SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to _______________
0-21946
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(Commission File No.)
HI-RISE RECYCLING SYSTEMS, INC.
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(Name of Small Business Issuer in Its Charter)
FLORIDA 65-0222933
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16255 NW 54TH AVENUE, MIAMI, FLORIDA 33014
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number, including area code: (305) 624-9222
Securities registered under Section 12(b) of the Securities Exchange Act of
1934: None
Securities registered under Section 12(g) of the Securities Exchange Act of
1934:
COMMON STOCK, $0.01 PAR VALUE
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(Title of Class)
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Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B 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-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $3,207,309
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 27, 1997 was $21,287,445, computed by reference to
the closing bid price of the Common Stock on such date.
As of March 27, 1997, there were 6,307,391 shares of the registrant's Common
Stock outstanding.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
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ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Hi-Rise Recycling Systems, Inc. (the "Company") is primarily engaged in
marketing a proprietary automated system designed to collect source-separated
recyclables and other solid waste in multi-story residential buildings. The
Company's principal product, which is marketed under the Hi-Rise Recycling
System name (the "hi-rise system"), is easily adapted to a multi-story
building's existing waste disposal chute or designed into newly constructed
buildings, permitting residents to conveniently dispose of, without commingling,
a variety of recyclable waste, including glass, metal, newspapers and plastic,
plus garbage. By providing for source separation and collection from each floor,
the hi-rise system eliminates the cost, inconvenience and potential health and
fire hazards associated with manually transporting solid waste in elevators and
stairwells to a central storage area on the ground floor or basement. The
hi-rise system is intended to promote recycling and enable multi-story building
owners and residents to efficiently source-separate and divert recyclable waste
from landfills, while reducing the time, labor and hauling expenses normally
associated with solid waste disposal. The Company designed the hi-rise system in
response to perceived market opportunities arising out of increasing state and
local environmental regulation mandating or encouraging recycling.
To date, the Company has installed 105 hi-rise systems, of which 48 were sold
and 57 were leased or rented. In connection with sales type leases of the
hi-rise system, the Company has entered into shared savings agreements with
building owners, pursuant to which the Company manages a building's solid waste
disposal and receives a percentage of the building owner's shared savings
realized as a result of reduced waste disposal costs. The Company anticipates
that its principal source of revenue will be derived from sales type leases and
cash sales of the hi-rise system to multi-story residential building owners and
from direct sales to distributors of the hi-rise system and, to a lesser extent,
from shared savings programs and service contracts with multi-story building
owners. In addition, as a result of the Wilkinson Acquisition discussed below
under "Recent Events" the Company anticipates that it will derive revenue from
sales of sheet metal fabrication products.
In 1996, the Company focused its sales efforts on the new construction market.
As a result, the backlog of signed contracts continues to grow, increasing by
over 119%, from approximately $1.6 million at the end of 1995 to approximately
$3.5 million at December 31, 1996.
As part of its plan to expand its operations into new geographic markets, in
February 1995, the Company acquired all of the outstanding capital stock of IDC
Systems, Inc. , a privately held New York corporation ("IDC Systems"). IDC
Systems is engaged in the business of assembling, selling, installing and
servicing trash compaction systems in New York, New Jersey and Connecticut, and
currently services on a yearly basis approximately 1,700 compaction customers,
many of which are multi-story residential buildings that are potential customers
for the hi-rise system. At the present time IDC Systems' total customer base is
2,200. The Company intends
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to attempt to capitalize on IDC System's existing and potential customer base
and industry contacts. The Company will seek to sell its hi-rise systems and
continue to sell compaction systems in New York City and the surrounding
geographic areas.
In March 1996, three new directors were elected to the Board of Directors of the
Company. Donald Engel, who was elected Co-Chairman of the Board and Chief
Executive Officer, Ira S. Merritt and Joel M. Pashcow, Mark D. Shantzis, who had
been serving as Chairman of the Board and Chief Executive Officer, was elected
Co-Chairman of the Board and President. On January 1, 1997, Mr. Shantzis
resigned his position of President. Mr. Shantzis retained his position as
Co-Chairman of the Board and serves as a consultant to the Company. In addition,
David Friedman resigned as a director.
RECENT EVENTS
As part of its strategy to (i) expand its network of independent distributors,
(ii) offer a fully integrated waste disposal system for multi-story buildings
and (iii) commence manufacturing the components of the Company's systems, on
February 3, 1997, the Company, through a newly-formed wholly-owned subsidiary
now known as Wilkinson Company, Inc. ("Wilkinson"), acquired substantially all
of the assets other than real property (the "Wilkinson Assets") and assumed
certain of the liabilities of Wilkinson Company, Inc., an Ohio corporation (the
"Wilkinson Seller"). The aggregate purchase price paid for the Wilkinson Assets
was $2,486,827 in cash, subject to adjustment under certain circumstances, and
76,272 shares of the Company's Common Stock, $.01 par value per share (the
"Common Stock"), valued at $300,000. The Wilkinson Seller was engaged in the
sale, manufacture, distribution and installation of sheet metal fabrication
products, consisting primarily of laundry and rubbish chutes, as well as corner
guards, kick and push plates, handrails and bumper rail systems. The Company,
through its subsidiary Wilkinson, is continuing the business previously
conducted by the Wilkinson Seller. Wilkinson has a network of approximately 65
domestic independent distributors. The Company has commenced utilizing
Wilkinson's distributor network to market the hi-rise system as well as
Wilkinson's products. In addition, as a result of the Wilkinson Acquisition, the
Company is able to offer multi-story buildings a fully integrated waste disposal
system consisting of the hi-rise system, waste disposal chute and trash
compaction system. In connection with the Wilkinson Acquisition, Wilkinson
entered into a lease with the Wilkinson Seller for its facility in Stow, Ohio.
See Item 2. "Description of Property." The Company intends to consolidate
manufacturing and engineering of all of the Company's products at Wilkinson's
facility in Ohio, which the Company believes will enable it to realize cost
efficiencies.
On September 25, 1996, the Company acquired all of the outstanding capital stock
of Recycltech Enterprises Inc., a Province of Ontario corporation
("Recycltech"), which had, prior to the acquisition, served as the Company's
distributor of hi-rise systems in Toronto, Canada and its immediately
surrounding areas. In consideration for its acquisition of the Recycltech
capital
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stock, the Company issued an aggregate of 64,243 shares of its Common Stock,
valued at $300,000, to the former shareholders of Recycltech.
MARKET OVERVIEW
Public concern relating to the environmental impact of traditional solid waste
disposal methods, such as landfilling and incineration, has increased
dramatically over the past several years. Landfills involve potential
groundwater contamination and other nuisances, and have become difficult and
costly to site and construct. Similarly, incineration has not proven to be a
viable alternative, due principally to significant capital costs, potential air
pollution and controversy over site selection. In almost every community with
high concentrations of multi-story buildings in the United States, available
landfill space is becoming increasingly scarce. According to Biocycle, an
industry publication, many landfills will reach capacity over the next several
years and numerous landfills are likely to close due to their inability to
comply with stringent government regulation governing their operation and their
closing, although the Company believes that it is also likely that new landfills
will open in the future. In many areas, waste disposal at landfills and
incineration has become increasingly costly.
In response to these concerns, government authorities have adopted extensive
regulations to alleviate various environmental and waste disposal problems
resulting from traditional solid waste disposal methods. State and local
legislation targeting solid waste reduction and landfill diversion generally
includes mandatory recycling and/or tax incentives and government grants to
encourage recycling. To date, approximately 47 states have enacted legislation
targeting solid waste disposal reduction, of which 23 states require reductions
ranging from 40% to 70%. In addition, legislation has been enacted in 46 states
to discourage landfill use by, among other things, restricting disposal of a
variety of recyclables and imposing significant landfill disposal surcharge fees
in response to strong public opposition to the development of new landfill
space.
Various state and local legislation has been and is expected to be enacted
requiring source-separation as an integral part of recycling programs. In 1988,
the State of Florida adopted legislation requiring each county in the state to
initiate recycling and source-separation programs which, at a minimum would
reduce the volume of municipal solid waste by 30% by the end of 1994. As a
result, many Florida municipalities, including those in Dade, Broward, and
Collier (West Coast Florida) Counties, mandate that residents recycle newspaper,
aluminum cans, glass and plastic bottles. New York, which adopted legislation in
1988 requiring municipalities to implement regulations mandating recycling, has
enacted legislation requiring source-separation programs. In response to
federal, state and county pressures, many large cities, including New York City,
Chicago and Toronto, Canada, have enacted mandatory multi-story building
recycling legislation. Additionally, 27 states have enacted various types of
incentive tax credits ranging as high as 50% for machinery and equipment used in
the recycling process and various sales tax exemptions and most states have made
loans and grant funds available to municipalities to subsidize the cost of
recycling programs and equipment.
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Recycling involves the separation and recovery of materials, such as plastic,
glass, metal and newspaper, from the solid waste stream and the reuse of such
materials in the manufacture of various products. Generally, three methods are
utilized to separate recyclables from garbage: source-separation, which involves
separating various recyclables from one another and from garbage at the source
prior to collection; commingled separation, which involves separating
recyclables from garbage at the source and transporting the commingled
recyclables to a materials recovery facility for separation; and commingling,
which involves separating commingled recyclables and garage at a dirty-materials
recovery facility, primarily by sorting through the refuse by hand. The Company
believes, based in part on a study commissioned by the New Jersey Office of
Recycling, that source-separation results in the most cost-effective and highest
rate of recovery of recyclable materials.
The Company believes that existing methods for waste collection and separation
do not provide an efficient, cost-effective way for residents of multi-story
buildings to dispose of solid waste. Curbside recycling programs, which involve
collecting recyclables at designated times, are believed by the Company to be
aimed primarily toward single family homes in suburban communities. Materials
recovery facilities dedicated to separating commingled recyclables and garbage
involve significant labor costs and potential health hazards. Existing
multi-story building recycling programs involve placing containers for each
recyclable in the disposal chute room on each floor to be serviced by the
building staff or the recycling collector. This method requires increased
handling of materials in stairwells and elevators and daily service of each
chute room, which is typically a confined area. Another method requires
residents to separate and store recyclables and deposit them in a central
location either on the ground floor or outside the building. Unlike the hi-rise
system, both methods fail to take advantage of the efficiency and convenience of
the existing trash chute and result in significant labor costs and potential
health and fire code violations.
The Company believes that continuing initiatives of state and local government
authorities and increasing hauling costs and landfill use fees have created
incentives for multi-story building owners to implement recycling programs and
significant demand for innovative waste management solutions, such as the
hi-rise system. The Company believes that the hi-rise system provides an
efficient, cost-effective method of collecting and source-separating recyclables
in multi-story buildings and is a viable means for urban communities with high
concentrations of multi-story buildings to comply with government imposed solid
waste reduction, landfill diversion and recycling goals.
THE HI-RISE RECYCLING SYSTEM(TM)
The Company's principal product, which is marketed under the Hi-Rise Recycling
System name, is easily adapted to a multi-story building's existing waste
disposal chute or designed into newly constructed buildings, permitting
residents to conveniently dispose of, without commingling, a variety of
recyclable waste including glass, metal, newspaper and plastic, plus garbage. By
using
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the chute for source separation and collection from each floor, the hi-rise
system eliminates the cost, inconvenience and potential health and fire hazards
associated with manually transporting solid waste in elevators and stairwells to
a central storage area on the ground floor or basement. The hi-rise system is
intended to promote recycling and enable multi-story building owners and
residents to efficiently source-separate and divert recyclable waste from
landfills, while reducing the time, labor and hauling expenses normally
associated with solid waste disposal.
The hi-rise system consists of six waste collection and storage bins, one for
each recyclable and one for garbage, which rest on a carousel located at the
bottom of the building's waste disposal chute, and electronic panels installed
near the disposal chute's door on each floor. When activated by a resident, the
control panel electronically rotates the carousel to position the selected
collection bin under the disposal chute, in turn, to receive up to five
categories of recyclables and garbage for storage and collection. For instance,
pushing the newspaper button on the control panel positions a bin under the
chute to receive recyclable newspapers, while automatically "locking out" all
other chute doors to prevent other residents from disposing of a different
recyclable or garbage in the collection bin. An "in use" light on the control
panel on each floor notifies residents when the system is in operation.
Presently, there are two models of the carousel system, the "roll-away bin"
model and the bagger model. The roll-away bin model collects the garbage and
recyclables in roll-away bin containers that rest on the carousel and can be
rolled off the carousel when full and replaced by an empty one. The roll-away
collection bins are compatible with front and rear-end load garbage trucks and
side-load trucks designed to collect and transport recyclables and are easily
handled by one person. For those building where roll-away containers are not
practical, the Company has designed the bagger model. The bagger model collects
the garbage and recyclables in disposable bags that are located in round
collection bins that rest on the carousel. The bags can be removed from the bins
to be placed at curbside for collection. This model is most useful in cities
such as New York where most garbage rooms cannot accommodate bins or the
transportation of the bins to ground level. Both models are equipped with an
automatic garbage compactor.
The hi-rise system features a "controller" which incorporates: an electronic
display monitor which alerts building personnel when collection bins are full; a
telephone dialer which automatically communicates with service personnel in the
event the system malfunctions; a programmable microprocessor which permits the
system to be adapted to satisfy specific recycling and waste separation
requirements; and an electronic counter which automatically records resident use
by category of recyclable and garbage to provide data relating to waste
generation and landfill diversion for statistical and billing analysis. The
programmable microprocessor, which incorporates the Company's proprietary
software, permits the system to be upgraded to provide modem capabilities to
interface via telephone communication lines with waste haulers and other
industry participants. The Company believes that these system capabilities will
enhance education efforts to increase compliance with, and participation in,
recycling programs to satisfy evolving industry standards.
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The price of the hi-rise system currently ranges from $50,000 to $100,000
depending upon the number of floors in a multi-story building. The number of
systems installed in a building depends on the number of garbage chutes in the
building.
During the years ended December 31, 1996 and 1995, sales of hi-rise systems
accounted for approximately 36% and 40%, respectively, of the Company's
revenues.
IDC SYSTEMS PRODUCTS
IDC Systems offers a line of trash compaction systems designed primarily for use
in multi-story buildings. IDC Systems' line includes six principal models.
During the years ended December 31, 1996 and 1995, sales of trash compaction
systems accounted for approximately 14% and 25%, of the Company's revenues.
WILKINSON PRODUCTS
Wilkinson is engaged in the sale, manufacture, distribution and installation of
sheet metal fabrication products, consisting primarily of laundry and rubbish
chutes, as well as construction products such as corner guards, kick and push
plates, handrails and bumper rail systems. Wilkinson also offers a line of
recycling bins. Wilkinson's laundry and rubbish chutes are available with
various types of doors, including a door integrated with the hi-rise system
control panel, and are custom designed to meet a building's specifications.
Construction products and recycling bins are generally available either custom
designed or from stock. In addition, Wilkinson provides other sheet metal
fabrication products consisting of components custom designed to its customers'
specifications which are utilized by its customers in the manufacture of their
products. Wilkinson also sells replacement parts for its principal products.
MARKETING AND SALES
Target Geographic Markets
The Company's marketing efforts with respect to the hi-rise system are focused
in geographic markets in which the hi-rise system is believed to have potential
for significant market penetration. The Company believes that certain geographic
markets are likely to achieve greater system penetration based on a number of
factors, principal among which is the existence of mandatory recycling
legislation with penalties for non-compliance. The Company has identified
potential geographic markets by evaluating among other things, the existence of
proposed legislation mandating recycling; high or increasing landfill and
incinerator disposal fees which result in high monthly hauling fees to building
owners; and high concentrations of mid-rise and high-rise buildings in
serviceable geographic areas. Based on this evaluation, the Company is currently
focusing its efforts primarily in South Florida and West Florida and
metropolitan areas such as New York City and Toronto, Canada. The Company
currently anticipates that it will seek to achieve significant market
penetration in these and other selected geographic areas with one or more of the
model's characteristics.
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The Company plans to expand its operations into new geographic markets beginning
in markets in which the system is likely to achieve market penetration, such as
Boston, Massachusetts and Washington, D. C., as well as Chicago, Illinois.
In an effort to enter the New York City and surrounding geographic markets, in
February 1995, the Company acquired IDC Systems, a company engaged in the
business of assembling, selling, installing and servicing trash compaction
systems in New York, New Jersey and Connecticut. IDC Systems currently services
approximately 1,700 compaction customers, many of which are multi-story
residential buildings that are potential customers for the hi-rise system. The
Company is attempting to capitalize on IDC Systems' existing and potential
customer base and industry contacts. The Company will seek to sell its hi-rise
systems and continue to sell compaction systems in New York City and the
surrounding geographic areas. If it is able to establish a significant market
presence in New York City and other geographic areas, the Company anticipates
that it will implement product rollout in contiguous areas with high
concentrations of multi-story buildings. According to U. S. Census Bureau
statistics, approximately 30% of the U. S. population lives in multi-story
buildings, representing some 75 million people in an estimated 100,000
buildings. The Company estimates, based on its experience with buildings in
which the hi-rise system has been installed, that the average garbage hauling
fee in these buildings is about $20,000 a year, representing $4 billion annually
in hauling fees for multi-story residential buildings. The Company's hi-rise
systems can be installed in old buildings with virtually no structural changes,
and can be adapted to multi-story commercial buildings and designed into new
construction. Of the 105 systems installed, 93 have been installed in
multi-story residential buildings (including 32 in new residential construction
and one in a mixed-use historic rehabilitation) and 12 have been sold to private
waste hauling companies which have remarketed the system to residential building
owners.
The Company also plans, as part of its long-term objectives, to expand its
operations into foreign markets, including Japan, Korea and the European
Community.
SYSTEM SALES
The Company derives a substantial portion of its revenue from sales and leases
and rentals of the hi-rise system. To date, 105 hi-rise systems have been
installed in several urban communities, including 60 systems in Dade County,
Florida, 19 in Toronto, Canada, 4 in Broward County, Florida, 4 in Boca Raton,
11 in New York City, 2 in Naples, Florida and one each in Marco Island, Florida,
Chicago, Illinois, the University of Wisconsin, the University of Georgia and
the Washington, D. C. area.
The Company engages an independent sales force and independent distributors in
various regions throughout the United States, for marketing to multi-story
building owners and waste hauling companies. For the years ended December 1996,
1995 and 1994, one of such distributors accounted for approximately 5% of the
Company's system sales. Although the
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Company will continue to sell hi-rise systems through independent distributors,
the Company is increasing its emphasis on sales of hi-rise systems through its
direct sales force. The Company's independent distributors typically purchase
hi-rise systems from the Company for resale to their customers. In February
1995, the Company acquired IDC Systems. The Company intends to attempt to
capitalize on IDC System's existing and potential customer base and industry
contacts. The Company will seek to sell its hi-rise systems through a sales
force based at IDC Systems and continue to sell compaction systems in New York
City and the surrounding geographic areas. In February 1995, the Company also
acquired Dade County Recycling, Inc., a Florida corporation ("DCR"), a former
distributor of the hi-rise system in Dade County, Florida. On September 25,
1996, the Company acquired all of the outstanding capital stock of Recycltech
Enterprises Inc., a Province of Ontario corporation ("Recycltech"), which had,
prior to the acquisition, served as the Company's distributor of hi-rise systems
in Toronto, Canada and its immediately surrounding areas.
As part of its strategy to expand its distributor network and offer a fully
integrated waste disposal system for multi-story buildings, the Company
consummated the Wilkinson Acquisition. Wilkinson has a network of approximately
65 domestic and 10 international distributors who market its products primarily
to architects and building contractors. Wilkinson generally has contractual
arrangements with its distributors pursuant to which the distributor is granted
the exclusive right to market Wilkinson's products in the specified territory.
The distributor typically is not required to meet sales quotas to maintain its
relationship with Wilkinson. A substantial portion of Wilkinson's distributors
receive commissions based on net sales. Certain distributors, particularly the
larger ones, purchase products from Wilkinson for resale to their customers.
Since the consummation of the Wilkinson Acquisition, the Company has commenced
marketing the hi-rise system through Wilkinson's distributor network. The
Company intends to commence marketing IDC Systems' trash compaction systems
under the "Wilkinson" name. In addition, as a result of the Wilkinson
Acquisition, the Company is able to offer a fully integrated wasted disposal
system for multi-story buildings consisting of the hi-rise system, waste
disposal chute and trash compaction system. The Company believes that by
utilizing Wilkinson's distributor network to offer a fully integrated waste
disposal system, it will be able to penetrate further the new construction
market.
LEASE PROGRAMS
In addition to sales of hi-rise systems, the Company seeks to enter into
favorable long-term sales type lease agreements with building owners providing
for a fixed monthly rental, renewal options and a fair market value purchase
option at the end of the lease term. The Company also seeks to enter into
capital leases, for a term of seven years, with building owners providing for
monthly principal and interest payments to be applied towards the cost of the
hi-rise system. At the end of the lease, the building owner may purchase the
system for nominal consideration. Of the 105 systems installed to date, 57 have
been installed pursuant to lease agreements.
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SHARED SAVINGS PROGRAMS
In connection with sales, leases and rentals of hi-rise systems, the Company
seeks to enter into shared savings agreements with building owners. In general,
under shared savings agreements, the Company manages a building's solid waste
disposal for which the Company receives an amount equal to the building's
monthly waste hauling bill prior to system installation (which amount is
adjusted to reflect increases in the hauling rate). Under the terms of these
agreements, the Company pays the building's current waste hauling bills and is
entitled to retain between approximately 60-100% of the monthly savings realized
as a result of any decrease in the building's waste hauling bill. The Company
believes that by using the hi-rise system a building's savings result primarily
from reduced building labor costs of carrying recyclables in stairwells and
elevators and additionally from a percentage of the savings as a result of
reduced fees charged by a building's waste hauler due to the reduced volume of
waste disposed in landfills. Waste haulers typically have short-term (three
years or less) contracts based on volume, which permit building owners to save
money on existing contracts or to negotiate contracts in anticipation of
implementing shared savings program. The Company believes shared savings
programs maximize returns to the Company and will provide an increasing source
of cash flow over the term of the agreement, usually seven to ten years. To
date, the Company has entered into 33 shared savings agreements.
In January 1991, the prototype of the hi-rise system was installed in a 23-story
condominium in Dade County, Florida on a shared savings basis. Under this
program, the Company receives the first $425 per month of savings and shares the
balance of the savings with the building on a predetermined basis. Since the
installation, use of the hi-rise system has resulted in a significant reduction
in the volume of non-recyclable garbage being hauled to the landfill and in
corresponding reductions in the building's hauling fees.
During the years ended December 31, 1996 and 1995, shared savings contract
revenue accounted for approximately 13% of the Company's revenues.
MARKETING AND PROMOTION
The Company believes that increased awareness and understanding of
environmentally compatible alternatives to traditional methods of waste disposal
are important factors in the marketing of the hi-rise system. Accordingly, the
Company's marketing strategy is focused on education and emphasizes that the use
of the hi-rise system, which promotes recycling, will result in a cleaner
environment. The Company also markets the hi-rise system by utilizing statistics
generated by systems currently in use. The data is used to familiarize real
estate developers, building management companies, condominium boards and other
potential purchasers, about the environmental, time, labor and costs benefits of
the system as compared to other more costly and less convenient methods of
transporting recyclables floor-to-floor. The Company also seeks to educate local
officials in markets with high waste disposal costs and high concentrations of
multi-story buildings as to the environmental benefits of recycling and the use
of the hi-rise
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system, to encourage the adoption of recycling legislation. The Company has two
educators on staff to educate individuals and promote the hi-rise system. Other
marketing efforts include direct mailing, advertising in trade publications,
preparation of promotional brochures and participation in industry conferences
and trade shows.
The Company has received favorable media and industry attention. The hi-rise
system has been described in numerous national and local publications in the
United States, Canada, Australia and Europe and has been the topic of discussion
on several television and cable station news reports and talk shows, including
CNN Prime News, CNN Headline News, and the Wall Street Journal Report.
The Company believes that its acquisition of IDC Systems, a company engaged in
the business of assembling, selling, installing and servicing trash compaction
systems in New York, New Jersey and Connecticut, may enhance the Company's
ability to market and sell its hi-rise systems in New York City and its
surrounding geographic areas and to expand its customer base. IDC Systems
currently services approximately 1,700 compaction customers, many of which are
multi-story residential buildings. The Company intends to market and sell its
hi-rise system through IDC Systems to multi-story residential buildings located
in the tri-state area.
MANUFACTURING AND SUPPLY
To date, the Company has obtained all of its component parts, including
carrousels, roll-away waste collection bins and the components of the electronic
control panel and "controller" incorporated into hi-rise system, from
third-party manufacturers. For the years ended December 31, 1996 and 1995,
substantially all of the Company's carrousel requirements were purchased from
one manufacturer, Accudyne Corporation. The Company currently has alternative
sources for these components and believes that additional alternative sources
are readily available. The Company is substantially dependent on the ability of
its manufacturers, among other things, to satisfy performance and quality
specifications and dedicate sufficient production capacity for components within
scheduled delivery times. The Company does not maintain supply contracts with
any of its manufacturers and purchases components pursuant to purchase orders
placed from time to time in the ordinary course of business. Failure or delay by
the Company's suppliers in supplying necessary components to the Company would
adversely affect the Company's ability to obtain and deliver products on a
timely and competitive basis.
In addition, IDC Systems obtains all of its trash compaction system components
from third-party manufacturers. IDC Systems currently has alternative sources
for these components and the Company believes that additional alternative
sources are readily available. IDC Systems does not maintain supply contracts
with any of its manufacturers and purchases components pursuant to purchase
orders placed from time to time in the ordinary course of business. Failure or
delay by IDC Systems' suppliers in supplying components for its compaction
systems would adversely affect IDC Systems' ability to obtain and deliver
products on a timely and competitive basis. Sales of trash compaction systems
accounted for approximately 40% and 39% of IDC Systems
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sales during the years ended December 31, 1996 and 1995 with the balance
consisting of service revenue for parts and labor.
Wilkinson manufactures sheet metal fabrication products at its manufacturing
facility in Stow, Ohio. The manufacturing process consists primarily of
decoiling and cutting the steel to length, forming, welding, assembly and then
packaging for shipment. Quality control is performed during the welding process.
The principal materials used in manufacturing are stainless steel and aluminized
steel rolls. Wilkinson generally purchases its steel requirements pursuant to
blanket type purchase arrangements pursuant to which prices are established for
a specified period. Wilkinson currently has several sources for its steel
requirements and the Company believes that other sources are available. In
addition, Wilkinson purchases certain component parts from third party
manufacturers who manufacture these components to its specifications. The
Company intends to consolidate manufacturing and engineering of all of the
Company's products at Wilkinson's manufacturing facility. The Company has begun
configuring the facility to allocate space for new manufacturing. Certain of
Wilkinson's existing equipment may be used for manufacturing of the Company's
other products. In addition, the Company intends to purchase additional
equipment for this purpose.
PRODUCTION
The Company engages in limited assembly operations of the hi-rise system at its
facility in Miami, Florida. The Company's assembly operations involves the
certification of each system component, assembly of the system's electronic
control panels, a series of quality specification measurements, and various
other physical and visual tests to certify final performance specifications. The
Company's sales cycle, which in the case of direct sales, leases and rentals
commences at the times a prospective customer demonstrates to the Company an
interest in purchasing or leasing or renting a hi-rise system and ends upon
completion of installation of such system, at which time the Company recognizes
revenue, typically ranges from two to six months. The period from the execution
of a purchase order or lease or rental agreement until delivery of system
components to the Company, assembly, shipment and completion of installation of
such system typically ranges from one to two months in the case of existing
buildings and from six to eighteen months in the case of new building
construction. In the case of sales to distributors, the Company's sales cycle
commences at the time a prospective customer expresses an interest in purchasing
a hi-rise system and ends upon shipment of the system to the distributor, at
which time the Company recognizes revenue, and typically ranges from two to four
months. By contrast, the Company may fill purchase orders within seven days of
receipt when delivered out of inventory. These orders are primarily orders
concerning spare parts. The Company generally fills orders shortly after
receipt, except in the case of new building construction where delays in
installation may occur at the building owner's request as a result of its
construction schedule. At December 31, 1996, the Company had a backlog of
approximately $3,500,000 relating to installations of hi-rise systems in new
buildings and contracted compactor orders. Backlog at December 31, 1995 was
approximately $1,600,000. The Company believes that its
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present inventory level together with readily available components and supplies
is sufficient to satisfy the current backlog.
The minimum period of time required by Wilkinson to fill an order for its custom
designed product generally ranges from four to six weeks from its receipt of
approved drawings. However, its sales cycle typically depends on the building's
construction schedule. As a result, Wilkinson's sales cycle may range from six
months to 18 months.
CUSTOMERS
The Company plans to market the hi-rise system beyond the existing residential
building market to owners of existing commercial buildings with waste disposal
chutes and newly-constructed or renovated residential and commercial multi-story
buildings. The Company believes that other potential customers include waste
recycling companies, municipal waste haulers, hospitals, universities, hotels
and government buildings. The Company believes that its acquisition of IDC
Systems, will enhance the Company's ability to market and sell its hi-rise
systems in New York City and its surrounding geographic areas and to expand its
customer base. The new construction market in South Florida was a large source
of orders for 1996 and 1995. The Company estimates that it was able to penetrate
approximately 70% of this segment of the market in 1995, which was primarily
responsible for the increase in backlog.
