_________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 number 0-19761
OP-TECH Environmental Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 91-1528142
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6392 Deere Road, Syracuse, NY 13206
(Address of principal executive offices) (Zip Code)
(315) 463-1643
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X or No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of July 31, 1999.
11,603,963
_________________________________________________________________
INDEX
OP-TECH Environmental Services, Inc. and Subsidiaries
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets
-June 30, 1999 (Unaudited) and
December 31, 1998(Audited).................3
Consolidated Statements of Operation
-Three months ended June 30, 1999 and
June 30, 1998 (Unaudited)
-Six months ended June 30, 1999 and
June 30, 1998
(Unaudited)..................................4
Consolidated Statements of Cash Flows
-Six months ended June 30, 1999 and
June 30, 1998 (Unaudited)....................5
Notes to Consolidated Financial Statements
(Unaudited)...................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations.................................8
PART II. OTHER INFORMATION ...........................12
SIGNATURES...................................13
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1999 1998
ASSETS
Current Assets:
Cash and cash equivalents $ 15,934 $ 122,106
Accounts receivable (net of allowance
for doubtful accounts):
Unaffiliated parties 2,949,640 2,847,001
Affiliated parties 446,842 109,190
3,396,482 2,956,191
Costs on uncompleted projects applicable
to future billings 559,630 289,768
Prepaid expenses and other assets 340,082 316,882
Total Current Assets 4,312,128 3,684,947
Property and equipment, net 1,206,808 1,199,635
Assets held for sale 1,605,427 1,605,427
Other assets 109,794 142,744
Total Assets 7,234,157 6,632,753
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft 248,193 45,085
Accounts payable:
Unaffiliated parties 1,542,637 1,350,204
Affiliated parties 23,561 51,184
1,566,198 1,401,388
Billings in excess of costs and
estimated profit on uncompleted
projects 322,580 569,393
Accrued expenses and other liabilities 401,859 298,018
Current portion of long-term debt
and obligations under capital leases 378,072 351,751
Note payable to bank 1,417,915
Total Current Liabilities 4,334,817 2,665,635
Note payable to bank 739,531
Long-term debt and obligations under
capital leases 336,207 435,278
Shareholders' Equity:
Common stock, par value $.01 per
share; authorized 20,000,000 shares;
11,603,963 shares outstanding as of
June 30, 1999 and December 31, 1998 116,040 116,040
Additional paid-in-capital 7,787,152 7,787,152
Accumulated deficit (5,340,059) (5,110,883)
Total Shareholders' Equity 2,563,133 2,792,309
Total Liabilities and
Shareholders' Equity 7,234,157 6,632,753
The accompanying notes are an integral part of the financial statements.
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE, 30 JUNE 30,
1999 1998 1999 1998
Revenues:
Project billings and
services $3,079,195 $2,531,527 $6,002,305 $4,506,062
Project costs 2,375,454 1,735,074 4,488,834 3,120,969
Gross margin 703,741 796,453 1,513,471 1,385,093
Selling, general and
administrative expenses 850,329 544,498 1,661,138 1,026,578
Operating (loss) income (146,588) 251,955 (147,667) 358,515
Other income and
expense:
Interest expense 36,147 31,033 67,931 52,046
Other expense
(income), net 163 (4,723) 13,578 (13,057)
36,310 26,310 81,509 38,989
NET (LOSS) INCOME (182,898) 225,645 (229,176) 319,526
Earnings (loss) per common
share - basic and diluted (0.02) 0.02 (0.02) 0.03
Weighted average shares
outstanding 11,603,963 11,555,123 11,603,963 11,555,123
The accompanying notes are an integral part of the financial statements.
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998
Operating activities:
Net (loss) income $ (229,176) $ 319,526
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 142,567 71,435
(Gain) loss on sale of equipment (216)
(Increase) decrease in operating
assets and increase (decrease) in
operating liabilities:
Accounts receivable (440,291) (31,538)
Costs on uncompleted projects
applicable to future billings (269,862) (209,367)
Billings and estimated profit in
excess of costs on uncompleted
contracts (246,813) 242,865
Prepaid expenses and other assets 51,643 (182,921)
Accounts payable and accrued expenses 268,651 (62,713)
Net cash (used in) provided by
operating activities (723,497) 147,287
Investing activities:
Proceeds from sale of equipment 30,131
Purchase of property and equipment (123,264) (138,418)
Net cash used in investing
activities (93,133) (138,418)
Financing activities:
Cash overdraft 203,108 (224,458)
Proceeds from notes payable to banks
and current and long-term borrowings,
net of financing costs 2,777,458 1,834,838
Principal payments on current and
long-term borrowings (2,270,108) (1,634,870)
Net cash provided by (used in)
financing activities 710,458 (24,490)
Decrease in cash and cash equivalents (106,172) (15,621)
Cash and cash equivalents at beginning
of period 122,106 81,517
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 15,934 65,896
The accompanying notes are an integral part of the financial statements.
