations in the Lantana facility
ceased in August 1997.
The Company's cost for land, buildings and improvements is
approximately $2,011,000. As of December 31, 1997, the Company wrote-
down the recorded value of these assets by $500,000, and the facility
is for sale.
Fort Myers, Lee County
The Company's Fort Myers facility is located on approximately two
acres and is zoned industrial. The facility contains a building of
approximately 6,400 square feet and office areas of approximately
2,200 square feet. The Fort Myers facility, which began operations
on October 1, 1995, is subject to a mortgage securing indebtedness
evidenced by a promissory note with an outstanding principal amount
at December 31, 1997, of approximately $323,000. The note matures on
August 9, 2000, and bears interest at the rate of 9.25 percent.
As a result of the recently awarded solid waste franchise agreement
with the City of Cape Coral, Florida, the Company will require a
larger facility to service an increased revenue base. In early 1998,
the Company made a bid on a competitor's idle facility, which would
meet the Company's expansion needs in the Lee County area. The bid of
$700,000 was for land and buildings. The Company may sell its
current facility if its bid for this property is successful.
Sales of Properties
Effective May 31, 1998, TransCor sold the Jacksonville property along
with certain other assets and businesses for approximately
$11,600,000, which resulted in a gain to the Company. In addition, as
of December 31, 1997, management holds for sale the Lantana property
and related businesses.
Item 3. Legal Proceedings
The Company is involved in various legal actions and claims arising
in the ordinary course of its business, none of which is expected to have
a material effect on the Company's financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.<PAGE>
PART II
Item 5. Market for the Registrant'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. 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.
1997 High Low
------------------------------------- --------- ---------
First Quarter . . . . . . . . . . . . $ 4.250 $ 3.000
Second Quarter . . . . . . . . . . . $ 4.000 $ 2.500
Third Quarter . . . . . . . . . . . . $ 6.000 $ 3.813
Fourth Quarter . . . . . . . . . . . $ 7.000 $ 4.500
1996 High Low
------------------------------------- --------- ---------
First Quarter . . . . . . . . . . . . $ 7.875 $ 5.250
Second Quarter . . . . . . . . . . . $ 5.750 $ 4.875
Third Quarter . . . . . . . . . . . . $ 5.000 $ 3.500
Fourth Quarter . . . . . . . . . . . $ 4.125 $ 3.250
The closing stock price for the Company's stock on March 31, 1998,
was $4.1875. On March 31, 1998, there were approximately 870 holders of
record of the common stock. Certain record 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 a common
stock cash dividend paid in July 1989, the Company has not paid any cash
dividends since its inception, and the Board of Directors does not plan
to declare or pay any cash dividends in the future.<PAGE>
Item 6. Selected Financial Data
The following selected financial data are derived from the
consolidated financial statements of Kimmins Corp. The data should be
read in conjunction with the consolidated financial statements, related
notes, and other financial information included herein.
HISTORICAL OPERATING STATEMENT DATA:
Years ended December 31,
(In thousands, except per share data)
------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- ------------------
Gross revenue . . . . . $ 83,609 $ 96,755 $111,346 $113,241 $ 135,311
Net revenue . . . . . . 77,405 85,353 95,426 97,977 113,526
Operating income
(loss) (1) . . . . . 3,666 2,670 4,596 (7,806) (5,793)
Income (loss) from
operations before
provision (benefit)
for income taxes . . 3,196 1,533 2,833 (10,775) (9,687)
Net income
(loss) (2) . . . . . 1,753 797 1,343 (8,683) (8,518)
PER SHARE DATA (3):
Net income (loss) per
share - basic . . . . $ .39 $ .18 $ .30 $ (1.96)$ (1.97)
Net income (loss) per
share - diluted . . . $ .39 $ .18 $ .29 $ (1.96)$ (1.97)
Weighted average number
of common shares
outstanding - basic . 4,443 4,443 4,445 4,420 4,318
Weighted average number
of common shares
outstanding - diluted 4,483 4,496 4,578 4,420 4,419
Cash dividends per
share . . . . . . . . None None None None None
(1) The 1997 operating results include charges of approximately $8,750 in
the fourth quarter related to revisions of contract estimates and
adjustments to contract claims and change order settlements. The 1996
operating results include charges of $6,452 in the fourth quarter
related to similar matters.
(2) The 1997 income tax benefit of $1,168 relates to TransCor, which is
not consolidated with Kimmins Corp. for tax purposes. The 1996
results included a benefit for income taxes of $2,092, which is net
of a valuation allowance of $1,707 related to the future
recoverability of deferred tax asset balances.
(3) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Standards No. 128, "
Earnings Per Share." For further discussion of earnings per share and
the impact of Statement No. 128, see the Notes to the Consolidated
Financial Statements beginning on page 27.<PAGE>
HISTORICAL BALANCE SHEET DATA:
As of December 31,
(In thousands)
------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- ------------------
Current assets . . . . $ 33,716 $ 36,200 $ 44,117 $ 41,856 $ 45,417
Working capital
(deficiency) . . . . 12,041 11,205 11,548 5,587 (13,289)
Total assets . . . . . 70,192 72,689 93,629 93,083 135,016
Long-term debt . . . . 19,454 17,032 26,540 31,360 69,621
Stockholders' equity . 23,102 24,514 26,381 17,853 9,393
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
The Company conducts its business in two segments: solid waste
management services and specialty contracting services. The solid waste
management services segment offers collection, transfer, transportation,
resource recovery and disposal of non-hazardous waste. The specialty
contracting services segment provides comprehensive services including
facilities demolition and dismantling, installation of sewer lines, water
lines and roads, excavation, removal and disposal of contaminated soil,
groundwater treatment and asbestos abatement.<PAGE>
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.
Percentage
Increase (Decrease)
Percentage of Net Revenue Year ended
Year Ended December 31, December 31,
---------------------------- -------------------
1996 vs. 1997 vs.
1995 1996 1997 1995 1996
--------- --------- --------- ------------------
Gross revenue . . . . . 116.7% 115.5% 119.2% 1.7% 19.5%
Outside services . . . 16.7% 15.5% 19.2% (4.1%) 42.7%
--------- --------- ---------
Net revenue . . . . . . 100.0% 100.0% 100.0% 2.7% 15.9%
Cost of revenue
earned . . . . . . . 81.2% 92.1% 91.1% 16.5% 13.7%
--------- --------- ---------
Gross profit . . . . . 18.8% 7.9% 8.9% (57.1%) 44.3%
Selling, general and
administrative
expense . . . . . . . 14.0% 15.8% 14.0% 16.1% 7.4%
--------- --------- ---------
Operating income
(loss) . . . . . . . 4.8% (7.9%) (5.1%) (269.8%) (25.8%)
Minority interest in
net (income) loss
of subsidiary . . . . (0.3%) 0.1% 0.5% (140.0%) 292.5%
Interest expense,
net . . . . . . . . . (1.5%) (3.2%) (3.9%) 119.1% 42.8%
--------- --------- ---------
Income (loss) before
provision for income
taxes (benefit) . . . 3.0% (11.0%) (8.5%) (480.3%) (10.1%)
Provision for income
taxes (benefit) . . . 1.6% (2.1%) (1.0%)
--------- --------- ---------
Net income (loss) . . . 1.4% (8.9%) (7.5%) (746.8%) 1.9%
========= ========= =========<PAGE>
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996
The Company incurred a net loss of $8,518,000 for the year ended
December 31, 1997, compared to a net loss of $8,683,000 for the year
ended December 31, 1996. Approximately $6,454,000 of the 1997 loss was
attributable to the Company's specialty contracting segment, and a net
loss of approximately $2,064,000 (net of the minority interest) was
attributable to the solid waste management services segment. The 1997
net loss associated with the solid waste management segment was primarily
attributable to a decrease in revenue and an increase in overhead costs.
During 1998, TransCor has sold or placed for sale certain of the non-
performing assets and contracts that contributed to the waste management
segment losses. Sales of such assets resulted in proceeds to TransCor in
1998 of approximately $11,600,000. The net loss in the specialty
contracting segment was attributable to a number of factors, including
delays and disruption of contracts during the fourth quarter of 1997 and
the first quarter of 1998, caused by the severe influences of weather
patterns (the "El Nino Effects") that affected the southeast. In
addition, the two remaining contracts in the Company's Northeastern (New
York-based) Division, which the Company has exited, incurred additional
losses in 1997 of approximately $3,409,000 that were due to conditions
that arose during 1997. Finally, certain utility and roadwork contracts
with the Florida Department of Transportation ("FDOT") resulted in losses
of approximately $3,200,000 related to customer-caused and weather-caused
delays. The Company has discontinued any new FDOT contracting, in order
to focus on more profitable specialty contracting services.
A line-by-line analysis of the Company's statements of operations
follows below:
During the year ended December 31, 1997, net revenue increased by
$15,549,000, or 16 percent, to $113,526,000 from $97,977,000 for the year
ended December 31, 1996. The increase in revenue associated with the
Company's utility contracting services ($22,435,000 increase in net
revenue) is due to the Company's change in focus towards
non-environmental projects. Revenue for land reclamation services
increased from approximately $2,562,000 in 1996 to approximately
$25,061,000 in 1997 and represents 27 percent of specialty contracting
services and 19 percent of total revenues for 1997. The change in revenue
associated with the Company's remediation services ($6,079,000 decrease
in net revenue), asbestos abatement services ($649,000 increase in net
revenue), and industrial demolition services ($1,000 increase in net
revenue) is due to the Company de-emphasizing these services and only
performing this work in conjunction with the Company's other non-
environmental activities. The decrease in revenue associated with the
Company's solid waste management services ($1,497,000 decrease in net
revenue) is primarily due to the closure of two facilities during 1997.
Utility contracting services net revenue, as a percentage of total net
revenue, increased to 57 percent for the year ended December 31, 1997,
from 43 percent for the year ended December 31, 1996. Remediation,
abatement and demolition services combined decreased to 6 percent from 13
percent. Solid waste management services net revenue comprised 37 percent
of total net revenue in 1997 compared to 45 percent in 1996. The impact
of price increases on net revenue is less than 1 percent.
Outside services, which primarily consist of subcontractor costs,
increased as a percentage of net revenue from 16 percent during the year
ended December 31, 1996, to 19 percent during 1997. The Company will use<PAGE>
the services of a subcontractor when it determines that an economic
opportunity exists regarding internally providing the services. The
Company utilized the services of subcontractors to a higher extent during
1997 than 1996 due to the ongoing contracts and the specific work
requirements.
Cost of revenue earned increased to $103,402,000 for the year ended
December 31, 1997, from $90,962,000 for the comparable period of 1996. As
a result, gross profit during the year ended December 31, 1997, increased
to $10,124,000 (9 percent of net revenue) from $7,015,000 (7 percent of
net revenue) in 1996. The increase in the dollar amount and percentage of
gross profit primarily is associated with the Company's utility
contracting ($2,949,000 increase in gross profit), demolition contracting
($1,293,000 decrease in gross loss), asbestos abatement services
($316,000 decrease in gross loss), and other services ($40,000 increase
in gross profit) and were partially offset by decreases in gross profit
from remediation services ($1,281,000 increase in gross loss). The
increase in gross profit from utility contracting services is
attributable mainly to new contracts with higher profit margins regarding
land reclamation services for phosphate mining companies, which was
partially offset by losses on certain FDOT contracts. The Company is
currently not bidding on any further FDOT contracts. The decrease in
losses at the gross margin level for remediation, abatement and
demolition operations is directly related to the closure of the northeast
office. However, losses of $2,948,000, including loss reserves for future
performance, were recorded in 1997 with respect to the two remaining
contracts in the former Northeast Division service area. Costs for legal
fees associated with a claim comprise $304,000 of the total loss of
$405,000 for remediation operations and the majority of costs included in
the $129,000 loss for abatement operations in the northeast.
Depreciation and amortization, included in cost of revenue, increased
to $8,796,000 in 1997, from $5,650,000 in 1996. The increase relates
primarily to depreciation expense, and resulted from the purchase during
the first and fourth quarters of 1997 of approximately $39,000,000 of
heavy construction equipment that had previously been leased under
operating leases. Because the equipment purchase transactions affected
only a portion of the year ended December 31, 1997, depreciation expense
in 1998 will be higher in respect of the full year of depreciation on
such equipment. Conversely, operating lease expense which amounted to
approximately $11,808,000 and $11,853,000 in each of 1996 and 1997,
respectively, will decline significantly in 1998 with the elimination in
1997 of certain operating lease arrangements. In addition, 1998
amortization expense will increase approximately $400,000 as a result of
the conversion in the fourth quarter of 1997 of certain real estate
related notes receivable to an equity interest, containing goodwill, in
the underlying properties.
The improvements in the special contracting segment were partially
offset by decrease in the solid waste managements services segment. Gross
margin for solid waste management services decreased from approximately
$7,297,000 in 1996 to approximately $7,089,000 in 1997. The $208,000
decrease in gross margin is mainly attributable to increased competition,
the closure of two regional facilities during 1997, and a decrease of
approximately $2,278,000 in revenue at a third facility.<PAGE>
Included in the Company's operating results for the years ended
December 31, 1996 and 1997 is the activity related to the settlement
and/or resolution of contract claims and unapproved change orders. This
activity can be summarized as follows:
Years ended December 31,
---------------------------
1996 1997
------------- -------------
Claim recoveries . . . . . . . . . . . . . . $ 2,013,000 $ 431,000
Cost of recoveries . . . . . . . . . . . . . 4,916,000 1,278,000
------------- -------------
Loss on resolved claims . . . . . . . . . . . $ (2,903,000) $ (847,000)
============= =============
In addition, the Company incurred costs associated with unresolved
claims of $2,079,000 and $3,216,000 during 1996 and 1997, respectively.
The Company had the following balances recorded relating to contract
claims and unsigned change orders at December 31, 1996 and 1997:
December 31,
---------------------------
1996 1997
------------- -------------
Claims . . . . . . . . . . . . . . . . . . . $ 5,558,000 $ 11,989,000
Unapproved change orders . . . . . . . . . . 3,392,000 0
------------- -------------
$ 8,950,000 $ 11,989,000
============= =============
Cumulative external claim preparation
costs included above . . . . . . . . . . . $ 295,000 $ 0
============= =============
During 1997, selling, general and administrative expenses increased
to $15,917,000 (14 percent) from $14,821,000 (15 percent) of net revenues
for the year ended December 31, 1996. The dollar increase in selling,
general, and administrative expenses primarily is attributable to
increased overhead costs, such as office salaries and marketing costs,
associated with higher levels of operations. The percentage decrease in
selling, general and administrative expenses primarily is associated with
the growth of the Company's specialty contracting operations, which has
historically operated with a lower overhead structure than the Company's
solid waste management operations, which has an overhead structure equal
to 18 percent of its net revenue in 1997 compared to 14 percent in 1996.<PAGE>
The percentage increase in selling, general and administrative
expenses for the solid waste management segment is primarily attributable
to non-recurring costs. The increase of $1,593,000 is directly related to
advertising costs for a new contract of approximately $500,000, an
increase in compensation expense of approximately $563,000 due to a
temporary increase in staff levels, and costs associated with the closing
and sale of facilities and operating assets of approximately $1,173,000,
including an impairment loss of $590,000 to certain land and buildings
held for sale, a write-off of intangible assets of $183,000, and a
reserve for doubtful accounts of $400,000 regarding the sale of certain
residential service contracts. The costs were partially offset by gains
of approximately $445,000 on the sale of certain contracts and related
equipment and approximately $200,000 in savings in other costs.
The percentage decrease in selling, general and administrative
expenses for specialty contracting operations is attributable to the
increase in net revenue of approximately $17,046,000, which represents an
increase of 47 percent.
As a result of the foregoing, the Company's operating loss was
$5,793,000 (negative 5 percent of net revenue) during the year ended
December 31, 1997, compared to an operating loss of $7,806,000 (negative
8 percent of net revenue) during the same period in 1996.
Minority interest in net loss of the TransCor subsidiary was $542,000
for the year ended December 31, 1997, compared to minority interest in
net income of $138,000 for the year ended December 31, 1996. The minority
interest in net income or loss of such subsidiary reflects an approximate
26 percent ownership interest in 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 in
1997.
Interest expense, net of interest income, increased to $4,436,000
during the year ended December 31, 1997, compared to $3,107,000, for the
year ended December 31, 1996. The increase is attributable to increases
in average borrowings during the year and to approximately $43,000,000 of
heavy construction equipment financing in the first and fourth quarters
of 1997 relating to the specialty contracting segment. Interest expense
in 1998 will be higher than amounts reflected in 1997 in respect of the
full year of interest on the equipment financing that occurred in the
first and fourth quarters of 1997.
During 1997, the Company contributed approximately $6,000,000 in
receivables from affiliates to Sunshadow Apartments, Ltd., and
Summerbreeze Apartments, Ltd., two Florida real estate limited
partnerships (collectively, the "Apartments"), in exchange for 49 percent
non-controlling, preferred limited partnership interests in the
Apartments. The amount in excess of the underlying equity ($12,066,000)
was attributed to goodwill and is being amortized over 30 years. The
Company recorded equity in losses in the Apartments of approximately
$81,000, which represents the Company's proportionate share of the
Apartment' net loss for the period October 22, 1997, through December 31,
1997. The Company also recorded equity in income of Cumberland
Technologies, Inc. ("Cumberland") of $51,000 for the year ended December
31, 1997.<PAGE>
The Company's effective tax rate was negative 12.1 percent for the
year ended December 31, 1997, compared to a tax rate of negative 19.5
percent for the year ended December 31, 1996. The decrease in the
effective tax rate was primarily due to the net operating loss generated
by the Company and the resulting recognition of future tax benefits from
credit and loss carryforwards. The net operating loss ("NOL") generated
in the year ended December 31, 1997, was approximately $7,465,000. The
NOL will be carried forward to offset any taxable income in future years.
For alternative minimum tax purposes, the loss carryforward is
approximately $4,933,000. Management expects to fully utilize these loss
and credit carryforwards before they expire in the year 2011; however, in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," a valuation allowance of approximately
$2,801,000 has been recognized. In addition to the loss carryforwards,
the Company has approximately $697,000 of alternative minimum tax credit
carryforwards available to offset future federal regular income taxes.
This credit does not expire.
As a result of the foregoing, the Company incurred a net loss for the
year ended December 31, 1997, of $8,518,000 (negative 7.5 percent of net
revenue) compared to a net loss of $8,683,000 (negative 9 percent of net
revenue) during the same period in 1996.
Year Ended December 31, 1996, Compared to Year Ended December 31, 1995
The Company incurred a net loss of $8,683,000 for the year ended
December 31, 1996, compared to net income of $1,343,000 for the year
ended December 31, 1995. Approximately $8,295,000 of the 1996 loss was
attributable to several matters related to the Company's specialty
contracting segment, and approximately $388,000 of the net loss (net of
the minority interest) was attributable to the solid waste management
services segment. The 1996 net loss associated with the solid waste
management segment was primarily attributable to a demolition contract
claim and a change order settlement which totaled $395,000. As it
relates to the specialty contracting segment, the Company incurred
$2,903,000 of pretax losses related to the settlement and/or resolution
of contract claims and unapproved change orders. In addition, the
Company incurred losses on two remediation contracts located in the
northeast region that resulted in pretax losses of $1,369,000. These
losses were attributable to the Company's de-emphasis of work located in
the northeastern states and focus towards operations located in the
southeastern states, primarily Florida. This de-emphasis resulted in
operational inefficiencies, such as work slow downs, that were the
ultimate causes of the losses. As management focused on the resolution
of the operating issues related to the northeast region, operational
inefficiencies in the southeast region arose, resulting in a pretax
charge of $3,580,000 related to five utility and two demolition and
abatement projects.
Certain of the above charges occurred in the fourth quarter of 1996,
resulting in an aggregate pretax loss of $6,452,000. Information related
to these matters substantially arose during the fourth quarter of the
year. As it relates to the specialty contracting segment, the Company
incurred $2,455,000 of pretax losses related to the settlement and/or
resolution of contract claims and unapproved change orders during the
fourth quarter of 1996. The losses associated with the remediation and
utility contracting contracts that related to the fourth quarter was
$1,543,000 and $2,454,000, respectively.<PAGE>
A line-by-line analysis of the Company's statements of operations
follows below:
During the year ended December 31, 1996, net revenue increased by
$2,551,000, or 3 percent, to $97,977,000 from $95,426,000 for the year
ended December 31, 1995. The increase in revenue associated with the
Company's solid waste management services ($4,492,000 increase in net
revenue) is primarily due to the commencement of two municipal contracts
during October 1995 to provide residential collection services. The
increase in revenue associated with the Company's utility contracting
services ($1,676,000 increase in net revenue) is due to the Company's
change in focus towards non-environmental projects. The decrease in
revenue associated with the Company's remediation services ($1,602,000
decrease in net revenue), asbestos abatement services ($1,243,000
decrease in net revenue), and industrial demolition services ($772,000
decrease in net revenue) is due to the Company de-emphasizing these
services and only performing this work in conjunction with the Company's
other environmental demolition activities. The impact of price increases
on net revenue was less than 1 percent.
Outside services, which primarily consist of subcontractor costs,
decreased as a percentage of net revenue from 17 percent during the year
ended December 31, 1995, to 16 percent during 1996. The Company will use
the services of a subcontractor when it determines that an economic
opportunity exists regarding internally providing the services. The
Company utilized the services of subcontractors to a lower extent during
1996 than 1995 due to the ongoing contracts and the specific work
requirements.
Cost of revenue earned increased to $90,269,000 for the year ended
December 31, 1996, from $77,466,000 for the comparable period of 1995. As
a result, gross profit during the year ended December 31, 1996, decreased
to $7,708,000 (8 percent of net revenue) from $17,960,000 (19 percent of
net revenue) in 1995. The decrease in the dollar amount and percentage of
gross profit primarily is associated with the Company's utility
contracting ($3,923,000 decrease in gross profit) and remediation
operations ($3,703,000 decrease in gross profit). The decrease in gross
profit from utility contracting services is directly related to
management's decision to stop legal action related to two unapproved
change orders and to a project that failed to perform to the Company's
original projections. The decrease in gross profit from remediation
services is directly related to losses incurred on two projects that
failed to perform to the Company's original projections and the
settlement of a contract claim that resulted in a pretax loss of
approximately $448,000. In addition, the Company incurred certain
decreases in its industrial demolition services ($1,380,000 decrease in
gross profit), solid waste management services ($848,000 decrease in
gross profit), and asbestos abatement services ($398,000 decrease in
gross profit). The decrease in gross profit associated with the
Company's industrial demolition services is due to a judge's reversal of
a previous jury award in favor of the Company on a contract claim,
resulting in a pretax charge to operations of $1,572,000.<PAGE>
Included in the Company's operating results for the years ended
December 31, 1995 and 1996 is the activity related to the settlement
and/or resolution of contract claims and unapproved change orders. This
activity can be summarized as follows:
Years ended December 31,
---------------------------
1995 1996
------------- -------------
Claim recoveries . . . . . . . . . . . . . . $ 1,618,000 $ 2,013,000
Cost of recoveries . . . . . . . . . . . . . 1,145,000 4,916,000
------------- -------------
Gain (loss) on resolved claims . . . . . . . $ 473,000 $ (2,903,000)
============= =============
In addition, the Company incurred costs associated with unresolved
claims of $6,440,000 and $2,079,000 during 1995 and 1996, respectively.
The Company had the following balances recorded relating to contract
claims and unsigned change orders at December 31, 1995 and 1996:
December 31,
---------------------------
1995 1996
------------- -------------
Claims . . . . . . . . . . . . . . . . . . . $ 9,128,000 $ 5,558,000
Unapproved change orders . . . . . . . . . . 2,659,000 3,392,000
------------- -------------
$ 11,787,000 $ 8,950,000
============= =============
Cumulative external claim preparation
costs included above . . . . . . . . . . . $ 1,226,000 $ 295,000
============= =============
During 1996, selling, general and administrative expenses increased
to $14,821,000 from $12,894,000 for the year ended December 31, 1995. The
dollar increase in selling, general, and administrative expenses
primarily is attributable to increased overhead costs, such as office
salaries and marketing costs, associated with higher levels of
operations. The percentage increase in selling, general and
administrative expenses primarily is associated with the growth of the
Company's solid waste management operations, which has an overhead
structure equal to 15 percent of its net revenue. These services have
historically operated with a higher overhead structure than the Company's
specialty contracting operations, which has an overhead structure equal
to 15 percent of its net revenue.
As a result of the foregoing, the Company incurred an operating loss
of $7,806,000 (negative 8 percent of net revenue) during the year ended
December 31, 1996, compared to operating income of $4,596,000 (5 percent
of net revenue) during the same period in 1995. <PAGE>
Minority interest in net loss of the TransCor subsidiary was $138,000
for the year ended December 31, 1996, compared to minority interest in
net income of $345,000 for the year ended December 31, 1995. The minority
interest in net income or loss of such 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 profit margins
earned on certain solid waste management services.
Interest expense, net of interest income, increased to $3,107,000
during the year ended December 31, 1996, compared to $1,418,000, for the
year ended December 31, 1995. During 1996, the Company discontinued
recognition of interest income of approximately $551,000 on certain notes
receivable from affiliates. The remainder of the increase is
attributable to increases in average borrowings during the year.
During 1996, the Company converted a $5,700,000 note receivable from
Cumberland into a common stock investment, representing a 30 percent
interest in Cumberland. The note was converted based upon the current
stock market price, which was less than the underlying equity in the book
value of Cumberland. The amount in excess of the underlying equity was
attributed to goodwill and is being amortized over 20 years. The Company
recorded equity in losses of Cumberland of approximately $37,000, which
represents the Company's proportionate share of Cumberland's net loss for
the period November 5, 1996, through December 31, 1996.
The Company's effective tax rate was (19.5) percent for the year
ended December 31, 1996, compared to a tax rate of 52.6 percent for the
year ended December 31, 1995. The decrease in the effective tax rate was
primarily due to the net operating loss generated by the Company and the
resulting recognition of future tax benefits from credit and loss
carryforwards. The net operating loss ("NOL") generated in the year
ended December 31, 1996, was approximately $11,200,000. Approximately
$4,500,000 will be carried back to prior tax years, resulting in
approximately $900,000 of federal tax refunds. The remaining NOL of
approximately $6,700,000 will be carried forward to offset any taxable
income in future years. For alternative minimum tax purposes, the loss
carryforward is approximately $6,200,000. Management expects to fully
utilize these loss and credit carryforwards before they expire in the
year 2011; however, in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," a valuation allowance
of approximately $1,700,000 has been recognized. In addition to the loss
carryforwards, the Company has approximately $836,000 of alternative
minimum tax credit carryforwards available to offset future federal
regular income taxes. This credit does not expire.
As a result of the foregoing, the Company incurred a net loss for the
year ended December 31, 1996, of $8,683,000 (negative 9 percent of net
revenue) compared to a net income of $1,343,000 (1 percent of net
revenue) during the same period in 1995.<PAGE>
Liquidity and Capital Resources
Cash provided by operating activities was $4,941,000, $1,061,000,
and $1,124,000 for the years ended December 1995, 1996 and 1997,
respectively. Cash provided or (used) by the operating activities of the
Company's solid waste management services segment amounted to $4,306,000,
$4,464,000, and ($131,000 ) in 1995, 1996 and 1997, respectively. Cash
provided or (used) by the Company's specialty contracting segment
amounted to $635,000, ($3,403,000), and $1,255,000 in 1995, 1996 and
1997, respectively. Cash was used by the solid waste management services
segment operations in 1996 at expected levels. Cash was provided in the
specialty contracting operations due to significant revenue growth,
discussed under results of operations, offset by the increase in payments
on accounts payable and accrued expenses. Increases or (decreases) in
the Company's accounts payable and accrued expenses amounted to
$7,630,000, $2,834,000, and ($116,000) in 1995, 1996 and 1997,
respectively. While these increases in 1995 and 1996 were generally in
response to increased operating levels, the reduction in 1997 was the
result of facility closures in the solid waste management services
segment. In addition, in 1997 cash flow was provided from decreases in
accounts and notes receivable ($4,404,000) and income tax refund
receivables ($952,000) and an increase in billings in excess of costs and
estimated earnings on uncompleted contracts ($3,831,000).
The Company made capital expenditures of $15,425,000, $6,968,000, and
$8,341,000 in 1995, 1996, and 1997, respectively. These expenditures were
primarily related to the acquisition of equipment associated with the
Company's solid waste management and utility contracting operations. In
addition to cash expenditures for equipment, the Company acquired
approximately $39,000,000 of heavy construction equipment during the
first and fourth quarters of 1997 that, as further discussed below, were
previously leased under operating leases. Since the equipment was
financed by the former lessor, the equipment acquisitions were accounted
for as a non-cash financing and investing activities. Management believes
future capital expenditures will be financed by available cash resources,
cash flow from operations and available credit resources, as needed.
During 1997, the Company generated cash from financing activities of
$8,022,000. Borrowings in 1997 included $5,522,000 for purchases of
equipment in the solid waste management services segment, primarily to
support the Hillsborough County contract that began October 1, 1997.
Other borrowings in 1997 related primarily to working capital drawings of
$12,200,000 on a new $16,000,000 working capital line of credit further
discussed below in the specialty contract services segment. Approximately
$7,000,000 of the drawings on the new line of credit were used to pay
down an existing line of credit to approximately $4,235,000. Subsequent
to year end that existing line of credit was paid in full and the
available borrowing base was reduced to $2,874,000, and is used only for
certain stand-by letters of credit. The 1997 borrowings, coupled with the
non-cash equipment financing, referred to previously, and the related
payments, resulted in an increase in the total indebtedness of the
Company to $86,046,000 at December 31, 1997 ($37,715,000 at December 31,
1996). Current maturities of total indebtedness amount to $17,385,000 at
December 31, 1997 ($7,794,000 at December 31, 1996).
Net borrowings on credit lines and debt balances were $10,315,000 and
$5,229,000 in 1995 and 1996, respectively. <PAGE>
During 1996 and 1997, the Company purchased 73,828 and 76,600 shares
of the Company's common stock on the open market for cash of $311,000 and
$421,000, respectively. The Company may purchase additional shares from
time to time if market conditions warrant such additional purchases.
On February 26, 1997, the Company, through its Kimmins Contracting
Corp. subsidiary, entered into a credit agreement with a financial
institution that provided for unrestricted borrowings up to $11,000,000.
On November 24, 1997, the credit agreement was increased to $16,000,000.