A substantial portion of Wilkinson's customers consist of architects and
building contractors who specify its products in building construction.
Wilkinson's customers generally utilize its products in construction of
residential buildings, hotels and hospitals. The Company believes that the
Wilkinson Acquisition will enhance its ability to penetrate the new construction
market.
INSTALLATION, SERVICE AND MONITORING
The hi-rise system can be easily installed with virtually no structural changes
to buildings or to disposal chutes in existing buildings, and can be easily
designed into new buildings. Installation generally takes one to four days and
consists of installing the carousel, collection bins and "controller" in the
basement and installing and wiring electronic control panels near disposal chute
doors on each floor. The Company performs diagnostic tests and procedures to
determine whether the installed system meets system specifications. The Company
currently has five employees providing installation services, not including the
eight service and installation personnel available in New York.
The Company's personnel provide on-site training to building staff in the use of
the hi-rise system. The Company provides training for both the operation and use
of the hardware components of the system and execution of all applications of
the software. Purchase of the system includes provision by the Company of a
complete installation, operation, service and safety manual in addition to
technical training which is tailored to the needs of the building management and
other personnel. Education is made available to the building manager,
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maintenance staff and waste hauler, typically during a two to four week
curriculum. In addition, prior to the installation of the hi-rise system in a
building, the Company institutes an educational program for residents and
provides educational materials, including instructional videos, to building
residents in order to encourage source-separation and proper use of the system.
Building management and residents are encouraged to maintain a high level of
recycling and conduct on-going source-separation surveys. When the hi-rise
system is activated by a resident, the control panel automatically "locks-out"
all other chute doors to prevent other residents from disposing of a different
recyclable or garbage. Nevertheless, there are no safeguards to prevent improper
disposal by the resident utilizing the system. Accordingly, the success of the
hi-rise system is dependent upon the cooperation of the building's residents.
However, based on its experience, the Company believes that it is unlikely that
a resident will misuse the system, inasmuch as the control panel must be
activated for disposal. Moreover, a resident not inclined to participate in the
building's recycling program may simply push the garbage button for disposal of
all his trash. The Company currently has two employees providing training and
educational services.
The Company offers a six-month, for retrofit buildings, or one year, for new
buildings, limited warranty covering workmanship and materials, during which
period the Company or its authorized service representative will make repairs
and replace parts which become defective due to normal use. Pursuant to
maintenance and service contracts, the Company will make repairs during business
hours according to a specified period commencing upon the expiration of the
warranty for a monthly fee. The Company employs five persons who are engaged in
system maintenance and service (including installation), excluding nine service
representatives employed by IDC Systems. These nine are trained to install and
service both compactors and the Hi-Rise Recycling System(TM). Other than
buildings which have entered into lease agreements with the Company, 13
buildings (containing 17 systems) have entered into service contracts with the
Company.
The Company also offers central station monitoring services with each hi-rise
system for either a fixed monthly or quarterly fee. The central station monitors
the hi-rise system's microprocessor which features a self-diagnostic capability
that electronically transmits system information via telephone communication
lines to a central monitoring station.
When a collection bin is full or the system malfunctions, a central station
operator routes calls to the nearest local representative for service or to the
appropriate building personnel, as appropriate. Although service contracts
typically cover normal business hours, monitoring services are available on a 24
hour, seven day a week basis.
As with the hi-rise system, IDC Systems' trash compaction systems can be easily
installed into existing buildings or new buildings. Installation normally takes
one to two days and consists of installing the compaction unit in the basement
or first floor of the building. IDC Systems currently has nine employees
providing service and installation services.
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In connection with sales of trash compaction units, IDC Systems offers a one
year limited warranty covering workmanship and materials, during which time IDC
Systems will make repairs and replace parts which become defective due to normal
use. In addition, IDC Systems attempts to enter into a maintenance and service
contract with the building regarding the compaction system. Pursuant to such
service contracts, for a monthly fee, IDC Systems will make repairs and
generally maintain the compaction system for a one year period, commencing upon
the expiration of the warranty period. In the event a building determines not to
enter into a maintenance and service agreement with IDC Systems regarding a
compaction system, IDC Systems will service the system as requested by the
building for a maintenance fee related to time and material costs of IDC
Systems.
Wilkinson performs installation in its geographic area. In connection with sales
of sheet metal fabrication products, Wilkinson typically offers a one year
limited warranty covering workmanship and materials, during which time Wilkinson
will make repairs and replace parts which become defective due to normal use.
PRODUCT DEVELOPMENT
The Company's product development efforts are focused on enhancing and refining
the hi-rise system and on adapting the system to satisfy individual and industry
requirements. For the years ended December 31, 1996 and 1995, product
development expenditures by the Company were approximately $48,881 and $29,970,
respectively, and were expensed as incurred. The Company intends to continue to
engage in ongoing system refinement and enhancement efforts, including
development of a diverter model that enables the system to accommodate larger
buildings with the hi-rise system and a separate compactor. The system also has
modem capabilities to interface via telephone communication lines with waste
hauling companies and other industry participants. The Company believes that the
potential ability of the system to alert waste hauling and recycling companies
when collection bins reach capacity will facilitate community recycling programs
and improve the efficiency of recyclable solid waste collection and disposal.
The Company also will seek to develop a capability to centrally monitor resident
participation and to use statistical data to develop recycling programs to
satisfy evolving industry trends and regulatory requirements. The bagger model
was one project completed in 1995 which the Company is actively marketing. An
integrated chute door system for new construction was also developed in 1995 and
is being actively marketed at the present time. This technology combines the
building's trash chute, trash chute door and floor panel into one piece of
equipment. A patent has been applied for and is pending at this time. Currently
eight customers have contracted to purchase the integrated door.
COMPETITION
The waste management industry is characterized by intense competition. Although
the Company is aware of only three companies that offer or are attempting to
offer solid waste collection
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alternatives for multi-story residential buildings, none of which the Company
believes is functionally equivalent to the hi-rise system, there can be no
assurance that other companies do not have or are not currently developing
functionally equivalent products, or that functionally equivalent products will
not become available in the near future. Additionally, the Company is aware of a
number of companies that offer trash compaction systems substantially similar to
those sold by IDC Systems and Wilkinson competes with certain regional
manufacturers of chutes and other sheet metal fabrication products. Certain of
the Company's, IDC Systems' and Wilkinson's competitors may have substantially
greater financial, personnel, marketing and other resources than the Company. In
addition, there are numerous companies involved in the waste management
industry, including waste hauling companies and other companies engaged in waste
separation, recovery and recycling, which may have the expertise and resources
that would encourage them to attempt to develop and market products which would
compete with the hi-rise system or render the system obsolete or less
marketable. The Company's system currently competes with other methods for
separating and collecting recyclables and waste disposal, such as landfilling
and incineration. Most of the companies marketing such waste disposal services
or products or with the potential to do so are well established, have
substantially greater financial and other resources than the Company and have
established reputations relating to product design, development, marketing and
support. The Company believes that the alternatives offered by its competitors
are less desirable than the hi-rise system because they are more expensive and
may result in risks such as fire and vermin from the storage of recyclables on
each floor of the building until collection and in health hazards to the
building's maintenance personnel associated with floor-to-floor collection and
transportation of recyclables.
The Company believes that the principal competitive factors in the Company's
market are cleanliness, efficacy, ease of use, labor savings, price and system
flexibility. The Company believes that Wilkinson competes primarily on the basis
of quality.
PATENTS AND PROPRIETARY INFORMATION
The Company holds United States and Canadian patents, which cover a system of
separating waste in multi-story buildings with a chute system. The Company's
United States and Canadian patents expire in 2008 and 2013, respectively.
Functionally equivalent waste collection and source-separation systems which may
not be covered by the Company's patent may be currently in commercial
distribution by the Company's competitors. The Company has applied for patents
in Japan, Korea and the European Community similar or identical to its United
States and Canadian patents. In 1995 the Company applied for two additional
patents in the United States and anticipates that it will apply for additional
patents as deemed appropriate. In addition, Wilkinson holds United States
patents covering certain recycling bins which expire in 2019 through 2010 and
has applications pending for additional patents. The Company believes that
patent protection is important to its business. There can be no assurance,
however, as to the breadth or degree of protection which existing or future
patents, if any, may afford the Company, that any unissued patent applications
will result in issued patents or that patents will not be
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circumvented or invalidated. Although the Company believes that its patents and
the hi-rise system do not and will not infringe patents or violate proprietary
rights of others, it is possible that its existing patent rights may not be
valid or that infringement of existing or future patents or proprietary rights
may occur. In the event the Company's products infringe patents or proprietary
rights of others, the Company may be required to modify the design of its system
or obtain a license. Moreover, if the Company's product infringes patents or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which could have a material adverse effect on the
Company.
The Company also relies on trade secrets and proprietary know-how and employs
various methods to protect the concepts, ideas and documentation of its
proprietary information. However, such methods may not afford complete
protection and there can be no assurance that others will not independently
develop such know-how or obtain access to the Company's know-how, concepts,
ideas and documentation. Although the Company has and expects to have
confidentiality agreements with its employees and appropriate vendors, there can
be no assurance that such arrangements will adequately protect the Company's
trade secrets. As the Company believes that its proprietary information is
important to its business, failure to protect such information could have a
material adverse effect on the Company.
EMPLOYEES
At March 25, 1997, the Company employed 75 persons, of which six are in
executive positions, ten are in sales, twenty-nine are in production, two are in
marketing, fourteen are in service and installation, ten are in administration,
two are in education and two in engineering. Included in such number of
employees are 14 persons employed by IDC Systems, including one in an executive
position and two in sales, two in administration and nine in service, and 35
persons employed by Wilkinson, including two in administration, three in sales
and thirty in production. The Company believes that it will be able to retain
such personnel without difficulty.
IDC Systems is a party to a collective bargaining agreement with the Building
Service Employees International Union, Local 32-E, Service Trade Division,
AFL-CIO (the "IDC Union") with respect to nine of its service employees. The
current collective bargaining agreement with the IDC Union will expire on March
15, 1998. The Company believes that its employee relations are excellent.
Wilkinson is a party to a collective bargaining agreement with the Building
Sheet Metal Workers International Union, Local 33, (the "Wilkinson Union") with
respect to nine of its service employees. The current collective bargaining
agreement with the Wilkinson Union will expire on March 29, 2000. The Company
believes that its employee relations are excellent.
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ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
The Company's executive offices and assembly operations are located in
approximately 7,500 square feet of leased space in Miami, Florida. The lease
provides for a current rental of $3,410 per month, with increases based on the
consumer price index. The current term of the lease expires on November 30,
1997. The Company has two renewal options for an additional three years with
increases in the annual rental based on increases in the consumer price index.
The Company also leases office space in New York City on a month-to-month basis
at a monthly rental of $1,000. The Company believes that its facilities are
adequate for its present needs.
IDC Systems' executive offices, warehouse and assembly operations are located in
approximately 10,600 square feet of leased space in Mount Vernon, New York. The
lease provides for a rental of $7,500 per month, with increases in year three
through five at 4% each, and a five year term expiring October 1, 2000. The
Company believes that IDC Systems' facilities are adequate for its present
needs.
Wilkinson's executive offices, warehouse, manufacturing and assembly operations
are located in approximately 50,000 square feet of leased space in Stow, Ohio.
The lease provides for an initial three year term expiring February 2, 2000 at
an initial rental of $15,000 per month, with increases in the second and third
year based on increases in the consumer price index. Wilkinson has an option to
renew the lease for an additional two years. The Company intends to consolidate
manufacturing and engineering of all of the Company's products at Wilkinson's
facility. The Company believes that Wilkinson's facilities are adequate for its
present needs.
Recycltech's offices are located in approximately 3,475 square feet of leased
space in the City of North York, Ontario, Canada. The lease provides for a
rental of $868 per month and a two year term which expires on November 30, 1998.
The Company believes that Recycltech's facilities are adequate for its present
needs.
ITEM 3. LEGAL PROCEEDINGS
As a result of operations conducted in the ordinary course of business, from
time to time the Company, IDC Systems and Wilkinson may be, and IDC Systems is
presently, subject to product liability and/or warranty claims and litigation.
The Company believes, though no absolute assurance can be given to that effect,
that the current levels of coverage provided by IDC Systems' product liability
insurance policy are adequate and that any such claims will not have a material
adverse effect on IDC Systems' financial condition or results of operations.
The Company had been previously notified that Jeffrey A. Daniels, its former
president whose employment was terminated in January 1996, intended to pursue
claims against the Company
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resulting from his termination. In July 1996, the Company entered into a
compromise agreement with Mr. Daniels pursuant to which (1) the Company agreed
to pay Mr. Daniels $39,000, in cash less appropriate payroll taxes and to pay
his attorney $11,000, and (2) Mr. Daniels agreed to release all claims against
the Company. In addition, the Company entered into a compromise agreement with
another former employee, Tom Witter, its sales manager, pursuant to which (1)
the Company agreed to pay such employee $27,500, in cash less appropriate
payroll taxes, and (2) such former employee agreed to release all claims against
the Company.
On October 7,1996, Milton Payton ("Mr. Payton"), a former employee, filed a
lawsuit in the Circuit Court of Cook County, Illinois County Department, Law
Division against the Company claiming breach of contract and fraud and
misrepresentation. In general, the lawsuit alleges that the Company made written
and verbal representations to Mr. Payton to become General Manager and part
owner of the Company's Midwest Subsidiary. Mr. Payton seeks compensatory damages
of $600,000 for breach of contract and $600,000 for fraud and misrepresentation.
The Company intends to vigorously contest the validity of Mr. Payton's claims
which the Company believes have no merit. The Company does not believe that the
ultimate outcome of this matter will have a material adverse effect on its
financial position or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has traded in the over-the-counter market on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
Small-Cap Market under the symbol "HIRI" since July 22, 1993, the date of the
Company's initial public offering. The following table sets forth, for the
periods indicated, the high and low closing bid quotations for the Common Stock,
as reported by NASDAQ. The NASDAQ quotations represent quotations between
dealers without adjustment for retail markups, markdowns or commissions and may
not necessarily represent actual transactions.
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PERIOD HIGH LOW
- ------------------------------------------- -------- --------
Year ended December 31, 1995
1st Quarter $ 8-5/8 $ 7
2nd Quarter 11-5/8 5-5/8
3rd Quarter 10-1/8 8-1/8
4th Quarter 10-1/2 8-1/2
Year ended December 31, 1996
1st Quarter $ 9-1/4 $ 2-1/2
2nd Quarter 7 3-1/2
3rd Quarter 6-3/8 3-5/8
4th Quarter 5-3/8 3-5/8
As of March 28, 1997, there were 83 holders of record of the Company's Common
Stock. The Company believes there are in excess of 850 beneficial owners of the
Company's Common Stock. On March 27, 1997, the closing bid price of the Common
Stock was $3.375 per share.
On November 13, 1995, the Company sold 720 shares of the Company's newly created
Series A Preferred Stock, $.01 par value (the "Series A Preferred Stock"), in an
offshore private placement for an aggregate purchase price of $7,200,000.
Pursuant to the terms of the Series A Preferred Stock, such stock became
convertible, at the option of the holders thereof, in increments over a period
of 135 days from the consummation of the private placement, into shares of the
Company's Common Stock, at a conversion rate based upon the lower of (i) $9.75
per share or (ii) 85% of the market price of the Common Stock at the time of
conversion. The conversion rate was subject to adjustment on the occurrence of
certain events. The Series A Preferred Stock was mandatorily convertible by the
holders thereof on October 27, 1998. Prior to any such conversion of the Series
A Preferred Stock, the Company had the option to redeem the Series A Preferred
stock at the then applicable conversion price. Upon conversion or redemption,
the holder was entitled to dividends at the rate of 10% per annum, accrued from
the date of issuance through the date of conversion or redemption, as the case
may be, payable in Common Stock in the case of conversion and cash in the case
of redemption. All 720 issued and outstanding shares of Series A Preferred Stock
have been converted into an aggregate of 2,705,979 shares of Common Stock at an
average per share conversion price of $2.78.
To date, the Company has not declared or paid any dividends on its Common Stock.
The payment of dividends, if any, is within the discretion of the Board of
Directors and will depend upon the Company's earnings, its capital requirements
and financial condition and other relevant factors. The Board does not intend to
declare any dividends in the foreseeable future, but instead intends to retain
future earnings, for use in the Company's business operations.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company was incorporated in May 1990 and was engaged principally in product
development until January 1991, when it installed the first hi-rise system on a
shared savings basis. The Company has only recently begun to generate
significant revenue from system sales and has not been profitable.
The Company is engaged primarily in the business of marketing a proprietary
automated system known as the "hi-rise system" designed to collect and separate
recyclable and other solid waste in multistory buildings. As part of its plan to
expand its operations into new geographic markets, in February 1995, the Company
acquired all of the issued and outstanding capital stock of IDC Systems. IDC
Systems is engaged in the business of manufacturing, installing and servicing
trash compaction systems in New York, New Jersey, and Connecticut. The Company's
results of operation for the year ended December 31, 1995 include the results of
IDC Systems from February 23, 1995, while the Company's results of operation for
the year ended December 31, 1996 include the results of IDC Systems for the full
twelve months.
In July 1993, the Company consummated an underwritten initial public offering
(the "IPO") of 1,380,000 shares of its Common Stock for aggregate net proceeds
of approximately $5,400,000. The net proceeds from the IPO have been used to
acquire components for hi-rise systems, to hire additional marketing and sales
personnel, to make strategic acquisitions, to repay bank indebtedness, to
increase marketing and direct sales programs, for refinement and enhancement of
the system, for working capital and for general corporate purposes.
On June 27, 1995, the Company issued and sold to Mr. Norton Herrick, in a
private placement transaction, 266,667 shares of Common Stock, and warrants to
purchase an additional 250,000 shares of Common Stock at an exercise price of
$9.00 per share, for aggregate net proceeds of approximately $814,000. The
warrants expired unexercised on December 27, 1996.
On November 13, 1995, the Company sold 720 shares of newly created Series A
Preferred Stock, in an offshore private placement for aggregate net proceeds of
approximately $6,368,000.
During 1995 and 1996, substantially all of the Company's operating revenues,
other than IDC Systems revenues, were derived from leases and rentals of the
hi-rise system and from direct sales of the hi-rise system to multi-story
residential building owners and, to a lesser extent, from shared savings
programs, maintenance and monitoring contracts. The Company continues to promote
shared savings programs as part of its marketing strategy. To date, the Company
has entered into 33 shared savings agreements, pursuant to which the Company
manages a building's solid waste disposal and receives an amount equal to the
building's monthly waste hauling bill prior to system installation (which amount
is adjusted to reflect increases in the hauling rate).
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Under the terms of these agreements, the Company pays the building's current
waste hauling bills and is entitled to retain between approximately 60-100% of
the monthly savings realized as a result of any decrease in the building's waste
hauling bill. The balance of any such savings is passed on to the building.
As part of its strategy to (i) expand its network of independent distributors,
(ii) offer a fully integrated waste disposal system for multi-story buildings
and (iii) commence manufacturing the components of the Company's systems, on
February 3, 1997, the Company acquired the Wilkinson Assets. The aggregate
purchase price paid for the Wilkinson Assets was $2,486,827 in cash, subject to
adjustment under certain circumstances, and 76,272 shares of the Common Stock,
valued at $300,000. The cash portion of the purchase price was funded from two
lines of credit and a term loan from Ocean Bank, N.A. ("Ocean Bank"). The
Wilkinson Seller was engaged in the sale, manufacture, distribution and
installation of sheet metal fabrication products. The Company, through its
subsidiary Wilkinson, is continuing the business previously conducted by the
Wilkinson Seller and intends to consolidate manufacturing and engineering of all
of the Company's products at its manufacturing facility in Ohio.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenue during the year ended December 31, 1996 was $3,207,309, an
increase of $145,008, compared to total revenue of $3,062,301 during the prior
year. Revenue from equipment sales, which includes hi-rise system sales and IDC
Systems compactor sales, decreased by $405,132 to $1,586,077 during the year
ended December 31, 1996, from $1,991,209 during the prior year. Hi-rise system
sales for the current year were $1,141,768 compared to $1,214,739 for the
previous year. The decrease is a result of the Company's emphasis during the
year ended December 31, 1996 on equipment sales in new construction buildings.
In the case of new building sales, the period of time between the execution of a
sales contract and installation of the hi-rise system typically ranges from six
to twenty-four months. The Company does not recognize revenue until the
installation of the system. The timing of system installation in these cases is
dependent on the construction process and generally is not within the Company's
control. As a result, backlog balance for recycling systems at December 31, 1996
was $3,566,955, compared to $1,634,434 at December 31, 1995. IDC Systems
compactor sales decreased to $444,309 during the year ended December 31, 1996
from $776,470 during the prior year. Revenue from shared savings agreements
increased slightly by $8,779 to $422,078 during the year ended December 31,
1996, from $413,299 during the prior year. Pursuant to the shared savings
agreements, the Company manages the customer's solid waste disposal in order to
reduce the waste hauling bill, in return for a percentage of the savings
achieved by the Company. The Company had 33 shared saving agreements in effect
at December 31, 1996 compared to 27 at December 31, 1995.
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Revenue from service and parts increased by $541,361 to $1,199,154 during the
year ended December 31, 1996, compared to $657,793 during the prior comparable
year. The primary reason for the increase is the inclusion of service and parts
revenue for IDC Systems for a full year compared to approximately 10 months in
the prior comparable year.
During the year ended December 31, 1996, the Company had interest income of
$416,358, an increase of $75,519, compared to $340,839 during the prior year.
The increase in interest income is primarily attributable to additional interest
realized from sales type lease agreements entered into in 1996 and the
continuation of those in place in 1995.
Total operating costs and expenses during the year ended December 31, 1996 were
$6,031,909, an increase of $420,189, compared to total operating costs and
expenses of $5,611,720 during the prior year. Cost of equipment sold decreased
by $40,002 from $1,624,163 during the year ended December 31, 1995 to $1,584,161
during the current year. As a percentage of equipment sales and service and
parts revenue, cost of equipment sold decreased to 57% during the year ended
December 31, 1996 from 61% during the prior comparable year. The decrease in
cost of equipment sold in absolute dollars and as a percentage of revenue is
primarily attributable to the decrease in IDC Systems compactor sales and the
increase in IDC Systems service and parts revenue. IDC Systems cost of sales for
service and parts as a percentage of its revenues is typically lower than the
cost of equipment sold of hi-rise systems and IDC Systems compactors as a
percentage of revenue from sales of hi-rise systems and compactors.
Selling and marketing expenses during the year ended December 31, 1996 were
$543,360, a decrease of $169,824 compared to selling and marketing expenses of
$713,184 during the prior year. The decrease in selling and marketing expenses
was primarily attributable to elimination of three sales people hired to create
a dealer network and two telemarketers during the year. General and
administrative expenses during the year ended December 31, 1996 were $3,381,364
an increase of $648,574 compared to general and administrative expenses of
$2,732,790, during the prior year. The increase in general and administrative
expenses was partially attributable to an increase of approximately $220,000 in
salaries and related costs as a result of the hiring of additional executive and
administrative personnel including a new chief executive officer and
administrative assistant. In addition, general and administrative expenses for
the year ended December 31, 1996 include approximately $55,000 of such expenses
for IDC Systems above the ten months in 1995. Legal and professional fees
increased by $100,000 primarily as a result of the filing of a registration
statement on Form S-3 during the current year and legal fees incurred in
connection with the exercise by certain holders of the Company's Series A
Preferred Stock of their right to convert such shares into shares of the
Company's Common Stock and changes in the Company's management. In addition, the
premium for the Company's directors and officers liability insurance increased
by $75,000 during the year. The purchase of IDC Systems and DCR, and the
depreciation on assets purchased in 1995 resulted in an additional $140,000 of
depreciation and goodwill expense in 1996.
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Interest expense increased $35,722 to $146,207 during the year ended December
31, 1996 from $110,485 during the prior year. The increase was primarily
attributable to increased borrowings under the Company's line of credit with
Ocean Bank.
In July 1996, the Company agreed to an out of court settlement with Mr. Jeffrey
Daniels, its former president who was terminated in January 1996, and another
former employee. The Company incurred settlement expenses totaling $84,702 in
cash in connection with such settlements.
As a result, the Company incurred a net loss of $2,639,151 during the year ended
December 31, 1996, compared to a net loss of $2,319,065, during the year ended
December 31, 1995.
CHANGES IN ACCOUNTING STANDARDS
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for the
year ended December 31, 1996. This pronouncement encourages, but does not
require, companies to recognize compensation expense for grants of stock, stock
options and other equity instruments to employees based on new fair value
accounting rules. The Company has determined not to recognize such compensation
expense for grants of stock options to employees. The Company has adopted the
pro forma disclosure provisions of SFAS No. 123. The impact on the Company's
consolidated financial statements of such disclosure totaled $67,280 in 1996.
See Note 11 to the Company's Consolidated Financial Statements appearing
elsewhere herein.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." SFAS No. 128 specifies new standards designed to improve
the earnings per share ("EPS") information provided in financial statements by
simplifying the existing computational guidelines, revising the disclosure
requirements, and increasing the comparability of EPS data on an international
basis. Some of the changes made to simplify the EPS computations include: (a)
eliminating the presentation of primary EPS and replacing it with basic EPS,
with the principal difference being that common stock equivalents are not
considered in computing basic EPS, (b) eliminating the modified treasury stock
method and the three percent materiality provision, and (c) revising the
contingent share provisions and the supplemental EPS data requirements. SFAS 128
also makes a number of changes to existing disclosure requirements. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. The Company has not yet determined the impact
of the implementation of SFAS 128.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $2,571,485 and cash and
cash equivalents aggregating $1,711,752 compared to working capital of
$6,305,990 and cash and cash equivalents of $5,717,560 at December 31, 1995.
25
<PAGE>
The Company's primary sources of working capital are the net proceeds from the
sale of Series A Preferred Stock in November 1995, net proceeds from a private
placement of Common Stock in June 1995, a $2.0 million line of credit with Ocean
Bank and its lease financing arrangements with First Sierra, Inc. ("First
Sierra").
Under the Ocean Bank line of credit, the Company may borrow up to 75% of the
present value of eligible leases of the hi-rise systems entered into since
January 1994. The line of credit is collateralized by leases of the Company's
hi-rise system, bears interest at a rate per annum equal to Citibank's prime
rate plus 2% and is payable on demand. The line was increased from $1.5 million
to $2.0 million on or about September 30, 1996. As of December 31, 1996, the
outstanding balance under this line of credit was $1,584,814.
Pursuant to the lease purchase agreement with First Sierra, First Sierra has
agreed to purchase from the Company from time to time eligible leases of hi-rise
systems for a purchase price equal to the discounted present value of the leases
purchased. In the event that a lessee defaults under a lease purchased by First
Sierra, First Sierra has the right to require the Company to repurchase the
lease. The lease financing arrangement commenced in January 1995. Proceeds from
sales of leases to First Sierra in the year ended December 31, 1995 were
approximately $512,000. Outstanding leases sold to First Sierra which the
Company is contingently liable to repurchase amounted to $303,742 at December
31, 1996.
In order to fund the cash portion of the purchase price for the Wilkinson
Assets, in February 1997, the Company obtained an $850,000 line of credit and a
$900,000 five-year term loan from Ocean Bank. The line of credit and the term
loan bear interest at a rate per annum equal to Citibank's prime rate plus 2%.
The line of credit is due in February 1998. The term loan is payable in monthly
installments of principal and interest.
On June 27, 1995, the Company sold to Mr. Norton Herrick, in a private placement
transaction, 266,667 shares of Common Stock, and warrants to purchase an
additional 250,000 shares of Common Stock at the exercise price of $9.00 per
share, for aggregate net proceeds of $813,998. The warrants expired unexercised
on December 27, 1996.
On November 13, 1995, the Company sold 720 shares of newly created Series A
Preferred Stock in an offshore private placement for an aggregate purchase price
of $7,200,000. In connection with this private placement, the Company received
proceeds net of expenses of approximately $6,368,000.
Net cash used in operating activities was $3,152,794 and $3,940,726 during the
years ended December 31, 1995 and 1996, respectively. The increase was primarily
attributable to a net loss of $2,639,151 in the year ended December 31, 1996 and
an increase of $599,462 in capital leases entered into with customers in 1996.
In addition, accounts receivable increased by $245,207, and inventory by
$509,624. The increase in accounts receivable was the result of two sales
totaling $184,000 installed at the end of the year and higher December billings
for lease payments and hauling bills in 1996 compared to 1995. Inventory
increased as a result of more finished goods in stock to support the increase in
backlog which increased by approximately $1.9 million. Net cash used by
investing activities was $314,824 during the year ended December 31, 1996 and
relates primarily to the purchase of fixed assets. The majority of the purchases
relate to the establishment of a computer network for the Company's Florida and
New York offices and software for the accounting and sales databases at these
locations. Net cash provided by
26
<PAGE>
financing activities was $249,742 during the year ended December 31, 1996,
reflecting the proceeds from the line of credit. At December 31, 1996, the
Company had cash and cash equivalents of $1,711,752, compared to cash and cash
equivalents of $5,717,560 at December 31, 1995.
The Company currently has no outstanding material commitments for capital
expenditures. The Company's primary requirements for capital will be the cost of
systems sold, leased and rented, strategic acquisitions, marketing and sales
costs associated with the Company's national and international expansion into
new target markets and efforts to establish a nationwide distribution network,
costs related to the plan to commence manufacturing of the Company's products
and general and administrative expenses associated with the Company's plan for
expansion.