PART I - FINANCIAL INFORMATION
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in
this Form 10-Q to make applicable and take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statement made by, or on behalf of,
the Company. This 10-Q, press releases issued by the Company, and
certain information provided periodically in writing and orally by
the Company's designated officers and agents contain statements
which constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words expect, believe, goal,
plan, intend, estimate, and similar expressions and variations
thereof used are intended to specifically identify forward-looking
statements. Where any such forward-looking statement includes a
statement of the assumptions or basis underlying such forward-
looking statement, the Company cautions that, while it believes such
assumptions or basis to be reasonable and makes them in good faith,
assumed facts or basis almost always vary from actual results, and
the differences between assumed facts or basis and actual results
can be material, depending on the circumstances. Where, in any
forward-looking statement, the Company, or its management, expresses
an expectation or belief as to future results, such expectation or
belief is expressed in good faith and believed to have a reasonable
basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.
Item 1. Financial Statements.
OP-TECH ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
quarterly results include all adjustments (consisting of only normal
recurring adjustments) that the Company considers necessary for a
fair presentation of such information for interim periods.
The unaudited financial statements include the accounts of the
Company and its subsidiary. All material intercompany transactions
and balances have been eliminated in consolidation.
2. The timing of revenues is dependent on the Company's backlog,
contract awards, and the performance requirements of each contract.
The Company's revenues are also affected by the timing of its
clients planned remediation work as well as the timing of unplanned
emergency spills. Historically, planned remediation work generally
increases during the third and fourth quarters. Although the
Company believes that the historical trend in quarterly revenues for
the third and fourth quarters of each year are generally higher than
the first and second quarters, there can be no assurance that this
will occur in future periods. Accordingly, quarterly or other
interim results should not be considered indicative of results to be
expected for any quarter or for the full year.
3. The Company purchased technical, accounting and consulting
services and rented certain office space from a shareholder and its
affiliates. The costs for these services amounted to $167,826 and
$149,084 for the six months ended June 30, 1999 and 1998
respectively.
Additionally, the Company provided $546,439 and $139,944 of
remediation, sub-contract support and project services to a
shareholder and its affiliates for the six months ended June 30,
1999 and 1998 respectively. Services provided were at competitive
rates, which were bid on a project-by-project basis.
4. Earnings per Share
Basic earnings per share is computed based on the weighted
average shares outstanding. Diluted earnings per share is computed
based on the weighted average shares outstanding adjusted for the
dilutive effect of the assumed exercise of stock options and stock
warrants during the year. Due to the loss incurred by the Company
during the first six months of 1999, the impact of the outstanding
options and warrants is anti-dilutive and, therefore, their impact
has not been included in the diluted earnings per share disclosure.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had cash and cash equivalents of
$15,934 as compared to $122,106 at December 31, 1998.
At June 30, 1999, the Company had a working capital deficit of
$22,689 compared to a surplus of $1,019,312 at December 31, 1998,
with a current ratio of .99 to 1 at June 30, 1999 and 1.38 to 1 at
December 31, 1998. The decrease in working capital is primarily due
to the Company's revolving loan being classified as a current
liability as of June 30, 1999 and as a long-term liability as of
December 31, 1999.
For the six months ended June 30, 1999, the Company's net cash
used in operations was $723,497 compared to net cash provided by
operations of $147,287 during the six months ended June 30, 1998.
The increase in cash used in operating activities during the first
six months of 1999 was substantially due to the Company's continued
expansion and growth. The increase in cash used was also due to
expenditures made by the Company in order to prepare for an
emergency spill contract, which will cover most of New York State.
The contract is expected to begin in early September 1999.
The Company's cash used in investing activities of $93,133
during the first six months of the year was attributable to the
purchase of six utility vehicles, a wet/dry vacuum, six gas meters,
several negative air machines, a pressure washer, and computer and
office equipment.