As of December 31, 1997, the Company has drawn approximately $12,200,000
on the facility, which, as noted above, was used to partially pay down
bank debt. Borrowings on this facility are due in February 1999. In
addition, on February 26, 1997, the Company issued approximately
$13,041,000 of term debt to acquire heavy construction equipment used in
the specialty contracting business that had been leased under operating
leases. The term debt requires periodic payments through February 2004.
On November 24, 1997, proceeds of a second term loan of $28,590,000 were
used to finance additional operating assets currently used in the
specialty contracting services segment. The term debt requires periodic
payments through December 2002 and a balloon payment in January 2003.
The Company is subject to a variety of restrictive covenants under
various debt agreements with one of its institutional lenders. In 1997
the Company failed to meet the consolidated net income requirement under
approximately $4,235,000 of its bank debt and approximately $54,000,000
of other financial institution debt. As of December 31, 1997, the Company
obtained waivers for these covenants. While management believes that the
Company will maintain compliance under the terms of the agreements,
including those conditions amended or waived, any further inability to
achieve compliance with the loan covenants could affect the Company's
access to further borrowings or require it to secure additional equity by
other means.
During the years ended December 31, 1996 and 1997, the Company's
average contract and trade receivables were outstanding for 76 and 70
days, respectively. The Company anticipates sustaining this rate of
collection for the year ended December 31, 1998. Management believes that
the number of days outstanding for its receivables approximates industry
norms. Part of the Company's contracting operations is subcontracted, and
any delay in collections of receivables relating to primary contracts
will generally result in a delay of payment to subcontractors.
Effective May 31, 1998, certain assets, businesses and contracts of
the waste management segment, with a net book value of approximately
$6,100,000, were sold for cash of $11,600,000. The operations of the
businesses sold had 1997 revenue of approximately $9,200,000 and a net
loss of approximately $1,000,000. Cash from this transaction was used to
pay approximately $3,800,000 of TransCor debt and $1,300,000 was advanced
to Kimmins. The remaining cash is unrestricted and available to the
Company for use in operations.
In addition to the sales above, the Company has discontinued the use
of certain assets with a net book value of approximately $4,046,000 and
has placed them for sale. Of these assets, approximately $1,800,000
relates to assets from the discontinuance of a certain remediation
business in the specialty contracting segment.<PAGE>
As a result of the 1997 operating loss incurred, which included the
accrual of losses for future contract performance on certain specialty
contracting contracts, and the financing arrangements described above,
that had the affect of significantly increasing current maturities of
long-term debt over levels in previous years, the Company has a working
capital deficiency as of December 31, 1997. Management of the Company
anticipates that its projected operations, coupled with the
aforementioned sale of businesses, will generate sufficient levels of
cash to fulfill its current and future obligations in the normal course
of business.
The Company had a note receivable in an original amount of $3,638,696
from the Apartments, of which Mr. Francis M. Williams is the sole
shareholder of the corporate general partner and the sole limited
partner. The note receivable accrued interest at prime plus 1.375
percent, increasing to prime plus 2 percent, with principal and interest
payable in monthly installments through December 31, 1998, and was
guaranteed by Mr. Williams. The Company did not receive any interest or
principal payments during 1997 relating to this note receivable, and the
Company has not recognized interest income since 1996. The amount due
from the Apartments at December 31, 1996, was approximately $3,851,000.
On October 22, 1997, the Company contributed its note receivable in
an amount of approximately $3,851,000 from the Apartments and other
receivables of $3,059,000 for a non-controlling 49 percent preferred
limited partnership interest in the Apartments and a receivable of
$900,000 from the Apartments. The amount of $12,066,000 in excess of the
underlying equity was attributed to goodwill and is being amortized over
thirty years. The Company will be allocated 49 percent of operating
income, losses and cash flow. The preference in the Company's equity
interest in the Apartments occurs upon the sale of the underlying
partnership properties. Upon the occurrence of a capital transaction, the
Company would receive cash flows from the sale or refinancing of the
Apartments' assets equal to its capital contribution prior to any other
partner receiving any proceeds. The Company accounts for its investment
in the Apartments using the equity method.
The Company's current bonding coverage for non-environmental projects
is $60,000,000 for an individual project and $120,000,000 in the
aggregate. Historically, the Company has obtained bonding coverage in
amounts up to $8,500,000 for environmental projects and $53,000,000 for
non-environmental projects. However, bonding coverage is not guaranteed
on projects up to the above limits because each project has its own
distinct and separate bond requirements, and it is customary for surety
bonding companies to underwrite each surety obligation individually.
Management believes that bonding coverages are adequate for the size and
scope of projects being performed.
At December 31, 1997, the Company had a single material commitment
for capital expenditures. As part of a municipal solid waste management
services contract commencing in October 1998, the Company is committed to
acquire $3,500,000 of vehicles and equipment.
See Note 20 of Notes to Consolidated Financial Statements for the
Company's business segment information.<PAGE>
Effects of Change in Method of Accounting
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). SFAS No. 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. The Company adopted the provisions of SFAS No. 128 effective
December 31, 1997. All earnings per share amounts for all periods
presented have been restated to conform to the SFAS No. 128 requirements.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income ("SFAS No. 130"). SFAS
No. 130 requires that total comprehensive income and comprehensive income
per share be disclosed with equal prominence as net income and earnings
per share. Comprehensive income is defined as changes in stockholders'
equity exclusive of transactions with owners such as capital
contributions and dividends. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Management is currently assessing the
impact of SFAS No. 130, but does not expect its effect to be material.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"), which supercedes SFAS No. 14. SFAS
No. 131 uses a management approach to report financial and descriptive
information about a Company's operating segments. Operating segments are
revenue-producing components of the enterprise for which separate
financial information is produced internally for the Company's
management. SFAS No. 131 is effective for fiscal years beginning after
December 31, 1997. Management is currently assessing the impact of SFAS
No. 131, but does not expect its effect to be material.
In April 1997, the American Institute of Certified Public Accountants
issued an Exposure Draft of a proposed SOP, Reporting on the Costs of
Start-up Activities. Start-up costs are defined broadly in the proposed
SOP as those one-time activities related to opening a new facility,
introducing a new product or service, conducting business in a new
territory, conducting business with a new class of customer or
beneficiary, initiating a new process in an existing facility, or
commencing some new operation. Start-up costs, including organizational
costs, would be expensed as incurred under the proposed SOP. The proposed
SOP would be effective for most entities for fiscal years beginning after
December 15, 1998. The SOP will require the Company, upon adoption, to
write off as a cumulative effect of a change in accounting principle any
previously capitalized start-up or organization costs. Therefore, in the
first quarter of 1999, the Company will record a change for the remaining
unamortized balance of contract start-up costs which approximates
$875,000 at December 31, 1997.
Impact of Year 2000
Some of the Company's older computer programs were written using two
digits rather than four digits to define the applicable year. As a
result, those computer programs have time-sensitive software that
recognize a date using "00" as the year 1900 rather than the year 2000.
This could cause a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities.<PAGE>
The Company has completed an assessment and will have to modify or
replace portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter.
The total Year 2000 project is estimated to be immaterial to the
financial statements. To date, the Company's incremental costs for
assessment of the Year 2000 issue, the development of a modification
plan, and the purchase of new software have been insignificant.
Management believes that total costs, when completed, will be immaterial
to the financial statements.
The majority of software used by the Company is licensed from various
software providers who are currently updating the programs to be Year
2000 compliant. In-house developed programs comprise a small portion of
the total software utilized, and the majority of these programs are
believed to be Year 2000 compliant.
The project is estimated to be completed not later than December 31,
1998, which is prior to any anticipated impact on the Company's operating
system. The Company believes, with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if
such modifications and conversions are not made, or are not completed
timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to
which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 Issues. There is no
guarantee that the systems of other companies on which the Company's
systems rely will be timely converted and would not have an adverse
effect on the Company's systems.
The costs of the project and the date on which the Company believes
it will complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of
future events, including the continued availability of certain resources
and other factors. However, there can be no assurance that these
estimates will be achieved and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.<PAGE>
Forward-Looking Information
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements that reflect management's current views with respect to future
events and financial performance. Such statements involve risks and
uncertainties, and there are certain important factors that could cause
actual results to differ materially from those anticipated. Some of the
important factors that could cause actual results to differ materially
from those anticipated include, but are not limited to, economic
conditions, competitive factors, and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
Company. Due to such uncertainties and risk, readers are cautioned not
to place undue reliance on such forward-looking statements, which speak
only as of the date hereof.
Effect of Inflation
Inflation has not had, and is not expected to have, a material impact
upon the Company's operations. If inflation increases, the Company will
attempt to increase its prices to offset its increased expenses. No
assurance can be given, however, that the Company will be able to
adequately increase its prices in response to inflation.
Item 8. Financial Statements and Supplementary Data
KIMMINS CORP.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
----
Report of Independent Certified Public Accountants . . . . . . . . . 21
Consolidated balance sheets at December 31, 1996 and 1997 . . . . . . 22
Consolidated statements of operations for each of the
three years in the period ended December 31, 1997 . . . . . . . . . 24
Consolidated statements of stockholders' equity for each of the
three years in the period ended December 31, 1997 . . . . . . . . . 25
Consolidated statements of cash flows for each of the three years
in the period ended December 31, 1997 . . . . . . . . . . . . . . . 26
Notes to consolidated financial statements . . . . . . . . . . . . . 27
Financial statement schedule:
Schedule II - Valuation and qualifying accounts . . . . . . . . . . . S-1
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>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kimmins Corp.
We have audited the accompanying consolidated balance sheets of
Kimmins Corp. as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997.
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 Corp. at December 31, 1996 and 1997, and
the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, 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.
/s/ Ernst & Young LLP
Tampa, Florida
June 18, 1998<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
---------------------------
1996 1997
------------- -------------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . $ 968,638 $ 3,674,027
Accounts receivable:
Contract and trade . . . . . . . . . . . 20,060,169 23,627,522
Affiliates . . . . . . . . . . . . . . . . 1,648,529 104,658
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . . 15,967,872 5,434,123
Income tax refund receivable . . . . . . . 1,199,775 247,561
Deferred income tax, net . . . . . . . . . 1,499,329 1,980,148
Property held for sale . . . . . . . . . . - 733,658
Other current assets . . . . . . . . . . . 512,110 484,756
------------- -------------
Total current assets . . . . . . . . . . . 41,856,422 36,286,453
------------- -------------
Property and equipment, net . . . . . . . . . 37,012,994 72,775,007
Property held for sale . . . . . . . . . . . 1,864,527 3,312,397
Intangible assets, net . . . . . . . . . . . 898,853 606,975
Non-current portion of costs and estimated
earnings in excess of billings on
uncompleted contracts . . . . . . . . . . - 9,130,090
Accounts receivable - affiliates . . . . . . 1,450,716 900,000
Note receivable - affiliate . . . . . . . . . 3,850,727 -
Investment in the Apartments . . . . . . . . - 5,862,067
Investment in Cumberland Technologies, Inc. . 5,105,632 4,991,956
Other assets, net . . . . . . . . . . . . . . 1,043,036 1,151,045
------------- -------------
$ 93,082,907 $135,015,990
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
---------------------------
1996 1997
------------- -------------
Current liabilities:
Accounts payable - trade . . . . . . . . . $ 19,169,607 $ 19,332,517
Accrued expenses . . . . . . . . . . . . . 8,072,187 7,793,596
Billings in excess of costs and estimated
earnings on uncompleted contracts . . . . 752,287 4,583,533
Current portion of long-term debt . . . . . 7,794,848 17,385,838
Current portion of Employee Stock
Ownership Plan trust debt . . . . . . . . 480,000 480,000
------------- -------------
Total current liabilities . . . . . . . . 36,268,929 49,575,484
------------- -------------
Long-term debt . . . . . . . . . . . . . . . 29,920,396 68,660,873
Employee Stock Ownership Plan Trust debt . . 1,440,000 960,000
Deferred income taxes . . . . . . . . . . . 4,159,605 3,527,480
Minority interest in subsidiary . . . . . . 3,440,681 2,898,777
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 4,447
shares authorized; 4,447,397 shares issued
and outstanding . . . . . . . . . . . . . 4,447
Class B common stock, $.001 par value; 2,292
10,000,000 shares authorized, 2,291,569
shares issued and outstanding . . . . . . 2,292
Capital in excess of par value . . . . . . 18,730,173 18,730,173
Retained earnings (deficit) . . . . . . . . 1,228,167 (7,290,073)
Unearned employee compensation from
Employee Stock Ownership Plan Trust . . . (1,800,000) (1,320,000)
------------- -------------
18,165,079 10,126,839
Less treasury stock, at cost (73,828 shares
and 150,428 shares) . . . . . . . . . . . (311,783) (733,463)
------------- -------------
Total stockholders' equity . . . . . . . . 17,853,296 9,393,376
------------- -------------
$ 93,082,907 $135,015,990
============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Revenue:
Gross revenue . . . . . . . . $111,346,075 $113,240,908 $135,311,067
Outside services, at cost . . (15,919,816) (15,264,042) (21,785,161)
------------- ------------- -------------
Net revenue . . . . . . . . . 95,426,259 97,976,866 113,525,906
Costs and expenses:
Cost of revenue earned . . . 77,935,865 90,962,103 103,401,549
Selling, general and
administrative expenses . . 12,894,121 14,821,251 15,917,357
------------- ------------- -------------
Operating income (loss) . . . . 4,596,273 (7,806,488) (5,793,000)
Minority interest in net
(income) loss of
subsidiary . . . . . . . . . (345,320) 138,060 541,904
Interest expense (net of
interest income of
approximately $1,005,000,
$569,000, and $169,000 for the
years ended December 31, 1995,
1996, and 1997,
respectively) . . . . . . . . 1,417,802 3,107,000 4,435,853
------------- ------------- -------------
Income (loss) before provision
for income taxes (benefit) . 2,833,151 (10,775,428) (9,686,949)
Provision for income taxes
(benefit):
Current . . . . . . . . . . 661,472 (934,864) (55,765)
Deferred . . . . . . . . . . 829,096 (1,157,125) (1,112,944)
------------- ------------- -------------
1,490,568 (2,091,989) (1,168,709)
------------- ------------- -------------
$ 1,342,583 $ (8,683,439) $ (8,518,240)
Net income (loss) . . . . . . ============= ============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Per Share Data:
Basic income (loss)
per share . . . . . . . . . $ .30 $ (1.96) $ (1.97)
============= ============= =============
Diluted income (loss)
per share . . . . . . . . . $ .29 $ (1.96) $ (1.97)
============= ============= =============
Weighted average number of
shares outstanding used in
computation:
Basic . . . . . . . . . . . 4,444,685 4,420,175 4,318,481
============= ============= =============
Diluted . . . . . . . . . . 4,578,342 4,420,175 4,318,481
============= ============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
<TABLE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Class B
Common Stock Common Stock Capital in
----------------- ----------------- Excess of
Shares Amount Shares Amount Par Value
---------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
January 1, 1995 . . . 4,442,997 $ 4,443 2,291,569 $ 2,292 $18,710,378
Stock options
exercised . . . . . . 4,400 4 - - 19,795
Employee compensation
from Employee Stock
Ownership Trust . . . - - - - -
Net income . . . . . . - - - - -
---------- ------- ---------- ------- -----------
Balance at December 31,
1995 . . . . . . . . . 4,447,397 4,447 2,291,569 2,292 18,730,173
Employee compensation
from Employee Stock
Ownership Trust . . . - - - - -
Purchase of treasury
stock, at cost . . . . - - - - -
Net loss . . . . . . . - - - - -
---------- ------- ---------- ------- -----------
Balance at December 31,
1996 . . . . . . . . 4,447,397 4,447 2,291,569 2,292 18,730,173
Employee compensation
from Employee Stock
Ownership Trust . . . - - - - -
Purchase of treasury
stock, at cost . . . - - - - -
Net loss . . . . . . . - - - - -
---------- ------- ---------- ------- -----------
Balance at December 31, 4,447,397 $ 4,447 2,291,569 $ 2,292 $18,730,173
1997 . . . . . . . . ========== ======= ========== ======= ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
<TABLE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
<CAPTION>
Unearned
Employee
Compen-
sation
from
Employee
Retained Stock Total
Earnings Ownership Treasury Stockholders'
(Deficit) Plan Trust Stock Equity
----------------------- --------- -------------
<S> <C> <C> <C> <C>
Balance at January 1,
1995 . . . . . . . . . $ 8,569,023 $(2,771,934)$ - $ 24,514,202
Stock options
exercised . . . . . . - - - 19,799
Employee compensation
from Employee Stock
Ownership Trust . . . - 504,852 - 504,852
Net income . . . . . . 1,342,583 - - 1,342,583
----------- ----------- --------- -------------
Balance at December 31,
1995 . . . . . . . . . 9,911,606 (2,267,082) - 26,381,436
Employee compensation
from Employee Stock
Ownership Trust . . . - 467,082 - 467,082
Purchase of treasury
stock, at cost . . . . - - (311,783) (311,783)
Net loss . . . . . . . (8,683,439) - - (8,683,439)
----------- ----------- --------- -------------
Balance at December 31,
1996 . . . . . . . . 1,228,167 (1,800,000) (311,783) 17,853,296
Employee compensation
from Employee Stock
Ownership Trust . . . - 480,000 - 480,000
Purchase of treasury
stock, at cost . . . . - - (421,680) (421,680)
Net loss . . . . . . . (8,518,240) - - (8,518,240)
----------- ----------- --------- -------------
Balance at December 31,
1997 . . . . . . . . $(7,290,073)$(1,320,000)$(733,463)$ 9,393,376
=========== =========== ========= =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Cash flows from operating
activities:
Net income (loss) . . . . . $ 1,342,583 $ (8,683,439) $ (8,518,240)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and
amortization . . . . . 4,301,711 5,650,341 8,796,152
Provision for
uncollectible accounts
receivable . . . . . . 404,455 430,381 772,522
Minority interest in
income (loss) of
subsidiary . . . . . . 345,320 (138,060) (541,904)
(Gain) loss on disposal
of property and
equipment . . . . . . . (241,034) (22,359) (94,376)
Accrued interest on term
note . . . . . . . . . (454,772) (372,066) -
Equity in losses of
investment . . . . . . - 36,766 29,556
Deferred income taxes . 829,096 (1,157,125) (1,112,944)
Unearned employee
compensation from
Employee Stock
Ownership Plan Trust . 504,852 467,082 480,000
Changes in operating
assets and liabilities:
Accounts and notes
receivable . . . . . (881,808) 1,520,094 (4,404,372)
Costs and estimated
earnings in excess of
billings on
uncompleted
contracts . . . . . (6,835,059) 1,033,414 1,403,660
Income tax refund
receivable . . . . . (371,087) (149,150) 952,214
Other assets . . . . . (864,933) (535,230) (353,338)
Accounts payable -
trade . . . . . . . 4,054,862 1,811,337 162,910
Accrued expenses . . . 3,575,357 1,023,055 (278,591)
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Billings in excess of
costs and estimated
earnings on
uncompleted
contracts . . . . . (768,934) 145,673 3,831,246
------------- ------------- -------------
Total adjustments . 3,598,026 9,744,153 9,642,735
------------- ------------- -------------
Net cash provided by operating
activities . . . . . . . . . 4,940,609 1,060,714 1,124,495
------------- ------------- -------------
Cash flows from investing
activities:
Capital expenditures
including $500,000 of
business acquisitions
during 1996 . . . . . . . . (15,425,379) (6,968,009) (8,341,461)
Proceeds from sale of
property and equipment . . 851,623 486,835 1,900,426
------------- ------------- -------------
Net cash used by investing
activities . . . . . . . . . (14,573,756) (6,481,174) (6,441,035)
------------- ------------- -------------
Cash flows from financing
activities:
Proceeds from long-term
debt . . . . . . . . . . . 19,611,436 14,556,332 24,842,174
Repayments of long-term
debt . . . . . . . . . . . (8,716,731) (8,535,914) (15,918,565)
Repayments of Employee Stock
Ownership Plan Trust
debt . . . . . . . . . . . (600,000) (480,000) (480,000)
Purchase of treasury
stock . . . . . . . . . . . - (311,783) (421,680)
Proceeds from stock
options . . . . . . . . . . 19,799 - -
------------- ------------- -------------
Net cash provided (used) by
financing activities . . . . 10,314,504 5,228,635 8,021,929
------------- ------------- -------------
Net increase (decrease) in
cash . . . . . . . . . . . . 681,357 (191,825) 2,705,389
Cash, beginning of year . . . . 479,106 1,160,463 968,638
------------- ------------- -------------
Cash, end of year . . . . . . . $ 1,160,463 $ 968,638 $ 3,674,027
============= ============= =============
The accompanying notes are an integral part of
these consolidated financial statements.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies
Organization - Kimmins Corp. and its subsidiaries (collectively, the
"Company") operate two business segments: solid waste management
services and specialty contracting services. The Company provides solid
waste management services to commercial, industrial, residential and,
municipal customers in the state of Florida. The Company provides
specialty contracting services in the south and northeast, including
infrastructure development; underground construction; road work; site
remediation services such as 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. All
material intercompany transactions have been eliminated.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Concentrations of credit risk - Financial instruments which subject
the Company to concentrations of credit risk consist primarily of trade
receivables in the State of Florida. Trade receivables are comprised
primarily of amounts due from solid waste management customers and on
specialty contracting contracts. Credit is extended based on an
evaluation of the customer's financial condition. Collateral is
generally not required; however, the Company has the ability to file for
a mechanic's lien to protect its interest in contract accounts
receivable. Credit losses are provided for in the financial statements
and have been within management's expectations.
A significant portion of the Company's solid waste management
business is conducted under contracts with municipal customers in
Florida. These contracts have varying terms and are typically subject to
renegotiation or reproposal by the respective municipalities. Revenue
from these contracts amount to 15 percent, 24 percent, and 22 percent of
gross revenue during 1995, 1996 and 1997, respectively. No individual
municipal contract contributed revenue greater than 10 percent of total
net revenue in any year presented.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
Accounts receivable - trade, net includes $1,322,000 and $217,000 as
of December 31, 1996 and 1997, respectively, related to a municipal solid
waste management contract with St. Lucie County. Unlike other municipal
solid waste management contracts, St. Lucie County required the Company
to bill and collect directly from individual property owners. Pursuant
to St. Lucie County ordinances, property owners that are delinquent in
payment are subject to lien rules. The Company has placed liens on
approximately 2,250 and 2,120 individual properties representing
approximately $511,000 and $474,000 of the gross balance as of December
31, 1996 and 1997, respectively. Management intends to file additional
liens when considered appropriate, and all such liens will be maintained
in accordance with applicable laws until the outstanding balances are
recovered by payment, judgement, foreclosure, or other action.
Intangible assets - Intangible assets consist principally of the
excess of costs over fair market value of the net assets of the acquired
solid waste management business, which are amortized on a straight-line
basis over twenty years, and customer lists, which are amortized on a
straight-line basis over five years. Amortization expense was $67,000,
$124,000, and $109,000 for the years ended December 31, 1995, 1996 and
1997, respectively. Accumulated amortization was approximately $191,000
and $245,000 at December 31, 1996 and 1997, respectively.
Investments - The Company's 30 percent investment in Cumberland
Technologies, Inc. ("Cumberland") is accounted for using the equity
method of accounting. The Company's 49 percent investments in
Summerbreeze Apartments, Ltd., and Sunshadow Apartments, Ltd. (the
"Apartments"), are also accounted for using the equity method of
accounting. The original carrying amounts in excess of the underlying
equity in these companies is amortized over the estimated useful life of
the investment. The estimated useful lives of these intangibles are
twenty years for Cumberland and thirty years for the Apartments.
Other assets - Other assets consist primarily of pre-contract costs
associated with residential solid waste management contracts obtained
during 1996 and 1997, which are amortized on a straight-line basis over
five years, the term of the contracts, and loan costs, which are
amortized over the term of the loans. Amortization expense was $197,000,
$280,000, and $272,000 for the years ended December 31, 1995, 1996 and
1997, respectively. Accumulated amortization was $637,000 and $909,000
at December 31, 1996 and 1997, respectively. See "Recently Issued
Accounting Standards."
Income taxes - Income taxes have been provided using the liability
method.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
Contracts and revenue recognition - Contracts generally range from 6
to 18 months in duration, and earnings from contracting operations 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 that 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 in the period
indications of a loss become known. The estimates can be affected by
uncertainties, such as weather related delays, and it is reasonably
possible that a change in estimate could occur in the near term.
Change orders are modifications to an original contract that
effectively change the scope and/or price of the contract. They may
include changes in specifications or design, method or manner of
performance, facilities, equipment, materials, site, or period for
completion of the work. Certain change orders may be priced under the
terms of the contract. Other change orders are unpriced; that is, the
work to be performed is defined; however, the adjustment to the contract
price is negotiated subsequent to performance. Finally, in some cases,
both scope and price of a change order may be unapproved or in dispute.
Accounting for change orders depends on the underlying circumstances,
which may differ for each change order depending on the customer, the
contract, and the nature of the change. The Company evaluates each
change order according to its characteristics and the circumstances in
which they occur.
Contract revenue and associated profit are recognized for change
orders that have been approved by the customer and the contractor
regarding both scope and price to the extent performance related to the
change order has occurred.
Accounting for change orders, where either scope or price have not
been determined, depends on careful consideration of the underlying
characteristics and the circumstances in which they occur. For all
unpriced change orders, recovery is deemed probable if the terms of the
contracts or other applicable legal principles provide a legal basis for
recoverability, the costs incurred are objective and verifiable, and,
finally, all future events necessary for recovery are more likely than
not to occur. The Company considers the following factors in evaluating
whether recovery is probable: the customer's written approval of the
scope and/or price of the change order, the objectivity, verifiability,
and reasonableness of underlying accounting documentation for change
order costs, and the Company's experience in negotiating change orders in
similar instances. <PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
The following guidelines are utilized by the Company in accounting
for change orders under which either the scope or price have not been
approved by the customer.
A. Costs directly attributable to change orders whose scope and/or
price is not determinable are charged directly to operations in
the period in which the costs are incurred if it is not probable
that the costs will be recovered through a change in the contract
price.
B. If it is probable that the costs will be recovered through a
change in the contract price, the costs are treated as costs of
contract performance in the period in which they are incurred and
contract revenue is recognized to the extent of the costs
incurred. Costs incurred in excess of amounts that are probable
of recovery are charged directly to operations when incurred.
C. In the case of change orders that are approved as to scope but
not price, profit recognition is deferred until receipt of the
priced change order.
Contract claims are amounts incurred by the Company related to
contract changes that are unapproved as to both scope and price, or are
directly disputed or contested as to either, by the customer. Claims are
amounts in excess of the agreed contract price (or amounts not included
in the original contract price) that are due to customer-caused delays,
errors in specification and designs, contract terminations, or other
causes of unanticipated additional costs. The Company recognizes
contract revenue relating to claims to the extent of its costs incurred
only if it is probable that the claim will result in additional contract
revenue and if the amount of contract revenue and related costs can be
reliably estimated. Those two requirements are satisfied by the
existence of all of the following conditions:
A. The contract or other applicable legal principles provides a
legal basis for the claim; or a legal opinion has been obtained,
stating that the Company is entitled to recover amounts under the
contract or other applicable legal principles.
B. Additional costs are caused by circumstances that were unforeseen
at the contract date and are not the result of deficiencies in
the contractor's performance.
C. Costs incurred by the Company that are associated with the claim
are identifiable and reasonable in view of the work performed.
D. The evidence supporting the claim is objective and verifiable.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
In evaluating the probability of recovery and the estimation of the
amounts that will be recovered, the Company consults with outside
consultants and legal counsel as the claims progress through the stages
of negotiations, actual filing of formal claims, and/or litigation. Legal
counsel has been engaged for the majority of the claims, both in number
and recorded amounts.
For those claims (see Note 5) where outside counsel has been engaged
to review the claim, the recorded amount is not in excess of the amounts
estimated by outside counsel to be recoverable.
Except in rare circumstances, claim preparation and legal costs are
expensed as incurred. Exceptions include instances in which the contract
document provides for their recovery or legal costs are incurred to
pursue approved settlements by court ruling, binding arbitration, and
otherwise. In all instances where such amounts are recorded, it is
probable that the amounts associated with claim preparation and legal
costs will be recovered. As of December 31, 1996 and 1997, $295,000 and
$0, respectively, of the claim preparation and legal costs were deferred.
Fees arising from services other than contracting activities are
recognized when the negotiated services are provided.
Advertising costs - Advertising costs are expensed as incurred. For
the years ended December 31, 1995, 1996 and 1997, TransCor expensed
approximately $88,000, $114,000 and $536,000, respectively in advertising
costs.
Stock based compensation - The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to the
fair value of the shares at the date of grant. The Company accounts for
stock option grants in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"), and, accordingly, recognizes no compensation expense for the stock
option grants.
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement No. 123 ("SFAS No. 123"), "Accounting and Disclosure of
Stock-Based Compensation," which encourages, but does not require,
companies to recognize stock awards based on their fair value at the date
of grant.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
Recently issued accounting standards - In February 1997, the FASB
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"), which establishes standards for computing and
presenting earnings per share. SFAS No. 128 replaces the presentation of
primary and fully diluted earnings per share with basic and diluted
earnings per share, respectively. Basic earnings per share are computed
by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share are computed similar to fully diluted earnings per
share. All earnings per share amounts have been restated to conform to
SFAS No. 128 requirements. See Note 19 of Notes to Consolidated Financial
Statements for earnings per share calculations.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income ("SFAS No. 130"). SFAS
No. 130 requires that total comprehensive income and comprehensive income
per share be disclosed with equal prominence as net income and earnings
per share. Comprehensive income is defined as changes in stockholders'
equity exclusive of transactions with owners such as capital
contributions and dividends. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Management is currently assessing the
impact of SFAS No. 130, but does not expect its effect to be material.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"), which supercedes Financial
Accounting Standards No. 14. SFAS No. 131 uses a management approach to
report financial and descriptive information about a Company's operating
segments. Operating segments are revenue-producing components of the
enterprise for which separate financial information is produced
internally for the Company's management. SFAS No. 131 is effective for
fiscal years beginning after December 31, 1997. Management is currently
assessing the impact of SFAS No. 131, but does not expect its effect to
be material.