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion or Plan of Operation contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations and beliefs concerning
future events. The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward-looking statements, including, without limitation, the
following: decline in demand for the Company's products; and the effect of
general economic conditions generally and factors affecting the waste hauling
and construction industries. These statements by their nature involve
substantial risks and uncertainties and actual events or results may differ as a
result of these and other factors.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company required by Form 10-KSB are
attached following Part III of this report commencing on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Donald Engel..................... 64 Co-Chairman of the Board and Chief Executive Officer
Mark D. Shantzis................. 45 Co-Chairman of the Board
Seymour Oestreicher.............. 72 Vice President-Distribution Development
J. Gary McAlpin.................. 45 Chief Operating Officer
Michael Bracken.................. 38 Executive Vice President of New Construction
Warren Adelson................... 55 Director
Ira S. Merritt................... 55 Director
Joel M. Pashcow.................. 53 Director
</TABLE>
DONALD ENGEL has been Co-Chairman of the Board and Chief Executive Officer of
the Company since March 1996. Prior to joining the Company, Mr. Engel was a
private investor. From June 1991 to June 1993, Mr. Engel served as a consultant
to Bear Stearns & Co., Inc. From March 1985 to June 1991, Mr. Engel served as a
consultant to Drexel Burnham Lambert where he had been managing director since
1978. Mr. Engel has served as a director of multi-national companies such as
Revlon Group, Inc., Triangle Industries, Inc., and Uniroyal Chemical, Inc.
MARK D. SHANTZIS founded the Company in 1990 and served as its Chairman of the
Board and Chief Executive Officer from inception until March 1996. Mr. Shantzis
has been Co-Chairman of the Board since March 1996 and from March 1996 until
January 1997 he served as President of the Company. Mr. Shantzis has been
Chairman, President and Chief Executive Officer of Equidebt Financial Group,
Inc. , a company engaged in providing real estate development, management and
financial services, since February 1984. Mr. Shantzis is the inventor of the
Company's Hi-Rise Recycling System.(TM)
28
<PAGE>
SEYMOUR OESTREICHER has been Vice President - Distribution Development of the
Company since March 1995. Mr. Oestreicher was a founder and has been Chairman of
IDC Systems, a company engaged in selling, installing and servicing trash
compaction systems, since its formation in 1987. Mr. Oestreicher was a founder
and served as Chairman and President of International Dynetics Corp., a company
engaged in the design, manufacture and installation of trash compaction systems,
from 1969 until 1986. At IDC Systems and International Dynetics Corp., Mr.
Oestreicher oversaw the design, manufacture and sale of refuse compactors and
specialized electro-hydraulic waste handling equipment primarily in New York,
New Jersey and Connecticut, with distribution worldwide. From January 1951 to
June 1969, he was Vice President of AMF, Inc., with responsibility for
operations and sales in its International Electrical Products Division.
MICHAEL BRACKEN has been Executive Vice President of New Construction Sales of
the Company since July 1996. Mr. Bracken joined the Company in September 1993 as
a salesman. From August 1992 to August 1993, Mr. Bracken was the General Manager
and Construction Project Manager of Brickell Biscayne Condominium in Miami.
Prior thereto, he served as a field manager of Schlumberger Overseas Ltd., a
petroleum engineering company, for eleven years in South East Asia.
GARY MCALPIN has been Chief Operating Officer of the Company since March 1996.
Mr. McAlpin joined the Company in October 1996 as a Vice President. From January
1996 to October 1996, he served as a construction/project manager of
Birwelco-Montenay, a power generator. For the prior eight years, he served as
Vice President and General Manager of IDAB Incorporated, a materials handling
company.
WARREN ADELSON has been a director of the Company since May 1993. Mr. Adelson
has been President of Adelson Galleries, a New York art gallery, since January
1990. From 1974 to January 1990, Mr. Adelson was Vice President of Coe Kerr
Gallery, a New York City art gallery.
JOEL M. PASHCOW has been a director of the Company since March 1996. Mr. Pashcow
is now the Chairman of the Executive Committee of the Board of Trustees of
Ramco-Gershenson Property Trust (NYSE) and Chairman and President of Atlantic
Realty Trust. Mr. Pashcow serves as the Chairman of the Board of Directors of
RPS Realty Trust, a New York Stock Exchange commercial property REIT, from
February 1988 to April 1996. Mr. Pashcow has served as a member of the Board of
Governors of the Real Estate Securities and Syndication Institute and as a
director and member of the executive committee of the National Realty Committee.
29
<PAGE>
IRA S. MERRITT has been a director of the Company since March 1996. Since his
semi-retirement in 1990, Mr. Merritt, a licensed certified public accountant,
has been engaged in selling residential real estate in Boca Raton, Florida. From
1988 to 1990, Mr. Merritt was employed by the Sidney Kohl Company, a Florida
real estate company, where he established the firm's property management
division. From 1982 to 1988, Mr. Merritt was the Executive Vice President and
Chief Financial Officer of Hanover Companies, Inc. From 1975 to 1982, Mr.
Merritt was the senior partner of Merritt, Levy and Cohen, an accounting firm
specializing in the real estate industry.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written or oral representations that no
other reports were required for such persons, during the fiscal year ended
December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent (10%) beneficial owners were
complied with, except for Gary McAlpin and Michael Bracken each of whom failed
to timely file a Form 3.
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's officers are elected annually by the Board of Directors and serve
at the discretion of the Board of Directors. The Company's directors hold office
until the next annual meeting of shareholders and until their successors have
been duly elected and qualified.
In connection with the Company's initial public offering in July 1993, the
Company agreed with Whale Securities Co., L. P., who acted as the underwriter
(the "Underwriter"), for a period of five years, to nominate and use its best
efforts to elect a designee of the Underwriter as a director of the Company. To
date, the Underwriter has not exercised this right.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31, 1994,
1995 and 1996, the aggregate compensation awarded to, earned by or paid to
Donald Engel, who has been Chief Executive Officer of the Company since March
1996, and Mark D. Shantzis, who served as Chief Executive Officer until March
1996 (together, the "Named Executive Officers"). No other executive officer of
the Company had aggregate compensation exceeding $100,000 during the year
30
<PAGE>
ended December 31, 1996. The Company did not grant any restricted stock awards
or stock appreciation rights or make any long-term incentive plan payouts during
such fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#)
- ----------------------------------------------- ---- ------------ ------------
<S> <C> <C> <C>
Donald Engel 1994 -- --
Co-Chairman of the Board and Chief Executive 1995 -- --
Officer(1) 1996 $138,750 500,000(2)
Mark D. Shantzis 1994 $156,857(4) 100,000(5)
Co-Chairman of the Board and President(3) 1995 171,987(4) --
1996 148,561(4) --
<FN>
- -----------------
(1) Mr. Engel has served as the Chief Executive Officer and Co-Chairman of the
Board since March 1996.
(2) Represents options granted under the Company's 1996 Stock Option Plan to
purchase 500,000 shares of Common Stock at an exercise price of $4.00 per
share.
(3) Mr. Shantzis served as the Company's Chairman of the Board and Chief
Executive Officer from inception until March 1996 when he became President
and Co-Chairman of the Board. Mr. Shantzis resigned as President effective
January 1, 1997.
(4) In addition, Mr. Shantzis received a monthly car allowance of $750.
(5) Represents options granted under the Company's 1993 Stock Option Plan to
purchase 100,000 shares of Common Stock at an exercise price of $5.00 per
share.
</FN>
</TABLE>
OPTION GRANT TABLE
The following table sets forth certain information concerning grants of stock
options made during the fiscal year ended December 31, 1996 to the Named
Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR SHARE DATE
- ----------------------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Donald Engel........... 500,000 80.6% $4.00 3/24/2006
Mark D. Shantzis....... -- -- -- --
</TABLE>
31
<PAGE>
FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised stock
options held by the Named Executive Officers as of December 31, 1996. No stock
options were exercised by the Named Executive Officers during the year ended
December 31, 1996. No stock appreciation rights have been granted or are
outstanding.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END(#) AT FY-END($)
----------------------------- ----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Engel........ -- -- 500,000 -- --(1) --(1)
Mark D. Shantzis.... -- -- 60,000 40,000 --(1) --(1)
<FN>
- -----------------
(1) The closing bid price for the Company's Common Stock as reported on NASDAQ
on December 30, 1996 was $3.875. Value is zero as the exercise prices for
all options are greater than the price at December 30, 1996.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
All non-employee directors receive an annual stipend of $10,000 and are
reimbursed for their expenses in connection with their activities as directors
of the Company. Directors of the Company who are also employees of the Company
do not receive additional compensation for their services as directors. During
1995, the Company granted Warren Adelson options to purchase 5,000 shares of
Common Stock at an exercise price of $8.25 per share in consideration for his
serving on the Company's Compensation Committee. In March 1996, the Company's
Board of Directors determined that all non-employee directors who serve on the
Company's Compensation and/or Audit Committee will be paid $2,500 per meeting by
the Company.
Non-employee directors are eligible to receive options under the Company's
Directors Stock Option Plan (the "Directors Stock Option Plan"). During 1995,
options were granted under the Directors Stock Option Plan to purchase 2,500
shares of Common Stock to each of Warren Adelson and David Friedman, a former
director of the Company, as non-employee directors.
In March 1996, the Board of Directors adopted, subject to shareholder approval,
a new Directors Stock Option Plan (the "New Directors Plan"). The New Directors
Plan was approved by the Company's shareholders in June 1996. Options to
purchase 20,000 shares of Common Stock have been granted to each of Messrs.
Merritt and Pashcow
32
<PAGE>
in connection with their election as directors of the Company.
See "Stock Option Plans" below.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Donald Engel,
effective as of March 25, 1996, which provides for the employment of Mr. Engel
as Co-Chairman of the Board and Chief Executive Officer of the Company. Such
employment agreement provides for an annual base salary of $180,000 subject to
annual increases in accordance with the Consumer Price Index. The employment
agreement requires Mr. Engel to devote his full time, energies and efforts to
the affairs of the Company. Mr. Engel has agreed that during the term of his
employment agreement and for a period of five years thereafter, he will not
compete or engage in a business competitive with any recycling or sold-waste
disposal business in which the Company or its subsidiaries or affiliates then
engages and which operates within any state in which the Company conducts
business. The employment agreement provides that Mr. Engel or the Company may
terminate such agreement upon ten days notice. Upon the termination of the
employment agreement, Mr. Engel will be entitled to receive any unpaid salary
and accrued bonus through the date of termination.
The Company has also entered into a three-year employment and consulting
agreement with Mark D. Shantzis, effective as of March 25, 1996, which provides
for the employment of Mr. Shantzis as Co-Chairman of the Board and President of
the Company or Consultant to the Company. The initial term of the employment and
consulting agreement will be automatically extended for successive one year
terms unless either party gives notice of its intent not to extend the term at
least six (6) months prior to its expiration date (three (3) months in the case
of any extension period after the initial term). Such agreement provides for an
annual base salary of $180,000 subject to annual increases in accordance with
the Consumer Price Index. Mr. Shantzis has agreed that during the term of his
employment and consulting agreement and for a period of one (1) year thereafter,
he will not consult, compete or engage in or own in excess of 5% of any entity
which engages in the business of providing mechanical multi-story recycling and
which operates within any state in which the Company conducts business. The
employment and consulting agreement provides that Mr. Shantzis or the Company
may terminate such agreement upon thirty (30) days notice. Upon the termination
of Mr. Shantzis' employment and/or consulting relationship with the Company, Mr.
Shantzis will be entitled to receive any unpaid salary and bonus, if any,
accrued through the date of termination and a lump sum severance payment in the
amount of the base salary that would have been paid by the Company to Mr.
Shantzis through the scheduled end of the employment and consulting agreement.
STOCK OPTION PLANS
In July 1993, the Company adopted the 1993 Stock Option Plan (the "Stock Option
Plan") pursuant to which 350,000 shares of Common Stock were reserved for
issuance to officers and other key employees and to certain other persons who
are employed or engaged by the Company. In 1995, the number of shares of Common
Stock reserved for issuance under the Stock Option Plan was
33
<PAGE>
increased by 150,000 shares to 500,000 shares. Under the Stock Option Plan,
options are designated as "incentive stock options" or "non-qualified options"
within the meaning of the Internal Revenue Code of 1986, as amended. The purpose
of the Stock Option Plan is to encourage stock ownership by persons instrumental
to the success of the Company, in order to give them a greater personal interest
in the Company's business. Generally, the exercise price of any stock option
granted to an eligible employee may not be less than 100% of the fair market
value of the shares underlying such option on the date of the grant, unless such
employee owns more than 10% of the outstanding Common Stock, in which case the
exercise price of any incentive stock may not be less than 110% of such fair
market value. Generally the term of each option and the manner in which it may
be exercised is determined by the Board of Directors, provided, that no option
may be exercisable more than ten (10) years after the date of grant and, in the
case of an incentive stock option to an eligible employee owning more than 10%
of the outstanding Common Stock, no more than five years. Payment for shares
purchased upon exercise of any option may be in cash or in shares of the
Company's Common Stock. Options are not transferable, except upon the death of
an optionee. In general, the unexercised portion of an option granted to an
employee under the Stock Option Plan shall automatically and without notice
terminate and become null and void at the time of the earliest to occur of: (i)
three months after the date on which the employee's employment is terminated for
any reason other than for Cause (as defined in the Stock Option Plan), mental or
physical disability or death; (ii) immediately upon the termination of the
employee's employment for Cause; (iii) one year after the date on which the
employee's employment is terminated by reason of the employee's mental or
physical disability or (iv)(A) one year after the date of termination of the
employee's employment by reason of the death of the employee or (B) three months
after the date of the employee's death if such death occurs during the one year
period following the employee's termination as a result of mental or physical
disability. As of December 31, 1996, 527,106 options have been granted and are
outstanding under the Company's Stock Option Plan at an average price of $5.31
per share.
In July 1993, the Company also adopted the Directors Stock Option Plan pursuant
to which 50,000 shares of Common Stock have been reserved for issuance. Only
non-employee directors are eligible to receive options under the Directors Stock
Option Plan. The Directors Stock Option Plan provides for an automatic grant of
an option to purchase 5,000 shares of Common Stock upon a person's election as a
director of the Company and an automatic grant of 2,500 shares of Common Stock
upon such person's re-election as a director of the Company. The Company has
granted to Warren Adelson options to purchase 5,000 shares of Common Stock under
the Directors Stock Option Plan at an exercise price equal to $5.00 per share,
options to purchase 2,500 shares of Common Stock at an exercise price equal to
$6.06 per share and options to purchase 2,500 shares of Common Stock at an
exercise price of $8.25 per share. In addition, in March 1996, the Company
granted to each of Messrs. Merritt and Pashcow options under the Directors Stock
Option Plan to purchase 5,000 shares of Common Stock at an exercise price of
$3.75 per share. In 1996, the Board of Directors terminated the Directors Stock
Option Plan.
In 1996, the Board of Directors and the shareholders of the Company adopted the
Company's 1996 Stock Option Plan (the "1996 Stock Option Plan") pursuant to
which 1,000,000 shares of Common
34
<PAGE>
Stock are reserved for issuance to officers and other key employees and to
certain other persons who are employed or engaged by the Company. The purpose of
the 1996 Stock Option Plan is to encourage stock ownership by persons
instrumental to the success of the Company, in order to give them a greater
personal interest in the Company's business. The terms and provisions of the
1996 Stock Option Plan are substantially similar to those of the 1993 Stock
Option Plan. In connection with the adoption of the 1996 Stock Option Plan, the
Company's Compensation Committee granted to Donald Engel, the Company's
Co-Chairman of the Board and Chief Executive Officer, subject to shareholder
approval of the 1996 Stock Option Plan, options to purchase 500,000 shares of
Common Stock at $4.00 per share. Such options are to vest over a five-year
period with vesting to accelerate in the event that the price of the Common
Stock increases to $6.00 per share. As of December 31, 1996, 545,000 options
have been granted and are outstanding under the Company's Stock Option Plan at
an average price of $4.00 per share.
In addition, in March 1996, the Board of Directors adopted, subject to
shareholder approval which has been obtained, the New Directors Plan pursuant to
which 150,000 shares reserved for issuance. Only non-employee directors are
eligible to receive options under the New Directors Plan. The New Directors Plan
provides for an automatic grant of an option to purchase 20,000 shares of Common
Stock upon a person's election as a director of the Company and an automatic
grant of 1,000 shares of Common Stock upon such person's re-election as a
director of the Company. The Company has granted to each of Messrs. Pashcow and
Merritt options to purchase 20,000 shares of Common Stock under the New
Directors Plan at an exercise price of $4.00 per share.
35
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 25, 1997, with respect
to the beneficial ownership of shares of the Company's Common Stock by (i) each
person known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the Named Executive Officers, (iii) each director
of the Company and (iv) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF OF BENEFICIAL OUTSTANDING SHARES
BENEFICIAL OWNER(1) OWNERSHIP(2) OWNED
- -------------------------------------------------- ----------------- ------------------
<S> <C> <C>
Donald Engel ..................................... 550,000(3) 8.1%
Mark Shantzis..................................... 503,075(4) 7.9%
Warren Adelson ................................... 789,012(5) 12.0%
Ira S. Merritt.................................... 23,500(6) *
Joel M. Pashcow................................... 22,500(7) *
All directors and executive officers as a group 1,940,249(8) 26.9%
(8 persons)....................................
<FN>
- -----------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified above is 16255 N. W. 54th Avenue, Miami, Florida 33014.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and that are exercisable within 60 days have
been exercised. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Includes 500,000 shares of Common Stock issuable upon the exercise of
options granted under the 1996 Stock Option Plan.
(4) Includes (i) 338,075 shares beneficially owned by Mr. Shantzis and Mora
Shantzis, his spouse, as joint tenants with rights of survivorship, (ii)
60,000 shares of Common Stock issuable upon the exercise of presently
exercisable options to purchase Common Stock, (iii)
36
<PAGE>
5,000 shares of Common Stock held by Mr. Shantzis as custodian under the
Uniform Gifts to Minors Act for certain of his minor nieces and nephews and
(iv) 100,000 shares of Common Stock beneficially owned by Recycling
Education Foundation, of which Mora Shantzis is the sole director. Does not
include 40,000 shares of Common Stock issuable upon the exercise of options
which are not presently exercisable under the Stock Option Plan.
(5) Includes 15,000 shares of Common Stock issuable upon the exercise of
presently exercisable options and 250,000 shares of Common Stock issuable
upon the exercise of warrants, which warrants are currently exercisable.
(6) Includes 22,500 shares of Common Stock issuable upon the exercise of
options granted under the New Directors Plan.
(7) Consists of 22,500 shares of Common Stock issuable upon the exercise of
options granted under the New Directors Plan.
(8) Includes (i) 17,962 shares of Common Stock which were issued to Harriet
Oestreicher, Seymour Oestreicher's wife, in connection with the Company's
acquisition of IDC Systems, (ii) 17,000 shares of Common Stock issuable
upon the exercise of presently exercisable options to purchase Common Stock
held by Seymour Oestreicher and (iii) 17,200 shares of Common Stock issuable
upon the exercise of presently exercisable options to purchase Common Stock
held by Michael Bracken. Does not include 10,590 shares of Common Stock
issuable to Mrs. Oestreicher in two equal annual installments commencing in
February 1997. See Notes (2) through (7) above.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1992, the Company acquired substantially all of the assets of Events,
Etc., of which Mora M. Shantzis was the sole shareholder and director. Prior to
its acquisition by the Company, Events, Etc. marketed environmental and
recycling related products and accessories through catalog sales. The Company
continues to market these products through its Modern Recycling Solutions
catalog. In connection with this acquisition, the Company issued a promissory
note in the principal amount of $24,000 (the aggregate investment that had been
made by Mora M. Shantzis) which bore interest at the rate of 10% per annum
commencing March 26, 1992 and continuing through March 25, 1994, at which time
the entire accrued interest became due. Principal and interest became payable in
monthly installments of $2,000 commencing April 1994. The Company completed
payment of this note in April 1995.
During the years ended December 31, 1996 and 1995, product development
expenses of $7,666 and $22,500, respectively, were paid to Tekmar Inc.
("Tekmar"), a company owned by the wife of Byron M. Blank, a Vice-President of
the Company. At December 31, 1996 and 1995, the Company had a note receivable
from Tekmar in the amount of $33,223 and $32,847, respectively. The note bears
interest at 5.5% and is due 180 days after demand for repayment by the Company.
As of the date hereof, the Company has not demanded repayment of such note and
does not anticipate that it will demand repayment in the foreseeable future.
In February 1995, the Company, through its newly-formed wholly-owned subsidiary
IDC Acquisition Sub, Inc., acquired all of the outstanding capital stock of IDC
Systems, a New York corporation organized in November 1987 of which Harriet
Oestreicher owned 47.5% of the
37
<PAGE>
outstanding capital stock. Mrs. Oestreicher is the wife of Seymour Oestreicher,
the Company's Vice President-Distribution Development. Pursuant to the
acquisition, the Company agreed to pay $500,000 in cash, of which $366,667 has
been paid and $133,333 is payable in two equal annual installments, with
interest at the rate of 5.5% per annum, in February of 1997 and 1998. In
connection with the acquisition, the Company issued 26,667 shares of Common
Stock to the former shareholders of IDC Systems and agreed to issue additional
shares of Common Stock in three equal amounts annually, commencing in February
1996. In April 1996, an aggregate of 11,148 additional shares of Common Stock
were issued to the former shareholders of IDC Systems, of which Harriet
Oestreicher received 5,295 shares.
The Company had entered into a two-year employment agreement with Seymour
Oestreicher effective as of February 23, 1995, which provided for the employment
of Mr. Oestreicher as its Vice President - Distribution Development. The
employment agreement terminated pursuant to its terms in February 1997. Such
employment agreement provided for an annual base salary of $45,000. Mr.
Oestreicher has agreed not to compete or engage in a business competitive with
the Company's current or anticipated business (including those previously
conducted by IDC Systems) during the term of his employment agreement and for a
period of five years thereafter.
The Company had entered into a two-year consulting agreement with Harriet
Oestreicher, the wife of Seymour Oestreicher, effective as of February 23, 1995,
which provided for the employment of Mrs. Oestreicher as a consultant to IDC
Systems. The consulting agreement terminated pursuant to its terms in February
1997. The consulting agreement provided for an annual fee of $50,000. Mrs.
Oestreicher has agreed not to compete or engage in a business competitive with
the Company's current or anticipated business (including those previously
conducted by IDC Systems) during the term of her consulting agreement and for a
period of five years thereafter.
In 1988, Harriet Oestreicher, loaned $50,000 to IDC Systems for working capital
purposes. The Company repaid this loan in February 1995, together with interest
at the rate of 10% per annum.
In May 1995, Mark D. Shantzis and Warren Adelson, the Company's principal
shareholders, reimbursed the Company with respect to a litigation settlement in
the amount of $400,000 by contributing 36,129 shares and 15,484 shares,
respectively, of Common Stock to the capital of the Company.
In March 1996, the Company entered into an employment agreement with Donald
Engel, the Company's Co-Chairman of the Board and Chief Executive Officer, and
an employment and consulting agreement with Mark D. Shantzis, the Company's
Co-Chairman of the Board. See Part III, Item 10 - "Executive Compensation" above
for a description of these agreements.
38
<PAGE>
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBITS DESCRIPTION
- --------- -----------
3.1 Company's Amended and Restated Articles of Incorporation(1)
3.2 Company's Bylaws(1)
4.1 Form of Common Stock Certificate(1)
4.2 Form of Underwriter's Warrant(1)
10.1 Stock Option Plan(1)(2)
10.2 Directors Stock Option Plan(1)(2)
10.3 Form of Employment Agreement between the Company and Mark D.
Shantzis(1)(2)
10.4 Letter agreement dated October 4, 1992 between the Company,
QRSZBN Corp. and Warren Adelson(1)
10.5 Agreement for Purchase and Sale of Assets dated as of March 26,
1992 between the Company and Events, Etc., Inc.(1)
10.6 Form of Indemnification Agreement between the Company and each of
its executive officers and directors(1)(2)
10.7 Forms of Monitoring and Service Agreements(1)
10.8 United States Patent No. 5,031,829 dated July 16, 1991(1)
10.9 Assignment of Patent dated June 15, 1993, by Mark Shantzis in
favor of the Company(1)
10.10 International Application under the Patent Cooperation Treaty(1)
10.11 Request for Entry into National Phase under Article 22 or 39 of
the Patent Cooperation Treaty dated January 24, 1992 filed in
Canada(1)
10.12 Request for Entry into Regional Phase under the Patent
Cooperation Treaty dated January 20, 1993 filed in the European
Community(1)
10.13 Application under the Patent Cooperation Treaty filed in Japan(1)
10.14 Application under the Patent Cooperation Treaty filed in Korea(1)
10.15 Form of Reimbursement Agreement between the Company, Mark D.
Shantzis and Warren Adelson(1)
10.16 Business lease between the Company and Drake Enterprises dated
September 21, 1993.(3)
10.17 Line of Credit Agreement between the Company and Ocean Bank.(4)
10.18 Lease Financing Agreement between the Company and First
Sierra.(5)
39
<PAGE>
EXHIBITS DESCRIPTION
- --------- -----------
10.19 Merger Agreement between the Company, IDC Acquisition Sub, Inc.,
IDC Systems and the stockholders of IDC Systems.(5)
10.20 Employment Agreement between the Company and Seymour
Oestreicher.(2)(5)
10.21 Subscription Agreement between the Company and Norton Herrick
dated June 27, 1995.(6)
10.22 Registration Rights Agreement, dated June 27, 1995, between the
Company and Norton Herrick.(7)
10.23 Asset Purchase Agreement dated February 3, 1997 among the
Company, WC Acquisition Corp. and Wilkinson Company, Inc.,
including Form of Lease.(8)
10.24 Credit Agreement dated September 1996 between the Company and
Ocean Bank.
10.25 Lease dated October 9, 1996 between Recycltech, Ltd. and Pianosi
Bros. Construction Ltd.
10.26 Compromise Agreement dated July 1996 between the Company and
Jeffrey Daniels(9)
10.27 Compromise Agreement dated July 1996 between the Company and
Thomas Witter(10)
10.28 1996 Stock Option Plan(2)(11)
10.29 1996 Directors Stock Option Plan(2)(12)
10.30 Employment Agreement dated March 25, 1996 between the Company and
Donald Engel(2)
10.31 Employment and Consulting Agreement dated March 25, 1996 between
the Company and Mark D. Shantzis(2)
10.32 Promissory Note, Commercial Security Agreements and Agreements to
Furnish Insurance dated February 3, 1997 by the Company and
WC Acquisition Corp. (now known as Wilkinson Company, Inc.) in
favor of Ocean Bank.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants-Coopers and Lybrand L. L.P.,
dated March 28, 1997.
27.1 Financial Data Schedule.
- -----------------
(1) Incorporated by reference to the exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (No. 33-63778-A).
(2) Management contract or compensation plan.
(3) Incorporated by reference to Exhibit 10. 16 filed with the Company's Form
10-KSB for the year ended December 31, 1993.
(4) Incorporated by reference to Exhibit 10. 17 filed with the Company's Form
10-QSB for the quarter ended December 31, 1994.
(5) Incorporated by reference to Exhibit 10. 18 and 10. 19 filed with the
Company's Form 10-KSB for the year ended December 31, 1994.
(6) Incorporated by reference to Exhibit 10.1 filed with the Company's Current
Report on Form 8-K dated June 27, 1995.
(7) Incorporated by reference to Exhibit 10.2 filed with the Company's Current
Report on Form 8-K dated June 27, 1995.
(8) Incorporated by reference to Exhibit 2 filed with the Company's Current
Report on Form 8-K dated February 3, 1977.
(9) Incorporated by reference to Exhibit 10.1 filed with the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996.
(10) Incorporated by reference to Exhibit 10.2 filed with the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1996.
(11) Incorporated by reference to Exhibit A filed with the Company's Definitive
Proxy Statement with respect to its 1996 Annual Meeting of Shareholders
held on July 16, 1996 (the "1996 Proxy Statement").
(12) Incorporated by reference to Exhibit B filed with the 1996 Proxy Statement.
(b) Reports on Form 8-K
None.
40
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HI-RISE RECYCLING SYSTEMS, INC.
Date: March 28, 1997 By: /s/ DONALD ENGEL
------------------
Donald Engel, Co-Chairman of the Board and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: March 28, 1997 By: /s/ DONALD ENGEL
------------------
Donald Engel, Co-Chairman of the Board and Chief
Executive Officer (principal executive officer)
Date: March 28, 1997 /s/ MARK D. SHANTZIS
--------------------
Mark D. Shantzis, Co- Chairman of the Board
Date: March 28, 1997 /s/ BRADLEY HACKER
------------------
Brad Hacker, Controller
(Principal Financial and Accounting Officer)
Date: March 28, 1997 /s/ WARREN ADELSON
------------------
Warren Adelson, Director
Date: March 28, 1997 /s/ IRA S. MERRITT
------------------
Ira S. Merritt, Director
Date: March 28, 1997 /s/ JOEL M. PASHCOW
-------------------
Joel M. Pashcow, Director
41
<PAGE>
TABLE OF CONTENTS
PAGES
Report of Independent Accountants F-1
Consolidated Financial Statements:
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Shareholders' Equity F-4
Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-15
Unaudited Pro Forma Condensed Consolidated
Financial Statements F-16 - F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Hi-Rise Recycling Systems, Inc.