Cash provided by financing activities was $710,458, which was
primarily due to the items discussed above and the timing of
paydowns and cash advances on the Company's line of credit.
As of June 30, 1999, the Company has a loan agreement that
provided for borrowings up to $1,500,000 on a revolving basis,
collateralized by all accounts receivable, inventory and equipment
now owned or acquired later. As of June 30, 1999, the Company had
overdrawn funds of $166,108 on the revolving loan. Effective July
1, 1999, the Company's revolving loan was amended to provide up to
$2,000,000 in borrowings. The revolving loan is subject to renewal
at the bank's option and is payable on April 30, 2000. The
revolving loan is guaranteed by a shareholder for an amount not to
exceed $500,000. In addition, effective August 13, 1999, the
Company obtained an additional loan for $150,000 which is payable on
November 13, 1999.
During the first six months of 1999, all principal payments on
the Company's debt were made timely.
Management believes that the Company will have adequate cash
flow to meet its obligations during the next twelve months.
Effective January 1, 1999, the Company sold its wholly-owned
subsidiary, St. Lawrence Industrial Services, Inc., to a director of
the Company. The sale did not have a significant impact on the
Company's financial statements.
YEAR 2000
The Company recognizes the need to ensure its operations will
not be adversely impacted by year 2000 software failures. The
company is addressing the risk to the availability and integrity of
financial systems and the reliability of operational systems. The
Company is in the process of reviewing its major suppliers for year
2000 compliance. In 1998, the company upgraded its financial
systems to comply with year 2000 requirements and has also
undertaken an upgrade of its headquarters information and decision
support systems, which is expected to be complete by September of
1999. The Company has spent approximately $40,000 to date on these
system upgrades and estimates spending approximately $15,000 over
the next 4 months.
THE MASSENA PORT FACILITY
The Massena Port Facility is a former oil tank farm, which is
located on the St. Lawrence River in Massena, NY. The property is
improved with several buildings and a deep water docking facility
for large ocean going ships. The property is still a viable
location for a petroleum distribution facility and could still
function as one pending upgrades of tanks and diking systems to
current state and federal guidelines. Any improvements such as
these would be treated as a capital expense in the year they were
incurred. Currently, the Company uses the property for its Massena
branch office headquarters, equipment storage and its Aqueous
Treatment/360 Facility. A wholly-owned subsidiary of a shareholder
currently has an option to purchase the Massena Port Facility for
$2,000,000.
In 1996, the Company reclassified the Massena Property to
Assets Held for Sale. The property at that time had a carrying
value of approximately $1.9 million. Due to the significance of the
carrying value of the property, in March of 1997, management
obtained an independent third party appraisal to support its
carrying value. Such appraisal included an evaluation of similar
sales plus a pending transaction at the time. The appraisal also
included an evaluation of the time frame during which a sale would
be expected. Based upon the appraisal report and an estimate of the
costs to sell, management recognized an impairment of $308,377 on
the property during 1997. As of June 30, 1999, the carrying value
of the property is $1,605,427.
RESULTS OF OPERATIONS
BILLINGS
The Company's project billings for the second quarter of 1999
increased 22% to $3,079,195 from $2,531,527 for the second quarter
of 1998. For the six month period ended June 30, 1999, the
Company's billings have increased 33% to $6,002,305 from $4,506,062
for the same period in 1998. Revenues from underground storage tank
removals increased approximately $1,100,000, which was attributable
to the Federal Government deadline to remove all underground storage
tanks ("USTs") that are not in compliance with the EPA guidelines
for USTs. Billings from asbestos projects increased approximately
$800,000 while billings from bioremediation projects also increased
approximately $440,000. The increase in these service lines was
offset by a decrease of approximately $1,250,000 in transportation
and disposal when comparing the first six months of 1999 to the same
period in 1998. The decrease was due to a major emergency spill
contract the Company had during the first half of 1998. During the
six months ended June 30, 1999, the Company's branches that were
opened subsequent to June 30, 1998, generated revenue of
approximately $1,050,000, all of which was core service revenue
resulting from competitive bidding in both the public and private
markets. The Company's Braintree, MA, and Albany, NY, branches also
showed a significant increase in the volume of work performed when
compared to the first six months of 1998.