Proposed accounting standards - In April 1997, the American Institute
of Certified Public Accountants issued an Exposure Draft of a proposed
SOP, Reporting on the Costs of Start-up Activities. Start-up costs are
defined broadly in the proposed SOP as those one-time activities related
to opening a new facility, introducing a new product or service,
conducting business in a new territory, conducting business with a new
class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. Start-up costs, including
organizational costs, would be expensed as incurred under the SOP. The
SOP is effective for most entities for fiscal years beginning after
December 15, 1998. The SOP will require the Company, upon adoption, to
write off as a cumulative effect of a change in accounting principle any
previously capitalized start-up or organization costs. Therefore, in the
first quarter of 1999, the Company will charge off the remaining
unamortized balance of contract start-up costs which approximates
$875,000 at December 31, 1997.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and summary of significant
accounting policies (continued)
Supplemental statements of cash flows information -
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Cash paid:
Interest . . . . . . . . $ 2,423,000 $ 3,524,000 $ 4,543,000
Income taxes . . . . . . $ 1,453,000 $ 28,000 $ 30,000
Non-cash investing and
financing activity:
Seller financing of $ - $ - $ 39,408,000
equipment addition . . .
Reclassification - Certain amounts in the 1996 consolidated financial
statements have been reclassified to conform to the 1997 presentation.
2. Business acquisitions
On March 31, 1995, KRC acquired certain assets from County
Sanitation, Inc., for $2,267,000 relating to its solid waste management
operations. This acquisition has been accounted for under the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired (approximately $1,415,000) based on the
estimated fair values at the date of acquisition. The purchase price
associated with the acquisition exceeded the fair value of the net assets
acquired by approximately $852,000, which was assigned to intangible
assets, including goodwill. The operating results associated with this
business acquisition are included in the Company's consolidated results
of operations from April 1, 1995, to December 31, 1997.
3. Related party transactions
Mr. Francis M. Williams, the Company's President and majority
stockholder, also controls Cumberland, a property and casualty insurance
company that provides insurance for specialty sureties and performance
and payment bonds for contractors. Through Cumberland, the Company has
obtained performance and payment bonds in connection with certain of its
contracts and projects. The fees that the Company paid for these services
for the years ended December 31, 1995, 1996 and 1997, were approximately
$5,000, $2,900, and $43,000, respectively. The Company also has a 30
percent investment in Cumberland (see Note 8 of the Notes to the
Consolidated Financial Statements).<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related party transactions (continued)
Effective July 1, 1997, employees associated with TransCor's
demolition contracting services unit were transferred to Kimmins
Contracting Corp. ("KCC"), a wholly-owned subsidiary of the Company, for
administrative and accounting purposes. As a result, contracting services
previously performed by employees of TransCor were subcontracted to KCC.
For the year ended December 31, 1997, TransCor paid $3,417,574 to KCC for
services rendered by KCC as a subcontractor. In addition, TransCor rents
equipment from KCC for use in performing demolition contracts. TransCor
incurred approximately $670,000, $2,103,000, and $2,573,000 in equipment
rental charges with KCC for the years ended December 31, 1995, 1996, and
1997, respectively.
During 1995 and 1996, the Company paid landfill fees of approximately
$88,000 and $139,000, respectively, to a company that is primarily owned
by the brother of the Company's President. In 1997, there were no
transactions with this related party. The amounts paid approximated the
fair market rate for the type of services involved.
4. Accounts receivable
December 31,
---------------------------
1996 1997
------------- -------------
Contract and trade:
Billed contract receivables:
Completed and uncompleted contracts . $ 8,649,514 $ 9,581,464
Retainage . . . . . . . . . . . . . . 3,576,869 6,042,716
Unbilled contract receivables . . . . . 3,808,997 4,924,002
Trade receivables . . . . . . . . . . . 4,641,497 4,000,641
------------- -------------
20,676,877 24,548,823
Less allowance for doubtful accounts . . (616,708) (921,301)
------------- -------------
$ 20,060,169 $ 23,627,522
============= =============
All unbilled receivables relate to work performed or material shipped
by the balance sheet date and are billed as soon as is administratively
feasible.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts receivable (continued)
The Company had a note receivable in an original amount of $3,638,696
from Sunshadow Apartments, Ltd., and Summerbreeze Apartments, Ltd., two
Florida real estate limited partnerships (collectively, the
"Apartments"). The note receivable originally accrued interest at prime
plus 1.375 percent, increasing to prime plus 2 percent on July 1, 1995,
with principal and interest payable in monthly installments through
December 31, 1998, and was guaranteed by Mr. Francis M. Williams,
majority owner of the Company. The Company did not receive any interest
or principal payments during 1997 relating to this note receivable, and
management of the Company discontinued recognition of interest income in
1996. The amount due from the Apartments at December 31, 1996, was
approximately $3,851,000. During 1997, the note receivable and other
receivables were contributed to the Apartments in exchange for 49 percent
non-controlling preferred limited partnership interests in the
Apartments. See Note 8 of Notes to Consolidated Financial Statements for
additional information.
At December 31, 1996, $5,301,000 of the combined accounts receivable
- affiliates and note receivable - affiliate balances were due from
corporate affiliates of Mr. Francis M. Williams. The affiliated
receivables relate to contract services performed. Most of these
receivables were contributed as an investment in the Apartments as
described above. At December 31, 1997, the balance of accounts receivable
- affiliates was $1,004,658, of which $900,000 is classified as a long-
term receivable and is guaranteed by Mr. Francis M. Williams.
5. Costs and estimated earnings in excess of billings
on uncompleted contracts
December 31,
---------------------------
1996 1997
------------- -------------
Expenditures on uncompleted
contracts . . . . . . . . . . . . . . . $ 76,218,248 $115,708,567
Estimated earnings on uncompleted
contracts . . . . . . . . . . . . . . . 4,490,748 6,141,672
------------- -------------
80,708,996 121,850,239
Less actual and allowable billings on
uncompleted contracts . . . . . . . . . 65,493,411 111,869,559
------------- -------------
$ 15,215,585 $ 9,980,680
============= =============
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . $ 15,967,872 $ 14,564,213
Billings in excess of costs and estimated
earnings on uncompleted contracts . . . (752,287) (4,583,533)
------------- -------------
$ 15,215,585 $ 9,980,680
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Costs and estimated earnings in excess of billings
on uncompleted contracts (continued)
During the years ended December 31, 1995, 1996, and 1997, the Company
recognized revenue from contract claims of approximately $1,624,000,
$38,000, and $56,000, respectively. During 1995, 1996 and 1997, the
Company settled contract claims that resulted in net gains (losses) of
approximately $473,000, ($2,903,000), and ($847,000), respectively.
As of December 31, 1996 and 1997, the costs and estimated earnings in
excess of billings on uncompleted contracts includes the Company's cost
associated with unapproved or disputed contract change orders and costs
claimed from customers on completed contracts of approximately $9,000,000
and $12,000,000, respectively. During the performance of these contracts,
the Company encountered site conditions that differed from bid
specifications. As a result, the Company incurred additional labor and
equipment costs in performing the contract. By their nature, recovery of
these amounts is often subject to negotiation with the customer and, in
certain cases, resolution through litigation. As a result, the recovery
of these amounts may extend beyond one year. The portion at December 31,
1997, that is not expected to be collected within twelve months is
classified as a non-current asset.
6. Property held for sale
As a result of management's decision to cease operations in the
northeast and to de-emphasize the performance of certain environmental
services within the specialty contracting segment, the Company decided to
sell its thermal incineration unit. This asset has a carrying value of
approximately $1,800,000 and $1,865,000 as of December 31, 1997 and 1996,
respectively. A purchase agreement for the sale of the incinerator for
$1,800,000 is currently pending. The Company wrote down the carrying
value of the asset by $40,000 to reflect the fair market value based on
the purchase agreement.
In addition, as a result of management's review of the Company's
various regional solid waste operating facilities, a decision was made to
dispose of less profitable operating assets. The Company's TransCor
subsidiary sold its residential solid waste services contract with St.
Lucie County to a competitor and ceased operations at its Lantana,
Florida, facility. The Lantana and St. Lucie facilities contributed
losses of approximately $1,111,000 and $476,000, respectively, of the
$2,184,000 operating loss of TransCor for the year ended December 31,
1997. The Company wrote off intangible assets of $183,000 associated with
contracts that were sold. Also, in accordance with SFAS No. 121,
"Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," TransCor wrote down certain land and buildings that management
believed had carrying amounts higher than their fair market value,
resulting in a $590,000 impairment loss.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property held for sale (continued)
TransCor's impairment loss of $590,000 was calculated by comparing
the carrying amount of impaired assets of approximately $2,834,000 with
recent offers on the properties held for sale. The $590,000 impairment
loss is included in selling, general and administrative expenses on the
consolidated statements of operations for the year ended December 31,
1997. The land and buildings that were impaired at December 31, 1997, and
have executed agreements for sale are expected to be sold during 1998
and, accordingly, the carrying value of these assets of approximately
$734,000, which is net of the related impairment loss of $90,000, is
classified as a current asset under the caption "Property Held for Sale"
in this consolidated balance sheet.
7. Property and equipment
December 31,
---------------------------
1996 1997
------------- -------------
Land . . . . . . . . . . . . . . . . . $ 5,622,769 $ 4,323,053
Buildings and improvements . . . . . . 7,909,361 6,235,460
Construction and recycling equipment . 44,195,714 88,085,391
Furniture and fixtures . . . . . . . . 1,508,105 1,503,217
Construction in progress . . . . . . . 33,463 48,419
------------- -------------
59,269,412 100,195,540
Less accumulated depreciation . . . . . (22,256,418) (27,420,533)
------------- -------------
$ 37,012,994 $ 72,775,007
============= =============
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. Depreciation expense was approximately $4,038,000,
$5,219,000, and $8,000,000 for the years ended December 31, 1995, 1996
and 1997, respectively. Construction in progress will be depreciated
over the estimated useful lives of respective assets when placed into
service.
8. Investments in Cumberland Technologies, Inc.,
Summerbreeze Apartments, Ltd., and
Sunshadow Apartments, Ltd.
In 1988, Cumberland Casualty & Surety Company ("CCS") issued a
surplus debenture to the Company that bears interest at 10 percent per
annum in exchange for $3,000,000. In 1992, such debenture was assigned to
Cumberland Technologies, Inc. ("Cumberland"), a holding company that
provides, among other services, reinsurance for specialty sureties and
performance and payment bonds for contractors. Cumberland entered into a
term note agreement with the Company for the outstanding amount of the
debenture, including accrued interest. Interest accrued on the term note
was $506,755 at December 31, 1995 ($372,066 in 1996 prior to the
conversion discussed below).<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investments in Cumberland Technologies, Inc.,
Summerbreeze Apartments, Ltd., and
Sunshadow Apartments, Ltd. (continued)
On November 5, 1996, the Company received 1,723,290 shares, or 30
percent of the outstanding common stock, of Cumberland common stock in
exchange for the term note from affiliate. The Cumberland common stock
had a fair market value of $3.00 per share on the date of the exchange,
based upon the quoted market price. This investment is accounted for
under the equity method. The amount of $3,300,000 in excess of the
underlying equity was attributed to goodwill and is being amortized over
twenty years. At December 31, 1997, the market value of the Cumberland
common stock held by the Company was approximately $4,739,000 based on a
stock price of $2.75.
The following is a summary of the financial position of Cumberland at
December 31, 1997:
December 31,
1997
-------------
Cash and cash equivalents . . . . . . . . . . . . . . . $ 1,803,000
Investments . . . . . . . . . . . . . . . . . . . . . . 6,469,000
Accounts receivable - trade, net . . . . . . . . . . . 1,307,000
Reinsurance recoverable . . . . . . . . . . . . . . . . 2,017,000
Intangibles . . . . . . . . . . . . . . . . . . . . . . 1,681,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . 2,044,000
-------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 15,321,000
=============
Policy liabilities and accruals . . . . . . . . . . . . $ 7,639,000
Long-term debt . . . . . . . . . . . . . . . . . . . . 1,418,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . 255,000
-------------
Total liabilities . . . . . . . . . . . . . . . . . . $ 9,312,000
Stockholders' equity . . . . . . . . . . . . . . . . . 6,009,000
-------------
Total liabilities and stockholders' equity . . . . . $ 15,321,000
=============
Cumberland's operating results included revenue of $7,770,000 and net
income of $171,000 during the year ended December 31, 1997. The Company's
equity in this net income amounted to $51,000. In addition,
approximately $165,000 of amortization expense was recorded by the
Company related to the investment.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investments in Cumberland Technologies, Inc.,
Summerbreeze Apartments, Ltd., and
Sunshadow Apartments, Ltd. (continued)
On October 22, 1997, the Company contributed its note receivable in
an amount of approximately $3,851,000 from the Apartments and other
receivables of $3,059,000 for a non-controlling 49 percent preferred
limited partnership interest in the Apartments and a receivable of
$900,000 from the Apartments. The amount of $12,066,000 in excess of the
underlying equity was attributed to goodwill and is being amortized over
thirty years. The Company will be allocated 49 percent of operating
income, losses and cash flow. The preference in the Company's equity
interest in the Apartments occurs upon the sale of the underlying
partnership properties. Upon the occurrence of a capital transaction, the
Company would receive cash flows from the sale or refinancing of the
Apartments' assets equal to its capital contribution prior to any other
partner receiving any proceeds. The Company accounts for its investment
in the Apartments using the equity method.
During the period from October 22, 1997, through December 31, 1997,
the Apartments recognized revenue of $722,000 and net income of $4,000.
The Company has recorded its 49 percent share of the net results of
operations. In addition, approximately $67,000 of amortization expense
was recorded by the Company related to the investments in the Apartments.
At December 31, 1997, the Company's balance in its total investment in
the Apartments was $6,762,067.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investments in Cumberland Technologies, Inc.,
Summerbreeze Apartments, Ltd., and
Sunshadow Apartments, Ltd. (continued)
The following is a summary of the financial position of the
Apartments at December 31, 1997:
Total
Investment
in
Partnerships
-------------
Cash and cash equivalents . . . . . . . . . . . . . . . $ 63,000
Accounts receivable - affiliate . . . . . . . . . . . . 959,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . 3,800,000
Buildings, capitalized construction interest,
furniture and equipment, net . . . . . . . . . . . . 17,194,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . 550,000
-------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 22,566,000
=============
Accounts payable and accrued expenses . . . . . . . . . $ 783,000
Accounts payable to affiliates . . . . . . . . . . . . 1,670,000
Mortgage loan payable . . . . . . . . . . . . . . . . . 21,141,000
Note payable to partner - Francis M. Williams . . . . . 2,860,000
-------------
Total liabilities . . . . . . . . . . . . . . . . . . 26,454,000
Partners deficit . . . . . . . . . . . . . . . . . . . (3,888,000)
-------------
Total liabilities and partners deficit . . . . . . . . $ 22,566,000
=============
9. Accrued expenses
December 31,
---------------------------
1996 1997
------------- -------------
Deferred revenue . . . . . . . . . . . . $ 1,641,857 $ 919,631
Accrued insurance . . . . . . . . . . . . 3,608,350 3,743,584
Accrued disposal costs . . . . . . . . . 744,229 407,229
Accrued interest . . . . . . . . . . . . 270,133 383,088
Accrued real estate taxes . . . . . . . . 441,566 601,682
Other . . . . . . . . . . . . . . . . . . 1,366,052 1,738,382
------------- -------------
$ 8,072,187 $ 7,793,596
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term debt
December 31,
---------------------------
1996 1997
------------- -------------
Notes payable, principal and interest
payable in monthly installments through
March 1, 2003, interest at varying rates
up to 13 percent, collateralized by
equipment . . . . . . . . . . . . . . . . $ 19,548,486 $ 63,076,321
Revolving term bank line of credit,
including letters of credit, reduced from
$12,390,000 in 1996 to $4,424,000 in 1997
(see below), due July 31, 1999, interest
payable monthly at lender's base rate
(8.5 percent at December 31, 1997) plus
.5 percent, permanent quarterly principal
reductions of $250,000 begin on July 1,
1997 . . . . . . . . . . . . . . . . . . 11,190,002 4,235,377
Revolving term line of credit,
$16,000,000 (none during 1996) maximum,
due February 26, 1999, interest payable
monthly at lender's base rate of LIBOR
(8.2656 percent at December 31, 1997)
plus 2.5 percent, collateralized by
equipment . . . . . . . . . . . . . . . . - 12,200,000
Mortgage notes, principal and interest
payable in monthly installments through
January 1, 2012, interest at varying
rates up to prime (8.5 percent at
December 31, 1997) plus 1.75 percent, 6,976,756 6,535,013
collateralized by land and buildings . . ------------- -------------
37,715,244 86,046,711
7,794,848 17,385,838
Less current portion . . . . . . . . . ------------- -------------
$ 29,920,396 $ 68,660,873
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term debt (continued)
Annual principal maturities subsequent to December 31, 1997, are as
follows:
1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,385,838
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 28,809,807
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 12,304,954
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 10,544,535
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 8,933,115
Thereafter . . . . . . . . . . . . . . . . . . . . . . 8,068,462
-------------
$ 86,046,711
=============
The lenders' base rate under the revolving term bank line of credit
at December 31, 1997, was 8.5 percent. At December 31, 1997, there was
approximately $88,000 of borrowings available under the revolving term
bank line of credit. The revolving term bank line of $4,424,000 includes
the letter of credit facility of $2,526,000 and is secured by a pledge of
all of the stock of the Company's subsidiaries and substantially all of
the unsecured assets of the Company. The use of funds under these lines
is limited among certain subsidiaries, and repayment is guaranteed by
Cumberland. Subsequent to year end, the revolving term bank line was
fully repaid and the borrowing base was reduced to equal the outstanding
letters of credit.
The revolving term line of credit of $16,000,000 is secured by a
pledge of the trade receivables of Kimmins Contracting Corp.
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 $6,500,000 and net income of not less than
$1,500,000. In addition, the covenants prohibit the Company from paying
dividends without lender approval. Specifically regarding the revolving
term bank line of credit for $4,235,000, the Company did not meet the
tangible net worth and net income requirements under the credit agreement
with the bank. The Company has obtained waivers for the financial
covenants for the year ended December 31, 1997, and the year ended
December 31, 1998. As of December 31, 1997, the Company was in
compliance with or obtained waivers for all loan covenants, and the
Company may be required to obtain similar waivers for certain covenants
in 1998.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term debt (continued)
During 1997, Kimmins Contracting Corp. ("KCC"), a wholly-owned
subsidiary of the Company, entered into four separate debt agreements.
KCC converted equipment previously rented under operating leases into
equipment notes of approximately $13,041,000 in February 1997 and
$28,590,000 in November 1997 under terms similar to the Company's other
equipment notes outstanding. In addition, KCC obtained an $11,000,000
working capital loan, of which $7,000,000 was used to reduce the
Company's outstanding revolving term bank line of credit during March
1997. In November 1997, KCC increased the working capital loan from
$11,000,000 to $16,000,000. As of December 31, 1997, KCC had drawn
$12,200,000 on the line of credit.
The above equipment notes and the working capital loan agreements
contain certain covenants, the most restrictive of which require
maintenance of a total liabilities to adjusted net worth ratio of 8.0 to
1.0 and a current ratio of 1.5 to 1.0. Regarding the revolving term line
of credit for $12,200,000 and outstanding equipment notes for
approximately $40,300,000, KCC and the Company, as guarantor, did not
meet the total liability to net worth ratio, current ratio or net income
requirements under the credit and note agreements. The equipment notes
and working capital loan are guaranteed by the Company and require the
Company to maintain a debt to equity ratio not exceeding 6.5 to 1 and a
current ratio of not less than 1.2 to 1. The Company and KCC have
obtained waivers of these financial covenants for the year ended December
31, 1997. In addition, the Company received a modification of the
covenants for the year ended December 31, 1998, with which the Company
believes it will comply.
Included in the notes payment of approximately $63,076,000 are
equipment notes of TransCor for $5,700,000 that are due in July 1998.
TransCor has executed a commitment agreement that refinances the
$5,700,000 until January 1, 2000. The $5,700,000 is classified as long-
term debt as of December 31, 1997.
11. Employee Stock Ownership Plan Trust Debt
In March 1990, the Company's Employee Stock Ownership Plan Trust
("ESOP") (Note 13) originally was funded from a $5,100,000 loan. This
loan was refinanced during December 1995 and bears interest at prime plus
1/2 percent, with quarterly principal and monthly interest payments
through October 2000. The balance at December 31, 1997, was $1,440,000.
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.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Employee Stock Ownership Plan Trust Debt (continued)
Annual principal maturities for each of the next four years are as
follows:
1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 480,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
-------------
$ 1,440,000
=============
12. Leasing arrangements
The Company rents equipment and machinery as needed, as well as
office space, under operating leases for varying periods not to exceed
one year. Rental expenses for the years ended December 31, 1995, 1996,
and 1997, were approximately $9,079,000, $11,808,000, and $11,853,000,
respectively.
The Company s future minimum lease payments under non-cancelable
operating leases are as follows:
1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,095,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 3,095,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 1,982,000
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 16,364
-------------
$ 8,188,364
=============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 257,371 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 originally 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, 1996 and 1997, the unearned employee compensation was
reflected as a reduction in stockholders' equity. The Company's
accounting treatment for the ESOP as described above is in accordance
with SOP 76-3 for grandfathered plans established prior to 1993.
Interest and compensation expenses relating to the ESOP are as
follows:
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Interest . . . . . . . . . $ 354,449 $ 185,728 $ 133,023
Compensation . . . . . . . $ 504,852 $ 467,082 $ 480,000
The ESOP shares were as follows:
December 31,
---------------------------
1996 1997
------------- -------------
Allocated shares . . . . . . . . . . . . 159,000 183,000
Shares released for allocation . . . . . - -
Unreleased shares . . . . . . . . . . . . 96,000 72,000
------------- -------------
Total ESOP shares . . . . . . . . . . . . 255,000 255,000
============= =============
Market value of unreleased shares . . . $ 324,000 $ 383,000
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Pension and other benefit plans (continued)
Stock Option Plan. The Company originally reserved 975,000 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 be any amount determined
by the Board of Directors but not less than the 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.
The Company's 1987 Stock Option Plan has the option to acquire an
aggregate of 975,000 shares of common stock that may be granted to
employees, officers, directors and consultants of the Company. The Plan
authorizes the Board of Directors (the "Board") to issue incentive stock
options ("ISOs"), as defined in Section 422A(b) of the Internal Revenue
Code, and stock options that do not conform to the requirements of that
Code section ("Non-ISOs"). The Board has discretionary authority to
determine the types of stock options to be granted, the persons among
those eligible to whom options will be granted, the number of shares to
be subject to such options, and the terms of the stock option agreements.
Options may be exercised in the manner and at such times as fixed by the
Board, but may not be exercised after the tenth anniversary of the grant
of such options.
The following table summarizes the transactions for the three years
ended December 31, 1997, relating to the Plan:
Number of Per Share
Shares Exercise Price
------------ --------------
Outstanding January 1, 1995 . . . . . . . 205,143 $3.33 - $ 4.50
Granted . . . . . . . . . . . . . . . . 7,500 $ 4.50
Exercised . . . . . . . . . . . . . . . (4,400) $ 4.50
Canceled . . . . . . . . . . . . . . . - $ -
------------
Outstanding December 31, 1995: . . . . . 208,243 $3.33 - $ 4.50
Granted . . . . . . . . . . . . . . . . - $ -
Exercised . . . . . . . . . . . . . . . - $ -
Canceled . . . . . . . . . . . . . . . (51,167) $ 3.33 - $4.50
------------
Outstanding December 31, 1996: . . . . . 157,076 $ 3.33 - $4.50
Granted . . . . . . . . . . . . . . . . 270,742 $ 2.62 - $3.94
Exercised . . . . . . . . . . . . . . . - $ -
Canceled . . . . . . . . . . . . . . . (153,743) $ 3.33 - $4.50
------------
Outstanding December 31, 1997 . . . . . . 274,075 $ 2.62 - $4.50
============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Pension and other benefit plans (continued)
Pro forma information regarding net income (loss) and earnings per
share is required by SFAS No. 123, which also requires that the
information be determined as if the Company had accounted for its
employee stock options granted subsequent to December 31, 1993, under the
fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1995, 1996 and
1997; risk-free interest rates of 5.5 percent; a dividend yield of zero;
volatility factors of the expected market price of the Company's common
stock based on historical trends; and a weighted-average expected life of
the options of seven years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferrable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows:
1995 1996 1997
------------- ------------- -------------
Pro forma net income (loss)
attributable to
stockholders . . . . . . $ 1,341,028 $ (8,685,767) $ (8,549,501)
Pro forma income (loss) per
common share:
Basic . . . . . . . . . .30 (1.96) (1.98)
Diluted . . . . . . . . .29 (1.96) (1.98)
Multi-Employer Defined Contribution Plan. 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, 1995, 1996, and 1997, were not significant.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income taxes
The Company accounts for income taxes using the asset and liability
method pursuant to Statement of Financial Accounting Standards 109,
"Accounting for Income Taxes" (Statement No. 109). Under this method,
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 No. 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.
For the year ended December 31, 1997, the Company incurred net
operating losses ("NOL") for federal tax purposes of approximately
$10,989,000. The NOL consists of $7,465,000 generated by the Company and
approximately $3,524,000 generated by TransCor, which files separately as
explained below. All of the NOLs of approximately $10,989,000 are
available as NOL carryforwards to future periods. The total loss
carryforwards of approximately $13,917,000 for the Company and
approximately $3,981,000 for TransCor expire through the year 2012 if not
used. In addition, the Company and TransCor have approximately
$17,070,000 and $5,285,000 of state NOL carryforwards. The deferred tax
assets include a valuation allowance of approximately $4,507,740 as an
offset to the expected future benefit of the NOL carryforward
attributable to the Company due to the uncertainty of realizing the
benefit. For alternative minimum tax ("AMT") purposes, the NOL
carryforward is approximately $11,298,000. The Company also has
alternative minimum tax credit carryforwards of approximately $697,000
available to reduce future federal regular income taxes. The AMT credit
carryforwards do not expire.
As a result of TransCor's sale of its common stock in March 1993, it
is no longer consolidated with the Company for income tax purposes. The
Company has provided deferred income taxes 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
that 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.<PAGE>
KIMMINS 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:
December 31,
---------------------------
1996 1997
------------- -------------
Deferred tax assets:
Net operating loss carryforward . . . . $ 2,598,970 $ 6,741,983
Valuation allowance . . . . . . . . . . (1,707,009) (4,507,740)
Allowance for doubtful accounts . . . . 236,903 354,602
Costs deferred for tax expensed for
books . . . . . . . . . . . . . . . . 210,556 304,207
Alternate minimum tax credit
carryforwards . . . . . . . . . . . . 836,430 696,623
Accrued workers' compensation . . . . . 907,782 1,217,647
Uncompleted long-term contracts . . . . - 167,690
State tax credit carryforward . . . . . 32,730 52,730
Other . . . . . . . . . . . . . . . . . 194,293 599,011
------------- -------------
3,310,655 5,626,753
------------- -------------
Deferred tax liabilities:
Excess of tax over book depreciation . $ 4,704,561 $ 6,488,973
Uncompleted long-term contracts . . . 323,798 -
Costs deferred for book expensed for
tax . . . . . . . . . . . . . . . . . 337,390 425,864
Outside basis difference in TransCor . 605,182 259,248
------------- -------------
5,970,931 7,174,085
------------- -------------
Net deferred tax liability . . . . . . 2,660,276 1,547,332
Less current net deferred asset . . . . 1,499,329 1,980,148
------------- -------------
Net non-current deferred liability . . $ 4,159,605 $ 3,527,480
============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Income taxes (continued)
Factors causing the effective tax rate to differ from the statutory
rate are as follows:
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Federal statutory rate . . 34.0% (34.0%) (34.0%)
Valuation allowance . . . . 0.0% 15.9% 30.8%
State income taxes . . . . 10.0% (3.5%) (3.4%)
Additional tax on the
Company's shares of
TransCor's earnings . . . 8.0% 2.3% (5.9%)
Other . . . . . . . . . . . 0.6% (0.2%) .4%
------------- ------------- -------------
Effective tax rate . . . . 52.6% (19.5%) (12.1%)
============= ============= =============<PAGE>
KIMMINS 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 $9.00 per share, after which the holders of
Class B common stock are entitled to receive up to $9.00 per share.
Thereafter, all assets remaining for distribution will 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 $.84 per share), which is calculated by adding the total
shares outstanding at fiscal year end to the number of shares that could
be converted during the fiscal year. The holders of the Class B common
stock will thereafter have the right to convert up to 625,000 shares of
Class B common stock into common stock on a share for share basis as
follows. Each cumulative incremental increase in net earnings in any
subsequent year of $.21 per share above the specified level of earnings
previously obtained will afford holders the right to convert up to an
additional 625,000 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 625,000 of such shares in any fiscal year
unless the Company achieves earnings of $1.44 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. In addition, conversion occurs if
a sale of part of the Company's business as to which there is a bona fide
offer to purchase would have resulted in convertibility of any of the
outstanding Class B Common Stock and it is determined by the Board of
Directors of the Company not to approve such a transaction, then, upon
request of the holder or holders of a majority of the outstanding Class B
Common Stock, the number of shares thereof which would have become
convertible had the transaction occurred would become convertible. A
similar provision provides that if there is an independent valuation of a
part of the business of the Company such that if such part of the
business were sold, the result would allow conversion of all outstanding
Class B Common Stock and if the Board of Directors of the Company does
not authorize such sale, then, upon request of the holder or holders of a
majority of the outstanding Class B Common Stock, the outstanding Class B
Common Stock would become convertible. No shares of Class B common stock
became eligible for conversion into common stock during the years ended
December 31, 1995, 1996, and 1997.
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.
During the years ended December 31, 1996 and 1997, the Company
acquired 73,828 and 76,600 shares of treasury stock at a cost of
$311,783, and $267,331, respectively. At December 31, 1997, the balance
of the Company's treasury stock was $733,463.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Contingencies
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.
At December 31, 1997, TransCor had a commitment to purchase equipment
in the amount of $3,500,000 for use in connection with a municipal waste
management contract that commences in October 1998.
17. Fourth quarter adjustments
During the fourth quarter of 1997, the Company revised its estimates
of costs to complete certain contracts primarily as a result of work
slowdowns caused by excessive rainfall and recorded certain charges
related to contract claim and change order settlements. The aggregate
effect of these revised estimates on the Company's pretax income for 1997
was a reduction of approximately $10,000,000. Approximately $1,000,000 of
the total fourth quarter adjustments of $10,000,000 are related to
contract claim and change order settlements.