Miami, Florida
We have audited the accompanying consolidated balance sheets of Hi-Rise
Recycling Systems, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hi-Rise Recycling
Systems, Inc. as of December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Miami, Florida
February 28, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,711,752 $ 5,717,560
Investments 597,973 836,056
Accounts receivable, net of allowance for doubtful accounts
of $147,299 and $120,559 in 1996 and 1995, respectively 765,024 612,133
Inventory 1,117,883 579,881
Other assets, net 329,738 300,837
----------- -----------
Total current assets 4,522,370 8,046,467
Property and equipment, net 757,370 411,025
Note receivable from related party 33,223 32,847
Net investment in sales type leases 3,157,812 2,558,350
Deferred acquisition costs 62,281 0
Goodwill 1,448,237 1,035,281
----------- -----------
Total assets $ 9,981,293 $12,083,970
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 193,507 $ 279,448
Unearned service agreement revenue 22,564 17,171
Revolving line of credit 1,584,814 1,243,858
Current portion of long-term debt 150,000 200,000
----------- -----------
Total current liabilities 1,950,885 1,740,477
Long-term debt 150,000 300,000
----------- -----------
Total liabilities 2,100,885 2,040,477
Commitments and contingencies (Notes 9, 13 and 14)
Shareholders' equity:
Preferred stock, $.01 par value per share; 1,000,000 shares
authorized; 720 shares issued and outstanding at December
31, 1995 0 7
Common stock, $.01 par value per share; 10,000,000 shares
authorized; 6,231,119 and 3,444,563 shares issued and outstanding
at December 31, 1996 and 1995, respectively 62,311 34,446
Additional paid-in capital 13,776,320 13,328,112
Accumulated deficit (5,958,223) (3,319,072)
----------- -----------
Total shareholders' equity 7,880,408 10,043,493
----------- -----------
Total liabilities and shareholders' equity $ 9,981,293 $12,083,970
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
Revenues:
Equipment sales $1,586,077 $1,991,209
Shared savings contract revenue 422,078 413,299
Service and parts revenue 1,199,154 657,793
---------- ----------
Total revenues 3,207,309 3,062,301
---------- ----------
Operating expenses:
Cost of equipment and parts sold 1,584,161 1,624,163
Selling and marketing 543,360 713,184
General and administrative 3,381,364 2,732,790
Shared savings contract expense 313,032 330,339
Other 209,992 211,244
---------- ----------
Total operating expenses 6,031,909 5,611,720
---------- ----------
Operating loss (2,824,600) (2,549,419)
---------- ----------
Other income (expense):
Interest income 416,358 340,839
Interest expense (146,207) (110,485)
Litigation settlements (84,702) 0
---------- ----------
185,449 230,354
---------- ----------
Net loss $(2,639,151) $(2,319,065)
========== ==========
Net loss per common share $ (0.47) $ (0.70)
========== ==========
Weighted average common shares outstanding 5,578,333 3,325,093
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
SHARES OF ADDITIONAL TOTAL
COMMON PREFERRED COMMON PAID-IN ACCUMULATED SHAREHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT EQUITY
---------- --------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 3,180,000 $ 0 $ 31,800 $ 5,804,571 $(1,000,007) $ 4,836,364
Issuance of common stock 316,176 0 3,162 1,154,846 0 1,158,008
Sale of preferred stock, net of
expenses of $831,814 0 7 0 6,368,179 0 6,368,186
Common stock contributed as
treasury 0 0 0 400,000 0 400,000
Cancellation of common stock (51,613) 0 (516) (399,484) 0 (400,000)
Net loss 0 0 0 0 (2,319,065) (2,319,065)
---------- -------- -------- ------------ ----------- -----------
Balance at December 31, 1995 3,444,563 7 34,446 13,328,112 (3,319,072) 10,043,493
Conversion of preferred stock
into common stock 2,705,979 (7) 27,060 (27,053) 0 0
Issuance of common stock 80,577 0 805 407,981 0 408,786
Compensatory stock options 0 0 0 67,280 0 67,280
Net loss 0 0 0 0 (2,639,151) (2,639,151)
---------- -------- -------- ------------ ----------- -----------
Balance at December 31, 1995 6,231,119 $ 0 $ 62,311 $ 13,776,320 $(5,958,223) $ 7,880,408
========== ======== ======== ============ =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,639,151) $(2,319,065)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 146,344 133,080
Bad debt expense 101,929 33,196
Compensation expense for stock options 67,280 0
Changes in assets and liabilities, net of acquisitions:
Notes payable issued for litigation settlement 0 (100,000)
Accounts receivable (245,207) (299,533)
Inventory (509,624) (195,699)
Other assets (1,917) 23,958
Net investment in sales type leases (599,462) (508,463)
Accounts payable and accrued liabilities (248,545) 80,147
Unearned service agreement revenue (12,373) (415)
----------- -----------
Net cash used in operating activities (3,940,726) (3,152,794)
----------- -----------
Cash flows from investing activities:
Increase in deferred acquisition costs (62,281) 0
Purchase of businesses, net of cash acquired (60,630) (509,484)
Purchase of property and equipment (429,620) (310,937)
Loans to related party (376) (4,200)
Proceeds from maturity of investments 238,083 1,151,921
----------- -----------
Net cash provided by (used in)
investing activities (314,824) 327,300
----------- -----------
Cash flows from financing activities:
Payment on note payable to related party 0 (7,464)
Net proceeds from revolving line of credit 340,956 562,560
Payment on long-term debt (116,667) 0
Proceeds from issuance of common stock 25,453 813,998
Proceeds from issuance of preferred stock 0 6,368,186
----------- -----------
Net cash provided by financing activities 249,742 7,737,280
----------- -----------
Net increase (decrease) in cash and cash equivalents (4,005,808) 4,911,786
Cash and cash equivalents, beginning of year 5,717,560) 805,774
----------- -----------
Cash and cash equivalents, end of year $ 1,711,752 $ 5,717,560
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 136,117 $ 105,440
=========== ===========
Purchase of businesses, net of cash acquired
Working capital, other than cash $ (12,723) $ (262,436)
Property and equipment (2,525) (25,139)
Cost in excess of net assets acquired, net (383,382) (979,953)
Other assets 0 (8,862)
Debt (38,000) 450,000
Issuance of commmon stock 300,000 316,906
----------- -----------
Net cash used to acquire businesses $ (60,630) $ (509,484)
=========== ===========
Non-cash activities:
During 1996 and 1995, the Company acquired businesses as described in Note
2. The Company issued stock and notes payable in conjunction with these
acquisitions. During 1996, the Company issued stock as payment on debt as
described in Note 8.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
F-5
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS ORGANIZATION:
Hi-Rise Recycling Systems, Inc. (the "Company") markets a proprietary
automated system designed to collect and source-separate recyclable and
other solid waste in multi-story residential buildings. The Company
designed the hi-rise system in response to perceived market opportunities
arising out of increasing state and local environmental regulation
mandating or encouraging recycling. IDC Systems (IDC), acquired in February
1995, installs and services compactors into mainly multi-story buildings.
Recycltech Enterprises, Inc. (Recycltech), acquired in September 1996,
serves as the Company's distributor of hi-rise systems in Toronto, Canada.
In November 1995, the Company sold 720 shares of Series A preferred stock,
par value of $.01 per share, in an offshore private placement for net
proceeds of $6,368,186. During 1996, all of the preferred stock was
converted, pursuant to its original terms, into 2,705,979 shares of common
stock at an average per share conversion price of $2.78.
In June 1995, the Company issued and sold, in a private placement
transaction, 266,667 shares of common stock, and warrants to purchase an
additional 250,000 shares of common stock at an exercise price of $9.00 per
share, for an aggregate of $1,000,000, in cash. The warrants expired at the
end of fiscal 1996.
2. BUSINESS COMBINATIONS:
In September 1996, the Company acquired all of the outstanding stock of
Recycltech. In consideration for its acquisition of the Recycltech capital
stock, the Company issued an aggregate of 64,243 shares of its common
stock, valued at $300,000, to the former shareholders of Recycltech.
In February 1995, the Company acquired IDC, a compactor supply and service
company for $950,000 consisting of cash of $300,000, 26,667 shares of
common stock valued at $200,000 and future obligations to the seller of
approximately $450,000.
In February 1995, the Company acquired Dade County Recycling, Inc. (DCR).
The stockholders of DCR received in May 1995, a notice to proceed from the
Solid Waste Department of Metropolitan Dade County, Florida with
installation of the Company's system into one or more designated
multi-family residential buildings. The purchase price consisted of 8,500
unregistered shares of common stock, 25,000 options to purchase shares of
the Company's common stock, the right to receive an additional 9,500 shares
of the Company's unregistered common stock upon written confirmation of
Dade County's consent, and $19,000 in cash.
All business combinations have been accounted for as purchases, and the
results of operations are included in the consolidated financial statements
from their respective dates of acquisition.
F-6
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant 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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents. The Company places its cash and cash equivalents with high
credit quality financial institutions and limits the amount of credit
exposure to any one financial institution.
INVESTMENTS
Investments, consisting of U.S. government securities, are carried at
amortized cost which approximates market. The Company has the positive
intent and ability to hold these securities to maturity.
INVENTORIES
Inventories consist primarily of systems held for sale and spare parts,
which are stated at the lower of cost (first-in, first-out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
the estimated useful lives of the assets. The Company and its wholly owned
subsidiaries use a straight-line method for depreciating assets with the
exception of IDC which uses the double declining balance method. When the
assets are sold, replaced or otherwise retired, the costs and related
accumulated depreciation are removed from the accounts and any related
gains or losses are included in operations.
F-7
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
GOODWILL
Goodwill relating to business combinations is stated at acquisition cost
less accumulated amortization. Goodwill is amortized on a straight-line
basis over twenty years. The Company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted cash flows of the related business
unit, as prescribed in Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which was effective for the year
ended December 31, 1996. This pronouncement had no impact on the financial
statements of the Company for fiscal 1996.
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes whereby deferred income taxes are recognized for the tax consequences
in future years for differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year-end based on
enacted tax laws and statutory tax rates applicable to the time periods in
which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.
REVENUE RECOGNITION
The Company leases hi-rise systems under sales-type leases expiring in
various years through 2006. Revenue from these sales-type leases represents
the present value of all minimum lease payments, net of executory costs.
The components of the net investment in sales type leases described in Note
5 are discounted at the interest rates implicit in the leases. The related
cost of the system is charged to cost of system sold. Associated interest,
using the interest method, is recorded over the terms of the lease
agreements.
System sales and parts revenue are recognized upon customers' acceptance of
systems. Under the shared savings arrangement, the Company installs its
hi-rise system and earns revenue based on a formula applied to the savings
realized in hauling costs by the user as a result of the reduced volume of
waste disposed in landfills. Such revenue is recognized monthly upon
receipt of payment from the building. Service and monitoring revenue
relates to services provided subsequent to installation of the system for
which the Company is paid either a fixed monthly or quarterly fee. Such
revenue is recognized over the terms of the respective agreements. When the
Company sells its hi-rise system to new buildings, the period of time
between the execution of a sales contract and installation of the system
typically ranges from six to eighteen months.
IDC's sales and parts revenue are recognized upon the installation of the
compactors into the buildings. Recycltech's revenue is recognized when the
hi-rise systems are serviced.
F-8
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PER SHARE DATA
Per share data is based on the weighted average number of shares of common
stock outstanding. Common stock equivalents have not been included because
their effect is anti-dilutive. If the conversion of preferred stock into
common stock, as described in Note 1, occurred on January 1, 1996, the net
loss per common share would have been $0.43.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share (EPS) (SFAS No. 128). SFAS No. 128 specifies new
standards designed to improve the EPS information provided in financial
statements by simplifying the existing computational guidelines, revising
the disclosure requirements, and increasing the comparability of EPS data
on an international basis. Some of the changes made to simplify the EPS
computations include: (a) eliminating the presentation of primary EPS and
replacing it with basic EPS, with the principal difference being that
common stock equivalents are not considered in computing basic EPS, (b)
eliminating the modified treasury stock method and the three percent
materiality provision, and (c) revising the contingent share provisions and
the supplemental EPS data requirements. SFAS 128 also makes a number of
changes to existing disclosure requirements. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. The Company has not yet determined the impact of
the implementation of SFAS 128.
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31 consisted of the following:
1996 1995
-------- --------
Equipment $333,995 $166,801
Furniture and fixtures 176,937 147,587
Automobiles 127,857 82,469
Computers and software 321,691 131,333
-------- --------
960,480 528,190
Less accumulated depreciation 203,110 117,165
-------- --------
$757,370 $411,025
======== ========
F-9
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NET INVESTMENT IN SALES TYPE LEASES:
The net investment in sales type leases at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Minimum lease payments $ 4,000,101 $ 3,511,055
Unearned income (1,036,028) (11,074,255)
Estimated residual value of leased systems 193,739 154,720
----------- ------------
$ 3,157,812 $ 2,558,350
=========== ============
</TABLE>
Future minimum lease payments due from customers under sales-type leases as
of December 31, 1996 are as follows:
1997 $ 505,956
1998 505,956
1999 505,956
2000 505,956
2001 505,956
Thereafter 1,470,321
----------
$4,000,101
==========
During 1995, the Company sold receivables, with recourse, with a balance of
$740,062. The balance of the receivables sold that remain uncollected at
December 31, 1996 and 1995 was approximately $547,000 and $608,000,
respectively.
6. RELATED PARTY TRANSACTIONS:
During 1996 and 1995, product development expenses of $7,666 and $22,500,
respectively, were paid to Tekmar, Inc. (Tekmar), a related party. At
December 31, 1996 and 1995, the Company had a note receivable from Tekmar
amounting to $33,223 and $32,847, respectively. The note bears interest at
5.5% and is due 180 days after demand for repayment by the Company.
7. REVOLVING LINE OF CREDIT:
The Company has a revolving line of credit agreement with a financial
institution. The revolving credit loan agreement provides for borrowings up
to a maximum of $2,000,000 ($1,500,000 at December 31, 1995) based on the
Company's level of eligible lease contracts receivable which serve as
collateral for the borrowings. The revolving line of credit is payable on
demand and bears interest at the prime rate plus 2% (10.25% and 10.50% at
December 31, 1996 and 1995, respectively) and is subject to annual renewal.
F-10
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. LONG-TERM DEBT:
Long-term debt at December 31 consisted of the following:
1996 1995
-------- --------
Promissory note, bearing interest payable
at a rate of 8% matured June 1996 $ 0 $ 50,000
Acquisition obligation, payable in cash of
$133,333, bearing interest at a rate of 5.5%,
and $166,667 in common stock 300,000 450,000
-------- --------
300,000 500,000
Less current portion 150,000 200,000
-------- --------
Long-term debt, net of current portion $150,000 $300,000
======== ========
9. COMMITMENTS:
The Company leases office facilities and equipment. Approximate future
minimum payments under noncancelable operating leases as of December 31,
1996, are as follows:
1997 $148,225
1998 100,379
1999 93,035
2000 70,830
--------
$412,469
========
Rental expense for the years ended December 31, 1996 and 1995 was
approximately $137,000 and $95,000, respectively.
F-11
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. INCOME TAXES:
The Company's income tax liability has been determined under the provisions
of SFAS No. 109. At December 31, 1996 and 1995, the significant components
of the net deferred tax asset were as follows:
1996 1995
----------- -----------
Net operating loss carryforward $ 1,930,699 $ 1,016,010
Other 67,565 33,932
Valuation allowance (1,998,264) (1,049,942)
----------- -----------
Net deferred tax asset $ 0 $ 0
=========== ===========
SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized.
The Company's income tax expense (benefit) differed from the amounts
computed by applying the U.S. federal income tax rate of 34% as a result of
a blended statutory rate of 37.63% which was fully offset by a net
operating loss carryforward. At December 31, 1996, the Company had a net
operating loss carryforward of approximately $5,077,238 which expires in
various years commencing on 2011.
11. STOCK OPTIONS AND WARRANTS:
During 1996, the Company's Board of Directors and shareholders adopted the
1996 Stock Option Plan (the "1996 Plan") and the 1996 Directors Stock
Option Plan (the "1996 Directors Plan") (collectively the "1996 Plans"),
which authorize the issuance of 1,000,000 and 500,000 shares of common
stock options, respectively. The Company's Stock Option Plan (the "1993
Plan") and Directors Stock Option Plan (the "1993 Directors Plan")
(collectively, with the 1996 Plans, the "Plans"), authorize the issuance of
500,000 and 50,000 shares of common stock options, respectively. The Plans
are designed to serve as incentives for retaining qualified and competent
employees and directors. During 1996, the Board of Directors authorized the
termination of the 1993 Directors Plan.
The Company's Board of Directors administers and interprets the 1996 Plan
and the 1993 Plan and is authorized to grant options thereunder to all
eligible employees of the Company, including officers and directors of the
Company. Options may be granted under the 1996 Plan and the 1993 Plan on
such terms and at such prices as determined by the Board, except that the
per share exercise price of options will not be less than the fair market
value of the common stock on the date of grant, and in the case of an
incentive stock option granted to a 10% shareholder, the per share exercise
price will not be less than 110% of such fair market value. Employees'
stock options typically vest twenty percent annually over a five year
period and the majority of directors' stock options vest immediately.
F-12
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
The 1996 Directors Plan provides for an automatic grant of an option to
purchase 20,000 shares of common stock upon a person's election as a
director of the Company and an automatic grant of an option to purchase
1,000 shares of common stock upon such person's re-election as a director
of the Company.
The following table reflects the Plans' option activity for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
WEIGHTED AVG. WEIGHTED AVG.
EXERCISE EXERCISE
1996 PRICE 1995 PRICE
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 349,773 $5.33 221,000 $5.15
Granted (exercise price = FMV at date of grant) 728,000 4.02 130,106 5.63
Exercised (5,667) 5.00 (1,333) 5.00
---------- ----- ----------- -----
Options outstanding at end of year 1,072,106 $4.45 349,773 $5.33
========== ===== =========== =====
Options exercisable at end of year 618,216 $4.75 217,292 $5.75
========== ===== =========== =====
Price range of options outstanding
at end of year $4.00-$9.75 - $4.75-$9.75 -
Options available for future grants
at end of year 927,894 - 200,227 -
========== ===== =========== =====
Weighted avg. fair value of options granted 728,000 $3.24 130,106 $6.41
========== ===== =========== =====
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
the year ended December 31, 1996. This pronouncement encourages, but does
not require, companies to recognize compensation expense for grants of
stock, stock options and other equity instruments to employees based on new
fair value accounting rules. The Company has determined not to recognize
such compensation expense for grants of stock options to employees. The
compensation expense, if recognized, would have resulted in the pro forma
amounts indicated below for the years ended December 31, 1996 and 1995:
1996 1995
----------- -----------
Net loss - as reported $(2,639,151) $(2,319,065)
Net loss - pro forma (4,003,741) (2,716,792)
Net loss per common share - as reported (0.47) (0.70)
Net loss per common share - pro forma (0.72) (0.82)
The fair value of each option grant was estimated as of the date of grant
using the Black Sholes Option Pricing Model with the following weighted
average assumptions: no expected dividends; expected volatility of 57.87%;
risk-free interest rate of 6.38%; and expected life of ten years.
During 1996, the Company granted 46,000 stock options to non-employees for
services rendered which resulted in compensation expense of $67,280.
F-13
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. STOCK OPTIONS AND WARRANTS, CONTINUED:
At December 31, 1995, the Company had additional warrants outstanding with
a right to purchase 120,000 shares of common stock at an exercise price of
$6.50.
In 1993, one of the principal shareholders of the Company received warrants
to purchase 250,000 shares of the Company's common stock at $5.00 per share
expiring in 2003 in connection with previous capital investments in the
Company.
12. FINANCIAL INSTRUMENTS:
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and accounts
receivable. The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
Although the Company has expanded its operations into other states and
Canada, approximately 86% of systems sales to date have been to customers
located in Florida.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate fair value because of
the short maturity of these items. The carrying amounts of long-term debt
and the revolving line of credit approximate fair value because the
interest rates on these instruments change with market interest rates.
13. LEGAL MATTERS:
During October 1996, a former employee of the Company, filed a lawsuit
against the Company alleging that the Company had defrauded and breached an
employment contract with the former employee. In general, the lawsuit
alleges that the Company made written and verbal representations to become
general manager and part owner of the Company's Midwest subsidiary. The
former employee seeks compensatory damages of $600,000 and punitive damages
for an unstated amount. The Company denies the allegation and intends to
contest vigorously the claims in the lawsuit.
During 1996, the Company entered into compromise agreements with respect to
two lawsuits resulting in charges of approximately $56,000 and $28,000,
respectively. During 1995, the Company's principal shareholders reimbursed
the Company for the 1994 settlement of a lawsuit for $400,000 by
contributing shares of common stock to the Company. These shares were
ultimately canceled by the Company.
F-14
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. SUBSEQUENT EVENT:
In February 1997, the Company, through a newly formed wholly-owned
subsidiary, pursuant to an asset purchase agreement, bought substantially
all of the assets excluding real property, and assumed certain of the
liabilities of Wilkinson Company, Inc. (Wilkinson), who is engaged in the
sale, manufacture, distribution and installation of sheet metal fabrication
products. The aggregate purchase price of approximately $2,786,000
consisted of approximately $2,486,000 in cash, subject to adjustment under
certain circumstances, and 76,272 shares of common stock valued at
$300,000. The Company also entered into a three year agreement with
Wilkinson to lease its manufacturing facility. The Company funded the
cash portion of the purchase price from proceeds under two lines of credit
and a term loan from a financial institution.
F-15
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated balance sheet as of
December 31, 1996 reflects the consolidated financial position of Hi-Rise
Recycling Systems, Inc. (the "Company"), after giving effect to the acquisition
of Wilkinson Company, Inc. (Wilkinson), as if this transaction had been
consummated as of December 31, 1996. The unaudited pro forma condensed
consolidated statement of operations reflects the acquisition as if the
transaction had been consummated at January 1, 1996. The pro forma adjustments,
which are described in the accompanying notes, are based on available
information and certain assumptions that management of the Company believes are
reasonable. The pro forma financial data should not be considered indicative of
actual results that would have been achieved if the transaction given pro forma
effect had been consummated on the dates indicated and do not purport to
indicate results of operations as of any future date or any future period.
In February 1997, the Company, in an asset purchase agreement, bought
substantially all of the assets excluding real property, and assumed certain of
the liabilities of Wilkinson, who is engaged in the sale, manufacture, and
distribution and installation of sheet metal fabrication products. The aggregate
purchase price of approximately $2,786,000 consisted of approximately $2,486,000
in cash, subject to adjustment under certain circumstances, and 76,272 shares of
common stock valued at $300,000. The Company funded the cash portion of the
purchase price from proceeds from two lines of credit and a term loan from a
financial institution.
F-16
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS,INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
PRO FORMA PRO FORMA
HI-RISE WILKINSON ADJUSTMENTS TOTAL
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,711,752 $ 900,278 $ 824,722 d $ 950,752
(2,486,000)e
Investments 597,973 0 0 597,973
Accounts receivable, net 865,024 956,992 (149,262)h 1,672,754
Inventory 1,117,883 487,799 0 1,605,682
Other current assets 329,738 97,181 (54,842)i 372,077
---------- --------- ----------- ----------
Total current assets 4,622,370 2,442,250 (1,865,382) 5,199,238
Property and equipment, net 757,370 945,893 (372,275)f 1,330,988
Net investment in sales type leases 3,157,812 0 0 3,157,812
Other assets 95,504 16,500 (77,781)a 34,223
Goodwill 1,448,237 0 993,578 j 2,441,815
---------- --------- ----------- ----------
Total assets $10,081,293 $3,404,643 $(1,321,860) $12,164,076
========== ========= =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 216,071 $ 648,170 $ (590,387)g $ 273,854
Revolving line of credit 1,584,814 0 825,000 b 2,409,814
Current portion of long-term debt 150,000 0 180,000 b 330,000
---------- --------- ----------- ----------
Total current liabilities 1,950,885 648,170 414,613 3,013,668
Long term debt 150,000 0 720,000 b 870,000
---------- --------- ----------- ----------
Total liabilities 2,100,885 648,170 1,134,613 3,883,668
Common stock 62,312 0 762 c 63,074
Additional paid-in-capital 13,709,039 580,007 (280,769)k 14,008,277
Accumulated deficit (retained earnings) (5,790,943) 2,176,466 (2,176,466)k (5,790,943)
---------- --------- ----------- ----------
Total shareholders' equity 7,980,408 2,756,473 (2,456,473) 8,280,408
---------- --------- ----------- ----------
Total liabilities and shareholders' equity $10,081,293 $3,404,643 $(1,321,860) $12,164,076
========== ========= =========== ==========
</TABLE>
See accompanying notes
F-17
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
PRO FORMA PRO FORMA
HI-RISE WILKINSON ADJUSTMENTS TOTAL
------- --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Sales $3,207,309 $4,028,656 $ 0 $7,235,965
OPERATING EXPENSES
Cost of goods sold 1,584,161 3,048,785 0 4,632,946
Selling and administrative 3,757,444 498,383 49,679 l 4,305,506
Other 523,024 0 0 523,024
---------- ---------- ------- ----------
Total operating expenses 5,864,629 3,547,168 49,679 9,461,476
---------- ---------- ------- ----------
Operating income (loss) (2,657,320) 481,488 (49,679) (2,225,511)
OTHER INCOME (EXPENSE):
Interest income 416,358 33,113 0 449,471
Interest expense (146,207) 0 (176,813)m (323,020)
Other (84,702) 243,278 0 158,576
---------- ---------- ------- ----------
185,449 276,391 (176,813) 285,028
---------- ---------- ------- ----------
LOSS BEFORE INCOME TAX EXPENSE (2,471,871) 757,879 (226,492) (1,940,484)
INCOME TAX EXPENSE 0 283,200 283,200
NET LOSS $(2,471,871) $474,679 $(226,492) $(2,223,684)
=========== ========== ======== ==========
</TABLE>
See accompanying notes
F-18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying pro forma financial statements are intended to present
the Company's financial position and results of operations on a pro
forma basis as if, for the purpose of the pro forma condensed
consolidated balance sheet, the transaction underlying the pro forma
adjustments had occurred on December 31, 1996 and, for the purpose of
the pro forma consolidated condensed statement of operations, as if the
transaction underlying the pro forma adjustments had occurred on
January 1, 1996.
The Company's historical financial information used in preparation of
the pro forma condensed consolidated financial statements has been
derived from the Company's audited consolidated financial statements as
of and for the year ended December 31, 1996. Wilkinson's historical
financial information used in preparation of the pro forma condensed
consolidated financial statements has been derived from Wilkinson's
audited financial statements as of and for the twelve months ended
September 30, 1996.
2) UNAUDITED PRO FORMA ADJUSTMENTS
A description of the adjustments included in the unaudited pro forma
financial statements is as follows:
BALANCE SHEET
- -------------
a) Represents the elimination of the Company's deferred acquisition costs
related to the acquisition plus $1,000 of other assets that were
purchased.
b) Records the Company's $900,000 loan and $825,000 borrowing on the new
line of credit which funded a portion of the acquisition.
c) Represents 76,272 shares of common stock issued by the Company to the
former owners of Wilkinson.
d) Represents elimination of Wilkinson cash retained by former
shareholder.
e) Represents the Company's payment of $2,486,000 in cash to Wilkinson's
former owners.
f) Represents property and equipment not purchased by the Company.
g) Represents accounts payable not assumed by the Company.
h) Represents accounts receivable not purchased by the Company.
i) Represents other current assets not purchased by the Company.
j) Records the goodwill which resulted from the $2.7 million purchase
price and $62,000 in deferred acquisition costs offset by the net
assets purchased by the Company.
k) Adjustment eliminates Wilkinson's equity less additional paid-in
capital associated with the issuance of stock.
STATEMENT OF OPERATIONS
l) Represents amortization of goodwill from January 1, 1996 through
December 31, 1996. Amortization expense is calculated using the pro
forma balance sheet whereby goodwill is based on differences between
Wilkinson's September 30, 1996 balances and those assets purchased and
liabilities assumed at the date of the acquisition. Goodwill is
amortized on a straight-line basis over twenty years.
m) Represents an adjustment for interest expense related to the $1.725
million in funds borrowed in connection with the acquisition of
Wilkinson.
F-19
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.24 Credit Agreement dated September 1996 between the Company and
Ocean Bank.
10.25 Lease dated October 9, 1996 between Recycltech, Ltd. and Pianosi
Bros. Construction Ltd.
10.30 Employment Agreement dated March 25, 1996 between the Company and
Donald Engel
10.31 Employment and Consulting Agreement dated March 25, 1996 between
the Company and Mark D. Shantzis
10.32 Promissory Note, Commercial Security Agreements and Agreements to
Furnish Insurance dated February 3, 1997 by the Company and
WC Acquisition Corp. (now known as Wilkinson Company, Inc.) in
favor of Ocean Bank.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants-Coopers & Lybrand L.L.P.
dated March 28, 1997.