PROJECT COSTS AND GROSS MARGIN
Project costs for the second quarter of 1999 increased 37% to
$2,375,454 from $1,735,074 for the same period in 1998. Project
costs as a percentage of revenues were 77% and 69% for the three
months ended June 30, 1999 and 1998 respectively. Gross margin for
the second quarter of 1999 decreased to 23% from 31% for the same
period in 1998.
For the six month period ended June 30, 1999, project costs
increased 44% to $4,488,834 from $3,120,969 for the six months ended
June 30, 1998. Project costs as a percentage of revenues were 75%
and 69% for the six month periods ended June 30, 1999 and 1998,
respectively. Gross margin for the six months ended June 30, 1999
decreased to 25% from 31% for the same period in 1998.
The increase in project costs was primarily due to the increase
in billings. The decrease in gross margin was due to the Company
performing a greater number of public tank removal and installation
projects, which typically produce a lower gross margin. In
addition, the Company had four projects, three tank removal and
reinstallation projects and one industrial cleaning project, which
cost the Company approximately $285,000 in out-of-pocket cash and
lost gross margin dollars. Most of this loss was absorbed by the
Company during the second quarter of 1999. In 1998, the Company had
a major emergency cleanup contract that was performed on a time and
materials basis, which produced a higher gross margin than bid work.
SELLING, GENERAL, ADMINISTRATIVE AND INTEREST EXPENSES
Selling, general and administrative expenses ("SG&A") for the
quarter ended June 30, 1999 increased 56% to $850,329 from $544,498
for the same period in 1998. For the six months period ended June
30, 1999, SG&A increased 62% to 1,661,138 from $1,026,578 for the
same period in 1998. SG&A as a percentage of revenues increased to
28% versus 22% for the three months ended June 30, 1999. For the
six month period ended June 30, 1999, SG&A increased to 28% of
revenues versus 23% for the same period in 1998. The increase in
SG&A was due to the Company's branch expansion. Since the second
quarter of 1998, the Company opened branches in Edison, NJ, Buffalo,
NY, and Rochester, NY and significantly increased the operations of
the Athens, PA branch. The Company also increased the number of
administrative personnel in order to accommodate the higher volume
of billing, payroll, and other administrative functions created by
the new branches. In addition, depreciation expense for the quarter
ended June 30, 1999, was approximately $60,000 higher than for the
first six months of 1998 primarily due to the purchase of a vacuum
truck valued at approximately $247,000, thirteen utility vehicles
valued at approximately $236,000, and other equipment.
INTEREST EXPENSE
Interest expense for the six months ended June 30, 1999
increased 31% to $67,931 from $52,046 for the same period in 1998.
The increase was primarily attributable to the financing of utility
vehicles, a vacuum truck, a backhoe, various other equipment and
computer equipment.
NET (LOSS) INCOME
The net loss for the three months ended June 30, 1999 was
($182,898), or ($.02) per share (basic and diluted), compared to a
net income of $225,645, or $.02 per share (basic and diluted), for
the same period in 1998. For the six months ended June 30, 1999,
the net loss was ($229,176), or ($.02) per share (basic and
diluted), compared to a net income of $319,526, or $.03 per share
(basic and diluted), for the same period in 1998.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
There were no material changes in the Company's market risk or
market risk strategies during the quarter ended June 30, 1999.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) 10.1 Revolving Loan Promissory Note
(b) No reports on Form 8-K were filed during the quarter
ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OP-TECH Environmental Services, Inc.
(Registrant)
Date: August 13, 1999 /s/ John R. Loveland
John R. Loveland, Chief Executive Officer
Date: August 13, 1999 /s/ Christopher J. Polimino
Christopher J. Polimino, Executive Vice
President and Chief Accounting Officer
EXHIBIT 10.1
PROMISSORY NOTE
Principal Loan $2,000,000
Loan Date 07-01-1999
Maturity 04-30-2000
Loan No 12572
Call 04AO
Collateral IC
Account 6894
Officer 111
Initials
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item
above containing "***" has been omitted due to text length limitations.
Borrower: OP-TECH Environmental Services, Inc.
6392 Deere Road
Syracuse, NY 13206
Lender: BSB Bank & Trust Company
PO Box 1056 (58-68 Exchange St.)