During the fourth quarter of 1996, the Company recorded certain
charges to operations related to contract estimate changes and contract
claim and change order settlements. The aggregate effect of these
charges included in the Company's pretax loss for 1996 amounted to
approximately $6,452,000.
18. Fair value of financial instruments
The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Cash, accounts receivable, note receivable - affiliate, and accounts
payable. The carrying amount reported in the balance sheet for cash,
accounts receivable, and accounts payable approximates their fair value.
Long-term debt. The fair values of the Company's long-term debt are
estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements. The carrying value of the Company's long-term debt
approximates fair value because the debt bears variable interest rates.<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Earnings (loss) per share
As required by FASB Statement No. 128, the following table sets forth
the computation of basic and diluted earnings per share:
Years ended December 31,
----------------------------------------
1995 1996 1997
------------- ------------- -------------
Numerator:
Net income (loss) . . . . . $ 1,342,583 $ (8,683,493) $ (8,518,240)
Adjustment for basic
earnings per share . . . 0 0 0
------------- ------------- -------------
Numerator for basic
earnings per share -
income available to
common stockholders . . . 1,342,583 (8,683,439) (8,518,240)
Effect of dilutive
securities:
Less tax effect of
interest . . . . . . . . 0 0 0
------------- ------------- -------------
Numerator for diluted
earnings per share -
income available to
common stockholders after
assumed conversions . . $ 1,342,583 $ (8,683,439) $ (8,518,240)
============= ============= =============
Denominator:
Denominator for basic
earnings per share -
weighted-average
shares . . . . . . . . . 4,444,685 4,420,175 $ 4,318,481
Effective of dilutive
securities:
Stock options . . . . . . . 133,657 0 0
Dilutive potential common
shares . . . . . . . . . 0 0 0
------------- ------------- -------------
Denominator for diluted
earnings per share -
adjusted weighted-average
shares and assumed
conversions . . . . . . . 4,578,342 4,420,175 $ 4,318,481
============= ============= =============
Basic earnings per share . $ 0.30 $ (1.96) $ (1.97)
============= ============= =============
Diluted earnings per share $ 0.29 $ (1.96) $ (1.97)
============= ============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Earnings (loss) per share
Unexercised options to purchase 38,000, 92,000 and 56,000 shares of
common stock for 1995, 1996 and 1997, respectively, were not included in
the computations of diluted loss per share because the assumed conversion
would be antidilutive.
20. 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, road work, dismantling,
asbestos abatement, excavation, removal and disposal of contaminated
soil. The solid waste management services segment offers collection,
transfer, transportation, resource recovery and disposal of non-hazardous
waste and demolition services.
For the years ended December 31, 1995, 1996 and 1997, the Company's
specialty contracting services segment earned gross revenue of
approximately $3,953,000 $14,884,000, and $10,648,000, respectively, on
contracts with the Florida Department of Transportation. For the years
ended December 31, 1995, 1996 and 1997, the Company's specialty
contracting services segment earned gross revenue of approximately
$3,999,000, $2,562,000, and $25,061,000, respectively, on contracts with
IMC-Agrico Company, a phosphate mining company with operations on
Florida's west coast. These were the only customers whose purchases
aggregated more than 10 percent of the Company's revenues.
A summary of information about the Company's segments for the years
ended December 31, 1995, 1996 and 1997, is as follows (in thousands):
Specialty Solid Waste
Contracting Management
1995 Services Services Total
------------------------------- ------------- ------------- -------------
Gross revenue . . . . . . . . . $ 70,227 $ 41,119 $ 111,346
============= ============= =============
Operating income . . . . . . . $ 1,892 $ 2,704 $ 4,596
Interest income . . . . . . . . 1,005 - 1,005
Interest expense . . . . . . . 1,875 548 2,423
Minority interest . . . . . . . - (345) (345)
Income (loss) before income ------------- ------------- -------------
taxes . . . . . . . . . . . . $ 1,022 $ 1,811 $ 2,833
============= ============= =============
Identifiable assets . . . . . . $ 46,778 $ 46,851 $ 93,629
============= ============= =============
Depreciation and amortization . $ 1,855 $ 2,447 $ 4,302
============= ============= =============
Capital expenditures . . . . . $ 1,577 $ 13,848 $ 15,425
============= ============= =============<PAGE>
KIMMINS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. Business segments and major customers (continued)
Specialty Solid Waste
Contracting Management
1996 Services Services Total
------------------------------- ------------- ------------- -------------
Gross revenue . . . . . . . . . $ 69,048 $ 44,193 $ 113,241
============= ============= =============
Operating income (loss) . . . . $ (8,298) $ 492 $ (7,806)
Interest income . . . . . . . . 569 - 569
Interest expense . . . . . . . 2,322 1,354 3,676
Minority interest . . . . . . . - 138 138
Loss before income tax ------------- ------------- -------------
benefit . . . . . . . . . . . $ (9,913) $ (862) $ (10,775)
============= ============= =============
Identifiable assets . . . . . . $ 47,441 $ 45,642 $ 93,083
============= ============= =============
Depreciation and amortization . $ 2,039 $ 3,611 $ 5,650
============= ============= =============
Capital Expenditures . . . . . $ 4,429 $ 2,539 $ 6,968
============= ============= =============
Specialty Solid Waste
Contracting Management
1997 Services Services Total
------------------------------- ------------- ------------- -------------
Gross revenue . . . . . . . . . $ 91,481 $ 43,830 $ 135,311
============= ============= =============
Operating income (loss) . . . . $ (3,609) $ (2,184) $ (5,793)
Interest income . . . . . . . . 169 - 169
Interest expense . . . . . . . 3,467 1,138 4,605
Minority interest . . . . . . . - 542 542
Income (loss) before income ------------- ------------- -------------
tax benefit . . . . . . . . $ (6,365) $ (3,322) $ (9,687)
============= ============= =============
Identifiable assets . . . . . . $ 93,169 $ 41,847 $ 135,016
============= ============= =============
Depreciation and amortization . $ 4,643 4,153 $ 8,796
============= ============= =============
Capital Expenditures . . . . . $ 2,169 $ 6,172 $ 8,341
============= ============= =============
21. Subsequent event to December 31, 1997
On May 31, 1998, TransCor sold its Jacksonville area waste collection
and recycling operations assets and certain assets of the Miami front-end
load and rear-load commercial waste and recycling business to Eastern
Environmental Services of Florida, Inc., for $11,600,000 in cash, which
exceeded the carrying value of the underlying assets.<PAGE>
PART III
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are as follows:
Name Age Position
--------------------------------------- ----------------------------
Francis M. Williams . . . . . . . . 56 President, Chief Executive
Officer, and Director
Norman S. Dominiak . . . . . . . . 53 Vice President
Joseph M. Williams . . . . . . . . 42 Secretary and Treasurer
Michael Gold . . . . . . . . . . . 49 Director
George Chandler . . . . . . . . . . 68 Director
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 and Chairman of the Board of Directors of
TransCor since November 1992. For more than five years prior to November
1988, Mr. Williams was the 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.
Norman S. Dominiak has been Vice President of the Company since
March 1995 and has been employed by the Company as its Chief Financial
Officer since January 1994. Mr. Dominiak has also been Chief Financial
Officer of TransCor since January 1994. Mr. Dominiak 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.<PAGE>
Joseph M. Williams has been the Secretary and Treasurer of the
Company since October 1988. Since September 1997, Mr. Williams has been
President and Chief Executive Officer of TransCor. Since November 1991,
Mr. Williams has served as President and has been a Director of
Cumberland Technologies, 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. 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.
Set forth below is information regarding certain key employees of
the Company:
Michael D. O'Brien, 47, 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., 42, 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 October 1988. From January 1978 to May 1981, Mr.
Simon owned Simon Construction Company, a company that performed site
work and utilities and demolition projects.<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance. Pursuant
to Section 16(a) of the Securities Exchange Act of 1934 and the rules
issued thereunder, the Company's executive officers and directors and any
persons holding more than 10 percent of the Company's common stock are
required to file with the Securities and Exchange Commission and the New
York Stock Exchange reports of their initial ownership of the Company's
common stock and any changes in ownership of such common stock. Specific
due dates have been established, and the Company is required to disclose
in its Annual Report on Form 10-K/A and Proxy Statement any failure to
file such reports by these dates. Copies of such reports are required to
be furnished to the Company. Based solely on its review of the copies of
such reports furnished to the Company, or written representations that no
reports were required, the Company believes that, during 1996, all of its
executive officers (including the Named Executive Officers), directors
and persons owning more than 10 percent of its common stock complied with
the Section 16(a) requirements.
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 the Chief Executive Officer and all other
executive officers whose salary and bonus exceeded $100,000 for the year
ended December 31, 1997 (the "Named Executives"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
-------------------------------
Other
Annual
Compen-
Name and Salary Bonus sation
Principal Position Year ($) ($) ($)
----------------------------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Francis M. Williams 1997 $ 172,120 $ 0 $0
Chairman of the Board, 1996 $ 184,810 $ 0 $0
President and Chief 1995 $ 271,137 $ 0 $0
Executive Officer
John V. Simon, Jr. 1997 $ 100,019 $ 108,032 $0
President of Kimmins 1996 $ 95,000 $ 25,000 $0
Contracting Corp. 1995 $ 95,000 $ 81,489 $0
Michael D. O'Brien 1997 $ 105,427 $ 0 $0
Vice President 1996 $ 95,000 $ 0 $0
of TransCor 1995 $ 91,261 $ 13,740 $0
(*) Represents the Company's contribution to the employee's account of
the Company's 401(k) Plan and premiums paid by the Company for term
life insurance and long-term disability. These plans, subject to the
terms and conditions of each plan, are available to all employees.
/TABLE
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE (continued)
<CAPTION>
Long-Term Compensation
-------------------------------
Awards Payouts
-------------------- ----------
All
Restricted Securities Other
Stock Underlying Compen-
Name and Award(s) Options/ LTIP sation
Principal Position Year ($) SARs (#) Payouts(s) ($)
----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Francis M. Williams 1997 $0 0 $0 $ 996 (*)
Chairman of the Board, 1996 $0 0 $0 $ 995 (*)
President and Chief 1995 $0 0 $0 $ 989 (*)
Executive Officer
John V. Simon, Jr. 1997 $0 71,666 $0 $1,698 (*)
President of Kimmins 1996 $0 0 $0 $1,655 (*)
Contracting Corp. 1995 $0 3,333 $0 $1,647 (*)
Michael D. O'Brien 1997 $0 2,000 $0 $ 695 (*)
Vice President 1996 $0 0 $0 $ 695 (*)
of TransCor 1995 $0 5,000 $0 $ 695 (*)
(*) 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.
/TABLE
<PAGE>
Stock Option/SAR Grants in the Last Fiscal Year. Stock options or
stock appreciation rights granted to Named Executives during the year
ended December 31, 1997, are summarized in the table below:
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
----------------------------------------------
Potential
Realizable
Value at
Number of Percent of Assumed Annual
Securities Total Rates of Stock
Underlying Options/SARs Price
Options/ Granted to Exercise Appreciation for
SARs Employees or Base Option Term (2)
Granted in Fiscal Price Expiration ------------------
Name (#)(1) Year ($/Sh)(1) Date 5% ($) 10% ($)
-------------------- ---------------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Williams 50,000 18.5% $ 2.62 04/30/07 $82,385 $208,780
13,333 4.9% $ 2.62 04/30/07 $21,969 $ 55,673
John V. Simon, Jr. 50,000 18.5% $ 2.62 04/30/07 $82,385 $208,780
21,666 8.0% $ 2.62 04/30/07 $35,699 $ 90,469
George A. Chandler 10,000 3.7% $ 3.94 11/12/07 $24,778 $ 62,793
8,000 3.0% $ 2.62 04/30/07 $13,182 $ 33,405
Michael A. Gold . . 10,000 3.7% $ 3.94 11/12/07 $24,778 $ 62,793
8,500 3.1% $ 2.62 04/30/07 $14,005 $ 35,493
(1) All options vest and are exercisable in 20 percent increments annually for five
years after the date of grant. The exercise price of all options is the fair
market value of the Company's stock at the time of the grant.
(2) These amounts represent assumed rates of appreciation for the market value of the
Company's stock from the date of the grant until the end of the option period at
rates arbitrarily set by the Securities and Exchange Commission. They are not
intended to forecast possible future appreciation in the Company's stock and any
actual gains on exercise of options are dependent on the future performance of the
Company's stock.
/TABLE
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-
End Option/SAR Values. The following table summarizes the net value
realized on the exercise of options in 1997 and the value of outstanding
options as of December 31, 1997, for the Named Executives.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number
of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs 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 14,333/57,333 $38,592/$154,369
(1) Value is calculated using the Company's closing stock price on December 31, 1997,
of $5.3125 per share less the exercise price for such shares.
</TABLE>
No stock options or stock appreciation rights were exercised by Mr.
Francis M. Williams during the year ended December 31, 1997, and Mr.
Williams does not have any outstanding stock options or SARs at December
31, 1997.
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option
Underlining Stock at Price at Term
Options/ Time of Time of Remaining
SARs Repricing Repricing New at Date of
Repriced or or or Exercise Repricing
Amended Amendment Amendment Price or
Name Date (#) ($) ($) ($) Amendment
----------------------- -------- ----------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman S. Dominiak 04/30/97 7,500 $2.62 $4.50 $2.62 8 years
Vice President
Joseph M. Williams 04/30/97 13,333 $2.62 $4.50 $2.62 8 years
Secretary/Treasurer
Michael D. O'Brien 04/30/97 15,976 $2.62 $4.50 $2.62 8 years
Vice President of
TransCor
John V. Simon, Jr. 04/30/97 21,666 $2.62 $4.50 $2.62 8 years
President of Kimmins
Contracting Corp.
/TABLE
<PAGE>
Compensation Committee Interlocks and Insider Participation. During
the year ended December 31, 1997, Mr. Francis M. Williams, the Company's
President and Chairman of the Board of Directors, served as President and
Chairman of the Board of Directors of TransCor, and Norman S. Dominiak
served as Chief Financial Officer of the Company and TransCor.
Compensation of Directors. During the year ended December 31, 1997,
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.
Stock Option and Other Plans
1987 Stock Option Plan
The Company adopted a stock option plan (the "Plan") pursuant to
which 975,000 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 be any amount
determined by the Board of Directors but not less than the par value of
the common stock on the date of the grant. 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, 1997, Joseph M. Williams held 63,333 options to purchase the
Company's stock at $2.62 per share of which 12,667 shares are
exercisable. At December 31, 1997, John V. Simon, Jr., held 71,666
options to purchase the Company's stock at $2.62 per share, of which
14,333 shares 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.<PAGE>
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 and its subsidiaries 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, 1997, interest expense and compensation expense relating to
the ESOP were $133,000 and $480,000, respectively. As of December 31,
1997, the unpaid ESOP debt is also reflected as a reduction in
stockholders' equity.<PAGE>
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 31, 1998, 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 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 1,858,975 (2) 41.8% 61.6%
Class B Common Stock 2,291,569 100.0%
Joseph M. Williams Common Stock 366,917 (3) 8.2% 5.4%
John V. Simon, Jr. Common Stock 24,617 (4) * *
Michael Gold Common Stock 13,523 (5) * *
George Chandler Common Stock 6,714 (6) * *
All executive officers Common Stock 2,280,354 (2)(3) 51.1%
and directors as a group (5)(7) 67.8%
(five persons) Class B Common Stock 2,291,569 (8) 100.0%
</TABLE>
(1) 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 1,479,136 shares owned directly by Mr. Francis M. Williams;
133,333 shares owned by Summerbreeze and 121,750 shares owned by
Sunshadow, both of which Mr. Williams is the sole shareholder of the
corporate general partner and a 50 percent limited partner (see Item
13, "Certain Relationships and Related Transactions"); 48,908 shares
owned by Mr. Williams' wife; 30,493 shares held by Mr. Williams as
Trustee for his wife and children; 37,913 shares held by Mr. Williams
as Custodian under the New York Uniform Gifts to Minors Act for his
children; 6,375 shares held by the Company's 401(k) and ESOP Plans of
which Mr. Williams is fully vested; and 1,067 shares held by Kimmins
Realty Investment, Inc., which is owned 100 percent by Mr. Williams.
(3) Includes 10,000 shares owned by Mr. Joseph M. Williams; 12,667 shares
issuable upon exercise of currently exercisable stock options; 3,030
shares held by the Company's 401(k) and ESOP Plans of which Mr.
Williams is fully vested; and 341,220 shares held by the Company's
401(k) Plan and ESOP of which Mr. Williams is a trustee with shared
voting and investment power.<PAGE>
(4) Includes 1,500 shares owned by Mr. Simon; 14,333 shares issuable upon
exercise of currently exercisable stock options; and 8,334 shares
held by the Company's 401(k) and ESOP plans of which Mr. Simon is
fully vested.
(5) Includes 1,150 shares owned by Mr. Gold; 5,775 shares currently owned
by Mr. Gold's wife; 2,898 held by Mr. Gold as trustee for Mr. Gold's
minor children; and 3,700 shares issuable upon exercise of currently
exercisable stock options.
(6) Includes 3,114 shares owned by Mr. Chandler; and 3,600 shares
issuable upon exercise of currently exercisable stock options.
(7) Includes 38,995 shares issuable upon exercise of currently
exercisable stock options; 23,102 shares held by the Company's 401(k)
and ESOP Plans of which certain officers of the Company are fully
vested; and 341,471 shares held by the Company's 401(k) and ESOP
Plans of which the Secretary of the Company is a trustee.
(8) Includes 1,500 shares that may be purchased by Mr. Dominiak pursuant
to immediately exercisable options. Does not include 6,000 shares
issuable to him upon exercise of options vesting at various times
commencing in April 1998. Also includes 3,195 shares that may be
purchased by Mr. O'Brien pursuant to immediately exercisable options.
Does not include 14,581 shares issuable to him upon exercise of
options vesting at various times commencing in April 1998.
* Less than one percent.
Item 13. Certain Relationships and Related Transactions
During 1995, 1996 and 1997, the Company paid landfill fees of
approximately $88,000, $139,000, and $0, respectively, to a company that
is owned primarily by the brother of Mr. Francis M. Williams. The amount
paid approximated fair market rates for the type of services involved.
The Company had a note receivable in an original amount of
$3,638,696 from Sunshadow Apartments, Ltd., and Summerbreeze Apartments,
Ltd., two Florida real estate limited partnerships (collectively, the
"Apartments"), of which Mr. Francis M. Williams is the sole shareholder
of the corporate general partner and was the sole limited partner. The
note receivable originally accrued interest at prime plus 1.375 percent,
increasing to prime plus 2 percent on July 1, 1995, with principal and
interest payable in monthly installments through December 31, 1998, and
was guaranteed by Mr. Williams. The Company did not receive any interest
or principal payments during 1997 relating to this note receivable, and
management of the Company discontinued recognition of interest income of
approximately $551,000 for the year. Amounts due from the Apartments at
December 31, 1996, were approximately $3,851,000.<PAGE>
On October 22, 1997, the Company contributed its note receivable in
an original amount of approximately $3,851,000 from Sunshadow Apartments,
Ltd., and Summerbreeze Apartments, Ltd., and other receivables of
$3,059,000 for a non-controlling 49 percent preferred limited partnership
interest in the Apartments. The Company will be allocated 49 percent of
operating income, losses and cash flow. The preference in the Company's
equity interest in the Apartments occurs upon the sale of the underlying
partnership properties. Upon the occurrence of a capital transaction, the
Company would receive cash flows from the sale or refinancing of the
Apartments' assets equal to its capital contribution prior to any other
partner receiving any proceeds. See Note 7 of Notes to Consolidated
Financial Statements for additional information.
On November 5, 1996, the Company received 1,723,290 shares of
Cumberland common stock in exchange for the term note of $5,169,870 due
from Cumberland. The Cumberland common stock had a fair market value of
$3.00 per share on the date of the exchange, based upon the quoted market
price. This investment is accounted for under the equity method, and the
Company's interest in Cumberland represents an ownership share of
approximately 30 percent. At December 31, 1996 and 1997, the market
value of the Cumberland common stock held by the Company was
approximately $5,170,000 and $4,739,000, respectively.
Effective July 1, 1997, employees associated with TransCor's
demolition contracting services unit were transferred to Kimmins
Contracting Corp. ("KCC"), a wholly-owned subsidiary of the Company, for
administrative and accounting purposes. As a result, contracting services
previously performed by employees of TransCor were subcontracted to KCC.
For the year ended December 31, 1997, TransCor paid $3,417,574 to KCC for
services rendered by Kimmins as a subcontractor. In addition, TransCor
rents equipment from KCC for use in performing demolition contracts.
TransCor incurred approximately $670,000, $2,103,000, and $2,573,000 in
equipment rental charges with KCC for the years ended December 31, 1995,
1996, and 1997, respectively.<PAGE>
PART IV
Item 14. Exhibits, Financial Statement, Schedules, and Reports on Form
8-K
(a) List of documents filed as part of this Report
1. Financial Statements
- Report of Independent Certified Public Accountants
- Consolidated balance sheets at December 31, 1996 and 1997
- Consolidated statements of operations for each of
the three years in the period ended December 31, 1997
- Consolidated statements of stockholders' equity for each of
the three years in the period ended December 31, 1997
- Consolidated statements of cash flows for each of
the three years in the period ended December 31, 1997
- Notes to consolidated financial statements
2. Financial Statement Schedule
Schedule Page
Number Number
II - Valuation and Qualifying Accounts . . . . . . . . . S-1
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/A:
3(a) -- Restated Certificate of Incorporation of Registrant,
as amended.
3(b)* -- By-laws of Registrant
10.1** -- Stock Option Plan
10.2 -- Form of Stock Option Agreement for Executives
10.3 -- Partnership Agreements
10.4 -- Term Notes for Equipment Financed with
Caterpillar Financial Services
21 -- Subsidiaries of the Registrant
23 -- Consent of Ernst & Young LLP
27 -- Financial Data Schedule (for SEC use only)
27.1 -- Restated Financial Data Schedule-1996
(for SEC use only)
27.2 -- Restated Financial Data Schedule-1995
(for SEC use only)
* Previously filed on March 17, 1987, as part of Registrant's
Registration Statement on Form S-1, File No. 33-12677, and
incorporated herein by reference thereto.
** Previously filed on June 29, 1989, 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.<PAGE>
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 CORP.
Date: July 6, 1998 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: July 6, 1998 /s/ Francis M. Williams
--------------------- ----------------------------------------
Francis M. Williams
President and Director
(Chief Executive Officer)
Date: July 6, 1998 /s/ Joseph M. Williams
--------------------- ----------------------------------------
Joseph M. Williams
Secretary/Treasurer
Date: July 6, 1998 /s/ Norman S. Dominiak
--------------------- ----------------------------------------
Norman S. Dominiak
Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
Date: July 6, 1998 /s/ Michael A. Gold
--------------------- ----------------------------------------
Michael A. Gold, Director
Date: July 6, 1998 /s/ George A. Chandler
--------------------- ----------------------------------------
George A. Chandler, Director
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State or Providence
of Incorporation
Company or Organization
------------------------------------------- ------------------------
Kimmins Contracting Corp. . . . . . . . . . Florida
Kimmins Ltd. . . . . . . . . . . . . . . . Ontario, Canada
Kimmins Industrial Service Corp. . . . . . Delaware
Kimmins Abatement Corp. . . . . . . . . . . Delaware
ThermoCor Kimmins, Inc. . . . . . . . . . . Florida
(f/k/a Kimmins Thermal Corp.)
Kimmins Specialty Contracting, Inc. . . . . Florida
Kimmins Associates, Inc. . . . . . . . . . Delaware
Kimmins Equipment Leasing Corp. . . . . . Florida
TransCor Waste Services, Inc. . . . . . . . Florida
Kimmins Recycling Corp. . . . . . . . . . . Florida
Bay Area Recycling and Fibers, Inc. . . . . 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<PAGE>
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 Corp. and in the related Prospectus, of our report dated
June 18, 1998, with respect to the consolidated financial statements and
schedule of Kimmins Corp. included in the Annual Report (Form 10-K) for
the year ended December 31, 1997.
/s/ Ernst & Young LLP
Tampa, Florida
June 30, 1998<PAGE>
KIMMINS CORP.
Schedule II - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
Additions Deductions
Balance at Charged to from Balance at
Beginning Costs and Allowances End of
Description of Period Expenses (a) Period
-------------------------- ---------- ---------- ----------- ----------
Year ended $ 662,997 $ 404,455 $ (670,241) $ 397,211
December 31, 1995 . . .
Year ended $ 397,211 $ 430,381 $ (210,884) $ 616,708
December 31, 1996 . . .
Year ended $ 616,708 $ 772,522 $ (467,929) $ 921,301
December 31, 1997 . . .
(a) Balance represents the write-off of uncollectible accounts.
S-1<PAGE>
EXHIBIT 10.4
TERM LOAN PROMISSORY NOTE FORM
PROMISSORY NOTE
Borrower: Kimmins Equipment Leasing Corp.
1501 Second Avenue, East
Tampa, Florida 33605
Lender: Caterpillar Financial Services
Corporation
3322 West End Avenue
Nashville, Tennessee 37203-1071
Principal Amount: $28,589,773.52 Date of Note: 11-24-97
Promise to Pay. For Value Received, Borrower promises to pay to the order
of Lender, in immediately available funds at the address of Lender set
forth above or at such other place as Lender or the holder hereof shall
designate in writing, the principal amount of Twenty Eight Million Five
Hundred and Eighty-Nine Thousand Seven Hundred and Seventy-Three Dollars
and 52/100ths Dollars ($28,589,773.52) with interest on the outstanding
principal from and including the date hereof at the per annum rate equal
to that set forth below, until the indebtedness evidenced by this Note
has been paid in full.
Payment Schedule. Monthly payments of principal and interest in arrears,
each in an amount equal to Five Hundred and One Thousand and One Hundred
and Twenty-Seven Dollars and 02/100ths Dollars ($501,127.02 shall be made
commencing on the 15th day of January, 1998, and continuing on the 15th
day of each month thereafter through and including the 15th day of
December, 2002, [and a final balloon payment equal to all principal and
interest outstanding at the time shall be made on the 15th day of
January, 2003, for a total of Sixty-One (61) payments. All payments
received shall be applied first to accrued interest and other non-
principal amounts then owing under this Note or the Loan Agreement
(defined below) and then to the principal balance outstanding. The
acceptance of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute waiver of
Lender's or the holder's right to receive payment in full of all amounts
due and owing at such time or any prior or subsequent time.
Interest. Interest shall be calculated at the fixed per annum. rate equal
to Seven and 75/100ths percent (7.75%). All interest payable hereunder
shall be calculated on the basis of the actual number of days elapsed in
a year of three hundred sixty (360) days.
Time. Time is of the essence hereof. If any payment or portion of a
payment or other sum due hereunder is not paid within ten (10) days of
when due, there shall be immediately due and payable from Borrower to
Lender a late fee equal to five percent (5%) of the scheduled payment.<PAGE>
Prepayment. Borrower may prepay this Note in full on any payment due date
by giving Lender at least thirty (30) days advance written notice and
paying the then unpaid principal balance of this Note, all accrued
interest and all other amounts payable hereunder.
Savings. If at any time implementation of any provision hereof shall
raise or be deemed to raise the interest rate per annum contracted for,
charged in or collectible under this Note above the lawful maximum
interest rate per annum in effect from time to time in the applicable
jurisdiction, then such interest rate per annum shall be limited to such
lawful maximum interest rate; provided, however, that if the applicable
state law is amended or the law of the United States of America preempts
the applicable state law, so that it becomes lawful for the Lender to
receive a greater interest rate per annum, than is presently allowed,
Borrower agrees that, on the effective date of such amendment or
preemption, as the case may be, the lawful maximum hereunder shall be
increased to the maximum interest rate per annum, allowed by the higher
of the amended state law or the law of the United States of America. If
from any circumstance, Lender or any holder shall ever receive as
interest or otherwise an amount which will exceed the applicable lawful
maximum rate, such amount which would be excessive shall be deemed a
mistake and shall be either refunded or applied to the reduction of any
principal owing under this Note, as Lender or the holder may elect.
Default. The following actions and/or failures to act shall constitute
events of default under this Note:
Default Under This Note. Should Borrower default in the payment of
any sum when due under this Note and such default shall continue
unremedied for ten (10) days thereafter.
Other Defaults in Favor of Lender. Should Borrower default under
any other promissory note, loan, extension of credit, security agreement,
or obligation in favor of Lender.
False Statements. Should any representation or warranty of Borrower
or any guarantor made in connection with obtaining the loan evidenced by
this Note or any security agreement directly or indirectly securing
repayment of this Note prove to be incorrect or misleading in any
material respect.
Default Under Loan and Security Agreement. Should Borrower default
under that certain Tenn Loan and Security Agreement dated November 20,
1997, entered into between Borrower and Lender (the "Loan Agreement"), or
should Borrower default under any other security agreement directly or
indirectly securing repayment of this Note.
Insecurity. Should Borrower have a material adverse change with
respect to its financial condition which results, in Lender's opinion, in
an impairment of the prospect of repayment of this Note.<PAGE>
Default in Favor of Third Parties. Should Borrower default under
any material promissory note, loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person.
Insolvency, Bankruptcy. Should Borrower become unable, or admit in
writing its inability, to pay its debts as they mature, or become the
subject of proceedings in bankruptcy or insolvency, or make a general
assignment for the benefit of creditors, or enter into an arrangement
with a group of creditors, or enter into any action for the purposes of
accomplishing any of the preceding.
Cease to do Business. Should Borrower or any affiliate of Borrower
wind up, liquidate, cease to do business, dissolve, reorganize, merge,
consolidate or sell, assign, transfer, lease or otherwise dispose of all
or substantially all of its assets, or become the subject of any
proceeding for any of the foregoing purposes.
Lender's Rights Upon Default. Should any one or more events of default
occur or exist under this Note, as provided above, Lender shall have all
rights and remedies reserved to Lender under the Term Loan and Security
Agreement, and shall further have the right, at its sole option, to
accelerate the maturity and insist upon immediate payment in full of the
unpaid principal balance and all accrued interest and all other amounts
then outstanding under this Note (including additional interest accrued
on past due payments and any prepayment premium, as provided herein and
under the Loan and Security Agreement), together with Lender's attorney's
fees, costs, expenses and other fees and charges, as provided herein.