27.1 Financial Data Schedule.
EXHIBIT 10.24
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of ________ ___, 1996, is between HI-RISE
RECYCLING SYSTEMS, INC., a Florida corporation (herein, together with its
successors and assigns, called the "Borrower"), and OCEAN BANK (herein, together
with its successors and assigns, called the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested from the Bank a commitment to extend a
line of credit in the amount of TWO MILLION DOLLARS ($2,000,000.00) for the
financing of lease contracts receivables;
WHEREAS, the Lender is willing, on the terms and subject to the conditions
hereinafter set forth, to provide such commitment and to make advances under the
line of credit;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINED TERMS. The following terms when used in this Agreement shall
have the following meanings:
"ACCOUNT" means any account (as that term is defined in Section 9-106 of the
Uniform Commercial Code as in effect, from time to time, in the State of
Florida).
"ADVANCE(S)" means any funds which Lender makes available to Borrower at
Borrower's request under the Facilities.
"ADVANCE RATE" means the base rate of interest as announced from time to
time by Citibank N.A., New York, New York, plus 2%, adjusted daily.
"ADVANCE REQUEST FORM" means the Advance Request Form of the Lender as
included in EXHIBIT A.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"AGREEMENT" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"AUTHORIZED OFFICER" means, relative to the Borrower, those of its officers
whose signatures and incumbency shall have been certified to the Lender pursuant
to SECTION 4.1.1.
"BORROWER" is defined in the PREAMBLE.
"BORROWING BASE" means, on any Borrowing Base Calculation Date, an amount
equal to 75% percent of all Eligible Receivables.
"BORROWING BASE CALCULATION DATE" means the day that a Borrowing Base
Certificate is submitted to the Lender.
"BORROWING BASE CERTIFICATE" means a certificate duly executed by the chief
accounting or financial Authorized Officer of the Borrower, substantially in the
form of EXHIBIT B attached hereto, with such changes as the Lender may from time
to time reasonably request for purposes of monitoring the Borrowing Base.
1
<PAGE>
"BUSINESS DAY" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in Miami,
Florida.
"CASH COLLATERAL ACCOUNT" means a separate non-interest bearing account,
identified as Cash Collateral Account #100768642-13, established by Borrower at
Lender pursuant to the Lockbox Agreement.
"CHANGE IN CONTROL" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 50% or more of the outstanding shares of voting stock of the
Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means all property and/or rights on or in which a Lien is
granted to the Lender (or to any agent, trustee, or other Person acting on the
Lender's behalf) pursuant to this Agreement, any of the Collateral Documents, or
any other Instruments provided for herein or therein or delivered or to be
delivered hereunder or thereunder or in connection herewith or therewith, as any
of the foregoing may be amended, supplemented, amended and restated, or
otherwise modified from time to time in accordance with the provisions hereof or
thereof.
"COLLATERAL DOCUMENTS" means, collectively, the Security Agreement and each
other Instrument or document pursuant to which a Lien is granted to the Lender
(or perfected in favor of the Lender) (or to or in favor of any agent, trustee,
or other Person acting on the Lender's behalf) as security for any of the
Obligations, as any and all of the foregoing may be amended, supplemented,
amended and restated, or otherwise modified from time to time in accordance with
the provisions hereof or thereof.
"COMMITMENT" means the Lender's obligation to make Advances pursuant to
SECTION 2.1.
"COMMITMENT AMOUNT" means, on any date, TWO MILLION DOLLARS ($2,000,000.00).
"COMMITMENT EXPIRATION DATE" means the date which Lender notifies the
Borrower that payment in full of the Obligations is due.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) the Commitment Expiration Date; or
(b) the occurrence and continuance of any Event of Default.
"DEFAULT" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule delivered to the Lender
by the Borrower on the date hereof.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"ELIGIBLE INVENTORY" means all inventory located at ____________________ in
which no security interest or lien exist.
"ELIGIBLE RECEIVABLES" is defined in SECTION 2.3.
"ENVIRONMENTAL LAWS" means all applicable Federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to protection of the environment or
human health or imposing liability or standards of conduct concerning any
Hazardous Material, as any of the foregoing may be amended or supplemented from
time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
"GAAP" is defined in SECTION 1.4.
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"HAZARDOUS MATERIAL" means
(a) any "hazardous substance", as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended;
(b) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic chemical,
material or substance within the meaning of any other applicable federal,
state or local law, regulation, ordinance or requirement (including consent
decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material, all as amended or hereafter amended.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(b) all obligations, contingent or otherwise, relative to the face amount
of all letters of credit, whether or not drawn, and banker's acceptances
issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have been
or should be, in accordance with GAAP, recorded as capitalized lease
liabilities;
(d) all other items which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person as of
the date at which Indebtedness is to be determined;
(e) whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of property or
services, and indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse;
(f) all contingent liabilities of such Person in respect of any of the
foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"INDEMNIFIED LIABILITIES" is defined in SECTION 9.4.
"INDEMNIFIED PARTIES" is defined in SECTION 9.4.
"INSTRUMENT" means any contract, agreement, indenture, mortgage, document or
writing (whether by formal agreement, letter, or otherwise) under which any
obligation is evidenced, assumed or undertaken, or any Lien (or right or
interest therein) is granted or perfected.
"LENDER" is defined in the preamble.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"LOAN DOCUMENT" means this Agreement, the Note, each Collateral Document,
and each other agreement, document or Instrument executed and delivered in
connection with this Agreement, as any and all of the foregoing may be amended,
supplemented, amended and restated, or otherwise modified from time to time in
accordance with the provisions hereof and thereof.
"LOCKBOX AGREEMENT" means the Lockbox Agreement by and between the parties,
executed and delivered pursuant to SECTION 4.1.1, substantially in the form of
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EXHIBIT C hereto, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"NOTE" means the Variable Rate Commercial Promissory Note of the Borrower
payable to the Lender, in the form of EXHIBIT D hereto (as such promissory note
may be amended, supplemented, endorsed or otherwise modified from time to time),
evidencing the Line of Credit, and also means all other promissory notes
accepted from time to time in substitution there for or renewal thereof.
"OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower,
however created, arising, or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, which arise out
of or in connection with this Agreement, the Note or any other Loan Document.
"ORGANIC DOCUMENT" means, relative to the Borrower, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in 3(2) of
ERISA, which is subject to Title IV of ERISA (other than a multi employer plan
as defined in 4001(a)(3) of ERISA), and to which the Borrower or any
corporation, trade or business that is, along with the Borrower, a member of a
controlled group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of 4063 of ERISA at any
time during the preceding five years, or by reason of being deemed to be a
contributing sponsor under 4069 of ERISA.
"PERSON" means any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"SECURITY AGREEMENT" means the Commercial Security Agreement by and between
the parties, executed and delivered pursuant to SECTION 4.1.1, substantially in
the form of EXHIBIT E hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"TANGIBLE NET WORTH" means the consolidated net worth of the Borrower and
its Subsidiaries after subtracting therefrom the aggregate amount of any
intangible assets of the Borrower and its Subsidiaries, including capitalized
software development costs, goodwill, franchises, licenses, patents, trademarks,
trade names, copyrights, service marks and brand names.
"UNITED STATES" or "U.S." means the United States of America.
"WELFARE PLAN" means a "welfare plan", as such term is defined in 3(1) of
ERISA.
1.2 USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise
requires, terms for which meanings are provided in this Agreement shall have
such meanings when used in the Disclosure Schedule, the Note and each Loan
Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
1.3 CROSS-REFERENCES. Unless otherwise specified, references in this
Agreement and in each other Loan Document to any Article are references to such
Article of this Agreement or such other Loan Document, as the case may be.
1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise specified, all
accounting terms used herein or in any other Loan Document shall be interpreted,
all accounting determinations and computations hereunder or thereunder shall be
made, and all financial statements required to be delivered hereunder or
thereunder shall be prepared in accordance with, those generally accepted
accounting principles ("GAAP") applied in the preparation of the financial
statements referred to in SECTION 5.5.
ARTICLE II
ADVANCES UNDER THE LINE OF CREDIT
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2.1 COMMITMENT. On the terms and subject to the conditions of this
Agreement, the Lender hereby agrees to make available Advances from time to time
before the Commitment Termination Date in such face amounts as the borrower may
from time to time request; PROVIDED, HOWEVER, that no Advance shall be given if,
after giving effect to such advance, the aggregate face value of all Advances
outstanding hereunder would exceed the lesser of: (i) TWO MILLION DOLLARS
($2,000,000.00) or (ii) the Borrowing Base.
2.2 ADVANCE REQUESTS. Provided that all conditions precedent to an Advance
have been satisfied by Borrower, Lender, subject to the terms hereof, shall make
Advances from time to time to Borrower's account within two (2) Business Days
after delivery to Lender by Borrower of a duly executed Advance Request Form
satisfactory in form and substance to Lender. Each Advance Request shall be
accompanied by the delivery to Lender of all documents reasonably requested by
Lender, including, without limitation, a duly executed Borrowing Base
Certificate. The Borrowing Base Certificate shall stipulate the total amount of
Eligible Receivables and Eligible Inventory.
2.3 ELIGIBLE RECEIVABLES. Eligible Receivables, as of the Borrowing Base
Calculation Date, shall include all accounts now owned or hereafter created by
Borrower, including all accounts receivable, contract rights and general
intangibles relating to such accounts received, resulting from the lease of
recycling systems equipment to lessee within the United States or where the
Products are delivered in the United States and all the proceeds thereof, BUT
EXCLUDING: (a) any Account which is more than sixty (60) calendar days past the
original due date; (b) any Account due by a Lessee for whom ten percent (10%) or
more of the outstanding receivable from the Borrower to said Lessee are sixty
days or more past due; (c) any intercompany Account of the Borrower arising from
a sale to an Affiliate or subsidiary; (d) those Accounts derived from finance
charges and/or any other charge in excess of the cost fo the recycling system
equipments; and/or (e) any Account in which another person has a security
interest or Lien;
2.4 COLLATERAL FOR ADVANCES.
2.4.1 DEPOSIT. The parties have executed a Lockbox Agreement that
authorizes the Lender to establish a Cash Collateral Account into which all
funds received from buyers corresponding to payment of Borrower's account
receivables shall be credited. As security for the payment of all obligations,
the Borrower hereby grants, conveys, assigns, pledges, sets over, and transfers
to the Lender, and creates in the Lender's favor a lien on nd security interest
in, all money, instruments, and securities at any time held in or acquired in
connection with the Cash Collateral Account, together with all proceeds thereof.
The Borrower shall have no right to withdraw or to cause the Lender to withdraw
any funds deposited in the Cash Collateral Account. At any time and from time to
time, upon the Lender's request, the Borrower promptly shall execute and deliver
any and all such further instruments and documents (including, without
limitation, financing statements and bond powers executed in blank) as may be
necessary, appropriate, or desirable in the Lender's judgment to obtain the full
benefits (including, without limitation, perfection and priority) of the
security interest created or intended to be created by this SECTION 2.4.1 and of
the rights and powers herein granted. The Borrower shall not create or suffer to
exist any Lien on any amounts or investments held in the Cash Collateral Account
other than the Lien granted under this SECTION 2.4.1.
2.4.2 APPLICATION OF FUNDS. The Lender shall apply funds in the Cash
Collateral Account in the following manner:
(i) on each Business Day that funds are deposited in the Cash Collateral
Account, Lender shall at the close of the Business Day, transfer all monies
above $1,000.00 to the Loan Account and reduce the aggregate value of Advances
outstanding by the same amount; and
(ii) on the Commitment Termination Date, Lender shall apply all monies in
the Cash Collateral Account to the outstanding Obligations in such order as
the Lender may elect.
Except in the case described in CLAUSE (II) above, the Lender shall release
all funds remaining in the Collateral Account to the Borrower within five
Business Days after the latter of (a) the Commitment Termination Date, and (b)
the Borrower shall have paid in full all Obligations. If the Lender resigns, the
outgoing Lender and the new Lender shall effect a transfer to the new Lender of
all of the outgoing Lender's right, title, and interest in and to the Collateral
Account concurrently with the effectiveness of such resignation.
2.4.3 FEES. The Borrower shall pay to the Lender fees customarily charged
by the Lender with respect to the maintenance of accounts similar to the Cash
Collateral Account.
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ARTICLE III
INTEREST AND FEES
3.1 COMMITMENT FEE. In consideration of this Agreement and the Commitment,
the Borrower agrees to pay to the Lender on the date of this Agreement a
commitment fee in the amount of $10,000.00.
3.2 INTEREST. Interest shall accrue on the aggregate face value of the
Advances at the Advance Rate. Each change in the prime rate shall be effective
as of the opening of business on the effective date of such change in the prime
rate. Interest on Advances shall be payable on the first Business Day of each
month, commencing on the first date after the date of the initial Advance. On
the first Business Day of each month, Borrower's operating account
#_____________ will be debited for the total accrued interest during the
preceding month less any prepayments of interest which may have been made.
3.3 PENALTY INTEREST. Interest on any Advance, or portion thereof, that
remains outstanding after the Commitment Termination Date, shall accrue at the
maximum rate permitted by law.
ARTICLE IV
CONDITIONS TO CREDIT EXTENSIONS
4.1 CONDITIONS PRECEDENT
4.1.1 CONDITIONS TO CLOSING. As a condition to Lender executing this
Agreement, Borrower shall deliver to Lender, in form and substance satisfactory
to Lender:
(a) A duly executed Note.
(b) A duly executed Security Agreement
(c) The Lender and the Borrower shall have entered into and delivered
the Lockbox Agreement in the form attached hereto as EXHIBIT F.
(d) Borrower will have established a Cash Collateral Account with
Lender as stipulated for in Section 2.4 of this Agreement.
(e) A favorable opinion of counsel to Borrower.
(f) Evidence satisfactory to Lender that Borrower is organized and in
good standing in the State of Florida and is qualified as a foreign
corporation and in good standing all jurisdictions in which it transacts
business.
(g) Copies of Borrower's Articles of Incorporation, certified as of a
recent date by the Secretary of State of Florida, and copies of Borrower's
by-laws, certified by the Secretary or Assistant Secretary of Borrower that
such by-laws are true and correct as of the date of the execution of this
Agreement by Lender.
(h) Certificates of the Secretary or an Assistant Secretary of
Borrower, dated as of the date of the initial Advance, as to incumbency and
signatures of the officers of Borrower executing this Agreement, any of the
other Loan Documents and any other certificates or other document to be
delivered pursuant hereto or thereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
4.1.2 CONDITIONS TO INITIAL ADVANCE. Notwithstanding any other provision of
this Agreement and without affecting in any manner the rights of Lender
hereunder, Borrower shall have no rights under this Agreement (but shall have
all applicable obligations hereunder), and Lender shall not be obligated to make
an initial Advance hereunder, unless and until Borrower shall have delivered to
Lender, in form and substance satisfactory to Lender:
(a) Resolutions of Borrower's board of directors, certified by the
Secretary or Assistant Secretary of Borrower, duly adopted and in full
force
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and effect on the date of the initial Advance, authorizing (i) the
execution, delivery and performance of this Agreement and all other Loan
Documents, (ii) the Advances hereunder and the performance by Borrower of
all actions contemplated by this Agreement and the other Loan Documents,
(iii) the granting of the Liens provided for in this Agreement, (iv)
specific officers to execute and deliver this Agreement, the other Loan
Documents and all other related documents and instruments.
(b) Acknowledgment copies of properly filed Uniform Commercial Code
financing statements (Form UCC-l), dated a date reasonably near to the date
of the Note, or such other evidence of filing as may be acceptable to the
Lender, naming the Borrower as the debtor and the Lender as the secured
party, or other similar instruments or documents, filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the opinion
of the Lender, desirable to perfect the security interest of the Lender
pursuant to the Security Agreement.
(c) Executed copies of proper Uniform Commercial Code Form UCC-3
termination statements, if any, necessary to release all Liens and other
rights of any Person in any of the Products previously granted by any
Person.
(d) Certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report certified
by a party acceptable to the Lender, dated a date reasonably near to the
date of the Note, listing all effective financing statements which name the
Borrower (under its present name and any previous names) as the debtor and
which are filed in the jurisdictions in which filings were made pursuant to
CLAUSE (B) above, together with copies of such financing statements.
(e) Certificates of the chief financial officer of Borrower stating
that no material adverse change has occurred prior to the date of the
initial Advance in the business, assets, operations, prospects, or
financial or other condition of Borrower since DECEMBER 31ST, 1995.
(f) Evidence that the insurance policies provided for in Section 6.1.4
have been obtained and are in full force and effect, certified by the
Secretary or Assistant Secretary of Borrower.
(g) Such additional information and materials as Lender may reasonably
request, including, without limitation copies of any debt agreements,
security agreements and other material contracts.
(h) Copy of the letter from Borrower to its accountants referred to in
Section 6.1.5 hereof.
4.1.3 CONDITIONS TO EACH ADVANCE. It shall be a further condition to the
initial Advance and each subsequent Advance that all of the following statements
shall be true on the date of each such Advance:
(a) All of the representations and warranties of Borrower contained
herein or in any of the Loan Documents shall be true and correct on and as
of the date of such Advance as though made on and as of such date, except
to the extent that any such representations of warranty expressly relates
to an earlier date and for changes therein permitted or contemplated by
this Agreement or the other Loan Documents.
(b) No event shall have occurred and be continuing, or would result
from such Advance, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
(c) No Liens shall have been filed or recorded against any of the
Collateral, other than the Liens arising hereunder.
(d) No order, judgment or decree of any court, arbitration or
governmental authority shall purport to enjoin or restrain Lender from
making any further Advances to Borrower.
(e) The Borrower shall provide the Bank with all the original
documentation concerning the leases financed by the Bank. Such
documentation shall be kept in the Bank's vault throughout the term of the
lease contract and shall be returned to the Borrower upon the full payment
of each individual lease and/or the Note. These items shall include, but
not be limited to the following: (1) An invoice executed by the lessee of
the equipment and the Borrower; (2) A statement executed by each lessee of
equipment stating that the equipment has been received and installed with
the lessee to the lessee's satisfaction; (3) Certificate of insurance on
each leased equipment naming the Borrower as loss/payee and as additional
insured; (4) Borrower must deliver to the Bank the original executed lease
agreement in connection with each equipment lease.
The acceptance by Borrower of the proceeds of each Advance shall be deemed
to constitute a representation and warranty by Borrower that the conditions in
this Section 4.1.3 have been satisfied.
4.2 LENDER APPOINTED ATTORNEY-IN-FACT.
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(a) Borrower hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of Borrower and in the name of Borrower or in its own
name, from time to time in Lender's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and
to execute and deliver any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby gives Lender the
power and right, on behalf of Borrower, without notice to or assent by
Borrower to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of Borrower or its own name or
otherwise, to take possession of, and endorse and collect, any
checks, drafts, notes, acceptances or other Instruments for the
payment of moneys due under any Collateral and to file any claim
or to take any other action or proceeding in any court of law or
entity or otherwise deemed appropriate by Lender for the purpose
of collecting any and all such moneys due under any Collateral
whenever payable and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed appropriate by Lender for the purpose of collecting any
and all such moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes or Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Agreement and to pay
all or any part of the premiums therefor and the costs thereof;
and
(iii)(A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to Lender or as Lender shall
direct; (B) to receive payment of and receipt for any and all
moneys, claims and other amounts due, and to become due at any
time, in respect of, or arising out of, any Collateral; (C) to
sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
receivables constituting or relating to the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect
the Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against Borrower with respect to any
Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to
give such discharges or releases as Lender may deem appropriate;
and (G) generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as
fully and completely as though Lender were the absolute owner
thereof for all purposes, and to do, at Lender's option and
Borrower's expense, at any time, or from time to time, all acts
and things which Lender reasonably deems necessary to protect,
preserve or realize upon the Collateral and Lender's Lien
therein, in order to effect the intent of this Agreement, all as
fully and effectively as Borrower might do.
(b) Lender agrees that, except upon the occurrence and during the
continuation of an Event of Default, it will forebear from exercising the
power of attorney or any rights granted to Lender pursuant to this Section
4.2. Borrower hereby ratifies, to the extent permitted by law, all that
said attorneys shall lawfully do or cause to be done by virtue hereof. The
power of attorney granted pursuant to this Section 4.2 is a power coupled
with an interest and shall be irrevocable until the Obligations are
indefeasibly paid in full. Nothing set forth in this subparagraph (b) shall
limit the rights of Lender granted in Section 8.2 or 8.3 hereof.
(c) The powers conferred on Lender hereunder are solely to protect
Lender's interests in the Collateral and shall not impose any duty upon it
to exercise any such powers. Lender shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or agents shall be
responsible to
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Borrower for any act or failure to act, except for its or their own gross
negligence or willful misconduct.
(d) Borrower also authorizes Lender, at any time and from time to
time (i) to communicate in its own name with any party to any Contract with
regard to the assignment of the right, title and interest of Borrower in
and under the Contracts hereunder and other matters relating thereto and
(ii) to execute, in connection with the sale provided for in Section ____
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
Advances hereunder, the Borrower represents and warrants unto the Lender as set
forth in this ARTICLE V.
5.1 ORGANIZATION, ETC. The Borrower is a corporation validly organized and
existing and in good standing under the laws of Florida, is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the nature of its business requires such qualification, and has full power
and authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under each Loan Document to
which it is a party, to grant Liens under the respective Collateral Documents to
which it is a party, to obtain loans and to own and hold under lease its
property and to conduct its business substantially as currently conducted by it.
5.2 DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and
performance by the Borrower of each Loan Document executed or to be executed by
it, are within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not
(a) contravene the Borrower's Organic Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Borrower;
or
(c) result in, or require the creation or imposition of, any Lien on any
of the Borrower's properties other than Liens granted to secure
obligations.
5.3 GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body or other Person is required for the due execution, delivery or
performance by the Borrower of any Loan Document to which it is a party. The
Borrower is not an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.4 VALIDITY, ETC. This Agreement constitutes, and each other Loan Document
executed by the Borrower will, on the due execution and delivery thereof,
constitute, the legal, valid and binding obligation of the Borrower enforceable
in accordance with its respective terms.
5.5 FINANCIAL INFORMATION. The balance sheets of the Borrower as at
DECEMBER 31ST, 1995, and the related statements of earnings and cash flow of the
Borrower for the periods then ended, copies of which have been furnished to the
Lender, have been prepared in accordance with GAAP consistently applied, and
present fairly the consolidated financial condition of the corporations covered
thereby as at the dates thereof and the results of their operations for the
periods then ended.
5.6 INDEBTEDNESS. Except as disclosed on the DECEMBER 31ST, 1995 balance
sheet and in Item 6.2.2, the Borrower has no Indebtedness of any nature, in
excess of $100,000 in the aggregate.
5.7 NO MATERIAL ADVERSE CHANGE. Since the date of the financial statements
described in SECTION 5.5, there has been no material adverse change in the
financial condition, operations, assets, business, properties or prospects of
the Borrower.
5.8 LITIGATION, CONTINGENT LIABILITIES, AND LABOR CONTROVERSIES.
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(a) No litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings or investigations are
pending or threatened against the Borrower in which any injunctive relief is
sought or in which money damages in excess of $25,000 are sought except as set
forth (including estimates of the dollar amounts involved) in Item 5.8
("Litigation") of the Disclosure Schedule, and there are no inquiries, whether
formal or informal, from any governmental agency or authority or otherwise,
which might give rise to such actions, proceedings or investigations.
(b) The Borrower has not failed to obtain any licenses, permits, franchises
or other governmental authorizations necessary to the ownership of its
respective properties or to the conduct of its respective business, which
violation or failure to obtain might materially or adversely affect the
Borrower's business, credit, operations, financial condition or prospects.
(c) There are no labor controversies pending or threatened against the
Borrower which, if adversely determined, would materially and adversely affect
the Borrower's business, credit, operations, financial condition or prospects.
(d) Other than any liability incident to any litigation or proceedings
described in this SECTION 5.8, the Borrower does not have any material
contingent liabilities not provided for or disclosed in the financial
statements referred to in SECTION 5.5.
5.9 SUBSIDIARIES. Except as disclosed in Item 5.9, the Borrower has no
subsidiaries.
5.10 OWNERSHIP OF PROPERTIES.
(a) The Borrower has a valid leasehold interest in all property leased by
it, and has good and marketable title to all of its other properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(which, with respect to licenses, means that the Borrower is the lawful owner
of its rights under such licenses), free and clear of all Liens, charges or
claims (including infringement claims with respect to patents, trademarks,
copyrights and the like) except as permitted pursuant to SECTION 6.2.3.
(b) The Borrower does not own any fee interests in real property.
5.11 TAXES. The Borrower has filed all tax returns and reports required by
law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
respective books.
5.12 PENSION AND WELFARE PLANS. Prior to the date of the execution and
delivery of this Agreement, no steps have been taken to terminate any Pension
Plan, and no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to any Pension Plan which might
result in the incurrence by the Borrower or any member of the Controlled Group
of any material liability, fine or penalty. Except as disclosed in ITEM 5.12
("Employee Benefit Plans") of the Disclosure Schedule, neither the Borrower nor
any member of the controlled group has any contingent liability with respect to
any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
5.13 ENVIRONMENTAL WARRANTIES. Except as set forth in ITEM 5.13
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying ground water) owned
or leased by the Borrower have been, and continue to be, owned or leased by
the Borrower in material compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by the Borrower with respect to any alleged violation of any
Environmental Law, or
(ii) complaints, notices or inquiries to the Borrower regarding
potential liability under any Environmental Law;
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(c) there have been no releases of Hazardous Materials at, on or under any
property now or previously owned or leased by the Borrower that, singly or in
the aggregate, have, or may reasonably be expected to have, a material
adverse effect on the financial condition, operations, assets, business,
properties or prospects of the Borrower; and
(d) no conditions exist at, on or under any property now or previously
owned or leased by the Borrower which, with the passage of time, or the
giving of notice or both, would give rise to liability under any
Environmental Law.
5.14 REPRESENTATIONS CONCERNING COLLATERAL.
(a) Except for the security interest granted to Lender pursuant to this
Agreement, Borrower is the sole owner of each item of the Collateral in which
it purports to grant a security interest hereunder, having good and
marketable title thereto, free and clear of any and all Liens. No material
amounts payable under or in connection with any of its Receivables are
evidenced by Instruments which have not been delivered to Lender.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any
part of the Collateral is on file or of record in any public office, except
such as may have been filed by Borrower in favor of Lender pursuant to this
Agreement.
(c) Appropriate financing statements having been filed, this Agreement is
effective to create a valid and continuing first priority Lien on and first
priority perfected security interest in the Collateral with respect to which
a security interest may be perfected by filing pursuant to the UCC in favor
of Lender, prior to all other Liens and is enforceable as such as against
creditors of, and purchasers from, Borrower (other than purchasers of
Inventory in the ordinary course of business). All action necessary or
desirable to protect and perfect such security interest in each item of the
Collateral has been duly taken.
(d) Borrower's principal place of business and the place where its records
concerning the Collateral are kept and the location of its Eligible Inventory
are set forth on ITEM 5.15 ("Place of Business") of the Disclosure Schedule.
(e) Each Account reflected on any report furnished to Lender (i) is owned
by Borrower free and clear of all Liens in favor of any Person other than
Lender, other than Permitted Liens (ii) covers a bona fide final sale of
merchandise usually dealt in by Borrower in the ordinary course of Borrower's
business or the rendition of service by Borrower to customers in the ordinary
course of Borrower's business, (iii) is for a liquidated amount maturing as
stated in the duplicate invoice or other supporting data covering such
transaction and (iv) is not subject to any deduction, offset, counterclaim,
return privilege or other condition.
5.15 REGULATIONS G, U AND X. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock, and no
proceeds of the Advances made under the Facilities will be used for a purpose
which violates, or would be inconsistent with, Federal Reserve Board Regulation
G, U or X.
5.16 ACCURACY OF INFORMATION. All factual information heretofore or
contemporaneously furnished by or on behalf of the Borrower in writing to the
Lender for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of the Borrower to the Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of this
Agreement by the Lender, and such information is not, or shall not be, as the
case may be, incomplete by omitting to state any material fact necessary to make
such information not misleading.
5.17 COMPLIANCE WITH APPLICABLE LAWS. The Borrower is in compliance with the
requirements of all applicable laws, rules, regulations, and orders of all
governmental authorities (Federal, state, local or foreign, and including,
without limitation, Environmental Laws), a breach of which would materially and
adversely affect the Borrower's business, credit, operations, financial
condition or prospects.
ARTICLE VI
COVENANTS
6.1 AFFIRMATIVE COVENANTS. The Borrower agrees with the Lender that, until
all Obligations incurred by the Borrower in relation to the Commitment have been
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finally paid and performed in full, the Borrower will perform the obligations
set forth in this SECTION 6.1.
6.1.1 FINANCIAL INFORMATION, RESORTS, NOTICES, ETC. The Borrower will
furnish, or will cause to be furnished, to the Lender copies of the following
financial statements, reports, notices and information:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a copy of the Borrower's financial
statements for such fiscal year for the Borrower, including balance sheet,
statements of earnings, cash flow and all accompanying notes for such
fiscal year, in each case certified by independent public accountants
acceptable to the Lender, together with a certificate from such accountants
to the effect that, in making the examination necessary for the signing of
such annual report by such accountants, they have not become aware of any
Event of Default that has occurred and is continuing, or, if they have
become aware of such Event of Default, describing such Event of Default and
the steps, if any, being taken to cure it, together with such accountants'
annual letters to the Borrower's management, if any, and the Borrower's
responses thereto, if any;
(b) as soon as filed, a copy of each federal income tax return of
Borrower, and all schedules and forms attached thereto, and any amendments
to previous returns;
(c) within ten days of the end of each month, a monthly accounts
receivable aging report and a complete inventory listing;
(d) as soon as possible and in any event within one Business Day
after the occurrence of each Default, a statement of the chief financial or
chief executive Authorized Officer of the Borrower setting forth details of
such Default and the action which the Borrower has taken and proposes to
take with respect thereto;
(e) as soon as possible and in any event within one Business Day
after the commencement of any labor controversy, litigation, action or
proceeding of the type described in SECTION 5.8, notice thereof and, if
requested by the Lender, copies of all documentation relating thereto; and
(f) such other information respecting the condition or operations,
financial or otherwise, of the Borrower as the Lender may from time to time
reasonably request.