Binghamton, NY 13902
Principal Amount: $2,000,000.00 Initial Rate: 9.250%
Date of Note: July 1, 1999
PROMISE TO PAY. To repay Borrower's loan, Op-Tech Environmental Services,
Inc. ("Borrower") promises to pay to BSB BANK & TRUST COMPANY ("Lender"), or
order, in lawful money of the United States of America, the principal amount
of Two Million & 00/100 Dollars ($2,000,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal
balance of each advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on April 30, 2000. In addition,
Borrower will pay regular monthly payments of all accrued unpaid interest due
as of each payment date, beginning July 16, 1999, with all subsequent
interest payments to be due on the same day of each month after that. Unless
otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying the ratio
of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may
or may not be the lowest rate available from Lender at any given time.
Lender will tell Borrower the current Index rate upon Borrower's request.
The interest rate change will not occur more often than each day. Borrower
understands that Lender may make loans based on other rates as well. The
Index currently is 8.000% per annum. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.250 percentage
points over the Index, resulting in an initial rate of 9.250% per annum
NOTICE: Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest. Rather, early payments will reduce
the principal balance due. Borrower agrees not to send Lender payments
marked "paid in full", "without recourse", or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lender's
rights under this Note, and Borrower will remain obligated to pay any further
amount owed to Lender. All written communications concerning disputed
amounts, including any check or other payment instrument that indicates that
the payment constitutes "payment in full" of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a
disputed amount must be mailed or delivered to: BSB BANK & TRUST COMPANY,
P.O. Box 1056 (58-68 Exchange Street), Binghamton, NY 13902.
LATE CHARGE. If payment is 10 days or more late Borrower will be charged
4.000% of the unpaid portion of the regularly scheduled payment or $10.00,
whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 2.250 percentage points
over the index. The interest rate will not exceed the maximum rate permitted
by applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event
of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this
Note.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note
or the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or
misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on the Note and all accrued unpaid interest immediately
due, and then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay all costs and expenses
Lender incurs to collect the loan. This includes, subject to any limits
under applicable law, Lender's reasonable attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including reasonable attorneys'
fees and expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), and appeals. If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to all
other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of New York. This Note
has been accepted by Lender in the State of New York.
RIGHT OF SETOFF. In addition to Lender's right of setoff arising by
operation of law, Borrower grants to Lender a contractual security interest
in all Borrower's accounts with Lender (whether checking, savings, or some
other account and whether evidenced by a certificate of deposit). This
includes all accounts Borrower holds jointly with someone else and all
accounts Borrower may open in the future. However, this does not include any
IRA or Keogh accounts, or any trust accounts for which the grant of a
security interest would be prohibited by law. Borrower authorizes Lender, to
the extent permitted by applicable law, to charge or setoff all sums owing on
the indebtedness against any and all such accounts.
COLLATERAL. Borrower acknowledges this Note is secured by a All Accounts,
Inventory, Equipment And General Intangibles now owned or acquired later,
together with all proceeds of collateral. A mortgage from Op-Tech
Environmental Services, Inc. to Lender dated December 12, 1997. If there is
any inconsistency between the terms and conditions of this Note and the terms
and conditions of the collateral documents, the terms and conditions of this
Note shall prevail.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note, as well as directions for payment from Borrower's accounts,
may be requested orally or in writing by Borrower or by an authorized person.
Lender may, but need not, require that all oral requests be confirmed in
writing. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to
any of Borrower's accounts with Lender. The unpaid principal balance owing
on this Note at any time may be evidenced by endorsements on this Note or by
Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (A) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor
ceases doing business or is insolvent; (C) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's of this Note
or any other loan with Lender; or (D) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by Lender.
YEAR 2000. Borrower warrants and represents that all software utilized in
the conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after
January 1, 2000, and all information pertaining to such calendar dates, in
the same manner and with the same functionality as the software does
respecting calendar dates falling on or before December 31, 1999. Further,
Borrower warrants and represents that the data-related user interface
functions, data-fields, and data-related program instructions and functions
of the software include the indication of the century.
PRIOR NOTE. A mortgage dated December 12, 1997.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made. The obligations under this Note
are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
OP-TECH ENVIRONMENTAL SERVICES, INC.
By:___________________________________________
Anthony R. Pongonis, President of Op-Tech
Environmental Services, Inc.
By:___________________________________________
Joseph M. McNulty, Treasurer of Op-Tech
Environmental Services, Inc.
By:___________________________________________
John R. Loveland, CEO/Chairman of Op-Tech
Environmental Services, Inc.
By:/s/Christopher J. Polimino
Christopher J. Polimino, General Manager of
Op-Tech Environmental Services, Inc.