Lender shall have the further right, again at its sole option, to
accelerate the maturity and to insist upon immediate payment in full of
each and every other loan, extension of credit, debt, liability and/or
obligation of every nature and kind that Borrower may then owe to Lender,
whether direct or indirect or by way of assignment, and whether absolute
or contingent, liquidated or unliquidated, voluntary or involuntary,
determined or undetermined, secured or unsecured, whether Borrower is
obligated alone or with others on a joint, several or solidary basis, as
a principal obligor or otherwise, all without further notice, demand or
putting in default, unless Lender shall otherwise elect.
Attorney's Fees. If Lender refers this Note to an attorney for
collection, or files suit against Borrower to collect this Note, or if
Borrower files for bankruptcy or other relief from creditors, Borrower
agrees to pay Lender's reasonable attorney's fees and all other costs,
expenses and fees incurred by Lender in any such action. All such fees,
costs and expenses shall become a part of the indebtedness evidenced by
this Note, and shall bear interest at the rate of interest in effect
under this Note from time to time.<PAGE>
Right of Offset. As collateral security for the prompt and punctual
payment and satisfaction of this Note, Borrower grants Lender a
continuing security interest in the form of a pledge of any and all funds
that Borrower may have at any time on deposit with Lender or any
affiliated companies of Lender and hereby consents and agrees, in the
event of default hereunder, to Lender's offsetting against the
obligations of Borrower hereunder any sums owing from time to time from
Lender or any subsidiary or affiliate of Lender (including Caterpillar
Inc.) to Borrower.
Waivers. Borrower, and each guarantor, surety, endorser or any other
party who may at any time become liable for payment of the indebtedness
evidenced by this Note (each, an "Other Obligor"), hereby waive
presentment for payment, demand for payment, protest, notice of protest,
notice of nonpayment, notice of dishonor, notice of acceleration and
notice of intent to accelerate hereunder, and all other notices in
connection with this Note, filing of suit and diligence in collecting any
sums due under this Note or enforcing any of the security for this Note,
and severally agree that their obligations and liabilities to Lender
hereunder shall be on a "joint and several" basis. To the extent
permitted by law, Borrower and each Other Obligor hereby waives all
rights to plead any statute of limitations as a defense to any action on
this Note. BORROWER AND EACH OTHER OBLIGOR FURTHER WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS NOTE, AND ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER MAKING THE LOAN
EVIDENCED HEREBY AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER.
BORROWER AND EACH OTHER OBLIGOR WARRANTS THAT IT HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS. IN THE EVENT OF LITIGATION,
THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Borrower and each Other Obligor further severally agree that discharge or
release of any party who is or may be liable to Lender for the
indebtedness represented hereby, or the release or substitution of any
collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall remain
liable to Lender, or of releasing any other collateral that is not
expressly released by Lender. Borrower and each Other Obligor
additionally agree that Lender's acceptance of payment other than in
accordance with the terms of this Note, or Lender's subsequent agreement
to any extension of time, renewal, waiver or modification of this Note or
any of its provisions (without limitation as to number or term), or
Lender's failure or delay in exercising any rights or remedies granted to
Lender, shall likewise not have the effect of releasing Borrower or any
other party or parties from their respective obligations to Lender, or of
releasing any collateral that directly or indirectly secures repayment
hereof. In addition, any failure or delay on the part of Lender to
exercise any of the rights and remedies granted to Lender shall not have
the effect of waiving any of Lender's rights and remedies. Any partial
exercise of any rights and/or remedies granted to Lender shall
furthermore not be construed as a waiver of any other rights and
remedies, it being Borrower's intent and agreement that Lender's rights
and remedies<PAGE>
shall be cumulative in nature. Borrower and each Other Obligor further
agree that, should any event of default occur or exist under this Note,
any waiver or forbearance on the part of Lender to pursue the rights and
remedies available to Lender shall be binding upon Lender only to the
extent that Lender specifically agrees to any such waiver or forbearance
in writing. A waiver or forbearance on the part of Lender as to one event
of default shall not be construed as a waiver of forbearance as to any
other event of default.
Successors and Assigns Liable. Borrower's and each Other Obligor's
obligations and agreements under this Note shall be binding upon
Borrower's and each Other Obligor's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or
holders of this Note.
Caption Headings, Plural and Singular. Caption headings of the sections
of this Note are for convenience purposes only and are not to be used to
interpret or to define their provisions. In this Note, whenever the
context so requires, the singular includes the plural and the plural also
includes the singular.
Severability, Integration. If any provision of this Note is held to be
invalid, illegal or unenforceable by any court, that provision shall be
deleted from this Note and the balance of this Note shall be interpreted
as if the deleted provision never existed. This Note constitutes the
entire agreement of Borrower with respect to the repayment to Lender of
the indebtedness evidenced hereby and may not be altered or amended
except by a Note, any waiver or forbearance on the part of Lender to
pursue the rights and remedies available to Lender shall be binding upon
Lender only to the extent that Lender specifically agrees to any such
waiver or forbearance in writing. A waiver or forbearance on the part of
Lender as to one event of default shall not be construed as a waiver of
forbearance as to any other event of default.
Successors and Assigns Liable. Borrower's and each Other Obligor's
obligations and agreements under this Note shall be binding upon
Borrower's and each Other Obligor's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or
holders of this Note.
Caption Headings, Plural and Singular. Caption headings of the sections
of this Note are for convenience purposes only and are not to be used to
interpret or to define their provisions. In this Note, whenever the
context so requires, the singular includes the plural and the plural also
includes the singular.<PAGE>
Severability, Integration. If any provision of this Note is held to be
invalid, illegal or unenforceable by any court, that provision shall be
deleted from this Note and the balance of this Note shall be interpreted
as if the deleted provision never existed. This Note constitutes the
entire agreement of Borrower with respect to the repayment to Lender of
the indebtedness evidenced hereby and may not be altered or amended
except by a writing signed by Lender.
Applicable Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Tennessee, without
regard to the conflicts of laws principles thereof.
Borrower has read and fully understands all of the provisions of this
Note.
-----------------------------
Borrower
Signature: /s/ John V. Simon, Jr.
----------------------
Name (print): John V. Simon, Jr.
----------------------
Title: President
----------------------
Signature: /s/ Hubert Freund
----------------------
Name (print): Hubert Freund
----------------------
Title: Regional Sales Manager
----------------------<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
Borrower: Kimmins Contracting Corp.
1501 Second Avenue, East
Tampa, Florida 33605
Lender: Caterpillar Financial Services
Corporation
3322 West End Avenue
Nashville, Tennessee 37203-1071
Principal Amount: U.S. $16,000,000.00 Date of Note: 11-20-97
Restatement. This Amended and Restated Promissory Note ("Note") is issued
in conjunction with that certain Working Capital Loan and Security
Agreement dated February 26, 1997, and amended March 11, 1997 and
November 20, 1997 (as the same may be further amended from time to time,
the "Loan Agreement"), between Borrower and Lender, and Lender is and
shall be entitled to all benefits thereof and of all Loan Documents
executed and delivered in connection therewith. This Note amends and
restates one or more notes dated prior to the date hereof (individually
and collectively, the "Original Note"), and is given in substitution and
replacement for the Original Note. The delivery of this Note in
substitution and replacement of the Original Note shall not constitute a
novation or other release or satisfaction of the indebtedness evidenced
thereby and hereby. The provisions of the Loan Agreement are incorporated
herein by this reference. All capitalized terms used herein, unless
otherwise defined herein, shall have the meanings ascribed to such terms
in the Loan Agreement.
Promise to Pay. For Value Received, Borrower promises to pay to the order
of Lender, in immediately available funds at the address of Lender set
forth above or at such other place as Lender or the holder hereof shall
designate in writing, the above Principal Amount for this Loan with
interest on the outstanding principal from and including the date hereof
pursuant to the terms of the Loan Agreement referred to below until the
indebtedness evidenced by this Note has been paid in full, and Borrower
hereby ratifies all previous Notes evidencing Loans made pursuant
to such Loan Agreement.
Payment Schedule. Monthly payments of interest in arrears with the
principal becoming due and owing pursuant to the terms of the Loan
Agreement. All payments received shall be applied first to accrued
interest and other non-principal amounts then owing under this Note or
the Loan Agreement and then to the principal balance outstanding. The
acceptance of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute waiver of
Lender's or the holder's right to receive payment in full of all amounts
due and owing at such time or any prior or subsequent time.<PAGE>
Interest. Interest shall be calculated pursuant to the terms of the Loan
Agreement. All interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed in a year of three hundred
sixty (360) days.
Time. Time is of the essence hereof. If any payment or portion of a
payment or other sum due hereunder is not paid within fourteen (14) days
of when due, there shall be immediately due and payable from Borrower to
Lender a late fee equal to five percent (5%) of the scheduled payment.
Prepayment. Borrower may prepay this Note in full on any payment due date
by paying the then unpaid principal balance of this Note, all accrued
interest and all other amounts payable hereunder.
Savings. If at any time implementation of any provision hereof shall
raise or be deemed to raise the interest rate per annum contracted for,
charged in or collectible under this Note above the lawful maximum
interest rate per annum in effect from time to time in the applicable
jurisdiction, then such interest rate per annum shall be limited to such
lawful maximum interest rate; provided, however, that if the applicable
state law is amended or the law of the United States of America preempts
the applicable state law, so that it becomes lawful for the Lender to
receive a greater interest rate per annum than is presently allowed,
Borrower agrees that, on the effective date of such amendment or
preemption, as the case may be, the lawful maximum hereunder shall be
increased to the maximum interest rate per annum allowed by the higher of
the amended state law or the law of the United States of America. If from
any circumstance, Lender or any holder shall ever receive as interest or
otherwise an amount which will exceed the applicable lawful maximum rate,
such amount which would be excessive shall be deemed a mistake and shall
be either refunded or applied to the reduction of any principal owing
under this Note, as Lender or the holder may elect.
Default. The following actions and/or failures to act shall constitute
events of default under this Note:
Default Under This Note. Should Borrower default in the payment of
any sum when due under this Note and such default shall continue
unremedied for fourteen (14) days thereafter.
Other Defaults in Favor of Lender. Should Borrower default under
any other promissory note, loan, extension of credit, security agreement,
or obligation in favor of Lender.
False Statements. Should any representation or warranty of Borrower
or any guarantor made in connection with obtaining the loan evidenced by
this Note or any security agreement directly or indirectly securing
repayment of this Note prove to be incorrect or misleading in any
material respect.<PAGE>
Default Under Loan and Security Agreement. Should Borrower default
under that certain Working Capital Loan and Security Agreement dated
February 26, 1997, and amended March 11, 1997 and November 20, 1997 (as
the same may be further amended from time to time) entered into between
Borrower and Lender (the "Loan Agreement"), or should Borrower default
under any other security agreement directly or indirectly securing
repayment of this Note.
Insecurity. Should Borrower have a material adverse change with
respect to its financial condition which results, in Lender's opinion, in
an impairment of the prospect of repayment of this Note.
Default in Favor of Third Parties. Should Borrower default under
any material promissory note, loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person.
Insolvency, Bankruptcy. Should Borrower become unable, or admit in
writing its inability, to pay its debts as they mature, or become the
subject of proceedings in bankruptcy or insolvency, or make a general
assignment for the benefit of creditors, or enter into an arrangement
with a group of creditors, or enter into any action for the purposes of
accomplishing any of the preceding.
Cease to do Business. Should Borrower or any affiliate of Borrower
wind up, liquidate, cease to do business, dissolve, reorganize, merge,
consolidate or sell, assign, transfer, lease or otherwise dispose of all
or substantially all of its assets, or become the subject of any
proceeding for any of the foregoing purposes.
Lender's Rights Upon Default. Should any one or more events of default
occur or exist under this Note, as provided above, Lender shall have all
rights and remedies reserved to Lender under the Loan Agreement, and
shall further have the right, at its sole option, to accelerate the
maturity and insist upon immediate payment in full of the unpaid
principal balance and all accrued interest and all other amounts then
outstanding under this Note (including additional interest accrued on
past due payments and any prepayment premium, as provided herein and
under the Loan Agreement), together with Lender's attorney's fees, costs,
expenses and other fees and charges, as provided herein. Lender shall
have the further right, again at its sole option, to accelerate the
maturity and to insist upon immediate payment in full of each and every
other loan, extension of credit, debt, liability and/or obligation of
every nature and kind that Borrower may then owe to Lender, whether
direct or indirect or by way of assignment, and whether absolute or
contingent, liquidated or unliquidated, voluntary or involuntary,
determined or undetermined, secured or unsecured, whether Borrower is
obligated alone or with others on a joint, several or solidary basis, as
a principal obligor or otherwise, all without further notice, demand or
putting in default, unless Lender shall otherwise elect.<PAGE>
Attorney's Fees. If Lender refers this Note to an attorney for
collection, or files suit against Borrower to collect this Note, or if
Borrower files for bankruptcy or other relief from creditors, Borrower
agrees to pay Lender's reasonable attorney's fees and all other costs,
expenses and fees incurred by Lender in any such action. All such fees,
costs and expenses shall become a part of the indebtedness evidenced by
this Note, and shall bear interest at the rate of interest in effect
under this Note from time to time.
Right of Offset. As collateral security for the prompt and punctual
payment and satisfaction of this Note, Borrower grants Lender a
continuing security interest in the form of a pledge of any and all funds
that Borrower may have at any time on deposit with Lender or any
affiliated companies of Lender and hereby consents and agrees, in the
event of default hereunder, to Lender's offsetting against the
obligations of Borrower hereunder any sums owing from time to time from
Lender or any subsidiary or affiliate of Lender (including Caterpillar
Inc.) to Borrower.
Waivers. Borrower, and each guarantor, surety, endorser or any other
party who may at any time become liable for payment of the indebtedness
evidenced by this Note (each, an "Other Obligor"), hereby waive
presentment for payment, demand for payment, protest, notice of protest,
notice of nonpayment, notice of dishonor, notice of acceleration and
notice of intent to accelerate hereunder, and all other notices in
connection with this Note, filing of suit and diligence in collecting any
sums due under this Note or enforcing any of the security for this Note,
and severally agree that their obligations and liabilities to Lender
hereunder shall be on a "joint and several" basis. To the extent
permitted by law, Borrower and each Other Obligor hereby waives all
rights to plead any statute of limitations as a defense to any action on
this Note. BORROWER AND EACH OTHER OBLIGOR FURTHER WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS NOTE, AND ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER MAKING THE LOAN
EVIDENCED HEREBY AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER.
BORROWER AND EACH OTHER OBLIGOR WARRANTS THAT IT HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS. IN THE EVENT OF LITIGATION,
THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Borrower and each Other Obligor further severally agree that discharge or
release of any party who is or may be liable to Lender for the
indebtedness represented hereby, or the release or substitution of any
collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall remain
liable to Lender, or of releasing any other collateral that is not
expressly released by Lender. Borrower and each Other Obligor
additionally agree that Lender's acceptance of payment other than in
accordance with the terms of this Note, or Lender's subsequent agreement
to any extension of time, renewal, waiver or modification of this Note or
any of its provisions (without limitation as to number or term), or
Lender's failure or delay in exercising any rights or remedies granted to
Lender, shall likewise not have the effect of releasing<PAGE>
Borrower or any other party or parties from their respective obligations
to Lender, or of releasing any collateral that directly or indirectly
secures repayment hereof. In addition, any failure or delay on the part
of Lender to exercise any of the rights and remedies granted to Lender
shall not have the effect of waiving any of Lender's rights and remedies.
Any partial exercise of any rights and/or remedies granted to Lender
shall furthermore not be construed as a waiver of any other rights and
remedies, it being Borrower's intent and agreement that Lender's rights
and remedies shall be cumulative in nature. Borrower and each Other
Obligor further agree that, should any event of default occur or exist
under this Note, any waiver or forbearance on the part of Lender to
pursue the rights and remedies available to Lender shall be binding upon
Lender only to the extent that Lender specifically agrees to any such
waiver or forbearance in writing. A waiver or forbearance on the part of
Lender as to one event of default shall not be construed as a waiver of
forbearance as to any other event of default.
Successors and Assigns Liable. Borrower's and each Other Obligor's
obligations and agreements under this Note shall be binding upon
Borrower's and each Other Obligor's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or
holders of this Note.
Caption Headings, Plural and Singular. Caption headings of the sections
of this Note are for convenience purposes only and are not to be used to
interpret or to define their provisions. In this Note, whenever the
context so requires, the singular includes the plural and the plural also
includes the singular.
Severability, Integration. If any provision of this Note is held to be
invalid, illegal or unenforceable by any court, that provision shall be
deleted from this Note and the balance of this Note shall be interpreted
as if the deleted provision never existed. This Note constitutes the
entire agreement of Borrower with respect to the repayment to Lender of
the indebtedness evidenced hereby and may not be altered or amended
except by a writing signed by Lender.
Applicable Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Tennessee, without
regard to the conflicts of laws principles thereof.<PAGE>
Borrower has read and fully understands all of the provisions of this
Note.
Signature: /s/ John V. Simon, Jr.
----------------------
Name (print): John V. Simon, Jr.
----------------------
Title: President
----------------------
Signature: /s/ Hubert Freund
----------------------
Name (print): Hubert Freund
----------------------
Title: Regional Sales Manager
----------------------<PAGE>
Working Capital Loan Promissory Note
PROMISSORY NOTE
Borrower: Kimmins Contracting Corp.
1501 Second Avenue, East
Tampa, Florida 33605
Lender: Caterpillar Financial Services
Corporation
3322 West End Avenue
Nashville, Tennessee 37203-1071
Principal Amount: U.S. $11,000,000.00 Date of Note: 02/26/97
Promise to Pay. For Value Received, Borrower promises to pay to the order
of Lender, in immediately available funds at the address of Lender set
forth above or at such other place as Lender or the holder hereof shall
designate in writing, the outstanding principal balance of all Loans, up
to the Principal Amount set forth above, made pursuant to the terms of
the Loan Agreement referred to below on the date on which such
outstanding principal amounts become due and payable pursuant to the Loan
Agreement, in strict accordance with the terms thereof. Borrower likewise
promises to pay to Lender interest from and after the date hereof at such
interest rates, payable at such times, and computed in such manner as are
specified in the Loan Agreement, in strict accordance with the terms
thereof. All principle amounts of the Loans made by Lender to Borrower
pursuant to the Loan Agreement, and all accrued interest and unpaid
interest thereon, shall be deemed outstanding under this Note and shall
continue to be owing by Borrower in accordance with the terms of this
Note and the Loan Agreement.
Payment Schedule. Monthly payments of interest in arrears with the
principal becoming due and owing pursuant to the terms of the Loan
Agreement. All payments received shall be applied first to accrued
interest and other non-principal amounts then owing under this Note or
the Loan Agreement and then to the principal balance outstanding. The
acceptance of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute waiver of
Lender's or the holder's right to receive payment in full of all amounts
due and owing at such time or any prior or subsequent time.
Interest. Interest shall be calculated pursuant to the terms of the Loan
Agreement. All interest payable hereunder shall be calculated on the
basis of the actual number of days elapsed in a year of three hundred
sixty (360) days.<PAGE>
Time. Time is of the essence hereof. If any payment or portion of a
payment or other sum due hereunder is not paid within fourteen (14) days
of when due, there shall be immediately due and payable from Borrower to
Lender a late fee equal to five percent (5%) of the scheduled payment.
Prepayment. Borrower may prepay this Note in full on any payment due date
by paying the then unpaid principal balance of this Note, all accrued
interest and all other amounts payable hereunder.
Savings. If at any time implementation of any provision hereof shall
raise or be deemed to raise the interest rate per annum contracted for,
charged in or collectible under this Note above the lawful maximum
interest rate per annum in effect from time to time in the applicable
jurisdiction, then such interest rate per annum shall be limited to such
lawful maximum interest rate; provided, however, that if the applicable
state law is amended or the law of the United States of America preempts
the applicable state law, so that it becomes lawful for the Lender to
receive a greater interest rate per annum than is presently allowed,
Borrower agrees that, on the effective date of such amendment or
preemption, as the case may be, the lawful maximum hereunder shall be
increased to the maximum interest rate per annum allowed by the higher of
the amended state law or the law of the United States of America. If from
any circumstance, Lender or any holder shall ever receive as interest or
otherwise an amount which will exceed the applicable lawful maximum rate,
such amount which would be excessive shall be deemed a mistake and shall
be either refunded or applied to the reduction of any principal owing
under this Note, as Lender or the holder may elect.
Default. The following actions and/or failures to act shall constitute
events of default under this Note:
Default Under This Note. Should Borrower default in the payment of
any sum when due under this Note and such default shall continue
unremedied for fourteen (14) days thereafter.
Other Defaults in Favor of Lender. Should Borrower default under
any other promissory note, loan, extension of credit, security agreement,
or obligation in favor of Lender.
False Statements. Should any representation or warranty of Borrower
or any guarantor made in connection with obtaining the loan evidenced by
this Note or any security agreement directly or indirectly securing
repayment of this Note prove to be incorrect or misleading in any
material respect.
Default Under Loan and Security Agreement. Should Borrower default
under that certain Working Capital Loan and Security Agreement dated
February 26, 1997 entered into between Borrower and Lender (the "Loan
Agreement"), or should Borrower default under any other security
agreement directly or indirectly securing repayment of this Note.<PAGE>
Default in Favor of Third Parties. Should Borrower default under
any material promissory note, loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person.
Insolvency, Bankruptcy. Should Borrower become unable, or admit in
writing its inability, to pay its debts as they mature, or become the
subject of proceedings in bankruptcy or insolvency, or make a general
assignment for the benefit of creditors, or enter into an arrangement
with a group of creditors, or enter into any action for the purposes of
accomplishing any of the preceding.
Cease to do Business. Should Borrower or any affiliate of Borrower
wind up, liquidate, cease to do business, dissolve, reorganize, merge,
consolidate or sell, assign, transfer, lease or otherwise dispose of all
or substantially all of its assets, or become the subject of any
proceeding for any of the foregoing purposes.
Lender's Rights Upon Default. Should any one or more events of default
occur or exist under this Note, as provided above, Lender shall have all
rights and remedies reserved to Lender under the Loan Agreement, and
shall further have the right, at its sole option, to accelerate the
maturity and insist upon immediate payment in full of the unpaid
principal balance and all accrued interest and all other amounts then
outstanding under this Note (including additional interest accrued on
past due payments and any prepayment premium, as provided herein and
under the Loan Agreement), together with Lender's attorney's fees, costs,
expenses and other fees and charges, as provided herein. Lender shall
have the further right, again at its sole option, to accelerate the
maturity and to insist upon immediate payment in full of each and every
other loan, extension of credit, debt, liability and/or obligation of
every nature and kind that Borrower may then owe to Lender, whether
direct or indirect or by way of assignment, and whether absolute or
contingent, liquidated or unliquidated, voluntary or involuntary,
determined or undetermined, secured or unsecured, whether Borrower is
obligated alone or with others on a joint, several or solidary basis, as
a principal obligor or otherwise, all without further notice, demand or
putting in default, unless Lender shall otherwise elect.
Attorney's Fees. If Lender refers this Note to an attorney for
collection, or files suit against Borrower to collect this Note, or if
Borrower files for bankruptcy or other relief from creditors, Borrower
agrees to pay Lender's reasonable attorney's fees and all other costs,
expenses and fees incurred by Lender in any such action. All such fees,
costs and expenses shall become a part of the indebtedness evidenced by
this Note, and shall bear interest at the rate of interest in effect
under this Note from time to time.<PAGE>
Right of Offset. As collateral security for the prompt and punctual
payment and satisfaction of this Note, Borrower grants Lender a
continuing security interest in the form of a pledge of any and all funds
that Borrower may have at any time on deposit with Lender or any
affiliated companies of Lender and hereby consents and agrees, in the
event of default hereunder, to Lender's offsetting against the
obligations of Borrower hereunder any sums owing from time to time from
Lender or any subsidiary or affiliate of Lender (including Caterpillar
Inc.) to Borrower.
Waivers. Borrower, and each guarantor, surety, endorser or any other
party who may at any time become liable for payment of the indebtedness
evidenced by this Note (each, an "Other Obligor"), hereby waive
presentment for payment, demand for payment, protest, notice of protest,
notice of nonpayment, notice of dishonor, notice of acceleration and
notice of intent to accelerate hereunder, and all other notices in
connection with this Note, filing of suit and diligence in collecting any
sums due under this Note or enforcing any of the security for this Note,
and severally agree that their obligations and liabilities to Lender
hereunder shall be on a "joint and several" basis. To the extent
permitted by law, Borrower and each Other Obligor hereby waives all
rights to plead any statute of limitations as a defense to any action on
this Note. BORROWER AND EACH OTHER OBLIGOR FURTHER WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS NOTE, AND ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER MAKING THE LOAN
EVIDENCED HEREBY AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER.
BORROWER AND EACH OTHER OBLIGOR WARRANTS THAT IT HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS. IN THE EVENT OF LITIGATION,
THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Borrower and each Other Obligor further severally agree that discharge or
release of any party who is or may be liable to Lender for the
indebtedness represented hereby, or the release or substitution of any
collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall remain
liable to Lender, or of releasing any other collateral that is not
expressly released by Lender. Borrower and each Other Obligor
additionally agree that Lender's acceptance of payment other than in
accordance with the terms of this Note, or Lender's subsequent agreement
to any extension of time, renewal, waiver or modification of this Note or
any of its provisions (without limitation as to number or term), or
Lender's failure or delay in exercising any rights or remedies granted to
Lender, shall likewise not have the effect of releasing Borrower or any
other party or parties from their respective obligations to Lender, or of
releasing any collateral that directly or indirectly secures repayment
hereof. In addition, any failure or delay on the part of Lender to
exercise any of the rights and remedies granted to Lender shall not have
the effect of waiving any of Lender's rights and remedies. Any partial
exercise of any rights and/or remedies granted to Lender shall
furthermore not be construed as a waiver of any other rights and
remedies, it being Borrower's intent and agreement that Lender's rights
and remedies<PAGE>
shall be cumulative in nature. Borrower and each Other Obligor further
agree that, should any event of default occur or exist under this Note,
any waiver or forbearance on the part of Lender to pursue the rights and
remedies available to Lender shall be binding upon Under only to the
extent that Lender specifically agrees to any such waiver or forbearance
in writing. A waiver or forbearance on the part of Lender as to one event
of default shall not be construed as a waiver of forbearance as to any
other event of default.
Successors and Assigns Liable. Borrower's and each Other Obligor's
obligations and agreements under this Note shall be binding upon
Borrower's and each Other Obligor's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or
holders of this Note.
Caption Headings, Plural and Singular. Caption headings of the sections
of this Note are for convenience purposes only and are not to be used to
interpret or to define their provisions. In this Note, whenever the
context so requires, the singular includes the plural and the plural also
includes the singular.
Severability, Integration. If any provision of this Note is held to be
invalid, illegal or unenforceable by any court, that provision shall be
deleted from this Note and the balance of this Note shall be interpreted
as if the deleted provision never existed. This Note constitutes the
entire agreement of Borrower with respect to the repayment to Lender of
the indebtedness evidenced hereby and may not be altered or amended
except by a writing signed by Lender.
Applicable Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Tennessee, without
regard to the conflicts of laws principles thereof.
Borrower has read and fully understands all of the provisions of this
Note.
Signature: /s/ John V. Simon, Jr.
----------------------
Name (print): John V. Simon, Jr.
----------------------
Title: President
----------------------
Signature: /s/ Hubert Freund
----------------------
Name (print): Hubert Freund
----------------------
Title: Regional Sales Manager
----------------------<PAGE>
Term Loan Promissory Note Form
PROMISSORY NOTE
Borrower: Kimmins Contracting Corp.
1501 Second Avenue, East
Tampa, Florida 33605
Lender: Caterpillar Financial Services
Corporation
3322 West End Avenue
Nashville, Tennessee 37203-1071
Principal Amount: $13,041,370.93 Date of Note: 02/26/97
Promise to Pay. For Value Received, Borrower promises to pay to the order
of Lender, in immediately available funds at the address of Lender set
forth above or at such other place as Lender or the holder hereof shall
designate in writing, the principal amount of Thirteen Million Forty-One
Thousand Three Hundred Seventy and 93/100ths Dollars ($13,041,370.93)
with interest on the outstanding principal from and including the date
hereof at the per annum rate equal to that set forth below, until the
indebtedness evidenced by this Note has been paid in full.
Payment Schedule. Monthly payments of principal and interest in arrears,
each in an amount equal to the sum of (a) an amount of Two Hundred
Twenty-Seven Thousand Nine Hundred Ninety-Two and 52/100ths Dollars
($227,992.52) shall be made commencing on the 1st day of April, 1997, and
continuing on the lst day of each month thereafter through and including
the lst day of March, 2003, for a total of Seventy-Two (72) payments. All
payments received shall be applied first to accrued interest and other
non-principal amounts then owing under this Note or the Loan Agreement
(defined below) and then to the principal balance outstanding. The
acceptance of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute waiver of
Lender's or the holder's right to receive payment in full of all amounts
due and owing at such time or any prior or subsequent time.
Interest. Interest shall be calculated at the fixed per annum rate equal
to Seven and 88/100ths percent (7.88%). All interest payable hereunder
shall be calculated on the basis of the actual number of days elapsed in
a year of three hundred sixty (360) days.
Time. Time is of the essence hereof. If any payment or portion of a
payment or other sum due hereunder is not paid within four-teen (14) days
of when due, there shall be immediately due and payable from Borrower to
Lender a late fee equal to five percent (5%) of the scheduled payment.<PAGE>
Prepayment. Borrower may prepay this Note in full on any payment due date
by giving Lender at least thirty (30) days advance written notice and
paying the then unpaid principal balance of this Note, all accrued
interest and all other amounts payable hereunder.
Savings. If at any time implementation of any provision hereof shall
raise or be deemed to raise the interest rate per annum contracted for,
charged in or collectible under this Note above the lawful maximum
interest rate per annum in effect from time to time in the applicable
jurisdiction, then such interest rate per annum shall be limited to such
lawful maximum interest rate; provided, however, that if the applicable
state law is amended or the law of the United States of America preempts
the applicable state law, so that it becomes lawful for the Lender to
receive a greater interest rate per annum than is presently allowed,
Borrower agrees that, on the effective date of such amendment or
preemption, as the case may be, the lawful maximum hereunder shall be
increased to the maximum interest rate per annum allowed by the higher of
the amended state law or the law of the United States of America. If from
any circumstance, Lender or any holder shall ever receive as interest or
otherwise an amount which will exceed the applicable lawful maximum rate,
such amount which would be excessive shall be deemed a mistake and shall
be either refunded or applied to the reduction of any principal owing
under this Note, as Lender or the holder may elect.