6.1.2 COMPLIANCE WITH LAWS, ETC. The Borrower will comply in all material
respects with all applicable laws, rules, regulations and orders, such
compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
6.1.3 MAINTENANCE OF PROPERTIES. The Borrower will maintain, preserve,
protect and keep its properties in good repair, working order and condition, and
make necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
6.1.4 INSURANCE. The Borrower will maintain or cause to be maintained with
responsible insurance companies insurance, naming the Lender as loss payee, with
respect to its properties and business (including business interruption
insurance) against such casualties and contingencies and of such types and in
such amounts as is (a) required by the Collateral Documents and (b) as is
customary in the case of similar businesses and will, upon request of the
Lender, furnish to the Lender at reasonable intervals a certificate of an
Authorized Officer of the Borrower setting forth the nature and extent of all
insurance maintained by the Borrower in accordance with this SECTION 6.1.4.
6.1.5 BOOKS AND RECORDS. The Borrower will keep books and records which
accurately reflect all of its business affairs and transactions and permit the
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Lender or any of its representatives, at reasonable times and intervals, (a) to
visit all of its offices, (b) to discuss its financial matters with its officers
and independent public accountants (and the Borrower hereby authorizes such
independent public accountants to discuss the Borrower's financial matters with
the Lender or its representatives whether or not any representative of the
Borrower is present) and (c) to examine any of its books or other corporate
records.
6.1.6 FINANCIAL COVENANTS. The Borrower shall at all times maintain levels
of consolidated Tangible Net Worth, a ratio of total consolidated Indebtedness
to consolidated Tangible Net Worth, a ratio of consolidated current assets
(excluding unbilled receivables) to consolidated current liabilities, and a
ratio of consolidated cash flow to consolidated funded debt service materially
equal to those reflected in Borrower's financial statements of DECEMBER 31ST,
1995, as provided to Lender.
6.1.7 ENVIRONMENTAL COVENANT. The Borrower will,
(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all applicable Environmental Laws;
(b) immediately notify the Lender and provide copies upon receipt of
all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with Environmental
Laws, and shall promptly cure and have dismissed with prejudice to the
satisfaction of the Lender any actions and proceedings relating to
compliance with Environmental Laws; and
(c) provide such information and certifications which the Lender may
reasonably request from time to time to evidence compliance with this
SECTION 6.1.7.
6.2 NEGATIVE COVENANTS. The Borrower agrees with the Lender that all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this SECTION 6.2.
6.2.1 BUSINESS ACTIVITIES. The Borrower will not engage in any new business
activity, except those described in the Item 6.2.1 and such activities as may be
incidental or related thereto.
6.2.2 INDEBTEDNESS. The Borrower will not create, incur, assume or suffer
to exist or otherwise become or be liable in respect of any Indebtedness,
without prior written consent of the Lender, other than, without duplication,
the following:
(a) Indebtedness in respect of the Obligations;
(b) Indebtedness existing as of the date of this Agreement which is
included in the Financial Statements of DECEMBER 31ST, 1995 as provided to
Lender or is identified it ITEM 6.2.2 ("Ongoing Indebtedness") of the
Disclosure Schedule.
(c) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities); and
(d) other Indebtedness of the Borrower in an aggregate amount not to
exceed $100,000.
6.2.3 LIENS. The Borrower will not, without prior written consent of the
Lender, pledge or grant any security interest in any asset account, contract
rights, equipment or inventory of the Borrower to anyone except the Lender. The
Borrower will not, without prior written consent of the Lender, create, incur,
assume or suffer to exist any Lien upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens securing payment and performance of the Obligations,
granted pursuant to any Loan Document;
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(b) Liens granted prior to the date of this Agreement to secure
payment of Indebtedness of the type permitted and described in CLAUSE (C)
of SECTION 6.2.2; and
(c) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books.
6.2.4 SALE OF ASSETS. Borrower shall not sell or transfer any assets except
in the ordinary course of business.
6.2.5 CONSOLIDATION, MERGER, ETC. Borrower will not liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, sell all or
substantially all of its assets, permit the transfer of any of its stock on the
books of the Borrower, or purchase or otherwise acquire all or substantially all
of the assets of any Person.
6.2.6 SALES OF COLLATERAL. Borrower shall not sell, transfer, convey or
otherwise dispose of any Collateral except for inventory sold in the ordinary
course of Borrower's business.
ARTICLE VII
TERM
7.1 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENT. No
termination or cancellation (regardless of cause or procedure) of the financing
under this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of Borrower or the rights of Lender relating to
any transaction or event occurring prior to such termination. All undertakings,
agreements, covenants, warranties and representations contained in this
Agreement shall survive such termination or cancellation and shall continue in
full force and effect until such time as all of the Obligations have been paid
in full in accordance with the terms of the agreements creating such
Obligations, at which time the same shall terminate.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 LISTING OF EVENTS OF DEFAULT. Each of the following events or occurrences
described in this SECTION 8.1 shall constitute an "Event of Default".
8.1.1 NON-PAYMENT OF OBLIGATIONS. The Borrower shall default in the payment
or prepayment when due of any principal of or interest on the Note, any Advance
or any other Obligation.
8.1.2 BREACH OF WARRANTY. Any representation or warranty of the Borrower
made or deemed to be made hereunder or in any other Loan Document or any other
writing or certificate furnished by or on behalf of the Borrower to the Lender
for the purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered hereunder is or shall be
incorrect when made in any material respect.
8.1.3 NON-PERFORMANCE OF COVENANTS. The Borrower shall default in the
due performance and observance of any of its obligations under SECTIONS 6.1 or
6.2; or the Borrower shall default in the due performance and observance of any
of its obligations under any Collateral Document and such default shall continue
for the applicable grace period, if any, set forth in such Collateral Document.
8.1.4 NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. The Borrower
shall default in the due performance and observance of any other agreement
contained herein or in any other Loan Document, and such default shall continue
unremedied for a period of 10 days after notice thereof shall have been given to
the Borrower by the Lender.
8.1.5 CROSS-DEFAULT. Borrower or Guarantor commits a default under any
other present or future loan agreement, undertaking or other agreement with: (i)
Lender; or (ii) any other lender, whether or not related to the transactions
contemplated by this Agreement or the Loan Documents. It is further understood
and agreed that a default by Borrower or Guarantor under this Agreement or under
any Loan Document shall also constitute a
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default under any other loan agreement, undertaking or other agreement between
Borrower and/or Lender.
8.1.6 DEFAULT UNDER GUARANTY. The Guarantors, individually or collectively,
shall default in the due performance and observation of any of their obligations
under the Guaranty.
8.1.7 JUDGMENTS. Any judgment or order for the payment of money in excess
of $100,000 shall be rendered against the Borrower and either
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
8.1.8 PENSION PLANS. Any of the following events shall occur with respect
to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
controlled group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $100,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under 302(f) of ERISA.
8.1.9 CONTROL OF THE BORROWER. Any Change in Control of the Borrower shall
occur.
8.1.10 BANKRUPTCY, INSOLVENCY, ETC. The Borrower or Guarantor shall (a)
become insolvent or generally fail to pay, or admit in writing its inability or
unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
property of any thereof, or make a general assignment for the benefit of
creditors:
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or for a substantial part
of the property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that the
Borrower hereby expressly authorizes the Lender to appear in any court
conducting any relevant proceeding during such 60-day period to preserve,
protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower, and, if any such case or proceeding
is not commenced by the Borrower, such case or proceeding shall be
consented to or acquiesced in by the Borrower or shall result in the entry
of an order for relief or shall remain for 60 days undismissed, provided
that the Borrower hereby expressly authorizes the Lender to appear in any
court conducting any such case or proceeding during such 60-day period to
preserve, Protect and defend its rights under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of, any
of the foregoing.
8.1.11 IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any Lien granted
thereunder, or the Guaranty shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of the Borrower; the Borrower or any
other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any Lien securing
any Obligation shall, in whole or in part, cease to be a perfected Lien, subject
only to those exceptions expressly permitted by such Loan Document.
8.2 ACTION IF BANKRUPTCY. If any Event of Default described in SECTION 8.1.10
shall occur, the outstanding principal amount of all outstanding Obligations
shall automatically be and become immediately due and payable, without notice or
demand.
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8.3 ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any
Event of Default described in SECTION 8.1.10) shall occur for any reason,
whether voluntary or involuntary, and be continuing, the Lender shall, by notice
to the Borrower, declare all or any portion of the outstanding principal amount
of the Note and all of the other Obligations to be due and payable and the
Commitment to be terminated, whereupon the full unpaid amount of such Note and
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment, and
the Commitment shall terminate.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each
other Loan Document may from time to time be amended, modified or waived, if
such amendment, modification or waiver is in writing and consented to by the
Borrower and the Lender. No failure or delay on the part of the Lender or the
holder of the Note in exercising any power or right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Lender or the
holder of the Note under this Agreement or any other Loan Document shall, except
as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder .
9.2 NOTICES. All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing and
addressed, delivered or transmitted to such party at its address or facsimile
number set forth below its signature hereto or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted.
9.3 PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to pay on demand all
expenses of the Lender (including the fees and out-of-pocket expenses of counsel
to the Lender and of local counsel, if any, who may be retained by counsel to
the Lender) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(b) the filing, recording, refiling or rerecording of the Collateral
Documents and all amendments, supplements and modifications to any
thereof and any and all other documents or instruments of further
assurance required to be filed or recorded or refiled or rerecorded by
the terms hereof or of any Collateral Document, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document or
any amendment thereto or modification thereof.
The Borrower further agrees to pay, and to save the Lender harmless from all
liability for, any stamp, documentary or other taxes which may be payable in
connection with the execution or delivery of any Loan Document, the Advances
hereunder or the issuance of the Note. The Borrower also agrees to reimburse the
Lender upon demand for all reasonable out-of-pocket expenses (including
attorneys' fees and legal expenses) incurred by the Lender in connection with
(x) the negotiation of any restructuring or "work-out", whether or not
consummated, of any Obligations and (y) the enforcement of any Obligations.
9.4 INDEMNIFICATION. In consideration of the execution and delivery of this
Agreement by the Lender, the Borrower hereby indemnifies, exonerates and holds
the Lender and each of its officers, directors, employees and agents
(collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any
and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses
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incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
any Advance; and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
9.5 ASSIGNMENT. Except with the prior written approval of Lender, Borrower
may not assign any of its rights or obligations under this Agreement or any of
the Loan Documents. Lender may assign any of its rights and obligations under
this Agreement or any of the Loan Documents to any person, its successors and
assigns. In the event that Lender assigns all or some of its rights to assignee
hereunder, then assignee shall have the right, in an Event of Default, to
accelerate all obligations of Borrower under this Agreement or any of the Loan
Documents.
9.6 SURVIVAL. The representations and warranties made by the Borrower in this
Agreement and in each other Loan Document shall survive the execution and
delivery of this Agreement and each such other Loan Document.
9.7 SEVERABILITY. Any provision of this Agreement or any other Loan Document
which is prohibited or unenforceable in any jurisdiction shall, as to such
provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
9.8 PARTICIPATIONS IN LOANS. Lender may at any time, without the consent of
Borrower, sell participations or assign its interest in all or part of the
Advances or the Note to one or more other Persons (each, a "Participant").
Borrower hereby grants to each such Participant, and each such Participant shall
have and is hereby given, a continuing lien on and security interest in any and
all monies, securities, and other property of Borrower and the proceeds thereof,
now or hereafter held or received by such Participant, and also upon any and all
deposits (general or special) and credits of Borrower with, and any and all
claims of Borrower against, such Participant, at any time existing, including
the right of set-off, to the extent of the Participant's participation in the
Advances, and such Participant shall be deemed to have the same right of set-off
to the extent of the Participant's participation in the Advances as it would
have if it were a direct lender hereunder.
9.9 CONFLICT OF TERMS. Except as otherwise provided in this Agreement or any
of the other Loan Documents by specific reference to the applicable provisions
of this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provision contained in this Agreement shall govern and control.
9.10 AUTHORIZED SIGNATURE. Until Lender shall be notified by Borrower to the
contrary, the signature upon any document or instrument delivered pursuant
hereto of an officer of Borrower listed in EXHIBIT G hereto shall bind Borrower
and be deemed to be the act of Borrower affixed pursuant to and in accordance
with resolutions duly adopted by Borrower's board of directors.
9.11 HEADINGS. The various headings of this Agreement and of each other Loan
Document are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or such other Loan Document or any provisions
hereof or thereof.
9.12 EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
9.13 GOVERNING LAW; ENTIRE AGREEMENT. This Agreement, the Note and each other
Loan Document shall each be deemed to be a contract made under and governed by
the internal laws of the State of Florida. This Agreement, the Security
Agreement, the Note and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto. The
parties hereto specifically agree to waive all rights to rely on or enforce any
oral statements made prior to or subsequent to the execution of this Agreement.
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9.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Borrower may not assign or transfer its
rights or obligations hereunder without the prior written consent of the Lender.
9.15 SUBMISSION TO JURISDICTION. THE PARTIES AGREE THAT VENUE AND
JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY AFFIRMATIVE OR DEFENSIVE
LEGAL PROCEEDING IN CONNECTION WITH THE ENFORCEMENT OF THIS AGREEMENT OR ANY
LOAN DOCUMENT.
9.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF EITHER PARTY MADE OR
UNDERTAKEN BEFORE, DURING OR AFTER THE EXECUTION OF THIS AGREEMENT. THE BORROWER
ACKNOWLEDGES AND AGREES THAT THIS SECTION 9.16 IS A MATERIAL INDUCEMENT FOR THE
LENDER TO EXTEND CREDIT TO THE BORROWER AS PROVIDED HEREIN.
IN WITNESS WHEREOF, the parties hereto have executed this Credit Agreement
the date first above written.
HI-RISE RECYCLING SYSTEMS, INC.
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Witness
By
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Witness Name:
Title:
Address:
Facsimile No.: (305)
OCEAN BANK
- ----------------------------
Witness
By
- ---------------------------- -----------------------------
Witness Name:
Title:
Address:780 N.W. 42nd Avenue
Miami, Florida 33126
Facsimile No.: (305)
18
<PAGE>
ITEM 5.8
PENDING LITIGATION
ITEM 5.12
EMPLOYEE BENEFIT PLANS
ITEM 5.13
ENVIRONMENTAL MATTERS
ITEM 5.15
PLACE OF BUSINESS
ITEM 6.2.1
NEW BUSINESS ACTIVITIES
ITEM 6.2.2
ONGOING INDEBTEDNESS
19
EXHIBIT 10.25
LEASE AGREEMENT
BETWEEN
RECYCLTECH LTD.
AS TENANT
AND
PIAMOSI BROS. CONSTRUCTION LTD.
AS LANDLORD
DATED this 9th day of October, 1996
<PAGE>
INDUSTRIAL LEASE
TABLE OF CONTENTS
ARTICLE PAGE
1. Premises........................................................... 1
2. Definitions ....................................................... 2
3. Term .............................................................. 3
4. Basic Rent ........................................................ 4
5. Taxes ............................................................. 5
6. Operating Costs ................................................... 5
7. Tenant's Covenants ................................................ 6
(a) Pay Rent ....................................................... 6
(b) Utilities Charges .............................................. 6
(c) Maintenance & Repair ........................................... 6
(d) Acceptance of Premises ......................................... 6
(e) Entry by Landlord .............................................. 6
(f) Repair where Tenant at Fault ................................... 7
(g) Alteration ..................................................... 7
(h) Mortgages and Encumbrances ..................................... 7
(i) Mechanic's Liens ............................................... 7
(j) Overloading .................................................... 7
(k) Glass, Locks & Trimmings ....................................... 7
(l) Signs .......................................................... 8
(m) Surrender on Termination ....................................... 8
(n) Refuse & Garbage ............................................... 8
(o) Plumbing Fixtures .............................................. 8
(p) Water Heaters .................................................. 8
(q) Heating ........................................................ 8
(r) Service Contracts .............................................. 8
(s) Notice of Accidents ............................................ 9
(t) Outside Storage ................................................ 9
8. Use of Demised Premises ............................................ 9
(a) Use ............................................................ 9
(b) Observance of Laws ............................................. 9
(c) Exterior Walls ................................................. 9
(d) Waste and Nuisance ............................................. 9
(e) Overloading Systems ............................................ 9
(f) Rules and Regulations .......................................... 10
(g) Exhibiting Premises ............................................ 10
(h) Alteration of Facilities ....................................... 10
(i) Conservation of Emergy ......................................... 10
9. Quiet Enjoyment .................................................... 10
10. Insurance .......................................................... 10
11. Assignment ......................................................... 11
12. Fixtures ........................................................... 12
13. Damage or Destruction .............................................. 12
14. Injuries, Loss and Damage .......................................... 13
15. Insolvency ......................................................... 14
16. Intent of Lease .................................................... 14
17. Miscellaneous ...................................................... 14
18. Impossibility, Unavoidable Delays .................................. 14
19. Certificates ....................................................... 15
20. Distress ........................................................... 15
21. Re-Entry ........................................................... 15
22. Entry as Agent ..................................................... 15
23. Right of Termination ............................................... 15
24. Non-Waiver ......................................................... 15
25. Overholding ........................................................ 16
26. Landlord Performing Tenant's Convenants ............................ 16
27. Payments to Landlord ............................................... 16
28. Recovery of Adjustments ............................................ 16
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
29. Registration and Planning Act ...................................... 16
30. Mortgages .......................................................... 16
31. Evidence of Payments ............................................... 17
32. Assignment by Landlord ............................................. 17
33. Captions ........................................................... 17
34. Guarantee .......................................................... 17
35. Notice ............................................................. 18
36. Interpretation of Lease ............................................ 19
37. Time of the Essence ................................................ 19
38. Entire Agreement ................................................... 19
39. Effect of Lease .................................................... 19
40. Law ................................................................ 20
Schedules
Schedule A
<PAGE>
THIS INDENTURE made this day of 19
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
BETWEEN: PIAMOSI BROS. CONSTRUCTION, LTD.
Hereinafter called the "Landlord",
OF THE FIRST PART
- and -
RECYCLTECH, LTD.
Hereinafter called the "Tenant"
OF THE SECOND PART
WITNESSETH:
Premises 1. THAT in consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Tenant
to be paid, observed and performed, the Landlord does demise
and lease unto the Tenant that designated portion of the
building or the entire building (whichever the case may be)
containing approximately ______ square feet (the "Premises")
upon the lands and premises situate, lying and being in the
City of North York, in the _________________ in the Province
of Ontatio and municipally known as 471 Champagne Drive
including the right at all times to the common use of the
driveway areas and the right to park not more than five (5)
cars subject to the provisions of this Lease and to any
rules and regulations prescribed by the Landlord in
connection with such common areas.
<PAGE>
ARTICLE 2
Definitions 2. FOR the purposes of this Lease:
(a) "Additional Rent" means all amounts payable by the
Tenant under the terms of this Lease, whether payable to the
Landlord or otherwise, over and above Basic Rent.
(b) "Basic Rent" means those amounts set out as Basic Rent
in Article 4 of this Lease:
(c) "Basic Rent Adjustment." The Basic Rent herein set
forth is calculated on the basis of the area of the Premises
being 3472 square feet plus the Proportionate Share of the
service areas of _______ square feet at the Basic Rent of
$10,416.00 DOLLARS ($3.00) per square foot.
When the Premises have been completed the exact measurements of
the Premises shall be taken by the Landlord's Architect and in
the event that the Premises are found to have an area either more
or less than the area referred to above, then the Basic Rent
shall be adjusted upwards or downwards accordingly at the said
rate. A Certificate prepared by the Landlord's Architects
certifying the areas shall be conclusive and binding on the
Tenant.
(d) "Building means the building located on the land in
which the Premises are located.
(e) "Capital Tax" means the tax or excise imposed upon the
Landlord which is measured by or based in whole or in part upon
the capital employed by the Landlord as at the date of the
substantial completion of construction of the Buildings, imputed
as if the Buildings were the only real property of the Landlord
and includes the amount of any capital or other place of
business tax levied by the Provincial Government or other
applicable taxing authority against the Landlord with respect to
the building.
(g) "Landlord's Architect" means a qualified architect,
engineer or Ontario Land Surveyor from time to time chosen by the
Landlord.
(h) "Lease" means this Lease and any alterations from time
to time made to this Lease in accordance with the provisions
herein set out.
(i) "Operating Costs" means the total costs, expenses or
amounts incurred, whether by the Landlord or others on behalf of
the Landlord in connection with the complete maintenance,
operation, management and repair of the lands and Buildings and
all components thereof including structural repair, roof
repairs and replacements not to exceed $300 per year. Such costs,
expenses and amounts shall include, without limiting the
generality of the foregoing, all expenditures made by the
Landlord in an effort to promote energy conservation, the cost of
electricity including lighting, not otherwise paid by the Tenant
hereunder, the cost of snow, ice and refuse clearance and
removal, gardening, landscaping and window cleaning, repaving,
line painting, lighting signs, sanitary control, cleaning and
maintenance of the exterior face of outside walls, the cost of
all Insurance (including, "all risks", loss of rental income,
general liability and boiler insurance), accounting costs
incurred in connection with preparation of statements and
opinions for tenants, the cost of providing security services,
<PAGE>
the cost of consultants retained with intent of reducing costs,
business taxes and real property taxes including local
improvement rates applicable to the parking areas, entrance area,
driveways, walkways, lawns and other service areas; amounts paid
on service contracts, the amount of all salaries, wages and
benefits paid to or on half of on-site persons engaged in
cleaning, supervision, maintenance, operation, management and
repair, plus an administrative fee equal to fifteen percent (15%)
of the total of the aforesaid costs, expenses and amounts.
Any report of the Landlord's chartered accountant or other
licensed public accountant appointed by the Landlord shall be
conclusive as to the amount of Operating Costs for any period to
which such report relates.
Operating Costs shall not include interest on Landlord's debt or
capital retirement of debt, depreciation of all capital and
equipment, capital taxes, loss of rental income
insurance.
(j) "Proportionate Share" means that fraction having as
its numerator the area of the Premises, and having as its
denominator the area of all Buildings, (by outside measurements).
The area of the Premises shall be measured and determined by
outside measurements, provided that in the event that the
Premises are a part of a Building, the outside walls to the
centre of partitions which separate the Premises from adjoining
premises or service areas shall be used for determining area of
the Premises.
(k) "Taxes" means all taxes, rates, duties, levies and
assessments whatsoever whether municipal, parliamentary or
otherwise, levied, charged or assessed upon the lands and
Buildings or upon any part or parts thereof and all improvements
now and hereafter erected or placed on the Premises, or charged
against the Landlord on account thereof, including local
improvement charges but excluding any taxes such as corporate,
income, profit and excess profit taxes assessed upon the income
of the Landlord. In addition to the foregoing, Taxes shall
include any and all taxes, charges, levies, or assessments which
may in the future be levied, charged or assessed in lieu therof
or in addition thereto. Taxes shall also include all costs and
expenses incurred by the Landlord in obtaining or attempting to
obtain a reduction or prevent an increase in the amount of such
Taxes.
(l) "Term" means that term set out in Article 3 of this
Lease or as such Term may be altered, extended or reduced
in accordance with the provisions of this Lease.
(m) "Year" means each calendar year, the whole or part of
which is included within the Term.
ARTICLE 3
Term 3. TO HAVE AND HOLD the Premises for and during the term of
two (2) years, to be computed from and inclusive of the 1st day
of December, 1996, and from thenceforth next ensuing and fully
to be complete and ended on the 30th day of November, 1998.
Provided that if the Premises are not ready for occupation by
the Tenant on the date hereinbefore stipulated, the rent shall
abate and shall not accrue nor be payable until the Premises are
ready for occupation by the Tenant.
A Certificate by the Landlord's Architect certifying that the
Premises are ready for occupation shall be conclusive and binding
upon the Tenant.
<PAGE>
ARTICLE 4
Basic Rent 4. (a) YIELDING AND PAYING therefor yearly and every year
during the Term unto the Landlord as Basic Rent for the Premises
without set-off, deductions or defalcation whatever in lawful
money of Canada:
(b) The aforesaid sums referred to in Article 4 (a) hereof
shall be paid in equal monthly instalments in advance, on the
first day of each month during the term, to the Landlord at the
address hereinafter designated or at such other place as the
Landlord shall designate, the first of such payments to be made
on the first day of December, 1996. If the date upon the
which the Premises are ready for occupation by the Tenant is on
a date other than the first day of a month, the Term shall
commence on the first day of the month following, and the rent
for the fraction of the month shall be adjusted pro rata.
(c) The Tenant covenants and agrees that the Landlord may,
at its option apply all sums received from the Tenant to any
rent or other amounts payable hereunder in such order as the
Landlord sees fit.
(d) The Landlord acknowledges receipt of the sum of three
thousand, two hundred thirty eight .27 DOLLARS ($3238.27),
which is to be held by the Landlord and applied as follows:
(i)
DOLLARS ($3238.27),
as Basic Rent for the first and last months of the term hereby
created:
(ii)
DOLLARS ($0),
not to be applied on account of rent but to be held by the
Landlord as security for the full and faithful performance by the
Tenant of all the agreements, terms, covenants and conditions
herein set forth and applied against expenses or other costs or
damages and not as penalty, upon forfeiture, default or early
termination by the Tenant without prejudice to any further claims
by the Landlord for damages and any remedy of recovery thereof.
In the event the Tenant carries out the terms and conditions of
this Lease, the Tenant shall, after vacating the Premises be
entitled to the return of its deposit less any deductions made
in respect of any default of the Tenant.
<PAGE>
ARTICLE 5
Taxes 5. (a) The Tenant covenants and agrees to pay all Taxes,
rates, charges, licenses, duties and assessments whatsoever
whether municipal, provincial, federal or otherwise now or
hereafter charges, assessed, levied or imposed in respect of any
personal property, fixtures, business or other activity carried
out upon or in connection with the Premises.
(b) If the Premises are not separately assessed by the
relevant taxing authorities, then the aforesaid taxes shall be
apportioned by the Landlord to the end that there shall be
attributed to the Premises its Proportionate Share of such
Taxes, and such amount or amounts shall be payable by the Tenant
to the Landlord forthwith upon demand as additional rent.
(c) If the Tenant or any person occupying the Premises
or any part thereof shall elect to have the Premises, or any
part thereof, assessed for separate school taxes, then the
Tenant agrees to pay the amount, if any, by which the separate
school taxes exceed the amount which should have been payable
as school taxes had such election not been made.
(d) If the taxes in respect of the Building in or upon
which the Premises are situate, or any part thereof, shall be
increased by reason of any installations made in or upon, or
any alterations made in or to the Premises by the Tenant, the
Tenant agrees to pay the amount of such increase.
(e) The Tenant upon request of the Landlord will promptly
display to the Landlord all paid bills for taxes which bills
after inspection by the Landlord, shall be returned to the
Tenant in the event that the Tenant is billed directly.
(f) The Tenant covenants and agrees to pay to the Landlord
monthly, on the date for payment of monthly rental instalments,
as Additional Rent, during the first nine (9) months of the Year,
an amount equal to one ninth (1/9th) of the amount estimated by
the Landlord to be the amount of the Taxes for such Year. The
Landlord shall be entitled subsequently during each Year, upon at
lease fifteen (15) days notice to the Tenant, to revise its
estimate of the amount of Taxes and the said monthly instalment
shall be revised accordingly. All amounts received under this
provision in any Year on account of the estimated amount of the
Taxes shall be applied in reduction of the actual amount of the
Taxes for such Year. If the amount received is less than the
actual Taxes, the Tenant shall pay any deficiency to the Landlord
as additional rent within fifteen (15) days following receipt by
the Tenant of notice of the amount of such deficiency. If the
amount received is greater than the actual Taxes, the Landlord
shall either refund the excess to the Tenant as soon as possible
after the end of the Year in respect of which such payments were
made, or at the Landlord's option, shall apply such excess
against any amounts owing or becoming due to the Landlord by the
Tenant.
(g) If the Term of this Lease commences or ends on any day
other than the first or last day, respectively, of a Year, the
Tenant shall be liable only for the portion of the Taxes for
such Year as falls within the Term.
ARTICLE 6
Operating 6. (a) The Tenant covenants and agrees to pay its
Costs Porportionate Share of the Operating Costs.