Default. The following actions and/or failures to act shall constitute
events of default under this Note:
Default Under This Note. Should Borrower default in the payment of
any sum when due under this Note and such default shall continue
unremedied for fourteen (14) days thereafter.
Other Defaults in Favor of Lender. Should Borrower default under
any other promissory note, loan, extension of credit, security agreement,
or obligation in favor of Lender.
False Statements. Should any representation or warranty of Borrower
or any guarantor made in connection with obtaining the loan evidenced by
this Note or any security agreement directly or indirectly securing
repayment of this Note prove to be incorrect or misleading in any
material respect.
Default Under Loan and Security Agreement. Should Borrower default
under that certain Term Loan and Security Agreement dated February 24,
1997, entered into between Borrower and Lender (the "Loan Agreement"), or
should Borrower default under any other security agreement directly or
indirectly securing repayment of this Note.
Insecurity. Should Borrower have a material adverse change with
respect to its financial condition which results, in Lender's opinion, in
an impairment of the prospect of repayment of this Note.<PAGE>
Default in Favor of Third Parties. Should Borrower default under
any material promissory note, loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person.
Insolvency, Bankruptcy. Should Borrower become unable, or admit in
writing its inability, to pay its debts as they mature, or become the
subject of proceedings in bankruptcy or insolvency, or make a general
assignment for the benefit of creditors, or enter into an arrangement
with a group of creditors, or enter into any action for the purposes of
accomplishing any of the preceding.
Cease to do Business. Should Borrower or any affiliate of Borrower
wind up, liquidate, cease to do business, dissolve, reorganize, merge,
consolidate or sell, assign, transfer, lease or otherwise dispose of all
or substantially all of its assets, or become the subject of any
proceeding for any of the foregoing purposes.
Lender's Rights Upon Default. Should any one or more events of default
occur or exist under this Note, as provided above, Lender shall have all
rights and remedies reserved to Lender under the Loan and Security
Agreement, and shall further have the right, at its sole option, to
accelerate the maturity and insist upon immediate payment in full of the
unpaid principal balance and all accrued interest and all other amounts
then outstanding under this Note (including additional interest accrued
on past due payments and any prepayment premium, as provided herein and
under the Loan and Security Agreement), together with Lender's attorney's
fees, costs, expenses and other fees and charges, as provided herein.
Lender shall have the further right, again at its sole option, to
accelerate the maturity and to insist upon immediate payment in full of
each and every other loan, extension of credit, debt, liability and/or
obligation of every nature and kind that Borrower may then owe to Lender,
whether direct or indirect or by way of assignment, and whether absolute
or contingent, liquidated or unliquidated, voluntary or involuntary,
determined or undetermined, secured or unsecured, whether Borrower is
obligated alone or with others on a joint, several or solidary basis, as
a principal obligor or otherwise, all without further notice, demand or
putting in default, unless Lender shall otherwise elect.
Attorney's Fees. If Lender refers this Note to an attorney for
collection, or files suit against Borrower to collect this Note, or if
Borrower files for bankruptcy or other relief from creditors, Borrower
agrees to pay Lender's reasonable attorney's fees and all other costs,
expenses and fees incurred by Lender in any such action. All such fees,
costs and expenses shall become a part of the indebtedness evidenced by
this Note, and shall bear interest at the rate of interest in effect
under this Note from time to time.<PAGE>
Right of Offset. As collateral security for the prompt and punctual
payment and satisfaction of this Note, Borrower grants Lender a
continuing security interest in the form of a pledge of any and all funds
that Borrower may have at any time on deposit with Lender or any
affiliated companies of Lender and hereby consents and agrees, in the
event of default hereunder, to Lender's offsetting against the
obligations of Borrower hereunder any slim owing from time to time from
Lender or any subsidiary or affiliate of Lender (including Caterpillar
Inc.) to Borrower.
Waivers. Borrower, and each guarantor, surety, endorser or any other
party who may at any time become liable for payment of the indebtedness
evidenced by this Note (each, an "Other Obligor"), hereby waive
presentment for payment, demand for payment, protest, notice of protest,
notice of nonpayment, notice of dishonor, notice of acceleration and
notice of intent to accelerate hereunder, and all other notices in
connection with this Note, filing of suit and diligence in collecting any
sums due under this Note or enforcing any of the security for this Note,
and severally agree that their obligations and liabilities to Lender
hereunder shall be on a "joint and several" basis. To the extent
permitted by law, Borrower and each Other Obligor hereby waives all
rights to plead any statute of limitations as a defense to any action on
this Note. BORROWER AND EACH OTHER OBLIGOR FURTHER WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS NOTE, AND ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS A MATERIAL INDUCEMENT TO LENDER MAKING THE LOAN
EVIDENCED HEREBY AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVER.
BORROWER AND EACH OTHER OBLIGOR WARRANTS THAT IT HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS. IN THE EVENT OF LITIGATION,
THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Borrower and each Other Obligor further severally agree that discharge or
release of any party who is or may be liable to Lender for the
indebtedness represented hereby, or the release or substitution of any
collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall remain
liable to Lender, or of releasing any other collateral that is not
expressly released by Lender. Borrower and each Other Obligor
additionally agree that Lender's acceptance of payment other than in
accordance with the terms of this Note, or Lender's subsequent agreement
to any extension of time, renewal, waiver or modification of this Note or
any of its provisions (without limitation as to number or term), or
Lender's failure or delay in exercising any rights or remedies granted to
Lender, shall likewise not have the effect of releasing Borrower or any
other party or parties from their respective obligations to Lender, or of
releasing any collateral that directly or indirectly secures repayment
hereof. In addition, any failure or delay on the part of Lender to
exercise any of the rights and remedies granted to Lender shall not have
the effect of waiving any of Under's rights and remedies. Any partial
exercise of any rights and/or remedies granted to Lender shall
furthermore not be construed as a waiver of any other rights and
remedies, it being Borrower's intent and agreement that Lender's rights
and remedies<PAGE>
shall be cumulative in nature. Borrower and each Other Obligor further
agree that, should any event of default occur or exist under this Note,
any waiver or forbearance on the part of Under to pursue the fights and
remedies available to Lender shall be binding upon Lender only to the
extent that Lender specifically agrees to any such waiver or forbearance
in writing. A waiver or forbearance on the part of Lender as to one event
of default shall not be construed as a waiver of forbearance as to any
other event of default.
Successors and Assigns Liable. Borrower's and each Other Obligor's
obligations and agreements under this Note shall be binding upon
Borrower's and each Other Obligor's respective successors, heirs,
legatees, devisees, administrators, executors and assigns. The rights and
remedies granted to Lender under this Note shall inure to the benefit of
Lender's successors and assigns, as well as to any subsequent holder or
holders of this Note.
Caption Headings, Plural and Singular. Caption headings of the sections
of this Note are for convenience purposes only and are not to be used to
interpret or to define their provisions. In this Note, whenever the
context so requires, the singular includes the plural and the plural also
includes the singular.
Severability, Integration. If any provision of this Note is held to be
invalid, illegal or unenforceable by any court, that provision shall be
deleted from this Note and the balance of this Note shall be interpreted
as if the deleted provision never existed. This Note constitutes the
entire agreement of Borrower with respect to the repayment to Lender of
the indebtedness evidenced hereby and may not be altered or amended
except by a writing signed by Lender.
Applicable Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Tennessee, without
regard to the conflicts of laws principles thereof.
Borrower has read and fully understands all of the provisions of this
Note.
Signature: /s/ John V. Simon, Jr.
----------------------
Name (print): John V. Simon, Jr.
----------------------
Title: President
----------------------
Signature: /s/ Hubert Freund
----------------------
Name (print): Hubert Freund
----------------------
Title: Regional Sales Manager
----------------------<PAGE>
EXHIBIT 10.3
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SUNSHADOW APARTMENTS, LTD.,
A FLORIDA LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is
entered into and effective as of the 22nd day of October 1997, by and
between SUNSHADOW, INC. (the "General Partner"), a Florida corporation,
as the general partner, CUMBERLAND REAL ESTATE HOLDINGS, INC., a Florida
corporation (the "Withdrawing General Partner"), FRANCIS M. WILLIAMS, as
the original limited partner, and KIMMINS CORP., a Florida corporation
(the "Additional Limited Partner"), pursuant to the provisions of the
Florida Revised Uniform Limited Partnership Act, on the following terms
and conditions:
RECITALS
WHEREAS, the Withdrawing General Partner and the Original Limited
Partner formed the Partnership on July 16, 1987, and
WHEREAS, the Withdrawing General Partner has transferred all of its
interest in the Partnership to the General Partner who desires to be
admitted as a substitute general partner of the Partnership, and
WHEREAS, the Additional Limited Partner desires to be admitted as a
limited partner in the Partnership in exchange for a release of certain
claims it has against the Partnership, and
WHEREAS, the parties hereto desire to amend the partnership agreement
of the Partnership to reflect the withdrawal of the Withdrawing General
Partner, the admission of General Partner as a substitute general partner
and the admission of the Additional Limited Partner as an additional
limited partner and to restate the partnership agreement to reflect the
agreement of the parties hereto.
NOW, THEREFORE, in consideration of the foregoing the parties agree as
follows:
SECTION 1
THE PARTNERSHIP
1.1. Continuation and Partnership Name. The parties continue the
Partnership as a limited partnership pursuant to the provisions of the
Act. This Agreement supersedes any and all other agreements among the
parties, whether oral or written and the terms and conditions set forth
in this Agreement shall govern their relations as Partners. The name of
the Partnership shall continue to be SUNSHADOW APARTMENTS, LTD., a
Florida limited partnership, and all business of the Partnership shall be
conducted in that name. The General Partner may change the name of the
Partnership on ten (10) days written notice to the Limited Partners. The
Partnership shall hold all of its property in the name of the Partnership
and not in the name of any Partner.<PAGE>
1.2. Withdrawal and Admission of Certain Partners. The Withdrawing
General Partner hereby withdraws as a general partner of the Partnership
and the General Partner is hereby admitted as the substitute general
partner. The Additional Limited Partner is hereby admitted as an
additional limited partner.
1.3. Purpose. The purpose of the Partnership shall be to acquire, own,
develop, construct, improve, lease, manage, operate, and otherwise deal
with the Property, to own or lease such personalty and/or fixtures as may
be reasonably related to the ownership or operation of the Property, and
to conduct such other business activities and operations as are
consistent with and reasonably related to the foregoing purposes, and in
connection therewith, to enter into contracts and leases, to borrow money
necessary for the Partnership's business, to pledge, mortgage or
otherwise encumber all or any part of the Partnership's assets.
1.4. Principal Place of Business. The principal place of business of
the Partnership shall be determined by the General Partner, and the
General Partner may change the principal place of business of the
Partnership to any other place upon ten (10) days written notice to the
Limited Partners.
1.5. Term. The term of the Partnership commenced on the date the
certificate of limited partnership described in Section 620.108 of the
Act (the "Certificate") was filed in the office of the Florida Department
of State in accordance with the Act and shall continue until the winding
up and liquidation of the Partnership and its business is completed
following a Liquidating Event, as provided in Section 11.
1.6. Filings; Agent for Service of Process.
(a) The General Partner shall take all actions reasonably necessary
to maintain the status of the Partnership as a limited partnership under
the laws of Florida. The General Partner shall cause amendments to the
Certificate to be filed whenever required by the Act. Any amendments may
be executed by the General Partner.
(b) The agent for service of process on the Partnership shall be
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., or any successor
as appointed by the General Partner. The address of the registered office
of the Partnership at which the registered agent is located shall be One
Harbour Place, 5th Floor, Tampa, Florida 33602.
(c) Upon the dissolution of the Partnership, the General Partner (or,
in the event there is no remaining General Partner, any Person elected
pursuant to Section 11.2) shall promptly execute and cause to be filed
certificates of cancellation in accordance with the Act and the laws of
any other states or jurisdictions in which the Partnership has filed
certificates and shall promptly notify the Limited Partners of
dissolution.<PAGE>
1.7. Independent Activities. Each Limited Partner may, notwithstanding
this Agreement, engage in whatever activities they choose, whether the
same or competitive with the Partnership or otherwise, without having or
incurring any obligation to offer any interest in such activities to the
Partnership or any Partner. Neither this Agreement nor any activity
undertaken pursuant hereto shall prevent any Limited Partner from
engaging in such activities, or require any Limited Partner to permit the
Partnership or any Partner to participate in any such activities, and as
a material part of the consideration for the execution of this Agreement
by each Partner, each Partner hereby waives, relinquishes, and renounces
any such right or claim of participation.
1.8. Definitions. Capitalized words and phrases used in this Agreement
have the following meanings:
(a) "Act" means the Florida Revised Uniform Limited Partnership Act,
as set forth in Chapter 620 of the Florida Statutes, as amended from time
to time (or any corresponding provisions of succeeding law).
(b) "Additional Limited Partner" means Kimmins Corp.
(c) "Adjusted Capital Account Deficit" means, with respect to any
Interest Holder, the deficit balance, if any, in that Interest Holder's
Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(i) Credit to such Capital Account any amounts that Interest Holder
is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-
1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(d) "Affiliate" means, with respect to any Person, any Person owning
or controlling 50% or more of the outstanding voting interests of such
Person.
(e) " Capital Account" means, with respect to any General Partner or
Interest Holder, the Capital Account maintained for such General Partner
or Interest Holder in accordance with the following provisions.
(i) To each Person's Capital Account there shall be credited such
Person's Capital Contributions, such Person's distributive share of
Profits, and the amount of any Partnership liabilities assumed by such
Person or which are secured by any Property distributed to such Person.<PAGE>
(ii) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property distributed to
such Person pursuant to any provision of this Agreement, such Person's
distributive share of Losses, and the amount of any liabilities of such
Person assumed by the Partnership or which are secured by any property
contributed by such Person to the Partnership.
(iii) In the event all or a portion of an interest in the Partnership
is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
(iv) In determining the amount of any liability, there shall be taken
into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.7041(b), and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities which are
secured by contributed or distributed property or which are assumed by
the Partnership Partners), are computed in order to comply with such
Regulations, the General Partner may make such modification, provided
that it is not likely to have a material effect on the amounts
distributable to any Person pursuant to Section 11 upon the dissolution
of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, in accordance with Regulations Section 1.704-
1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply
with Regulations Section 1.704-1(b). As of the date hereof, the Capital
Account balances of the Partners is as set out in Schedule A attached
hereto.
(f) "Capital Contributions" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership with respect to the interest
in the Partnership held by such Partner, and in the case of the
Additional Limited Partner, the current unpaid balance (including
interest) of the obligations of the Partnership to the Additional Limited
Partner forgiven by the Additional Limited Partner upon its admission to
the Partnership.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).<PAGE>
(h) "Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such
year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
(i) "Fiscal Year" means that period of time from January 1 to the
following December 3 1, except for the first fiscal year, when the fiscal
year began on the date the Partnership was formed and ended on the
following December 31.
(j) "General Partner" means any Person who (i) is referred to as such
in the first paragraph of this Agreement or has become a General Partner
pursuant to the terms of this Agreement, and (ii) has not ceased to be a
General Partner pursuant to the terms of this Agreement. "General
Partners" means all such Persons.
(k) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partner, as of the following times: (a) the
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of Property as consideration for an
interest in the Partnership; and (c) the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided,
however, that adjustments pursuant to clauses (a) and (b) above shall be
made only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the
date of distribution; and<PAGE>
(iv) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.7041(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant
to this Section 1.7(k)(iv) to the extent the General Partner determines
that an adjustment pursuant to Section 1.7(k)(ii) is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this Section 1.7(k)(iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.7(k)(i), Section 1.7(k)(ii), or Section 1.7(k)(iv),
such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing
Profits and Losses.
(l) "Interest" means an ownership interest in the Partnership
representing a Capital Contribution set forth in Sections 2.1 or 2.2,
including any and all benefits to which the holder of such an Interest
may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of
this Agreement.
(m) "Interest Holder" means any Person who holds an Interest,
regardless of whether that Person has been admitted to the Partnership as
a Limited Partner. "Interest Holders" means all such Persons.
(n) "Limited Partner" means any Person (i) named as such in the first
paragraph of this Agreement who has become a Limited Partner pursuant to
the terms of this Agreement, and (ii) who holds an Interest. "Limited
Partners" means all such Persons. All references in this Agreement to a
majority in interest or a specified percentage of the Limited Partnership
shall mean Limited Partners whose combined Interests represent more than
50% or such specified percentage, respectively, of the Interests then
held by all Limited Partners.
(o) "Original Limited Partner" means Francis M. Williams.
(p) "Partners" means all General Partners and all Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners. All references in this
Agreement to a majority in interest or a specified percentage of the
Partners shall mean Partners who are entitled to receive more than 50% or
such specified percentage, respectively, of any distributions pursuant to
Section 4. 1.
(q) "Partnership" means the partnership formed pursuant to the
Certificate and described in this Agreement and the partnership
continuing the business of this Partnership in the event of dissolution
as herein provided.
(r) "Person" means any individual, partnership, corporation, trust,
or other entity.<PAGE>
(s) "Profits" and "Losses" mean, for each Fiscal Year or other period,
an amount equal to the Partnership's taxable income or loss for such year
or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 1.7(s) shall be added to such taxable income or
loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(e), and not otherwise
taken into account in computing Profits or Losses pursuant to this
Section 1.7(q) shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted to Section 1.7(k)(ii) or Section 1.7(k)(iii), the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value; and
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period, computed in accordance with Section 1.7(h).
(t) "Property" means the real property acquired by the Partnership and
described in Schedule B hereto and any improvements and personal property
acquired by the Partnership relating thereto, and shall include both
tangible and intangible property.
(u) "Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
(v) "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation, or other disposition and, as a
verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate, or otherwise dispose of.
(w) "Withdrawing General Partner" means Cumberland Real Estate
Holdings, Inc.<PAGE>
SECTION 2
IDENTITY OF PARTNERS CAPITAL CONTRIBUTIONS
2.1. General Partner. The name and address of the General Partner are
as follows:
Sunshadow, Inc.
4311 W. Waters Avenue
Suite 600
Tampa, Florida 33614
2.2. Limited Partners. The name and address of the Limited Partners are
as follows:
Francis M. Williams
1501 Second Avenue
Tampa, Fl, 33605
Kimmins Corp.
1501 Second Avenue
Tampa, FL 33605
2.3. Capital Contributions.
(a) Except as otherwise provided in this Agreement, no Partner shall
demand or receive a return of its Capital Contributions or withdraw from
the Partnership without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have
the right to receive property other than cash except as may be
specifically provided herein.
(b) Except as otherwise provided in this Agreement, no Partner shall
receive any interest, salary, or drawing with respect to its Capital
Contributions or its Capital Account or for services rendered on behalf
of the Partnership or otherwise in its capacity as a Partner.
(c) Except as otherwise provided by this Agreement, no Limited
Partner shall be liable for the debts, liabilities, contracts, or any
other obligations of the Partnership. Except as otherwise provided by
this Agreement, any other agreements among the Partners, or applicable
state law, a Limited Partner shall be liable only to make its Capital
Contributions and shall not be required to lend any funds to the
Partnership or, after its Capital Contributions have been paid, to make
any additional contributions to the Partnership. No General Partner shall
have any personal liability for the repayment of any Capital
Contributions of any Limited Partner.
SECTION 3
ALLOCATIONS
3.1. Profits. After giving effect to the special allocation set forth
in Section 3.3, profits for any Fiscal Year shall be allocated in the
same proportion as net cash flow is distributed to the Partners in
accordance with Section 4. 1.<PAGE>
3.2. Losses. After giving effect to the special allocation set forth in
Section 3.3, losses for any Fiscal Year shall be allocated as set forth
in Section 3.2(a) below, subject to the limitation in Section 3.2(b)
below:
(a) Losses for any Fiscal Year shall be allocated in the same
proportion as net cash flow is distributed to the Partners in accordance
with Section 4. 1.
(b) The Losses allocated pursuant to Section 3.2(a) shall not exceed
the maximum amount of Losses that can be so allocated without causing any
Interest Holder to have an Adjusted Capital Account Deficit at the end of
any Fiscal Year. In the event some but not all of the Interest Holders
would have Adjusted Capital Account Deficits as a consequence of an
allocation of Losses pursuant to Section 3.2(a), the limitation set forth
in this Section 3.2(b) shall be applied on an Interest Holder by Interest
Holder basis so as to allocate the maximum permissible Losses to each
Interest Holder under Regulations Section 1.704-1(b)(2)(ii)(d). All
Losses in excess of the limitations set forth in this Section 3.2(b)
shall be allocated to the General Partner.
3.3. Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and
such gain or loss shall be specially allocated to the Persons in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
3.4. Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the
Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with Section
1.7(k)(i)).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.70)(ii), subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement.<PAGE>
SECTION 4
DISTRIBUTIONS<PAGE>
4.1. Net Cash Flow. Except as otherwise provided in Section 4.2 and
Section 11, all net cash flow, if any, as determined by the General
Partner, shall be distributed, at such times as the General Partner may
determine, as follows:
(a) 1% to the General Partner, 50% to the Original Limited Partner and
49% to the Additional Limited Partner until the Capital Account balance
of the Additional Limited Partner has been reduced to zero, then
thereafter
(b) 1% to the General Partner, 49% to the Original Limited Partner
and 50% to the Additional Limited Partner.
4.2. Net Cash Flow from Capital Transactions. Except as otherwise
provided in Section 11, all net cash flow arising from the sale or
refinancing of any Partnership assets outside the ordinary course of
business shall be distributed as follows:
(a) 100% to the Additional Limited Partner until the Additional
Limited Partner has received distributions pursuant to this Section 4.2
equal to its Capital Contributions, then thereafter
(b) 100% to the Original Limited Partner until the Original Limited
Partner has received distributions pursuant to this Section 4.2 equal to
his Capital Contributions, then thereafter
(c) 1% to the General Partner, 49% to the Original Limited Partner
and 50% to the Additional Limited Partner.
4.3. Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law, with respect to any payment or
distribution by the Partnership to the Partners, shall be treated as
amounts distributed to the Partner pursuant to this Section 4 for all
purposes under this Agreement. The General Partner may allocate any such
amounts among the General Partners and Limited Partners in any manner
that is in accordance with applicable law.<PAGE>
SECTION 5
MANAGEMENT
5.1. Authority of the General Partner. Except to the extent otherwise
provided herein, the General Partner shall have the sole and exclusive
right to manage the business of the Partnership and shall have all of the
rights and powers which may be possessed by general partners under the
Act including, without limitation, the right and power to make any and
all elections for federal, state, and local tax purposes including,
without limitation, any election, if permitted by applicable law: (i) to
adjust the basis of the Property pursuant to Code Sections 754, 734(b),
and 743(b), or comparable provisions of state or local law, in connection
with transfers of Partnership interests and Partnership distributions;
(ii) to extend the statute of limitations for assessment of tax
deficiencies against Partners with respect to adjustments to the
Partnership's federal, state, or local tax returns; and (iii) to
represent the Partnership, the General Partner, and the Limited Partners
before taxing authorities or courts of competent jurisdiction in tax
matters affecting the Partnership, the General Partner, and the Limited
Partners in their capacities as such, and to execute any agreements or
other documents relating to or affecting such tax matters, including
agreements or other documents that bind the Partners with respect to such
tax matters or otherwise affect the rights of the Partnership, General
Partner, and Limited Partners. The General Partner is specifically
authorized to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law.
5.2. Right to Rely on General Partner. Any Person dealing with the
Partnership may rely (without duty of further inquiry) upon a certificate
signed by any General Partner as to:
(a) The identity of any General Partner or Limited Partners;
(b) The existence or nonexistence of any fact or facts that constitute
a condition precedent to acts by a General Partner or which are in any
other manner germane to the affairs of the Partnership;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Partnership; or
(d) Any act or failure to act by the Partnership on any other matter
whatsoever involving the Partnership or any Partner.
5.3. Restrictions on Authority of General Partner.
Without the consent of all of the Partners, no General Partner shall
have the authority to:
(a) Do any act in contravention of this Agreement;
(b) Do any act which would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in
this Agreement;
(c) Confess a judgment against the Partnership;<PAGE>
(d) Possess the Property, or assign rights in specific parts of the
Property, for other than a Partnership purpose;
(e) Knowingly perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction;
(f) File a bankruptcy or insolvency. petition or otherwise institute
insolvency proceedings;
(g) Dissolve, liquidate, consolidate, merge, or sell all or
substantially all of the assets of the Partnership;
(h) Cause the Partnership to engage in any other business activity
inconsistent with the purpose of the Partnership provided in Section 1.3
hereof; or
(i) Amend this Agreement.
5.4. Duties and Obligations of General Partner.
(a) The General Partner shall take all actions which may be necessary
or appropriate (i) for the continuation of the Partnership's valid
existence as a limited partnership under the laws of the State of Florida
(and of each other jurisdiction in which such existence is necessary to
protect the limited liability of the Limited Partners or to enable the
Partnership to conduct the business in which it is engaged) and (ii) for
the accomplishment of the Partnership's purposes, including the
acquisition, development, maintenance, preservation, and operation of the
Property in accordance with the provisions of this Agreement and
applicable laws and regulations.
(b) The General Partner shall devote to the Partnership such time as
may be necessary for the proper performance of all duties hereunder, but
the General Partner shall not be required to devote full time to the
performance of such duties.
(c) The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership and
of the Limited Partners, including the safekeeping and use of all of the
Property and the use thereof for the exclusive benefit of the
Partnership. Any transaction between the Partnership and an Affiliate of
the General Partner shall be permitted only upon such terms and
conditions as would be expected in an arm's length transaction between
unaffiliated parties.
5.5. Indemnification of General Partner.
(a) The Partnership, its receiver, or its trustee shall indemnify, save
harmless, and pay all judgments and claims against any General Partner
relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such General Partner in
connection with the business of the Partnership, including attorneys'
fees incurred by such General Partner in connection with the defense of
any action based on any such act or omission, which attorneys' fees may
be paid as incurred, including all such liabilities under federal and
state securities laws (including the Securities Act of 1933, as amended)
as permitted by laws.<PAGE>
(b) In the event of any action by a Limited Partner against any General
Partner, including a Partnership derivative suit, the Partnership shall
indemnify, save harmless, and pay all expenses of such General Partner,
including attorneys' fees, incurred in the defense of such action, if
such General Partner is successful in such action..
(c) The Partnership shall indemnify, save harmless, and pay all
expenses, costs, or liabilities of any General Partner who for the
benefit of the Partnership makes any deposit, acquires any option, or
makes any other similar payment or assumes any obligation in connection
with any property proposed to be acquired by the Partnership and who
suffers any financial loss as the result of such action.
(d) Notwithstanding the provisions of Sections 5.5(a), 5.5(b), and
5.5(c) above, no General Partner shall be indemnified from any liability
for fraud, bad faith, willful misconduct, or gross negligence.
(e) Notwithstanding the provisions of Sections 5.5(a), 5.5(b), and
5.5(c) above, the obligation of the Partnership to indemnify the General
Partner shall be fully subordinated to the secured obligations payable to
the Partnership's secured creditors and shall not constitute a claim
against the Partnership in the event that net cash flow in excess of the
amounts necessary to pay such secured obligations is insufficient to pay
such obligations.
5.6. Compensation and Loans.
(a) Compensation and Reimbursement. Except as otherwise provided in
this Section 5.6, no Partner shall receive any salary, fee, or draw for
services rendered to or on behalf of the Partnership, nor shall any
Partner be reimbursed for any expenses incurred by such Partner on behalf
of the Partnership.
(b) Expense. The General Partner may charge the Partnership for any
direct expenses reasonably incurred in connection with the Partnership's
business.
(c) Loans. Any Person may, with the consent of the General Partner,
lend or advance money to the Partnership. If any Partner shall make any
loan or loans to the Partnership or advance money on its behalf, the
amount of any such loan or advance shall not be treated as a Capital
Contribution but shall be a debt due from the Partnership. The amount of
any such loan or advance by a lending Partner shall be repayable out of
the Partnership's cash and shall bear interest at such rate as the
General Partner and the lending Partner shall agree. If a General Partner
is the lending Partner, the rate of interest shall be determined by the
General Partner taking into consideration, without limitation, prevailing
interest rates and the interest rates such General Partner is required to
pay in the event such General Partner has itself borrowed funds to loan
or advance to the Partnership. None of the Partners shall be obligated to
make any loan or advance to the Partnership.<PAGE>
5.7. Operating Restrictions.
(a) All Property in the form of cash not otherwise invested shall be
deposited in one or more accounts maintained in such financial
institutions as the General Partner shall determine or shall be invested
in short-term liquid securities or shall be left in escrow and
withdrawals shall be made only in the regular course of Partnership
business on such signature or signatures as the General Partner may
determine from time to time.
(b) The signature of any General Partner shall be necessary and
sufficient to convey title to any real property owned by the Partnership
or to execute any promissory notes, trust deeds, mortgages, or other
instruments of hypothecation, and all of the Partners agree that a copy
of this Agreement may be shown to the appropriate parties in order to
confirm the same, and further agree that the signature of any General
Partner shall be sufficient to execute any "statement of partnership" or
other documents necessary to effectuate this or any other provision of
this Agreement. All of the Partners do hereby appoint the General Partner
as their attorney-in-fact for the execution of any or all of the
documents described herein.
SECTION 6
ROLE OF LIMITED PARTNERS
6.1. Rights or Powers. Except as otherwise set forth in Section 6.2, no
Limited Partner shall have any right or power to take part in the
management or control of the Partnership or its business and affairs or
to act for or bind the Partnership in any way.
6.2. Voting Rights. The Limited Partners shall have the right to vote
on the matters explicitly set forth in this Agreement.
SECTION 7
BOOKS AND RECORDS
7.1. Books and Records. The Partnership shall keep adequate books and
records at its principal place of business, setting forth a true and
accurate account of all business transactions arising out of and in
connection with the conduct of the Partnership. Any Partner or its
designated representative shall have the right, at any reasonable time,
to have access to and inspect and copy the contents of such books or
records. The Partnership's books and records, deposit accounts and
stationary shall be separately maintained and the Partnership's assets
shall not be commingled with the assets of any other party.