(b) The Landlord shall be entitled at any time or times in
any Year, upon at least fifteen (15) days notice to the Tenant,
to require the Tenant to pay to the Landlord monthly, on the date
for payment of monthly rental instalments, as Additional Rent, an
amount equal to one-twelfth (1/12th) of the amount estimated by
the landlord to be the amount of the Operating Costs for such
year. The Landlord shall be entitled subsequently during such
Year, upon at least fifteen (15) days notice to the Tenant, to
revise its estimate of the amount of the Operating Costs and the
said monthly instalment shall be revised accordingly. All amounts
received under this provision in any Year on account of the
estimated amount of Operating Costs shall be applied in reduction
of the actual amount of Operating Costs for such Year. If the
amount received is less than the actual Operating Costs for such
Year, the Tenant shall pay any deficiency to the Landlord as
<PAGE>
Additional Rent within fifteen (15) days following receipt by
the Tenant of notice of any amount of such deficiency. If the
amount received is greater that the actual Operating Costs, the
Landlord shall either refund the excess to the Tenant as soon as
possible after the end of the Year in respect of which such
payments are made, or at the Landlord's option, shall apply such
excess against any amounts owing or becoming due to the
Landlord by the Tenant.
ARTICLE 7
Tenant's
Covenants
Pay Rent 7. (a) The Tenant Covenants to pay Basic Rent and Additional
Rent in the manner and at the times herein reserved.
Utilities (b) The Tenant shall pay as the same become due
Charges respectively all charges for public utilities, which, without
limiting the generality of the foregoing, shall include water,
gas, heat, electrical power or energy, steam or hot water used
upon or in respect of the Premises and for fittings, machinery,
apparatus, meters or other things leased in respect thereof and
for all work or services performed by any corporation or
commission in connection with such public utilities. In no event
shall the Landlord be liable for any injury to the Tenant, its
servants, agents, employees, customers and invitees or to any
property of any other person, firm or corporation on or about the
Premises caused by an interruption or failure in the supply of
any such utilities to the Premises. In the event separate utility
meters are not supplied and the utility bill or bills are
rendered directly to the Landlord, the Landlord, in consultation
with its engineer, shall estimate the amount of such utility
used by the Tenant and the same shall be payable to the Landlord
forthwith upon demand as Additional Rent. The estimate of the
Landlord's engineer, with regard to the use of any utility
service, shall be final and binding on the parties hereto. In
the event of any abnormal consumption of water, either by reason
of the character of the business carried on by the Tenant or by
the use of mechanical or other contrivances, the Tenant shall
install a water meter at its own expense and shall pay as
additional rent for the excess water consumed on the said
premises, payment for such excess to be made to the Landlord
monthly on the basis for the estimated charges, which shall be
adjusted semi-annually. The Tenant further undertakes and agrees
not to bypass the aforesaid water meter.
Maintanance (c) The Tenant, at its own expense, shall maintain and
Repair keep the Premises and every part thereof in a clean and sanitary
condition and in accordance with all laws, directions, rules and
regulations of the governmental agencies having jurisdiction and
will keep the Premises (including the interior faces of the
exterior walls and all permitted signs) and every part thereof in
good order and repair and painted or otherwise presentable and
will maintain in good order and operating condition all services
and plumbing equipment installed in the Premises, including
heating units and water and sewage pipes, all as a prudent tenant
would do save and except for reasonable wear and tear, and costs
due to: a) the Landlord's default; b) any act, omission or
negligence of the Landlord or anyone for whom it is in law
responsible; c) structural defects or weakness or original faulty
construction; and d) repair or replacement to the structure of
the Premises and/or the Building.
Any repair or replacement obligations which are not specifically
set out herein as the Tenant's responsibility shall be performed
by the Landlord at its sole cost and risk.
Acceptance (d) The Tenant shall examine the Premises before
Premises taking possession hereunder and such taking of possession
shall be conclusive evidence as against the Landlord
that at the time thereof the Premises were in good order and
satisfactory condition and that all promises, representations and
undertakings by or binding upon the Landlord with respect to any
alteration, remodelling or decorating by the Landlord. The Tenant
acknowledges that the existing leasehold improvements, if any,
are acceptable and that the Tenant is taking possession of the
Premises as is.
Entry by (e) The Landlord may enter and view the state of repair,
Landlord and the Tenant will upon the request of the Landlord acting
reasonably repair according to notice in writing provided
however, that if the tenant fails to repair within a reasonable
period of time and it shall be lawful for the Landlord and its
agents, contractors, servants, and employees to enter into and
upon the Premises and have the same repaired in proper manner and
to render a reasonable account for such repairs to the Tenant and
demand payment for same as Additional Rent.
<PAGE>
Repair Where (f) If any part of the Buildings, including the Premises
Tenant at and other areas of the Buildings of which the Tenant has
Fault exclusive use, boilers, engines, pipes and other apparatus (or
any of them) used for the purpose of heating or air-conditioning
the Buildings, or if the water pipes, drainage pipes, electric
lighting or other equipment of the Buildings or the roof or
outside walls of the Buildings get out of repair or become
damaged or destroyed through the negligence, carelessness or
misuse by the Tenant, its servants, agents, employees or anyone
permitted by it to be in the Buildings stopping up or injuring
the heating apparatus, elevators, water pipes, drainage pipes or
other equipment or part of the Buildings, the expense of the
necessary repairs, replacements or alterations shall be borne by
the Tenant who shall pay the same to the Landlord forthwith on
demand.
Alteration (g) The Tenant will not, without the prior written consent
of the Landlord, make or erect in or to the Premises any
installations, alterations, additions, partitions, repairs or
improvements, or do anything which might affect the proper
operation of the electrical, lighting, heating, ventilating,
air-conditioning, sprinkler, fire protection or other systems.
The Tenant's request for consent shall be in writing and
accompanied by an adequate description of the contemplated work,
and where appropriate, working drawings and specifications
therefor. The Landlord's reasonable cost of having its
architects, engineers or others examine such drawings and
specifications shall be payable by the Tenant upon demand as
Additional Rent. The Landlord may require that any or all work to
be done hereunder be done by contractors or workmen engaged by
the Tenant but first approved by the Landlord, and all work shall
be performed in accordance with all laws and any reasonable
conditions or regulations imposed by the Landlord and completed
in a good and workmanlike manner and with reasonable diligence
in accordance with the approvals given by the Landlord. Any
connections of apparatus to the electrical system, plumbing
lines, or heating, ventilating or air-conditioning systems shall
be deemed to be an alteration within the meaning of this
paragraph. The Tenant shall, at its own cost and before
commencement of any work, obtain all necessary building or other
permits and keep same in force.
Mortgages & (h) The Tenant shall not create any mortgage, conditional
Encumbrances sale agreement, or other encumbrance in respect of its leasehold
improvements or trade fixtures nor mortgage or other encumbrance
of this Lease.
Mechanic's (i) The Tenant covenants to pay promptly all its
Liens contractors and materialmen and shall do any and all things
necessary to minimize the possibility of a lien attaching to the
Premises or to any part of the building and, should any such
lien be made or filed, the Tenant shall discharge the same
forthwith (after notice thereof is given to the Tenant), at the
Tenant's expense. In the event the Tenant shall fail to cause any
such lien to be discharged, as aforesaid, then, in addition to
any other right or remedy of the Landlord, the Landlord may, but
it shall not be so obligated, discharge same by paying the amount
claimed to be due into Court or directly to any such lien
claimant and the amount so paid by the Landlord and all costs
and expenses, including solicitors' fees (on a solicitor and his
client basis), incurred herein for the discharge of such lien
shall be due and payable by the Tenant to the Landlord as
Additional Rent on demand.
Overloading (j) The Tenant covenants that it will not bring upon the
Premises or any part thereof any machinery, equipment, article or
thing that, by reason of its weight, size of operation, might
damage the Premises and will not any time overload the floors or
roof of the Premises and that if any damage is caused to the
Premises by any machinery, equipment, article or thing or by
overloading or by any act, neglect or misuse on the part of the
Tenant, or any of its servants, agents or employees or any
person having business with the Tenant, the Tenant will forthwith
pay to the Landlord the cost of making good the same, and that
any breach of this subparagraph shall be deemed to be a violation
of the within Lease and the Landlord may, at its option, cancel
the remainder of the Term upon giving the Tenant fifteen (15)
days notice in writing of its intention so to do.
Glass, (k) The Tenant covenants that all glass, locks and
Locks & trimmings, in or upon the doors or windows of the Premises, shall
Trimmings be kept whole. Whenever any part thereof shall become broken,
the same shall be replaced or repaired immediately with a type
or quality equivalent to the original installation and such
replacement and/or repair shall be carried out by the Tenant at
its expense.
<PAGE>
Assigns (l) The Tenant covenants and agrees not to paint, fix,
display, or cause to be painted, fixed or displayed any sign,
picture, advertisement, notice, lettering or decoration on any
part of the exterior of the Premises without in each instance
the prior written approval of the Landlord. All signs erected
by the Tenant with the Landlord's approval, as aforesaid, shall
nevertheless be of uniform size, lettering and location as the
signs of all other tenants in the Building. Any such signs or
other advertising material, as aforesaid, shall be removed by
the Tenant at the termination of this Lease and the Tenant shall
promptly repair any and all damage caused by such removal.
Provided, if the Landlord shall, in its sole discretion, desire
to establish a uniform sign policy for the tenants of the
Building, then the Tenant acknowledges and agrees that the
Landlord, at its option, shall be entitled to erect all signs or
other advertising material in or on the Building advertising the
respective tenant's business operations therein (including the
Tenant named herein). The cost of such signs and the installation
and erection thereof shall be borne by the Tenant and shall be
payable forthwith on demand. Any such sign shall be erected in
strict conformance with municipal regulations, requirements and
by-laws in existence from time to time.
Surrender on (m) Upon the expiration or sooner termination of the
Termination tenancy hereby created the Tenant covenants:
(i) to surrender the Premises in the same condition
as the Premises were in upon delivery of possession thereto under
this Lease, reasonable wear and tear, damage by fire, lightning,
tempest or other casualty not due to the negligence of the
Tenant, its servants, agents or employees only excepted;
(ii) to surrender all keys for the Premises to the
Landlord at the place then fixed for payment of rent and to
inform the Landlord of all combinations on locks, safes and
vaults, if any, in the Premises.
If at the end of the term hereof, or any renewals thereof, the
Tenant vacates the Premises and leaves any goods or fixtures
or any of its property whatsoever on the Premises, the Landlord
shall have no obligation to look after such goods, fixtures or
property and may sell or destroy the same, without the Tenant
receiving any compensation therefor, or have them removed and/or
stored at the expense of the Tenant or dispose of the same in
any other manner whatsoever as may be determined by the
Landlord in its sole discretion.
Refuse & (n) The Tenant agrees that it will not allow any waste,
Garbage refuse, garbage, ashes or other loose or objectionable material
to accumulate in or about the Premises and will provide covered
metal receptacles for the same and will at all times keep the
Premises in clean and wholesome condition, and shall immediately
before the termination of the Term hereby granted, wash the
floors, windows, walls and woodwork of the Premises. The Tenant
further covanants that at the time of termination of the tenancy
it will leave the Premises in a clean and tidy condition.
Plumbing (o) The plumbing fixtures shall not be used for any other
Fixtures purpose than that for which they were constructed and no foreign
substances of any kind shall be thrown therein and the expense
of any breakage, stoppage, or damage shall be borne by the
Tenant who shall or whose employees, agents, licencees or
invitees shall have caused it.
Water (p) In the event that the Tenant shall require a hot water
Heaters heater or heaters, the Tenant agrees to lease same from
Consumers Gas Company or Ontario Hydro and to pay all charges as
same become due for rental or work services required in
connection with the said hot water heater or heaters.
Heating (q) The Tenant covenants and agrees to heat the Premises
at its own expenses to a reasonable temperature to prevent the
occurance of any damage to the Premises and/or the Buildings
of which the Premises forms a part, by cold or frost.
Service (r) The Tenant covenants and agrees to take out a standard
Contracts servicing contract with a capable company for the service and
maintenance of heating units and furnaces and air conditioning
equipment in the Premises, such contract to include the monthly
cleaning of exchangers and the replacement of filters, and to
keep such contract in force for the Term of the within Lease or
any renewal thereof. The Tenant agrees to provide the Landlord
with a copy of the aforesaid servicing contract.
<PAGE>
Notice of (s) The Tenant shall give the Landlord prompt written
Accidents notice of any accident to or any defect in the plumbing, water
pipes, heating and/or air conditioning and heating apparatus,
electrical equipment, conduits or wires, or of any damage or
injury to the Premises or any part thereof however caused;
provided that nothing herein shall be construed so as to require
repairs to be made by the Landlord except as expressly provided
in this Lease.
Outside (t) The Tenant agrees that it will not store any goods
Storage or matter of any kind whatsoever outside the Premises without
the express written consent of the Landlord first had and
obtained.
ARTICLE 8
Use of
Demised
Premises
Use 8. (a) The Tenant covenants and agrees that the Premises shall
be used and occupied for the purposes of _______________________,
and for no other purpose or purposes whatsoever, save for those
additional uses to which the Landlord, in its sole and absolute
discretion, consents in writing.
Observance (b) The Tenant shall comply promptly with and conform
of Laws to the requirements of all applicable statutes, by-laws, laws,
regulations, ordinances and orders from time to time or at any
time in force during the Term of this Lease and affecting the
condition, equipment, maintenance, use or occupation of the
Premises or fire insurance company by which the Landlord and the
Tenant or either of them may be insured at any time during the
Term hereof, and, in the event of the default of the Tenant under
the provisions of this subclause, which the Tenant upon
receiving written notice, fails to care, the Landlord may itself
comply with any such requirement as aforesaid and the Tenant
will forthwith pay all costs and expenses incurred by the
Landlord in this regard and the Tenant agrees that all such costs
and expenses shall be recoverable by the Landlord as if the same
were Additional Rent reserved and in arrears under this Lease.
Exterior (c) The Tenant covenants that it will not erect on, fix
Wall or fasten to the roof or to the outside walls of the Premises
any television or radio antenna, sign, fixture or attachment of
any kind whatsoever without first receiving the Landlord's
written consent thereto, which consent shall not be unreasonably
withheld.
Waste and (d) The Tenant shall not do or suffer any waste or damage,
Nuisance disfiguration or injury to the Premises or the fixtures and
equipment thereof nor permit or suffer any overloading of the
floors thereof and shall not use or permit to be used any part
of the Premises for any dangerous, noxious or offensive trade or
business and shall not do anything or permit anything to be done
upon or about the Premises nor anything to be brought thereon
which may reasonably be deemed to be a nuisance, annoyance,
grievance, damage or disturbance to the occupiers or owners of
the Building and of adjacent lands or premises as the case may
be, and the Tenant shall take every reasonable precaution to
protect the Premises and the Building from danger of fire, water
damage or the elements.
Overloading (e) The Tenant shall not install or use any
Systems electrical or other equipment or electrical arrangement which may
overload the electrical or other service facilities unless it
does so with the express written consent to the Landlord and at
its own expense makes whatever changes are necessary to comply
with the reasonable and lawful requirements of the Landlord's
insurance underwriters and governmental authorities having
jurisdiction and in any event the Tenant shall make no changes
until it first submits plans and specifications to the Landlord
for its prior written approval which approval shall not be
unreasonably withheld.
<PAGE>
Rules and (f) The Tenant covenants and agrees to observe and perform
Regulations all rules and regulations which may now or hereafter be
promulgated by the Landlord and all of such rules and regulations
now or hereafter in force shall be read as forming part of the
terms of this Lease as if the same were embodied herein.
Exhibiting (g) The Landlord or its agents and employees shall have
Premises the right at any time during business hours of the Tenant to
enter upon the Premises for the purpose of exhibiting same,
provided that the exercise of such rights shall not unreasonably
interfere with the Tenant's business.
PROVIDED that the Landlord shall have the right six (6)
months prior to the expiry of the term or the renewal term, as
the lease may be within six (6) months prior to the termination
of the said term or any renewal thereof to place upon the
Premises a notice of reasonable dimensions and reasonably placed
so as not to interfere with the Tenant's business, stating that
the Premises are to let; further provided that the Tenant will
not remove such notice or permit the same to be removed. The
Landlord and its agents and employees shall also be permitted to
enter upon the Premises within the aforesaid period to show the
same to prospective tenants.
Alteration of (h) (i) Notwithstanding anything herein contained to the
Facilities contrary, provided that the rights of the tenant as set out
herein are no way affected, the Landlord shall be entitled
to alter the building services or facilities, the location of
driveways, sidewalks, parking areas, gardens and landscaped areas
and to extend existing buildings or erect new buildings or
extend existing buildings above the leased premises or other
premises on the lands, so long as all municipal and other
governmental requirements are met.
(ii) The Tenant and employees, servants, agents and
contractors of the Tenant, shall park in those areas on the lands
designated by the Landlord as employee parking areas, if as and
when the Landlord so designates, and shall not park in any other
areas whatsoever.
ARTICLE 9
Quiet
Enjoyment 9. The Landlord covenants with the Tenant for quiet
enjoyment.
Insurance 10. (a) The Tenant shall, throughout the term of this Lease,
provide at its own expense and keep in force for the benefit of
the Landlord and Tenant the following insurance coverages
(i) General liability insurance, including tenant's
legal liability insurance, in respect of injury to or death of
one or more persons or property damage in an amount satisfactory
to the Landlord and in any event, in an amount not less than
TWO MILLION DOLLARS, ($2,000,000.00);
(ii) Insurance against loss or damage by fire in
respect of all improvements to the Premises and equipment
appuretnant thereto to the full replacement value of same and
containing the standard extended perils and endorsements; and
(iii) Any and all insurance considered necessary by
the Landlord acting reasonably as a prudent owner.
<PAGE>
All insurance shall be effected with insurers in an amount and
upon terms and conditions satisfactory to the Landlord; all
insurance policies shall provide for thirty (30) days written
notice of cancellation, non-renewal or material change to the
Landlord. The Tenant shall promptly furnish to the Landlord
copies of insurance policies and other evidence satisfactory to
the Landlord as to such insurance and any renewals therof naming
Landlord and Landlord's mortgagee as co-insured. In the event
that the Tenant fails to insure as herein required or fails to
promptly furnish to the Landlord satisfactory evidence of such
insurance or the renewal thereof prior to its expiration, the
Landlord may from time to time effect such insurance for the
benefit of Tenant or Landlord or both of them and any premium
paid by the Landlord shall be recoverable by the Landlord as if
the same were Additional Rent reserved and in arrears.
(b) Neither the Tenant nor its officers, directors, agents,
servants, licencees or concessionaires, assignees or subtenants
shall bring onto the Premises nor do nor omit nor permit to be
done or omitted upon or about the Premises anything which shall
cause the rate of insurance upon the Premises or the Building or
any part thereof or its contents to be increased and, if the
said rate of insurance shall be increased by reason of the use
made of the Premises even though such use may be a permitted
use hereunder or by reason of anything done or omitted or
permitted to be done or omitted by the Tenant or its officers,
directors, agents, servants, licencees, concessionaires,
assignees or subtenants or by anyone permitted by the Tenant to
be upon the Premises, the Tenant shall pay to the Landlord
forthwith.
(c) If any policy of insurance upon the Building or any
part of the contents shall be cancelled or refused to be
renewed or granted by an insurer by reason of the use and
occupation of the Premises or any part thereof by the Tenant or
by any of its officers, directors, agents, servants, licensees,
concessionaires, assignees, subtenants or by anyone permitted
by the Tenant to be upon the Premises, the Tenant shall forthwith
upon demand remedy or rectify such use or occupation and if the
Tenant shall fail to do so forthwith the Landlord may, at its
option, terminate this Lease by leaving upon the Premises notice
in writing of such termination and the Tenant shall immediately
deliver up possession of the Premises to the Landlord and the
Landlord may re-enter and take possession of the Premises and the
Tenant shall thereupon pay all rent and any other payment for
which the Tenant is liable under this Lease apportioned to the
date of such termination together with all losses, damages or
costs of any kind arising out of the Tenant's breach of this
provision and/or the termination of this Lease under this
subclause.
(d) Neither the Tenant nor anyone claiming by, through
or under or on behalf of the Tenant shall have any claim, right
or action or right of subrogation against the Landlord for or
based upon any loss or damage to the Building or any property
therein or thereon caused by fire, explosion or other standard
extended coverage insurance perils save and except if any damage
occasioned by fire, explosion or other standard extended
coverage insurance perils results or arises from the negligent
act or omission of the Landlord or any person or persons for whom
the Landlord is in law responsible and the Tenant covenants and
agrees with the Landlord that any and all policies of insurance
providing coverage as aforesaid shall forthwith be endorsed with
a waiver of any and all subrogation rights which might otherwise
vest in the insurer of such policy or policies of insurance.
ARTICLE 11
Assignment 11. The Tenant will not assign, set over, transfer, sublet or
sublease or in any way deal with or part with the whole or any
part of the said Premises to any one for or during the whole or
any part of this Term without written consent first being
obtained from the Landlord, but such consent shall not be
unreasonably withheld or delayed.
PROVIDED, however, and it is made a condition to the giving
of such consent that:
(i) The Proposed assignee or sublessee of this Lease shall
agree in writing to assume and perform all of the
terms, covenants, conditions and agreements by this
Lease imposed upon the Tenant herein in a form to be
approved by the solicitor for the Landlord; and
<PAGE>
(ii) In the event of an assignment consented to by the
Landlord, the Tenant shall nonetheless remain
responsible to the Landlord for the fulfillment of all
obligations created by this Lease; and
(iii)The Tenant shall pay the Landlord all reasonable legal
fees in connection with the assignment plus the sum of
One Hundred and Fifty Dollars, ($150.00);
For the purpose of this clause, any sale or other
disposition of whatsoever nature and kind and including the issue
of shares, merger or statutory amaigamation resulting in a change
in the beneficial ownership, whether directly or indirectly, of
the shares of the Tenant, or of any corporation which has de
facto control over the Tenant, either directly or by reason of
the holding of shares in any other corporation or corporations,
shall be deemed to be an assignment by the Tenant of this Lease.
ARTICLE 12
Fixtures 12. Provided that the Tenant may remove its fixtures and
chattels if and only if all rent and other charges due or to
become due are fully paid; provided further, however, that all
leasehold improvements, installations, additions, partitions and
fixtures (other than trade or tenant's fixtures in or upon the
Premises, which term shall in no case include any heating,
ventilating and air conditioning equipment or other building
services or carpeting) whether placed there by the Tenant or the
Landlord shall be the Landlord's property upon the termination of
this Lease without compensation therefor to the Tenant and shall
not be removed from the Premises at any time during or after the
Term. Notwithstanding anything herein contained the Landlord
shall be under no obligation to replace, repair or maintain such
leasehold improvements, installations, additions, partitions, and
fixtures and the Landlord shall have the right upon the
termination of this Lease by effluxion of time or otherwise
within thirty (30) days thereafter to require the Tenant to
remove its leasehold improvements, installations, alterations,
partitions, and fixtures or anything in the nature thereof made
or installed by the Tenant and to make good any damage caused to
the Premises by such installation or removal.
ARTICLE 13
Damage or 13. (a) If the Premises or any portion thereof are damaged or
Construction destroyed by fire or by other casualty against which the Landlord
is insured, basic rent and additional rent shall abate in
proportion to the area of that portion of the Premises which,
in the reasonable opinion of the Landlord, is thereby rendered
unfit for the purposes of the Tenant until the Premises are
repaired and rebuilt and the Landlord agrees that it will, with
reasonable diligence, repair and rebuild the Premises. The
Landlord's obligation to rebuild and restore the Premises shall
not include the obligation to rebuild, restore, replace or repair
any chattel, fixture, leasehold improvement,
<PAGE>
installation, addition or partition in respect of which the
Tenant is to maintain insurance under Article 10 or any other
thing that is the property of the Tenant (in this clause
collectively called "Tenant's Improvements"); the Premises shall
be deemed restored and rebuilt and fit for the Tenant's purposes
when the Landlord's Architect certifies that they have been
substantially restored and rebuilt to the point where the Tenant
could occupy them for the purpose of rebuilding, restoring,
replacing or repairing the Tenants improvements; the issuance
of the certificate shall not relieve the Landlord of its
obligation to complete the rebuilding and restoration as
aforesaid, but the Tenant shall forthwith after issuance of the
certificate proceed to rebuild, restore, replace and repair
the Tenant's improvements.
(b) Notwithstanding Section (a) if the Premises or any
portion thereof are damaged or destroyed by any cause whatsoever
and cannot, in the reasonable opinion of the Landlord, be rebuilt
or made fit for the purposes of the Tenant as aforesaid within
ninety (90) days of the damage or destruction, the Landlord
instead of rebuilding or making the Premises fit for the Tenant
may, at its option, terminate this Lease by giving to the Tenant
within thirty (30) days after such damage or destruction notice
of termination and thereupon basic rent and additional rent and
any other payments for which the Tenant is liable under this
Lease shall be apportioned and paid to the date of such damage
and the Tenant shall immediately deliver up possession of the
Premises to the Landlord.
(c) Irrespective of whether the Premises or any portion
thereof are damaged or destroyed as aforesaid, in the event that
fifty percent (50%) or more, as determined by the Landlord, of
the Building, is damaged or destroyed by any cause whatsoever,
and if, in the reasonable opinion of the Landlord such area
cannot be rebuilt or made fit for the purposes of the Tenant
thereof within one hundred and eighty (180) days of such damage
or destruction, the Landlord may, at its option, terminate this
lease by giving to the Tenant within thirty (30) days after such
damage, notice of termination requiring vacant possession of the
Premises sixty (60) days after delivery of the notice of
termination and thereupon basic rent and additional rent and any
other payments for which the Tenant is liable under this Lease
shall be apportioned and paid up to the date on which vacant
possession is given and the Tenant shall deliver up posession of
of the Premises to the Landlord in accordance with such notice
of termination.
(d) Notwithstanding the provisions of Sections (a), (b) and
(c) hereof, in the event of damage or destruction occurring by
reason of any cause in respect of which proceeds of insurance are
substantially insufficient to pay for the costs of rebuilding
or making fit the Building or the Premises or are not payable to
or received by the Landlord, or in the event that any mortgagee
or other person entitled thereto shall not consent to the payment
to the Landlord of the proceeds of any insurance policy for such
purpose, the Landlord may terminate this Lease on written notice,
notwithstanding anything to the contrary herein contained.
ARTICLE 14
Injuries, 14. Save and except if the losses (as hereinafter defined) are
Loss and caused, arise, or are a result of the acts, omissions or
Damage negligence of the Landlord or anyone for whom in law, it is
responsible. The Landlord shall not be responsible in any way for
any injury to any person (including death) or for any loss of or
damage to any property belonging to the Tenant or to other
persons from time to time attending the Premises while such
person or property is in or about the Premises, the Buildings, or
any areaways, parking areas, lawns, sidewalks, steps, truckways
or platforms in connection therewith, including without limiting
the foregoing, any loss of or damage to any property caused by
theft or breakage, or by stream, water, rain or snow or for any
loss or damage caused by or attributable to the condition or
arrangements of any electric or other wiring or for any damage
caused by smoke or anything done or omitted to be done by any
electric or other wiring or for any damage caused by smoke or
anything done or omitted to be done by any other tenant of
premises in the Building or for any other loss whatsoever with
respect to the Premises, or goods placed therein or any business
carried on therein (collectively the "Losses"),
<PAGE>
ARTICLE 15
Solvency 15. Subject to any other rights or remedies available to the
Landlord, the Tenant covenants and agrees that if the Term hereby
granted or any of the goods and chattels of the Tenant on the
Premises shall be at any time during the Term hereof seized or
taken in execution or attachment by any creditor of the Tenant or
if the Tenant shall make an assignment for the benefit of
creditors or any bulk sale or becoming bankrupt or insolvent or
shall take the benefit of any Act now or hereafter in force for
bankrupt or insolvent debtors, or if a receiving order is made
against the Tenant, or if an order shall be made for the winding
up of the Tenant, or if the Tenant, or if the Premises shall,
without the consent of the Landlord, become and remain
substantially vacant or unused for a period of fifteen (15) days
or be used by any other persons than as such are entitled to use
them under the terms of this Lease, or if the Tenant assigns this
Lease or sublets the the Premises without the consent of the
Landlord or if the Tenant shall without the written consent of
the Landlord abandon or attempt to abandon the Premises or to
sell or to dispose of the goods or chattels of the Tenant out of
the ordinary course of business or to remove them or any of them
from the Premises so that there would not in the event of such
abandonment, sale or disposal be sufficient goods on the Premises
subject to distress to satisfy the rent above due or accruing
due, or if the Premises are used for a purpose other than that as
herein provided, then in every such case, the then current
month's rent and the next ensuing three months rent together with
all additional charges payable by the Tenant hereunder (to be
prorated as necessary) shall immediately become due and payable
and the Landlord may re-enter and take possession of the Premises
as though the Tenant or the servants of the Tenant or any other
occupant of the Premises were holding over after the expiration
of the term hereof, and the said Term shall, at the option of the
Landlord, forthwith become forfeited and determined, and in every
one of the cases above, such accelerated rent shall be
recoverable by the Landlord in the same manner as the rent hereby
reserved.
ARTICLE 16
Rent/ 16. This is a carefree lease and it is the mutual intention of
Lease of the parties hereto that the rentals herein provided to be
paid shall be net to the Landlord and clear of all taxes
(except Landlord's income and capital taxes), cost and charges
arising from or relating to the Premises and that the Tenant
shall save and except as set out herein, bear all costs of and be
responsible for all matters in relation to the operation,
maintenance and repair of the Premises save as otherwise provided
herein and shall pay all charges, impositions and expenses of
every nature and kind relating to the Premises together with the
Tenant's share of Operating Costs in accordance with the term
hereof.