7.2. Annual Reports. Within a reasonable period after the end of each
Partnership Fiscal Year, each Partner shall be furnished with pertinent
information regarding the Partnership and its activities during such
period.
7.3. Tax Information. Necessary tax information shall be delivered to
each Partner after the end of each Fiscal Year of the Partnership. Every
effort shall be made to furnish such information within 75 days after the
end of each Fiscal Year.<PAGE>
SECTION 8
ADDITIONAL CAPITAL CONTRIBUTIONS
This Section left blank intentionally.
SECTION 9
TRANSFER OF INTERESTS
This Section left blank intentionally.
SECTION 10
ADDITIONAL PARTNERS
10.1. Additional Partners. No Person shall be admitted to the
Partnership as a General Partner or Limited Partner without the unanimous
consent of the Partners. In the event the General Partner withdraws from
the Partnership, whether or not in violation of this Agreement, no
successor general partner shall be admitted to the Partnership unless
such successor is a corporation whose sole purpose, as reflected in its
articles of incorporation, is to act as the general partner of the
Partnership. In the event of the filing of any petition under any
bankruptcy law by the General Partner or any successor thereto, the
Partnership shall appoint an additional general partner whose sole
purpose, as reflected in its articles of incorporation, is to act as the
general partner of the Partnership.
10.2. Covenant Not to Withdraw, Transfer, or Dissolve. Except as
otherwise permitted by this Agreement, the General Partner hereby
covenants and agrees not to (a) withdraw or attempt to withdraw from the
Partnership, (b) exercise any power under the Act to dissolve the
Partnership, or (c) Transfer all or any portion of its interest in the
Partnership as a General Partner. Further, the General Partner hereby
covenants and agrees to continue to carry out the duties of a General
Partner hereunder until the Partnership is dissolved and liquidated
pursuant to Section 11.
10.3. Termination of Status as General Partner.
(a) If a General Partner ceases to be a Partner for any reason
hereunder, such Person shall continue to be liable as a Partner for all
debts and obligations of the Partnership existing at the time such Person
ceases to be a General Partner, regardless of whether, at such time, such
debts or liabilities were known or unknown, actual or contingent. A
Person shall not be liable as a General Partner for Partnership debts and
obligations arising after such Person ceases to be a General Partner. Any
debts, obligations, or liabilities in damages to the Partnership of any
Person who ceases to be a General Partner shall be collectible by any
legal means and the Partnership is authorized, in addition to any other
remedies at law or in equity, to apply any amounts otherwise
distributable or payable by the Partnership to such Person to satisfy
such debts, obligations, or liabilities.<PAGE>
(b) It is the intention of the Partners that the Partnership not
dissolve as a result of the cessation of any General Partner's status as
a General Partner; provided, however, that if a dissolution nevertheless
occurs under the Act, the Partnership's property and business shall
continue to be held and conducted in a new limited partnership under this
Agreement with any remaining General Partners as general partners, the
Limited Partners as limited partners, and any unadmitted assignees of
Interests as Interest holders. Notwithstanding any provision of the Act
to the contrary, each Partner (including any successor to the Partnership
interest of a General Partner) hereby (1) waives any rights that such
Partner may have as a result of any such unintended dissolution to demand
or receive an accounting of the Partnership or any distribution in
satisfaction of such Partner's interest in the Partnership or any
security for the return or distribution thereof, and (2) agrees to
indemnify and hold harmless the Partnership and the other Partners from
all cost, liability, and damage that any of such indemnified Partners may
incur (including, without limitation, incremental tax liability and
lawyer's fees and expenses of enforcing this indemnity) as a result of
any action inconsistent with part (1) of this sentence.
(c) Notwithstanding any provision to the contrary herein, if a Person
ceases to be a General Partner, the remaining General Partners shall
refile the Certificate as if the Partnership had dissolved as a result of
such cessation and a new limited partnership were formed pursuant to this
Agreement to hold the assets and continue the business of the
Partnership.
(d) If at the time a Person ceases to be a General Partner such Person
is also a Limited Partner or an Interest Holder with respect to Interests
other than its interest as a General Partner, such cessation shall not
affect such Person's rights and obligations with respect to such other
Interests.
SECTION 11
DISSOLUTION AND WINDING UP
11.1. Liquidating Events. The Partnership shall dissolve and commence
winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) July 16, 2037;
(b) The sale of all or substantially all of the Property;
(c) The vote by all of the Partners to dissolve, wind up, and
liquidate the Partnership;
(d) The happening of any other event that makes it unlawful,
impossible, or impractical to carry on the business of the Partnership;
or<PAGE>
(e) Any event which causes there to be no General Partner.
The Partners hereby agree that, notwithstanding any provision of the Act,
the Partnership shall not dissolve prior to the occurrence of a
Liquidating Event. Furthermore, if an event specified in Section 11.1(e)
occurs, the Limited Partners may, within 90 days of the date such event
occurs, unanimously vote to elect a successor General Partner and
continue the Partnership business, in which case the Partnership shall
not dissolve. If it is determined, by a court of competent jurisdiction,
that the Partnership has dissolved (i) prior to the occurrence of a
Liquidating Event, or (ii) upon the occurrence of an event specified in
Section 11. 1(e) following which the Limited Partners elect a successor
General Partner pursuant to the previous sentence, the Partners hereby
agree to continue the business of the Partnership without a winding up or
liquidation.
11.2. Winding Up. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action
that is inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs. The General Partner
(or, in the event there is no remaining General Partner, any Person
elected by a majority in interest of the Limited Partners) shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities
and Property and the Partnership Property shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom, to the extent sufficient therefor, shall be applied and
distributed in proportion to the positive Capital Account balances of the
Partners.
No General Partner shall receive any additional compensation for any
services perf pursuant to this Section 11.
11.3. Rights of Interest Holders. Except as otherwise provided in this
Agreement, (a) each Limited Partner shall look solely to the assets of
the Partnership for the return of its Capital Contribution and shall have
no right or power to demand or receive property other than cash from the
Partnership, and (b) no Limited Partner shall have priority over any
other Limited Partner as to the return of its Capital Contributions,
distributions, or allocations.<PAGE>
SECTION 12
POWER OF ATTORNEY
12.1. General Partner as Attorney-In-Fact. Each Limited Partner hereby
makes, constitutes, and appoints each General Partner and each successor
General Partner, with full power of substitution and resubstitution, its
true and lawful attorney-in-fact for it and in its name, place, and stead
and for its use and benefit, to sign, execute, certify, acknowledge,
swear to, file, and record (a) this Agreement and all agreements,
certificates, instruments, and other documents amending or changing this
Agreement as now or hereafter amended which the General Partner may deem
necessary, desirable, or appropriate including, without limitation,
amendments or changes to reflect (i) the exercise by an General Partner
of any power granted to him under this Agreement; (ii) any amendments
adopted by the Partners in accordance with the terms of this Agreement;
(iii) the admission of any substituted Partner; and (iv) the disposition
by any Partner of its interest in the Partnership; and (b) any
certificates, instruments, and documents as may be required by, or may be
appropriate under, the laws of the State of Florida or any other state or
jurisdiction in which the Partnership is doing or intends to do business.
Each Limited Partner authorizes each such attorney-in-fact to full power
and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done in connection with the foregoing as
fully as such Limited Partner might or could do personally, and hereby
ratifying and confirming all that any such attorney-in-fact shall
lawfully do or cause to be done by virtue thereof or hereof.
12.2. Nature as Special Power. The power of attorney granted pursuant
to this Section 12:
(a) Is a special power of attorney coupled with an interest and is
irrevocable;
(b) May be exercised by any such attorney-in-fact by listing the
Limited Partners executing any agreement, certificate, instrument, or
other document with the single signature of any such attorney-in-fact
acting as attorney-in-fact for such Limited Partners; and
(c) Shall survive the death, disability, legal incapacity, bankruptcy,
insolvency, dissolution, or cessation of existence of a Limited Partner
of the whole or a portion of its interest in the Partnership, except that
where the assignment is of such Limited Partner's entire interest in the
Partnership and the assignee, with the consent of the General Partner, is
admitted as a substituted Limited Partner, the power of attorney shall
survive the delivery of such assignment for the sole purpose of enabling
any such attorney-in-fact to effect such substitution.<PAGE>
SECTION 13
MISCELLANEOUS
13.1. Notices. Any notice, payment, demand, or communication required
or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer
of the Person to whom the same is directed, or sent by regular,
registered, or certified mail, addressed as follows, or to such other
address as such Person may from time to time specify by notice to the
Partners:
(a) If to the Partnership, to the address set forth in Section 1.3;
and
(b) If to a Partner, to the address set forth in Section 2. 1 or 2.2.
Any such notice shall be deemed to be delivered, given, and received for
all purposes as of the date so delivered, if delivered personally or if
sent by regular mail, or as of the date on which the same was deposited
in a regularly maintained receptacle for the deposit of United States
mail, if sent by registered or certified mail, postage and charges
prepaid. Any Person may from time to time specify a different address by
notice to the Partnership and the Partners.
13.2. Binding Effect. Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement shall be binding
upon and inure to the benefit of the Partners and their respective heirs,
legatees, legal representatives, successors, transferees, and assigns.
13.3. Construction. Every covenant, term, and provision of this
Agreement shall be construed according to its fair meaning and not
strictly for or against any Partner.
13.4. Time. Time is of the essence with respect to this Agreement.
13.5. Headings. Sections and other headings contained in this Agreement
are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this
Agreement or any provision hereof.
13.6. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
13.7. Incorporation by Reference. Every exhibit, schedule, and other
appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
13.8. Further Action. Each Partner, upon the request of any General
Partner, agrees to perform all further acts and execute, acknowledge, and
deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
13.9. Variation of Pronouns. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular, or
plural, as the identity of the Person or Persons may require.<PAGE>
13.10. Governing Law. The laws of the State of Florida shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
13.11. Waiver of Action for Partition. Each of the Partners irrevocably
waives any right that it may have to maintain any action for partition
with respect to any of the Partnership Property.
13.12. Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together
and shall constitute one agreement.
13.13. Sole and Absolute Discretion. Except as otherwise provided in
this Agreement, all actions which any General Partner may take and all
determinations which any General Partner may make pursuant to this
Agreement may be taken and made at the sole and absolute discretion of
such General Partner.
13.14. Special Restrictions. So long as the Partnership's mortgage loan
from Nomura Asset Capital Corporation ("Nomura") (together with any
assignment or renewal thereof, the "Nomura Loan") remains outstanding,
without the prior written consent of Nomura (or any successor holder of
the Nomura Loan), the Partnership shall not:
(a) Dissolve, merge, liquidate or otherwise sell or dispose of its
assets (other than in the ordinary course of the Partnership's day-to-day
operations);
(b) Incur any indebtedness outside the ordinary course of the
Partnership's day-to-day operations,
(c) Permit any transfer, directly or indirectly, of any interest in
the Partnership such that the transferee owns, as a result of such
transfer, a greater than 49% interest in the Partnership, or
(d) Amend the Partnership Agreement.
(e) Upon the admission of an additional or successor general partner,
the Partnership shall deliver an acceptable non-consolidation opinion to
the holder of the Nomura Loan.<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Amended and
Restated Agreement of Limited Partnership as of the date first above
written.
GENERAL PARTNER:
SUNSHADOW, INC.,
a Florida Corporation
By: /s/Joseph M. Williams
-------------------------------------
Joseph M. Williams, President
WITHDRAWING GENERAL PARTNER:
CUMBERLAND REAL ESTATE
HOLDINGS, INC., a Florida corporation
By: /s/Joseph M. Williams
-------------------------------------
Joseph M. Williams, President
ORIGINAL LIMITED PARTNER:
/s/Francis M. Williams
-------------------------------------
FRANCIS M. WILLIAMS
ADDITIONAL LIMITED PARTNER:
KIMMINS CORP., a Florida corporation
By: /s/Francis M. Williams
-------------------------------------
Francis M. Williams, President<PAGE>
SCHEDULE A
<TABLE>
PARTNERSHIP CAPITAL ACCOUNTS
FOR SUNSHADOW APARTMENTS
<CAPTION>
Francis
CREH CREH Williams Other
Name of General Limited Limited Limited
Partnership Partner Partner Partner Partner
<S> <C> <C> <C> <C>
Sunshadow Apartments:
-----------------------
Original capital
contribution $ 1.00 $ 0.00 $ 99.00 $ 0.00
Losses to
December 31, 1996 (61,001.97) 0.00 (6,039,209.69) 0.00
Losses for nine
months ending
September 30, 1997 (3,959.31) 0.00 (391,971.87) 0.00
------------- --------- --------------- --------
Total capital
accounts $ (64,960.28) $ 0.00 $(6,431,082.56) $ 0.00
============= ========= =============== ========
/TABLE
<PAGE>
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SUMMERBREEZE APARTMENTS, LTD.,
A FLORIDA LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is
entered into and effective as of the 22nd day of October, 1997, by and
between SUMMERBREEZE, INC. (the "General Partner"), a Florida
corporation, as the general partner, CUMBERLAND REAL ESTATE HOLDINGS,
INC., a Florida corporation (the "Withdrawing General Partner"), FRANCIS
M. WILLIAMS, as the original limited partner, and KIMMINS CORP., a
Florida corporation (the "Additional Limited Partner"), pursuant to the
provisions of the Florida Revised Uniform Limited Partnership Act, on the
following terms and conditions:
RECITALS
WHEREAS, the Withdrawing General Partner and the Original Limited
Partner formed the Partnership on July 16, 1987, and
WHEREAS, the Withdrawing General Partner has transferred all of its
interest in the Partnership to the General Partner who desires to be
admitted as a substitute general partner of the Partnership, and
WHEREAS, the Additional Limited Partner desires to be admitted as a
limited partner in the Partnership in exchange for a release of certain
claims it has against the Partnership, and
WHEREAS, the parties hereto desire to amend the partnership agreement
of the Partnership to reflect the withdrawal of the Withdrawing General
Partner, the admission of General Partner as a substitute general partner
and the admission of the Additional Limited Partner as an additional
limited partner and to restate the partnership agreement to reflect the
agreement of the parties hereto.
NOW, THEREFORE, in consideration of the foregoing the parties agree as
follows:
SECTION 1
THE PARTNERSHIP
1. 1. Continuation and Partnership Name. The parties continue the
Partnership as a limited partnership pursuant to the provisions of the
Act. This Agreement supersedes any and all other agreements among the
parties, whether oral or written and the terms and conditions set forth
in this Agreement shall govern their relations as Partners. The name of
the Partnership shall continue to be SUMMERBREEZE APARTMENTS, LTD., a
Florida limited partnership, and all business of the Partnership shall be
conducted in that name. The General Partner may change the name of the
Partnership on ten (10) days written notice to the Limited Partners. The
Partnership shall hold all of its property in the name of the Partnership
and not in the name of any Partner.<PAGE>
1.2. Withdrawal and Admission of Certain Partners. The Withdrawing
General Partner hereby withdraws as a general partner of the Partnership
and the General Partner is hereby admitted as the substitute general
partner. The Additional Limited Partner is hereby admitted as an
additional limited partner.
1.3. Purpose. The purpose of the Partnership shall be to acquire, own,
develop, construct, improve, lease, manage, operate, and otherwise deal
with the Property, to own or lease such personalty and/or fixtures as may
be reasonably related to the ownership or operation of the Property, and
to conduct such other business activities and operations as are
consistent with and reasonably related to the foregoing purposes, and in
connection therewith, to enter into contracts and leases, to borrow money
necessary for the Partnership's business, to pledge, mortgage or
otherwise encumber all or any part of the Partnership's assets.
1.4. Principal Place of Business. The principal place of business of
the Partnership shall be determined by the General Partner, and the
General Partner may change the principal place of business of the
Partnership to any other place upon ten (10) days written notice to the
Limited Partners.
1.5. Term. The term of the Partnership commenced on the date the
certificate of limited partnership described in Section 620.108 of the
Act (the "Certificate") was filed in the office of the Florida Department
of State in accordance with the Act and shall continue until the winding
up and liquidation of the Partnership and its business is completed
following a Liquidating Event, as provided, in Section 11.
1.6. Filings; Agent for Service of Process.
(a) The General Partner shall take all actions reasonably necessary to
maintain the status of the Partnership as a limited partnership under the
laws of Florida. The General Partner shall cause amendments to the
Certificate to be filed whenever required by the Act. Any amendments may
be executed by the General Partner.
(b) The agent for service of process on the Partnership shall be
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., or any successor
as appointed by the General Partner. The address of the registered office
of the Partnership at which the registered agent is located shall be One
Harbour Place, 5th Floor, Tampa, Florida 33602.
(c) Upon the dissolution of the Partnership, the General Partner (or,
in the event there is no remaining General Partner, any Person elected
pursuant to Section 11.2) shall promptly execute and cause to be filed
certificates of cancellation in accordance with the Act and the laws of
any other states or jurisdictions in which the Partnership has filed
certificates and shall promptly notify the Limited Partners of
dissolution.<PAGE>
1.7. Independent Activities. Each Limited Partner may, notwithstanding
this Agreement, engage in whatever activities they choose, whether the
same or competitive with the Partnership or otherwise, without having or
incurring any obligation to offer any interest in such activities to the
Partnership or any Partner. Neither this Agreement nor any activity
undertaken pursuant hereto shall prevent any Limited Partner from
engaging in such activities, or require any Limited Partner to permit the
Partnership or any Partner to participate in any such activities, and as
a material part of the consideration for the execution of this Agreement
by each Partner, each Partner hereby waives, relinquishes, and renounces
any such right or claim of participation.
1.8. Definitions. Capitalized words and phrases used in this Agreement
have the following meanings:
(a) "Act" means the Florida Revised Uniform Limited Partnership Act,
as set forth in Chapter 620 of the Florida Statutes, as amended from time
to time (or any corresponding provisions of succeeding law).
(b) "Additional Limited Partner" means Kimmins Corp.
(c) "Adjusted Capital Account Deficit" means, with respect to any
Interest Holder, the deficit balance, if any, in that Interest Holder's
Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(i) Credit to such Capital Account any amounts that Interest Holder
is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1-704-1(b)(2)(ii)(d)(5) and 1.704-
1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(d) "Affiliate" means, with respect to any Person, any Person owning
or controlling 50% or more of the outstanding voting interests of such
Person.
(e) "Capital Account" means, with respect to any General Partner or
Interest Holder, the Capital Account maintained for such General Partner
or Interest Holder in accordance with the following provisions.
(i) To each Person's Capital Account there shall be credited such
Person's Capital Contributions, such Person's distributive share of
Profits, and the amount of any Partnership liabilities assumed by such
Person or which are secured by any Property distributed to such Person.
(ii) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property distributed to
such Person pursuant to any provision of this Agreement, such Person's
distributive share of Losses, and the amount of any liabilities of such
Person assumed by the Partnership or which are secured by any property
contributed by such Person to the Partnership.<PAGE>
(iii) In the event all or a portion of an interest in the Partnership
is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
(iv) In determining the amount of any liability, there shall be taken
into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704l(b), and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities which are
secured by contributed or distributed property or which are assumed by
the Partnership Partners), are computed in order to comply with such
Regulations, the General Partner may make such modification, provided
that it is not likely to have a material effect on the amounts
distributable to any Person pursuant to Section 11 upon the dissolution
of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, in accordance with Regulations Section 1.704-
1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply
with Regulations Section 1.704-1(b). As of the date hereof, the Capital
Account balances of the Partners is as set out in Schedule A attached
hereto.
(f) "Capital Contributions" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership with respect to the interest
in the Partnership held by such Partner, and in the case of the
Additional Limited Partner, the current unpaid balance (including
interest) of the obligations of the Partnership to the Additional Limited
Partner forgiven by the Additional Limited Partner upon its admission to
the Partnership.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
(h) "Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such
year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.<PAGE>
(i) "Fiscal Year" means that period of time from January 1 to the
following December 31, except for the first fiscal year, when the fiscal
year began on the date the Partnership was formed and ended on the
following December 31.
(j) "General Partner" means any Person who (i) is referred to as such
in the first paragraph of this Agreement or has become a General Partner
pursuant to the terms of this Agreement, and (ii) has not ceased to be a
General Partner pursuant to the terms of this Agreement. "General
Partners" means all such Persons.
(k) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partner, as of the following times: (a) the
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of Property as consideration for an
interest in the Partnership; and (c) the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided,
however, that adjustments pursuant to clauses (a) and (b) above shall be
made only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the
date of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.7041(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant
to this Section 1.7(k)(iv) to the extent the General Partner determines
that an adjustment pursuant to Section 1.7(k)(ii) is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this Section 1.7(k)(iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.7(k)(i), Section 1.7(k)(ii), or Section 1.7(k)(iv),
such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing
Profits and Losses.<PAGE>
(l) "Interest" means an ownership interest in the Partnership
representing a Capital Contribution set forth in Section 2.1 or 2.2,
including any and all benefits to which the holder of such an Interest
may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions, of
this Agreement.
(m) "Interest Holder" means any Person who holds an Interest,
regardless of whether that Person has been admitted to the Partnership as
a Limited Partner. "Interest Holders" means all such Persons.
(n) "Limited Partner" means any Person (i) named as such in the first
paragraph of this Agreement who has become a Limited Partner pursuant to
the terms of this Agreement, and (ii) who holds an Interest. "Limited
Partners" means all such Persons. All references in this Agreement to a
majority in interest or a specified percentage of the Limited Partnership
shall mean Limited Partners whose combined Interests represent more than
50% or such specified percentage, respectively, of the Interests then
held by all Limited Partners.
(o) "Original Limited Partner" means Francis M. Williams.
(p) "Partners" means all General Partners and all Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners. All references in this
Agreement to a majority in interest or a specified percentage of the
Partners shall mean Partners who are entitled to receive more than 50% or
such specified percentage, respectively, of any distributions pursuant to
Section 4. 1.
(q) "Partnership" means the partnership formed pursuant to the
Certificate and described in this Agreement and the partnership
continuing the business of this Partnership in the event of dissolution
as herein provided.
(r) "Person" means any individual, partnership, corporation, trust,
or other entity.
(s) "Profits" and "Losses" mean, for each Fiscal Year or other period,
an amount equal to the Partnership's taxable income or loss for such year
or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 1.7(s) shall be added to such taxable income or
loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(e), and not otherwise
taken into account in computing Profits or Losses pursuant to this
Section 1.7(q) shall be subtracted from such taxable income or loss;<PAGE>
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted to Section 1.7(k)(ii) or Section 1.7(k)(iii), the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value; and
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period, computed in accordance with Section 1.7(h).
(t) "Property" means the real property acquired by the Partnership and
described in Schedule B hereto and any improvements and personal property
acquired by the Partnership relating thereto, and shall include both
tangible and intangible property.
(u) "Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
(v) "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation, or other disposition and, as a
verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate, or otherwise dispose of.
(w) "Withdrawing General Partner" means Cumberland Real Estate
Holdings, Inc.
SECTION 2
IDENTITY OF PARTNERS CAPITAL CONTRIBUTIONS
2.1. General Partner. The name and address of the General Partner are
as follows:
Summerbreeze, Inc.
4311 W. Waters Avenue
Suite 600
Tampa, Florida 33614
2.2. Limited Partners. The name and address of the Limited Partners are
as follows:
Francis M. Williams
1501 Second Avenue
Tampa, FL 33605
Kimmins Corp.
1501 Second Avenue
Tampa, FL 33605
2.3. Capital Contributions.<PAGE>
(a) Except as otherwise provided in this Agreement, no Partner shall
demand or receive a return of its Capital Contributions or withdraw from
the Partnership without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have
the right to receive property other than cash except as may be
specifically provided herein.
(b) Except as otherwise provided in this Agreement, no Partner shall
receive any interest, salary, or drawing with respect to its Capital
Contributions or its Capital Account or for services rendered on behalf
of the Partnership or otherwise in its capacity as a Partner.<PAGE>
(c) Except as otherwise provided by this Agreement, no Limited Partner
shall be liable for the debts, liabilities, contracts, or any other
obligations of the Partnership. Except as otherwise provided by this
Agreement, any other agreements among the Partners, or applicable state
law, a Limited Partner shall be liable only to make its Capital
Contributions and shall not be required to lend any funds to the
Partnership or, after its Capital Contributions have been paid, to make
any additional contributions to the Partnership. No General Partner shall
have any personal liability for the repayment of any Capital
Contributions of any Limited Partner.
SECTION 3
ALLOCATIONS
3.1. Profits. After giving effect to the special allocation set forth
in Section 3.3, profits for any Fiscal Year shall be allocated in the
same proportion as net cash flow is distributed to the Partners in
accordance with Section 4. 1.
3.2. Losses. After giving effect to the special allocation set forth in
Section 3.3, losses for any Fiscal Year shall be allocated as set forth
in Section 3.2(a) below, subject to the limitation in Section 3.2(b)
below:
(a) Losses for any Fiscal Year shall be allocated in the same
proportion as net cash flow is distributed to the Partners in accordance
with Section 4. 1.
(b) The Losses allocated pursuant to Section 3.2(a) shall not exceed
the maximum amount of Losses that can be so allocated without causing any
Interest Holder to have an Adjusted Capital Account Deficit at the end of
any Fiscal Year. In the event some but not all of the Interest Holders
would have Adjusted Capital Account Deficits as a consequence of an
allocation of Losses pursuant to Section 3.2(a), the limitation set forth
in this Section 3.2(b) shall be applied on an Interest Holder by Interest
Holder basis so as to allocate the maximum permissible Losses to each
Interest Holder under Regulations Section 1.704-1(b)(2)(ii)(d). All
Losses in excess of the limitations set forth in this Section 3.2(b)
shall be allocated to the General Partner.
3.3. Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and
such gain or loss shall be specially allocated to the Persons in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.<PAGE>
3.4. Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the
Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with Section
1.7(k)(i)).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.70)(ii), subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement.
SECTION 4
DISTRIBUTIONS
4.1. Net Cash Flow. Except as otherwise provided in Section 4.2 and
Section 11, all net cash flow, if any, as determined by the General
Partner, shall be distributed, at such times as the General Partner may
determine, as follows:
(a) 1% to the General Partner, 50% to the Original Limited Partner and
49% to the Additional Limited Partner until the Capital Account balance,
of the Additional Limited Partner has been reduced to zero, then
thereafter
(b) 1% to the General Partner, 49% to the Original Limited Partner
and 50% to the Additional Limited Partner.
4.2. Net Cash Flow from Capital Transactions. Except as otherwise
provided in Section 11, all net cash flow arising from the sale or
refinancing of any Partnership assets outside the ordinary course of
business shall be distributed as follows:
(a) 100% to the Additional Limited Partner until the Additional
Limited Partner has received distributions pursuant to this Section 4.2
equal to its Capital Contributions,
then thereafter
(b) 100% to the Original Limited Partner until the Original Limited
Partner has received distributions pursuant to this Section 4.2 equal to
his Capital Contributions, then thereafter
(c) 1% to the General Partner, 49% to the Original Limited Partner
and 50% to the Additional Limited Partner.<PAGE>
4.3. Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law, with respect to any payment or
distribution by the Partnership to the Partners, shall be treated as
amounts distributed to the Partner pursuant to this Section 4 for all
purposes under this Agreement. The General Partner may allocate any such
amounts among the General Partners and Limited Partners in any manner
that is in accordance with applicable law.
SECTION 5
MANAGEMENT
5.1. Authority of the General Partner. Except to the extent otherwise
provided herein, the General Partner shall have the sole and exclusive
right to manage the business of the Partnership and shall have all of the
rights and powers which may be possessed by general partners under the
Act including, without limitation, the right and power to make any and
all elections for federal, state, and local tax purposes including,
without limitation, any election, if permitted by applicable law: (i) to
adjust the basis of the Property pursuant to Code Sections 754, 734(b),
and 743(b), or comparable provisions of state or local law, in connection
with transfers of Partnership interests and Partnership distributions;
(ii) to extend the statute of limitations for assessment of tax
deficiencies against Partners with respect to adjustments to the
Partnership's federal, state, or local tax returns; and (iii) to
represent the Partnership, the General Partner, and the Limited Partners
before taxing authorities or courts of competent jurisdiction in tax
matters affecting the Partnership, the General Partner, and the Limited
Partners in their capacities as such, and to execute any agreements or
other documents relating to or affecting such tax matters, including
agreements or other documents that bind the Partners with respect to such
tax matters or otherwise affect the rights of the Partnership, General
Partner, and Limited Partners. The General Partner is specifically
authorized to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law.
5.2. Right to Rely on General Partner. Any Person dealing with the
Partnership may rely (without duty of further inquiry) upon a certificate
signed by any General Partner as to:
(a) The identity of any General Partner or Limited Partners;
(b) The existence or nonexistence of any fact or facts that constitute
a condition precedent to acts by a General Partner or which are in any
other manner germane to the affairs of the Partnership;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Partnership; or
(d) Any act or failure to act by the Partnership on any other matter
whatsoever involving the Partnership or any Partner.
5.3. Restrictions on Authority of General Partner.
Without the consent of all of the Partners, no General Partner shall
have the authority to:
(a) Do any act in contravention of this Agreement;<PAGE>
(b) Do any act which would make it impossible to carry ordinary
business of the Partnership, except as otherwise provided in this
Agreement;
(c) Confess a judgment against the Partnership;
(d) Possess the Property, or assign rights in specific parts of the
Property, for other than a Partnership purpose;
(e) Knowingly perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction;
(f) File a bankruptcy or insolvency petition or otherwise institute
insolvency proceedings;
(g) Dissolve, liquidate, consolidate, merge, or sell all or
substantially all of the assets of the Partnership;
(h) Cause the Partnership to engage in any other business activity
inconsistent with the purpose of the Partnership provided in Section 1.3
hereof; or
(i) Amend this Agreement.
5.4. Duties and Obligations of General Partner.
(a) The General Partner shall take all actions which may be necessary
or appropriate (i) for the continuation of the Partnership's valid
existence as a limited partnership under the laws of the State of Florida
(and of each other jurisdiction in which such existence is necessary to
protect the limited liability of the Limited Partners or to enable the
Partnership to conduct the business in which it is engaged) and (ii) for
the accomplishment of the Partnership's purposes, including the
acquisition, development, maintenance, preservation, and operation of the
Property in accordance with the provisions of this Agreement and
applicable laws and regulations.
(b) The General Partner shall devote to the Partnership such time as
may be necessary for the proper performance of all duties hereunder, but
the General Partner shall not be required to devote full time to the
performance of such duties.
(c) The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership and
of the Limited Partners, including the safekeeping and use of all of the
Property and the use thereof for the exclusive benefit of the
Partnership. Any transaction between the Partnership and an Affiliate of
the General Partner shall be permitted only upon such terms and
conditions as would be expected in an arm's length transaction between
unaffiliated parties.<PAGE>
5.5. Indemnification of General Partner.
(a) The Partnership, its receiver, or its trustee shall indemnify, save
harmless, and pay all judgments and claims against any General Partner
relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by such General Partner in
connection with the business of the Partnership, including attorneys'
fees incurred by such General Partner in connection with the defense of
any action based on any such act or omission, which attorneys' fees may
be paid as incurred, including all such liabilities under federal and
state securities laws (including the Securities Act of 1933, as amended)
as permitted by laws.
(b) In the event of any action by a Limited Partner against any General
Partner, including a Partnership derivative suit, the Partnership shall
indemnify, save harmless, and pay all expenses of such General Partner,
including attorneys' fees, incurred in the defense of such action, if
such General Partner is successful in such action.
(c) The Partnership shall indemnify, save harmless, and pay all
expenses, costs, or liabilities of any General Partner who for the
benefit of the Partnership makes any deposit, acquires any option, or
makes any other similar payment or assumes any obligation in connection
with any property proposed to be acquired by the Partnership and who
suffers any financial loss as the result of such action.
(d) Notwithstanding the provisions of Sections 5.5(a), 5.5(b), and
5.5(c) above, no General Partner shall be indemnified from any liability
for fraud, bad faith, willful misconduct, or gross negligence.
(e) Notwithstanding the provisions of Sections 5.5(a), 5.5(b), and
5.5(c) above, the obligation of the Partnership to indemnify the General
Partner shall be fully subordinated to the secured obligations payable to
the Partnership's secured creditors and shall not constitute a claim
against the Partnership in the event that net cash flow in excess of the
amounts necessary to pay such secured obligations is insufficient to pay
such obligations.
5.6. Compensation and Loans.
(a) Compensation and Reimbursement. Except as otherwise provided in
this Section 5.6, no Partner shall receive any salary, fee, or draw for
services rendered to or on behalf of the Partnership, nor shall any
Partner be reimbursed for any expenses incurred by such Partner on behalf
of the Partnership.
(b) Expense. The General Partner may charge the Partnership for any
direct expenses reasonably incurred in connection with the Partnership's
business.<PAGE>
(c) Loans. Any Person may, with the consent of the General Partner,
lend or advance money to the Partnership. If any Partner shall make any
loan or loans to the Partnership or advance money on its behalf, the
amount of any such loan or advance shall not be treated as a Capital
Contribution but shall be a debt due from the Partnership. The amount of
any such loan or advance by a lending Partner shall be repayable out of
the Partnership's cash and shall bear interest at such rate as the
General Partner and the lending Partner shall agree. If a General Partner
is the lending Partner, the rate of interest shall be determined by the
General Partner taking into consideration, without limitation, prevailing
interest rates and the interest rates such General Partner is required to
pay in the event such General Partner has itself borrowed funds to loan
or advance to the Partnership. None of the Partners shall be obligated to
make any loan or advance to the Partnership.
5.7. Operating Restrictions.
(a) All Property in the form of cash not otherwise invested shall be
deposited in one or more accounts maintained in such financial
institutions as the General Partner shall determine or shall be invested
in short-term liquid securities or shall be left in escrow and
withdrawals shall be made only in the regular course of Partnership
business on such signature or signatures as the General Partner may
determine from time to time.
(b) The signature of any General Partner shall be necessary and
sufficient to convey title to any real property owned by the Partnership
or to execute any promissory notes, trust deeds, mortgages, or other
instruments of hypothecation, and all of the Partners agree that a copy
of this Agreement may be shown to the appropriate parties in order to
confirm the same, and further agree that the signature of any General
Partner shall be sufficient to execute any "statement of partnership" or
other documents necessary to effectuate this or any other provision of
this Agreement. All of the Partners do hereby appoint the General Partner
as their attorney-in-fact for the execution of any or all of the
documents described herein.
SECTION 6
ROLE OF LIMITED PARTNERS
6.1. Rights or Powers. Except as otherwise set forth in Section 6.2, no
Limited Partner shall have any right or power to take part in the
management or control of the Partnership or its business and affairs or
to act for or bind the Partnership in any way.
6.2. Voting Rights. The Limited Partners shall have the right to vote
on the matters explicitly set forth in this Agreement.<PAGE>
SECTION 7
BOOKS AND RECORDS
7.1. Books and Records. The Partnership shall keep adequate books and
records at its principal place of business, setting forth a true and
accurate account of all business transactions arising out of and in
connection with the conduct of the Partnership. Any Partner or its
designated representative shall have the right, at any reasonable time,
to have access to and inspect and copy the contents of such books or
records. The Partnership's books and records, deposit accounts and
stationary shall be separately maintained and the Partnership's assets
shall not be commingled with the assets of any other party.
7.2. Annual Reports. Within a reasonable period after the end of each
Partnership Fiscal Year, each Partner shall be furnished with pertinent
information regarding the Partnership and its activities during such
period.
7.3. Tax Information. Necessary tax information shall be delivered to
each Partner after the end of each Fiscal Year of the Partnership. Every
effort shall be made to furnish such information within 75 days after the
end of each Fiscal Year.
SECTION 8
ADDITIONAL CAPITAL CONTRIBUTIONS
This Section left blank intentionally.
SECTION 9
TRANSFER OF INTERESTS
This Section left blank intentionally.
SECTION 10
ADDITIONAL PARTNERS
10.1. Additional Partners. No Person shall be admitted to the
Partnership as a General Partner or Limited Partner without the unanimous
consent of the Partners. In the event the General Partner withdraws from
the Partnership, whether or not in violation of this Agreement, no
successor general partner shall be admitted to the Partnership unless
such successor is a corporation whose sole purpose, as reflected in its
articles of incorporation, is to act as the general partner of the
Partnership. In the event of the filing of any petition under any
bankruptcy law by the General Partner or any successor thereto, the
Partnership shall appoint an additional general partner whose sole
purpose, as reflected in its articles of incorporation, is to act as the
general partner of the Partnership.<PAGE>
10.2. Covenant Not to Withdraw, Transfer, or Dissolve. Except as
otherwise permitted by this Agreement, the General Partner hereby
covenants and agrees not to (a) withdraw or attempt to withdraw from the
Partnership, (b) exercise any power under the Act to dissolve the
Partnership, or (c) Transfer all or any portion of its interest in the
Partnership as a General Partner. Further, the General Partner hereby
covenants and agrees to continue to carry out the duties of a General
Partner hereunder until the Partnership is dissolved and liquidated
pursuant to Section 11.
10.3. Termination of Status as General Partner.
(a) If a General Partner ceases to be a Partner for any reason
hereunder, such Person shall continue to be liable as a Partner for all
debts and obligations of the Partnership existing at the time such Person
ceases to be a General Partner, regardless of whether, at such time, such
debts or liabilities were known or unknown, actual or contingent. A
Person shall not be liable as a General Partner for Partnership debts and
obligations arising after such Person ceases to be a General Partner. Any
debts, obligations, or liabilities in damages to the Partnership of any
Person who ceases to be a General Partner shall be collectible by any
legal means and the Partnership is authorized, in addition to any other
remedies at law or in equity, to apply any amounts otherwise
distributable or payable by the Partnership to such Person to satisfy
such debts, obligations, or liabilities.
(b) It is the intention of the Partners that the Partnership not
dissolve as a result of the cessation of any General Partner's status as
a General Partner; provided, however, that if a dissolution nevertheless
occurs under the Act, the Partnership's property and business shall
continue to be held and conducted in a new limited partnership under this
Agreement with any remaining General Partners as general partners, the
Limited Partners as limited partners, and any unadmitted assignees of
Interests as Interest holders. Notwithstanding any provision of the Act
to the contrary, each Partner (including any successor to the Partnership
interest of a General Partner) hereby (1) waives any rights that such
Partner may have as a result of any such unintended dissolution to demand
or receive an accounting of the Partnership or any distribution in
satisfaction of such Partner's interest in the Partnership or any
security for the return or distribution thereof, and (2) agrees to
indemnify and hold harmless the Partnership and the other Partners from
all cost, liability, and damage that any of such indemnified Partners may
incur (including, without limitation, incremental tax liability and
lawyer's fees and expenses of enforcing this indemnity) as a result of
any action inconsistent with part (1) of this sentence.
(c) Notwithstanding any provision to the contrary herein, if a Person
ceases to be a General Partner, the remaining General Partners shall
refile the Certificate as if the Partnership had dissolved as a result of
such cessation and a new limited partnership were formed pursuant to this
Agreement to hold the assets and continue the business of the
Partnership.
(d) If at the time a Person ceases to be a General Partner such Person
is also a Limited Partner or an Interest Holder with respect to Interests
other than its interest as a General Partner, such cessation shall not
affect such Person's rights and obligations with respect to such other
Interests.<PAGE>
SECTION 11
DISSOLUTION AND WINDING UP
11.1. Liquidating Events. The Partnership shall dissolve and commence
winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) July 16, 2037;
(b) The sale of all or substantially all of the Property;
(c) The vote by all of the Partners to dissolve, wind up, and
liquidate the Partnership;
(d) The happening of any other event that makes it unlawful,
impossible, or impractical to carry on the business of the Partnership;
or
(e) Any event which causes there to be no General Partner.
The Partners hereby agree that, notwithstanding any provision of the Act,
the Partnership shall not dissolve prior to the occurrence of a
Liquidating Event. Furthermore, if an event specified in Section 11.1(e)
occurs, the Limited Partners may, within 90 days of the date such event
occurs, unanimously vote to elect a successor General Partner and
continue the Partnership business, in which case the Partnership shall
not dissolve. If it is determined, by a court of competent jurisdiction,
that the Partnership has dissolved (i) prior to the occurrence of a
Liquidating Event, or (ii) upon the occurrence of an event specified in
Section 11. 1 (e) following which the Limited Partners elect a successor
General Partner pursuant to the previous sentence, the Partners hereby
agree to continue the business of the Partnership without a winding up or
liquidation.
11.2. Winding Up. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action
that is inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs. The General Partner
(or, in the event there is no remaining General Partner, any Person
elected by a majority in interest of the Limited Partners) shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities
and Property and the Partnership Property shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom, to the extent sufficient therefor, shall be applied and
distributed in proportion to the positive Capital Account balances of the
Partners.
No General Partner shall receive any additional compensation for any
services perf pursuant to this Section 11.<PAGE>
11.3. Rights of Interest Holders. Except as otherwise provided in this
Agreement, (a) each Limited Partner shall look solely to the assets of
the Partnership for the return of its Capital Contribution and shall have
no right or power to demand or receive property other than cash from the
Partnership, and (b) no Limited Partner shall have priority over any
other Limited Partner as to the return of its Capital Contributions,
distributions, or allocations.
SECTION 12
POWER OF ATTORNEY
12.1. General Partner as Attorney-In-Fact. Each Limited Partner hereby
makes, constitutes, and appoints each General Partner and each successor
General Partner, with full power of substitution and resubstitution, its
true and lawful attorney-in-fact for it and in its name, place, and stead
and for its use and benefit, to sign, execute, certify, acknowledge,
swear to, file, and record (a) this Agreement and all agreements,
certificates, instruments, and other documents amending or changing this
Agreement as now or hereafter amended which the General Partner may deem
necessary, desirable, or appropriate including, without limitation,
amendments or changes to reflect (i) the exercise by an General Partner
of any power granted to him under this Agreement; (ii) any amendments
adopted by the Partners in accordance with the terms of this Agreement;
(iii) the admission of any substituted Partner; and (iv) the disposition
by any Partner of its interest in the Partnership; and (b) any
certificates, instruments, and documents as may be required by, or may be
appropriate under, the laws of the State of Florida or any other state or
jurisdiction in which the Partnership is doing or intends to do business.
Each Limited Partner authorizes each such attorney-in-fact to full power
and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done in connection with the foregoing as
fully as such Limited Partner might or could do personally, and hereby
ratifying and confirming all that any such attorney-in-fact shall
lawfully do or cause to be done by virtue thereof or hereof.
12.2. Nature as Special Power. The power of attorney granted pursuant
to this Section 12:
(a) Is a special power of attorney coupled with an interest and is
irrevocable;
(b) May be exercised by any such attorney-in-fact by listing the
Limited Partners executing any agreement, certificate, instrument, or
other document with the single signature of any such attorney-in-fact
acting as attorney-in-fact for such Limited Partners; and
(c) Shall survive the death, disability, legal incapacity, bankruptcy,
insolvency, dissolution, or cessation of existence of a Limited Partner
of the whole or a portion of its interest in the Partnership, except that
where the assignment is of such Limited Partner's entire interest in the
Partnership and the assignee, with the consent of the General Partner, is
admitted as a substituted Limited Partner, the power of attorney shall
survive the delivery of such assignment for the sole purpose of enabling
any such attorney-in-fact to effect such substitution.<PAGE>
SECTION 13
MISCELLANEOUS
13.1. Notices. Any notice, payment, demand, or communication required
or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally to the Person or to an officer
of the Person to whom the same is directed, or sent by regular,
registered, or certified mail, addressed as follows, or to such other
address as such Person may from time to time specify by notice to the
Partners:
(a) If to the Partnership, to the address set forth in Section 1.3; and
(b) If to a Partner, to the address set forth in Section 2.1 or 2.2.
Any such notice shall be deemed to be delivered, given, and received for
all purposes as of the date so delivered, if delivered personally or if
sent by regular mail, or as of the date on which the same was deposited
in a regularly maintained receptacle for the deposit of United States
mail, if sent by registered or certified mail, postage and charges
prepaid. Any Person may from time to time specify a different address by
notice to the Partnership and the Partners.
13.2. Binding Effect. Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement shall be binding
upon and inure to the benefit of the Partners and their respective heirs,
legatees, legal representatives, successors, transferees, and assigns.
13.3. Construction. Every covenant, term, and provision of this
Agreement shall be construed according to its fair meaning and not
strictly for or against any Partner.
13.4. Time. Time is of the essence with respect to this Agreement.
13.5. Headings. Sections and other headings contained in this Agreement
are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this
Agreement or any provision hereof.
13.6. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
13.7. Incorporation by Reference. Every exhibit, schedule, and other
appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
13.8. Further Action. Each Partner, upon the request of any General
Partner, agrees to perform all further acts and execute, acknowledge, and
deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
13.9. Variation of Pronouns. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular, or
plural, as the identity of the Person or Persons may require.<PAGE>
13.10. Governing Law. The laws of the State of Florida shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
13.11. Waiver of Action for Partition. Each of the Partners irrevocably
waives any right that it may have to maintain any action for partition
with respect to any of the Partnership Property.
13.12. Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together
and shall constitute one agreement.
13.13. Sole and Absolute Discretion. Except as otherwise provided in
this Agreement, all actions which any General Partner may take and all
determinations which any General Partner may make pursuant to this
Agreement may be taken and made at the sole and absolute discretion of
such General Partner.
13.14. Special Restrictions. So long as the Partnership's mortgage loan
from Nomura Asset Capital Corporation ("Nomura") (together with any
assignment or renewal thereof, the "Nomura Loan") remains outstanding,
without the prior written consent of Nomura (or any successor holder of
the Nomura Loan), the Partnership shall not:
(a) Dissolve, merge, liquidate or otherwise sell or dispose of its
assets (other than in the ordinary course of the Partnership's day-to-day
operations);
(b) Incur any indebtedness outside the ordinary course of the
Partnership's day-to-day operations,
(c) Permit any transfer, directly or indirectly, of any interest in
the Partnership such that the transferee owns, as a result of such
transfer, a greater than 49 % interest in the Partnership, or
(d) Amend the Partnership Agreement.
(e) Upon the admission of an additional or successor general partner,
the Partnership shall deliver an acceptable non-consolidation opinion to
the holder of the Nomura Loan.<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Amended and
Restated Agreement of Limited Partnership as of the date first above
written.
GENERAL PARTNER:
SUMMERBREEZE, INC.,
a Florida Corporation
By: /s/Joseph M. Williams
-------------------------------------
Joseph M. Williams, President
WITHDRAWING GENERAL PARTNER:
CUMBERLAND REAL ESTATE
HOLDINGS, INC., a Florida corporation
By: /s/Joseph M. Williams
-------------------------------------
Joseph M. Williams, President
ORIGINAL LIMITED PARTNER:
/s/Francis M. Williams
-------------------------------------
FRANCIS M. WILLIAMS
ADDITIONAL LIMITED PARTNER:
KIMMINS CORP., a Florida corporation
By: /s/Francis M. Williams
-------------------------------------
Francis M. Williams, President<PAGE>
SCHEDULE A
<TABLE>
PARTNERSHIP CAPITAL ACCOUNTS
FOR SUMMERBREEZE APARTMENTS
<CAPTION>
Francis
CREH CREH Williams Other
Name of General Limited Limited Limited
Partnership Partner Partner Partner Partner
<S> <C> <C> <C> <C>
Summerbreeze Apartments:
------------------------
Original capital
contribution $ 1.00 $ 0.00 $ 39,943.24 $ 0.00
Losses to
December 31, 1996 (38,772.63) 0.00 (3,838,393.01) 0.00
Losses for nine
months ending
September 30, 1997 (1,746.17) 0.00 (172,870.53) 0.00
----------- --------- --------------- ---------
Total capital
accounts $(40,517.80) $ 0.00 $(3,971,320.30) $ 0.00
=========== ========= =============== =========
/TABLE
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All of Parcel "A" of SUMMERBREEZE, according to the Plat thereof recorded
in Plat Book 132, Page 36, of the Public Records of Broward County,
Florida.<PAGE>
AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP
OF SUMMERBREEZE APARTMENTS, LTD.
THIS AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP is
made this 22nd day of October 1997, by Summerbreeze, Inc., a Florida
corporation, which is the sole general partner of Summerbreeze
Apartments, Ltd., a Florida limited partnership ("Partnership"). The
undersigned certifies as follows:
1. The name of the limited partnership is Summerbreeze Apartments,
Ltd.
2. The date of the filing of the Partnership's certificate of limited
partnership was July 15, 1987.
3. Cumberland Real Estate Holdings, Inc., has withdrawn as the sole
general partner of the Partnership and Summerbreeze, Inc., has been
admitted to the Partnership as the new sole general partner of the
Partnership.
4. This Certificate of Amendment to the Certificate of Limited
Partnership is duly executed and made in accordance with Section 620.109
of the Florida Statutes.
SUMMERBREEZE, INC.,
a Florida corporation, general partner
By: /s/Joseph M. Williams
-----------------------------
Joseph M. Williams, President<PAGE>
EXHIBIT 10.2
Option No. ____
STOCK OPTION AGREEMENT
AGREEMENT made as of this day of __________________ 19__, by
and between KIMMINS CORP., a Delaware corporation, having its office and
principal place of business located at 1501 Second Avenue, East, Tampa,
Florida 33605 (the "Company"); and Name
Address
INITIALS."
W I T N E S S E T H :
WHEREAS, on _________________________________ (Date), the Board of
Directors of the Company authorized the grant to Initials of an option
to purchase an aggregate of __________________________ (Number of Shares)
shares of the authorized but unissued Common Stock of Kimmins Corp. (the
"Company"), $.001 par value (the "Common Stock"), pursuant to the
Company's 1987 Stock Option Plan (the "Plan"), conditioned upon Initials'
acceptance thereof upon the terms and conditions set forth in this
Agreement; and
WHEREAS, Initials desires to acquire said option on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, and in consideration of the foregoing and of the terms
and conditions herein contained, the parties hereto agree as follows:
21. The Company hereby grants to Initials, as a matter of separate
agreement and not in lieu of salary or any other compensation for
services, the right and option to purchase all or any part of an
aggregate of shares of Common Stock (the "Option") on the terms
and conditions set forth herein.
2. This option shall be deemed to be a non-qualified stock option
within the meaning of the Internal Revenue Code of 1986.
3. The purchase price of each share of Common Stock subject to the
Option ("Option Shares") shall be $ (Price) per
share.
4. (a) The Option shall be exercisable during the ten (10) year period
commencing on the date hereof ("Date of Grant") and terminating at
the close of business on (Day before
original date in paragraph 1) (the "Exercise Period"); provided,
however, that the Option shall only be exercisable in cumulative
installments, during the Exercise Period, as follows: 20 percent of
the Option Shares may be purchased commencing on the Date of Grant,
an additional 20 percent of the Option Shares may be purchased
commencing on the first anniversary of the Date of Grant; an
additional 20 percent of the Option Shares may be purchased
commencing on the second anniversary of the Date of Grant; an
additional 20 percent of the Option Shares may be purchased
commencing on the third anniversary of the Date of Grant; and the
final 20 percent of the Option Shares may be purchased commencing
on the fourth anniversary of the Date of Grant.<PAGE>
4. (b) In the event of Initials' death, the Option will fully vest and
be exercisable immediately by Initials' executor or administrator
or by Initials' distributee to whom the Option may have been
transferred by will or by the laws of descent and distribution
within one year after such death (subject to the provisions of
Section 5 hereof).
5. Notwithstanding anything to the contrary herein contained, neither
this option nor any rights represented hereby shall be transferable
or assignable by Initials otherwise than by will or by the laws of
descent and distribution, and this option shall be exercisable
during Initials' lifetime only by Initials, and any attempt to
transfer or assign this option in violation of the foregoing shall
be void and of no force or effect. No transfer of the Option by
Initials by will or by laws of descent and distribution shall be
effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of the will and
such other evidence as the Company may deem necessary to establish
the validity of the transfer and the acceptance by the transferee
of the terms and conditions of the Option.
6. The purchase price of the Option Shares shall be paid in full in
cash at the time of exercise, as hereinafter provided. Initials
shall not have any of the rights of a shareholder with respect to
the Option Shares until such shares have been issued after the due
exercise of the Option. It shall be a condition to the obligation
of the Company to issue or transfer shares of Common Stock upon the
exercise of the Option that Initials pay to the Company, upon its
demand, such amount as may be requested by the Company for the
purposes of satisfying its liability to withhold federal, state or
local income or other taxes incurred by reason of the exercise of
the Option or the transfer of such shares upon such exercise.
7. In the event of a stock dividend, subdivision, combination or
reclassification of shares, or any other change in the corporate
structure or shares of the Company, the Company shall make such
reasonable adjustment as it may deem appropriate in the number
shares covered by the Option and upon the dissolution or
liquidation of the Company, or upon any merger, consolidation or
other form of reorganization, the Company may make such adjustment
with respect to the Option or take such other action as it deems
necessary or appropriate to reflect, or in anticipation of, such
dissolution, liquidation, merger or consolidation, including,
without limitation, the substitution of new options or the
termination of the Option.
8. The Company hereby represents and warrants to Initials that (a) the
Company, by appropriate and all required action, is duly authorized
to enter into this Agreement and consummate all of the transactions
contemplated hereunder; and (b) the Option Shares, when issued and
delivered by the Company to Initials in accordance with the terms
and conditions hereof, will be duly and validly issued and fully
paid and non-assessable.<PAGE>
9. Anything in this Agreement to the contrary notwithstanding,
Initials hereby agrees that he shall not sell, transfer by any
means or otherwise dispose of the Option Shares acquired by him
without registration under the Securities act of 1933 (the "Act"),
or in the event that they are not so registered, unless (a) an
exemption from the Act is available thereunder, and (b) Initials
has furnished the Company with notice of such proposed transfer and
the Company's legal counsel, in its reasonable opinion, shall deem
such proposed transfer to be so exempt.
10. Initials hereby acknowledges that:
( a ) He must bear the economic risk of the investment proposed herein
for an indefinite period of time because the Option Shares will
not have been registered under the Act and cannot be sold by him
unless they are registered under the Act or an exemption
therefrom is available thereunder.
( b ) He will have made available to him, both the opportunity to ask
questions of and receive answers from the officers and directors
of the Company and all persons acting on its behalf concerning
the terms and conditions of this Agreement and to obtain any
information concerning the Company or its business to the extent
the Company possesses or may possess such information or can
acquire it without unreasonable effort or expense necessary to
verify the accuracy of the information obtained pursuant
thereto.
( c ) The Company shall place stop transfer orders with its transfer
agent against the transfer of the Option Shares in the absence
of registration under the Act or an exemption therefrom
thereunder as provided herein.
( d ) The certificates evidencing the Option Shares shall bear the
following legends substantially, as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be
sold or transferred in the absence of such registration or an
exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to an option agreement dated as of
(Original Date), a copy of which is on file with the
Company, and may not be transferred, pledged or disposed of except
in accordance with the terms and conditions thereof."<PAGE>
11. Subject to the terms and conditions of this Agreement, the Option
may be exercised by written notice to the Company at its principal
place of business. Such notice shall state the election to
exercise the Option and the number of Option Shares in respect to
which it is being exercised and shall be signed by the person or
persons so exercising the Option. Such notice shall be accompanied
by payment of the full purchase price of the Option Shares, and
the Company shall issue a certificate or certificates evidencing
the Option Shares as soon as practicable after the notice is
received. Payment of the purchase price shall be made in cash (by
certified or cashier's check payable to the order of the Company),
or in shares of Commons Stock valued at the fair market value at
the time of exercise (or any combination of the foregoing). The
certificate or certificates evidencing the Option Shares shall be
registered in the name of the person or persons so exercising the
Option.
12. No amendment or modification of the Plan shall be construed as
disqualifying the Option granted under this Agreement. In the
event of a conflict between the provisions of the Plan and the
provisions of this Agreement, the provisions of the Plan shall in
all respects be controlling.
13. All notices, requests, deliveries, payments, demands and other
communications which are required or permitted to be given under
this Agreement shall be in writing and shall be either delivered
personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective
addresses set forth herein, or to such other address as either
shall have specified by notice in writing to the other. Same shall
be deemed duly given hereunder when so delivered or mailed, as the
case may be.
14. The waiver by any party hereto of a breach of any provision of
this agreement shall not operate or be construed as a waiver of
any other or subsequent breach.
15. This Agreement, as controlled by the provisions of the Plan,
constitutes the entire agreement between the parties with respect
to the subject matter hereof.
16. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and to the extent not prohibited herein, their
respective heirs, successors, assigns and representatives. Nothing
in this Agreement, expressed or implied, is intended to confer on
any person other than the parties hereto and as provided above,
their respective heirs, successors, assigns and representatives
any rights, remedies, obligations or liabilities.<PAGE>
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
KIMMINS CORP.
By: /s/Initials
----------------------------------
Initials
/s/Francis M. Williams
-----------------------------------
Francis M. Williams<PAGE>
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[CASH] $3,674,027
[SECURITIES] $0
[RECEIVABLES] $24,548,823
[ALLOWANCES] ($921,301)
[INVENTORY] $0
[CURRENT-ASSETS] $45,416,543
[PP&E] $100,195,540
[DEPRECIATION] ($27,420,533)
[TOTAL-ASSETS] $135,015,990
[CURRENT-LIABILITIES] $49,575,484
[BONDS] $0
[PREFERRED-MANDATORY] $0
[PREFERRED] $0
[COMMON] $4,447
[OTHER-SE] $9,388,929
[TOTAL-LIABILITY-AND-EQUITY] $135,015,990
[SALES] $135,311,067
[TOTAL-REVENUES] $135,311,067
[CGS] $125,186,710
[TOTAL-COSTS] $125,186,710
[OTHER-EXPENSES] $15,375,453
[LOSS-PROVISION] $0
[INTEREST-EXPENSE] $4,435,853
[INCOME-PRETAX] ($9,686,949)
[INCOME-TAX] ($1,168,709)
[INCOME-CONTINUING] ($8,518,240)
[DISCONTINUED] $0
[EXTRAORDINARY] $0
[CHANGES] $0
[NET-INCOME] ($8,518,240)
[EPS-PRIMARY] ($1.97)
[EPS-DILUTED] ($1.97)
</TABLE>
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[CASH] $968,638
[SECURITIES] $0
[RECEIVABLES] $20,676,877
[ALLOWANCES] ($616,708)
[INVENTORY] $0
[CURRENT-ASSETS] $41,846,422
[PP&E] $59,269,412
[DEPRECIATION] ($22,256,418)
[TOTAL-ASSETS] $93,082,907
[CURRENT-LIABILITIES] $36,268,929
[BONDS] $0
[PREFERRED-MANDATORY] $0
[PREFERRED] $0
[COMMON] $4,447
[OTHER-SE] $17,848,849
[TOTAL-LIABILITY-AND-EQUITY] $93,082,907
[SALES] $113,240,908
[TOTAL-REVENUES] $113,240,908
[CGS] $106,226,145
[TOTAL-COSTS] $106,226,145
[OTHER-EXPENSES] $14,683,191
[LOSS-PROVISION] $0
[INTEREST-EXPENSE] $3,107,000
[INCOME-PRETAX] ($10,775,428)
[INCOME-TAX] ($2,091,989)
[INCOME-CONTINUING] $(8,683,439)
[DISCONTINUED] $0
[EXTRAORDINARY] $0
[CHANGES] $0
[NET-INCOME] ($8,683,439)
[EPS-PRIMARY] ($1.96)
[EPS-DILUTED] ($1.96)
</TABLE>
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[CASH] $1,160,463
[SECURITIES] $0
[RECEIVABLES] $22,152,552
[ALLOWANCES] ($397,211)
[INVENTORY] $0
[CURRENT-ASSETS] $44,117,192
[PP&E] $56,810,219
[DEPRECIATION] ($19,217,558)
[TOTAL-ASSETS] $93,628,550
[CURRENT-LIABILITIES] $32,568,873
[BONDS] $0
[PREFERRED-MANDATORY] $0
[PREFERRED] $0
[COMMON] $4,447
[OTHER-SE] $26,376,989
[TOTAL-LIABILITY-AND-EQUITY] $93,628,550
[SALES] $111,346,075
[TOTAL-REVENUES] $111,346,075
[CGS] $93,855,681
[TOTAL-COSTS] $93,855,681
[OTHER-EXPENSES] $13,239,441
[LOSS-PROVISION] $0
[INTEREST-EXPENSE] $1,417,802
[INCOME-PRETAX] $2,833,151
[INCOME-TAX] $1,490,568
[INCOME-CONTINUING] $1,342,583
[DISCONTINUED] $0
[EXTRAORDINARY] $0
[CHANGES] $0
[NET-INCOME] $1,342,583
[EPS-PRIMARY] $.30
[EPS-DILUTED] $.29
</TABLE>