ARTICLE 17
Miscellaneous 17. (a) The Tenant covenants that it will not oppose or cause
to be opposed any application for additions to the Buildings or
changes of zoning concerning the lands on which the Buildings
are situate, or any lands of the Landlord within a radius of
one (1) mile of the Buildings, which is instituted by the
Landlord provided the ability of the Tenant to use the Premises
for the purposes herein provided is not adversely affected
thereby. Upon the request of the Landlord, the Tenant shall
execute a suitable acknowledgement that it does not oppose any
such application.
(b) The Tenant acknowledges and agrees that,
notwithstanding any statutory right to the contrary, it shall
not object to a severance of the lands upon which the Buildings
are situate for lease or mortgage purposes of the registration
in priority to its interest of the common driveway agreement
for ingress and egress to and from the severed portions of the
lands upon which the Building is situate.
ARTICLE 18
Impossibility, 18. Whenever and to the extent the Landlord is unable to fulfill
Unavoidable or shall be delayed or restricted in the fulfillment of any
Delays obligation hereunder by reason of being unable to obtain the
material, goods, equipment, service, utility or labour required
to enable it to fulfil such obligation or by reason of any
statute, law, regulation, by-law or order or by reason of any
other cause beyond its reasonable control, whether of the same
nature as the foregoing or not, the Landlord shall be relieved
from the fulfillment of such obligation and the Tenant shall not
be entitled to compensation for any inconvenience, nuisance or
discomfort thereby occasioned. There shall be no deduction from
the rent or other moneys payable hereunder by reason of such
failure or cause.
<PAGE>
ARTICLE 19
Certificates 19. The Tenant will at any time and from time to time, at no
cost to the Tenant, and upon not less than ten (10) days prior
notice, execute and deliver to the Landlord a statement in
writing certifying that this Lease is unmodified and in full
force and effect (or if modified, stating the modifications and
the Lease is in full force and effect as modified), the amount
of the annual rental then being paid hereunder, the dates to
which the same, by instalment or otherwise, and other charges
hereunder have been paid, whether or not there is any existing
default on the part of the Landlord of which the Tenant has
notice, and any other information reasonably required.
ARTICLE 20
Distress 20. The Tenant waives and renounces the benefit of any present
or future statute taking away or limiting the Landlord's
right of distress, and covenants and agrees that notwithstanding
any such statute none of the goods and chattels of the Tenant
on the Premises at any time during the Term shall be exempt
from levy by distress for rent in arrears.
ARTICLE 21
Re-Entry 21. Proviso for re-entry by the said Landlord on non-payment
of rent or non-performance of covenants or performance
of any act prohibited hereunder in accordance with the terms
hereof.
ARTICLE 22
Entry as 22. The Tenant further covenants and agrees that on the Landlord
Tenant becoming entitled to re-enter upon the Premises under any of
the provisions of this Lease, the Landlord, in addition to all
other rights, shall have the right to enter the Premises as the
agent of the Tenant, either by force or otherwise, without being
liable for any prosecution therefor and to relet the Premises as
agent of the Tenant and to receive the rent therefor and as the
agent of the Tenant to take possession of any furniture or other
property on the Premises and to sell the same at public or
private sale without notice and to apply the proceeds of such
sale, and any rent derived from re-letting the Premises, upon
account of the rent under this Lease and the Tenant shall be
liable to the Landlord for the deficiency, if any, for the
remainder of the Term as if such re-entry had not been made, less
the actual amount received by the Landlord after such re-entry in
respect of any re-letting applicable to the remainder of the
Term. The Tenant shall also reimburse the Landlord for all
reasonable legal and other costs incurred as a result of such
re-entry or re-letting.
ARTICLE 23
Right of 23. The Tenant further covenants and agrees that on the Landlord
Termination becoming entitled to re-enter upon the Premises under any of the
provisions of this Lease, the Landlord, in addition to all other
rights, shall have the right to terminate forthwith this Lease
and Term by leaving upon the Premises notice in writing of its
intention so to do and thereupon rent and any other payments for
which the Tenant shall be computed, apportioned and paid in full
to the date of such termination of this Lease and the Tenant
shall immediately deliver up possession of the Premises to the
Landlord, and the Landlord may re-enter and take possession of
the same.
ARTICLE 24
Non-Waiver 24. No condoning, excusing or overlooking by the Landlord or
any default, breach or non-observance by the Tenant at any time
or times in respect of any covenant, proviso or condition herein
contained shall operate as a waiver of the Landlord's rights
hereunder in respect of any continuing or subsequent default,
breach or non-observance, or so as to defeat or affect in any
way the rights of the Landlord herein in respect of any such
continuing or subsequent default or breach, and no waiver shall
be inferred from or implied by anything done or omitted by the
Landlord save only express waiver in writing. All rights and
remedies of the Landlord in this Lease contained shall be
cumulative and not alternative.
<PAGE>
ARTICLE 25
Overholding 25. If the Tenant shall continue to occupy all or part of the
Premises after the expiration of this Lease with the consent of
the Landlord, and without any further written agreement, the
Tenant shall be a monthly tenant at the Basic Rent payable and
otherwise on the same terms and conditions herein set out except
as to length of tenancy.
ARTICLE 26
Landlord 26. If the Tenant fails after receipt of written notice to
Performing perform or cause to be performed of the covenants or obligations
Tenant's of the Tenant herein, the Landlord shall have the right (but
Covenants shall not be obligated) to perform or cause to be performed and
to do or cause to be done such things as may be necessary or
incidental thereto (including without limiting the foregoing,
the right to make repairs, installations, erections and expend
moneys) and all payments, expenses, charges, fees and
disbursements incurred or paid by or on behalf of the Landlord
in respect thereof shall be paid by the Tenant to the Landlord
forthwith upon demand as Additional Rent.
ARTICLE 27
Payments to 27. All payments to be made by the Tenant under this Lease shall
Landlord be made at such place or places as the Landlord may designate
in writing and to the Landlord or to such agent of the Landlord
as the Landlord shall from time to time direct. The Tenant shall
pay the Landlord interest on all overdue rentals including Basic
Rent and Additional Rent or other amounts, all such interest to
be calculated from the date upon which the amount is first due
or demanded until actual payment thereof and at a rate of two
percent (2%) per annum in excess of the minimum lending rate to
prime commercial borrowers from time to time current at chartered
banks in the municipality in which the Building is situate.
ARTICLE 28
Recovery of 28. The Landlord shall have (in addition to any other right or
Adjustments remedy of the Landlord) the same rights and remedies in the
event of default by the Tenant in payment of any amount payable
by the Tenant hereunder, as the Landlord would have in the case
of default in payment of rent.
ARTICLE 29
Registration 29. (a) The Tenant covenants and agrees with the Landlord that
Planning the Tenant will not register or record this Lease or Notice
thereof against the title to the Premises except in the form
which shall be acceptable to the Landlord and which shall be
executed by the Landlord and Tenant prior to registration.
(b) Where applicable, this Lease shall be subject to the
condition that it is effective only if The Planning Act is
complied with. Pending such compliance, the Term, and any renewal
periods, shall be deemed to be a total period of one (1) day less
than the maximum lease term permitted by law without such
compliance.
ARTICLE 30
Mortgages 30. At the option of the Landlord, this Lease shall be subject
and subordinate to any and all mortgages, charges and deeds of
trust, which may now or at any time hereafter affect the Premises
in whole or in part, or the Building whether or not any such
mortgage, charge or deed of trust affects only the Premises,
the Building or affects other premises as well. On request,
at any time and from time to time, of the Landlord or of the
mortgagee, chargee or trustee under any such mortgage, charge or
deed of trust, the Tenant shall promptly, at no cost to the
tenant or mortgagee, chargee or trustee:
(a) attorn to such mortgagee, chargee or trustee and become
its tenant of the Premises or the Tenant of the Premises of any
purchaser from such mortgagee, chargee or trustee in the event
of the exercise of any permitted power of sale contained in any
such mortgage, charge or deed of trust for the then unexpired
residue of the Term on the terms herein contained, and/or
<PAGE>
(b) provided that no cost to the tenant the tenant is
granted a non-disturbance agreement upon reasonable terms and
conditions, postpone and subordinate this Lease to such mortgage,
charge or deed of trust to the intent that this Lease and all
right, title and interest of the Tenant in the Premises shall be
subject to the rights of such mortgagee, chargee or trustee as
fully as if such mortgage, charge or deed of trust had been
executed and registered and the money thereby secured had been
advanced before the execution of this Lease (and notwithstanding
any authority or consent of such mortgagee, or trustee, express
or implied to the making of this Lease).
(c) Any such attornment or postponement and subordination
shall extend to all renewals, modifications, consolidations,
replacements and extension of any such mortgage, charge or deed
of trust and every instrument supplemental or ancillary thereto
or in implementation thereof. The Tenant shall forthwith execute
any instruments of attornment or postponement and subordination
which may be so requested to give effect to this section.
ARTICLE 31
Evidence of 31. The Tenant agrees to produce to the Landlord upon request,
Payments satisfactory evidence of the due payment by the Tenant of all
payments required to be made by the Tenant under this Lease.
ARTICLE 32
Assignment 32. If the Landlord sells or leases the Premises or any part
of Landlord thereof, or assigns this Lease, it shall ensure that the
Purchaser or Assignee is responsible for compliance with the
covenants and obligations of the Landlord hereunder, and
provided said purchaser or assignee is bound, the Landlord
without further written agreement will be discharged and
relieved of liability under the said covenants and obligations.
ARTICLE 33
Captions 33. The captions appearing in this lease have been inserted as
a matter of convenience and for reference only and in no way
define, limit or enlarge the scope of meaning of this Lease nor
any of the Provisions hereof.
ARTICLE 35
Notice 35. (a) Any notice, request, statement or other document
pursuant to this Lease shall be in writing and shall be deemeed
to have been given if sent by registered prepaid post as follows:
TO THE LANDLORD
Mississauga, Ontario
or such other address as the Landlord shall notify the Tenant in
writing any time or from time to time;
TO THE TENANT: - at the Premises
and such notice shall be deemed to have been received by the
Landlord or the Tenant, as the case may be, on the fourth
business day after the date on which it shall have been so
mailed (in the event that there is an interruption of postal
service, the aforesaid period shall be extended for a period
equivalent to the period of interruption.
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ARTICLE 40
Law 40. This Lease shall be goverened by and construed in accordance
with the laws of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have executed this Lease.
SIGNED, SEALED & DELIVERED
In the Presence of BY: __________________________________
Authorized Signing Officer
BY: __________________________________
Authorized Signing Officer
TENANT:
BY: __________________________________
Authorized Signing Officer
BY: __________________________________ C/S
Authorized Signing Officer
<PAGE>
SCHEDULE "A" ATTACHED TO AND FORMING A PART OF THIS OFFER TO LEASE.
The Lessor, at its expense and prior to occupancy shall complete the following
work in a good and workmanlike manner:
1. Remove any wall anchors and fill in existing holes in wall and
re-paint;
2. Clean remainder of office walls and paint where necessary;
3. Erect a wall to create a private office with door in third office
area;
4. Patch a matching carpet strip in two most rear office areas;
5. Shampoo existing carpet
6. Create a man door opening to unit 473 Champagne from rear most
office area;
7. Leave warehouse in broom-swept condition;
8. Clean warehouse washroom;
9. Remove debris from rear shipping area;
10. Designate all non-policied parking spaces for tenant's use;
11. Repair hole in vestibule door.
The Lessor represents and warrants that all plumbing, lighting and heating, and
air conditioning and mechanicals in this unit are in good working order at the
time of occupancy.
The Lessor warrants that the Lessee shall not be responsible for the repair or
replacement of any major structural or mechanicals during the term of the Lease
unless directly caused by the Lessee's negligence.
The Lessee shall have vacant possession of the premises net Rent (Basic &
Additional Rent) free from signing of the Lease document and no later than
November 1, 1996 will lease commencement date of December 1, 1996 in order to
set up business.
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SCHEDULE "A"
1. It is the desire of the Lessor to establish a uniform sign policy for
all of the lessees occupying the building within which the demised
premises are located and accordingly the Lessor will provide, at his
expense, a panel on the front wall of the demised premises in which
the lessee is to install its name. The lettering comprimising the
name shall be installed only by the sign contractor selected and
appointed by the lessor at the Lessee's expense, such lettering to be
of uniform size and colouring to be approved by the Lessor. Upon
termination of the lease said lettering shall be removed by the
Lessee and any damage caused by such removal shall be promptly
repaired by the Lessee to the satisfaction of the Lessor.
It is strictly understood and agreed that no other sign, picture,
advertisement or notice shall be displayed, inscribed or painted
or affixed on any other part of the exterior of the demised premises
or on the inside face of any windows.
The Lessor will also affix on the front wall of the demised premises
the address number of the demised premises, the cost of which is to
be paid by the Lessee.
2. It is also the desire of the Lessor to establish a uniform window
drapery policy for all of the Lessees occupying the building within
which the demised premises are located and accordingly, white vertical
P.V.C. blinds shall be installed on the front windows of the demised
premises by the contractor selected and appointed by the lessor at
the Lessee's expense.
3. The Lessee shall provide his own lighting and electrical recepticles
in the warehouse portion of the demised premises.
4. The Lessor shall not be responsible for any delays in having the
premises ready for occupancy.
5. This offer is conditional upon the Lessor approving the credit rating
of the Lessee and in the event that the Landlord does not approve
then the agreement shall be considered null and void.
6. No hazardous operations such as spray painting, dip tanks, use of
explosive gases, woodworking, or special processes using flammable
or combustible liquids.
No storage of combustible, flammable, or corrosive chemicals or
products.
No presses or stamping machines.
No automotive work.
No overnight parking.
No outside storage of any kind.
7. Garbage disposal is to be arranged through the Landlord at the
tenant's expense. Only a disposal contractor authorized by the
Landlord will be allowed on the property.
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SCHEDULE OF RULES AND REGUL4TIONS FORMING PART OF THIS LEASE
The Tenant shall observe the following Rules and Regulations (as amended,
modified or supplemented from time to time by the Landlord as provided in
this Lease):
1. The sidewalks, entrances, elevators, stairways and corridors of the
building shall not be obstructed or used by the Tenant, his agents, servants,
contractors, invitees or employees for any purpose other than access to and
from the Pramises.
2. The floors, sky-lights and windows that reflect or admit light into
passageways or into any place in the building shall not be covered or
obstructed by the Tenant, and no awnings shall be put over any window.
3. The toilets, sinks, drains, washrooms and other water apparatus shall not
be used for any purpose other than those for which they were constructed, and
no sweepings, rubbish, rags, ashes or other substances, such as chemicals,
solvents, noxious liquids or pollutants shall be thrown therein, and any
damage resulting to them from misuse shall be borne by the Tenant by whom or
by whose employees, agents, servants, contractors or invitees the damage was
caused.
4. In the event that the Landlord provides and installs a Public Directory
Board inside the building, the Tenant's name shall be placed on the said
Board at the expense of the Tenant.
5. The Tenant shall not perform any acts or carry on any activity which may
damage the Premises or the common areas or be a nuisance to any other tenant.
6. No animals or birds shall be brought into the building or kept on the
Premises.
7. The Tenant shall not mark, drill into, bore or cut or in any way damage or
deface the walls, ceilings or floors of the Premises. No wires, pipes or
conduits shall be installed in the Premises without prior written approval of
the Landlord. No broadloom or carpeting shall be affixed to the Premises by
means of a non-soluble adhesive or similar products.
8. No one shall use the Premises for sleeping apartments or residential
purposes, for the storage of personal effects or articles other than those
required for business purposes, or for any illegal purpose.
9. The Tenant shall not use or permit the use of any objectionable
advertising medium such as, without limitation, loudspeakers, public address
systems, sound amplifiers, radio, broadcast or television apparatus within
the building which is in any manner audible or visible outside of the
Premises.
10. The Tenant must observe strict care not to allow windows to remain open
so as to admit rain or snow, or so as to interfere with the heating of the
building. The Tenant neglecting this rule will be responsible for any damage
caused to the property of other tenants, or to the property of the Landlord,
by such carelessness. The Tenant, when closing the Premises, shall close ail
windows and lock all doors.
11. The Tenant shall not without the express written consent of the Landlord,
place any additional locks upon any doors of the Premises and shall not
permit any dupilcate keys to be made, therefor; but shall use only additional
keys obtained from the Landlord, at: the expense of the Tenant, and shall
surrender to the Landlord on the termination of the Lease all keys of the
Premises.
12. No inflammable oils or other inflammable, toxic, dangerous or explosive
materials shall be kept or permitted to be kept in or on the Premises.
13. No bicycles or other vehicles shall be brought within the Premises or
upon the Landlord's property, including any lane or courtyard, unless
otherwise agreed in writing.
14. Nothing shall be placed on the outside of windows or projections of the
Premises. No air-conditioning equipment shall be placed at the windows of the
Premises without the consent in writing of the Landlord.
15. The moving of all heavy equipment and office equipment or furniture shall
occur only between 6:00 p.m. and 8:00 a.m. or any other time consented to by
the Landlord and the persons employed to move the same in and out of the
building must be acceptable to the Landlord. Safes and other heavy equipment
shall be moved through the Premises and common areas only upon steel bearing
plates. No deliveries requiring the use of an elevator for freight purposes
will be received into the building or carried in the elevators except during
hours approved by the Landlord.
16. The Landlord reserves the right to restrict the use of the building after
6:00 p.m.
17. Canvassing, soliciting and peddling in the building is prohibited.
18. The Tenant shall first obtain in writing the consent of the Landlord to
any alteration or modification to the electrical system in the Premises and
all such alterations and modifications shall be completed at the Tenant's
expense by an electrical contractor acceptable to the Landlord.
19. The Tenant shall first obtain in writing the consent of the Landlord
to the placement by the Tenant of any garbage containers or receptacles
outside the Premises or building.
20. The Tenant shall not install or erect on or about the Premises television
antennae, communications towers, satellite dishes or other such apparatus.
21. The Landlord shall have the right to make such other and further
reasonable rules and regulations and to alter, amend or cancel all rules
and regulations as in its judgement may from time to time be needed for the
safety, care and cleanliness of the building and for the preservation of
good order therein and the same shall be kept and observed by the Tenant,
his employees, agents, servants, contractors or invitees. The Landlord
may from time to time waive any of such rules and regulations as applied to
particular tenants and is not liable to the Tenant for breaches thereof by
other tenants.
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 25th day of March, 1996, by and between HI-RISE RECYCLING SYSTEMS, INC., a
Florida corporation (the "Company"), and DONALD ENGEL (the "Executive").
P R E L I M I N A R Y S T A T E M E N T
The Company desires to retain the Executive to serve as its Co-Chairman
of the Board of Directors ("Co-Chairman") and Chief Executive Officer ("CEO")
for such period as the Company and the Executive mutually desire and the
Executive desires to be retained by the Company in such capacity.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1. EMPLOYMENT AND TERM. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein until such time as either the Company or the
Executive gives notice of its or his intention to terminate his employment
hereunder or until otherwise (the "Expiration Date") terminated as hereinafter
set forth. The period during which the Executive is employed is hereunder shall
be hereinafter referred to as the "Employment Period".
1.2. DUTIES OF THE EXECUTIVE. The Executive shall, during the
Employment Period, devote his full time, energies, talents and efforts to
serving in the capacities of Co-Chairman and CEO in the best interests of the
Company, and shall perform the duties consistent with those offices assigned to
him from time to time by the Board of Directors of the Company or any properly
constituted committee thereof (the "Board") faithfully, efficiently and in a
professional manner. If, at any time during the Employment Period, either the
Company or the Executive believes that it is no longer in their mutual best
interests to have the Executive serve as Co-Chairman or CEO, either may give
notice to the other and, ten (10) days thereafter the Executive shall cease
being the Company's Co-Chairman and CEO and the employment of Executive
hereunder shall terminate. Executive shall perform such services customary to
the offices described above. Executive shall report to, and shall be subject
solely to the supervision and direction of the Board. Prior to the time that the
Executive ceases to be Co-Chairman and CEO of the Company, the Executive shall,
at the request of the Board, accept election and serve as an officer or director
of the Company and/or any subsidiary of the Company, without any additional
compensation therefor other than that specified herein, subject to the
existence, to
<PAGE>
Executive's satisfaction, of appropriate indemnification and/or insurance for
his service in such capacities. The Board may delegate certain of the duties of
the Executive set forth herein or formerly performed by the Executive for the
Company to other individuals or entities employed or retained by the Company,
without, however, diminishing in any way the compensation due to the Executive
hereunder.
1.3. PLACE OF PERFORMANCE. During the Employment Period, the
Company may request the Executive to travel in order to perform the nature and
extent of his duties hereunder. The Executive's obligation to travel at the
Company's request shall not be inconsistent with the other considerations set
forth herein. In no event shall the demands on the Executive's time be such as
would reasonably require him to change his current residence.
2. COMPENSATION. The Company shall pay to Executive compensation
for services provided hereunder as set forth in the Addendum to the Agreement
(the "Addendum"). Payments to Executive shall be less applicable social security
and withholding taxes and any other applicable payroll deductions, if any.
3. TERMINATION PROVISIONS.
3.1. TERMINATION. Either party to this Agreement shall have
the right to terminate this Agreement upon ten (10) days prior written notice to
the other party. Upon the termination of Executive's employment relationship
with the Company pursuant to this Section 3.1, the Executive shall, subject to
the other provisions of this Agreement, only be entitled to receive the
compensation specified in Sections 4.1 and 4.7 hereof.
3.2. DEATH. The Executive's employment relationship with the
Company shall terminate automatically upon the death of the Executive, without
any requirement of notice by the Company to the personal representative or
executor of the Executive's estate. Upon termination of the Executive's
employment with the Company pursuant to this Section 3.2, the Executive shall,
subject to the other provisions of this Agreement, only be entitled to the
compensation specified in Sections 4.2 and 4.4 hereof.
4. COMPENSATION AND BENEFITS UPON TERMINATION.
4.1. TERMINATION. Upon the termination of the Executive's
employment with the Company pursuant to Section 3.1 above, then the Company
shall pay the Executive any unpaid amounts of his Base Salary and accrued bonus,
if any, through the date of termination.
4.2. DEATH. Upon the Executive's death, the Company shall
pay to the person designated by the Executive in a notice filed with the Company
or, if no person is designated, to the personal representative or executor of
his estate when, as and if received by the Company, any payments to Executive's
spouse, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee benefit plan or life insurance policy or other plan or
policy then maintained by the Company. Any life insurance policy currently
maintained by the Company
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for the benefit of the Executive shall remain in full force and effect and shall
not be amended or modified except to allow for any increase in benefits payable
pursuant thereto.
4.3. NO MITIGATION. The aggregate amount payable by the
Company to the Executive pursuant to the foregoing provisions shall not be
reduced or mitigated in any respect.
4.4. BONUS. If the Executive's employment is terminated with
the Company for any reason, the Executive shall be paid, solely in consideration
for services rendered by the Executive prior to such termination, any unpaid
Annual Incentive Bonus previously established in writing by the Board, or any
duly appointed committee thereof, with respect to the Company's fiscal year in
which the termination date occurs, equal to such Annual Incentive Bonus that
would have been payable to the Executive for the fiscal year if the Executive's
employment had not been terminated, multiplied by the number of days in the
fiscal year prior to and including the date of termination and divided by three
hundred sixty-five (365).
5. SUCCESSORS. This Agreement shall be binding upon, and inure
to the benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business. This Agreement
and the Executive's rights and obligations hereunder may not be assigned by the
Executive.
6. ENTIRE AGREEMENT. Except as otherwise provided in this Agreement,
this Agreement constitutes the entire agreement among the parties pertaining to
the subject matter hereof, and supersedes and revokes any and all prior or
existing agreements, written or oral, relating to the subject matter hereof
(which shall be void and of no further force and effect), and this Agreement
shall be solely determinative of the subject matter hereof. Notwithstanding the
foregoing, the Indemnification Agreement by and between the Executive and the
Company dated as of the date hereof shall be and remain in full force and
effect.
7. CONFIDENTIAL INFORMATION; NON-COMPETITION; EQUITABLE REMEDIES.
7.1. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the
Company's client list and manner of doing business is proprietary to the
Company. Except as may be required by the lawful order of a court or agency of
competent jurisdiction, the Executive shall keep secret and confidential
indefinitely all nonpublic information concerning the Company, its affiliates
and its clients which was acquired by or disclosed to the Executive during the
course of his employment with the Company including, without limitation,
information relating to the Company (including, without limitation, business
methods, business policies, procedures, techniques, trade secrets, client and/or
customer lists, compensation levels, costs, financial data and plans), the
Company's clients, and not to disclose the same, either directly or indirectly,
to any other person, firm or business entity, or to use it in any way; provided,
however, that the provisions of this paragraph 7.1 shall not apply to
information which is in the public domain; and provided further, that the
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Company recognizes that the Executive has acquired, prior to his employment with
the Company and shall acquire during the course of his employment with the
Company, certain general information not specific to the Company and its clients
which Executive may use consistent with the provisions of applicable Federal or
state laws or the provisions of paragraph 7 hereof. While he is employed by the
Company, the Executive will not make any statement or disclosure which would be
prohibited by applicable Federal or state laws nor any statement or disclosure
which is intended or reasonably likely to be detrimental to the Company or any
of its subsidiaries or affiliates, or any of their clients. Executive shall
execute Company's standard confidentiality agreement attached as Exhibit A upon
execution of this Agreement.
(b) Upon the termination of the Executive's
employment with the Company for any reason whatsoever, the Executive shall
promptly return to the Company all documents, records, notebooks and other
materials which belong to the Company or any of its affiliates, clients or
clients' customers or sponsors and which are in the possession of the Executive,
including all copies thereof.
(c) In the event that the Executive is required,
by oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process, to disclose nonpublic
information, the Executive shall provide the Company with prompt notice thereof
so that the Company may seek an appropriate protective order and/or waive
compliance by the Executive with the provisions hereof; provided, however, that
if in the absence of a protective order or the receipt of such a waiver, the
Executive is, in the opinion of counsel for the Company, compelled to disclose
nonpublic information not otherwise disclosable hereunder to any legislative,
judicial or regulatory body, agency or authority, or else be exposed to
liability for contempt, fine or penalty or to other censure, such nonpublic
information may be so disclosed; provided that the Executive shall disclose only
that information that is required and shall redact or withhold all information
not required to be disclosed.
7.2. NONCOMPETITION/NONSOLICITATION/NONDISPARAGEMENT.
In addition to the provisions of Section 7.1:
(i) For the period (the "Noncompetition Period")
commencing on the date hereof and continuing through the fifth anniversary of
the termination of the Executive's employment relationship hereunder, the
Executive will not serve as or be a consultant to or employee, officer, agent,
director or owner of more than five percent of another corporation, partnership
or other entity which competes in any manner with or detracts from any recycling
or solid-waste disposal business in which the Company or its subsidiaries or
affiliates then engages (the "Business") and which operates (excluding corporate
offices) within any state in which the Company conducts business.
(ii) For the period (the "Nonsolicitation
Period") commencing on the Commencement Date and ending on the second
anniversary of the date on which the Executive's employment relationship with
the Company is terminated or ceases for any reason, the Executive
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shall not (i) solicit for employment or endeavor in any way to entice away from
employment with the Company or its affiliates any employee of the Company or its
affiliates who is an officer or a manager of any division; nor (ii) solicit or
accept business competitive with the Business from any clients of the Company or
its affiliates, from any prospective clients whose business the Company or any
affiliate of the Company is in the process of soliciting at the time the
Executive's employment with the Company terminated or ceased, or from any former
clients which had been doing business with the Company within one (1) year prior
to the time the Executive's employment with the Company terminated or ceased.
(iii) For the period (the Nondisparagement
Period") commencing on the Commencement Date and ending on the fifth anniversary
of the date on which the Executive's employment relationship with the Company is
terminated or ceases for any reason, the Executive will not directly or
indirectly disparage the commercial, business or financial reputation of the
Company or any of its affiliates or clients.
(iv) During the Noncompetition Period, the
Executive shall offer to the Company any and all business opportunities in the
Business, whether or not in the same geographic regions in which the Company's
businesses operate (the "Area"). If the Company wishes to pursue such
opportunity, it shall so notify the Executive within 30 days and so long as the
Company is diligently pursuing such opportunity, the Executive shall not do so.
If the Company does not wish to pursue such opportunity and so notifies the
Executive, then, (i) if the opportunity is in the Area, the Executive may not
pursue the opportunity, (ii) if the opportunity is not in the Area, the
Executive may pursue the opportunity without being in violation hereof.
7.3. EQUITABLE REMEDIES.
(a) The Executive acknowledges that the
restrictions contained in the foregoing paragraphs 7.1 and 7.2 in view of the
nature of the business in which the Company is engaged, are reasonable and
necessary in order to protect the legitimate interests of the Company, and that
any violation thereof would result in irreparable injuries to the Company, and
the Executive therefore acknowledges that, in the event of his violation of any
of these restrictions, the Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled.
(b) If the period of time specified in
paragraphs 7.1 and 7.2 above should be adjudged unreasonable in any proceeding,
then the period of time shall be reduced by such number of months so that such
restrictions may be enforced for such time as is adjudged to be reasonable.
8. ARBITRATION. Any dispute or controversy (except for disputes
arising under Section 7) arising under or in connection with this Agreement
shall be settled exclusively by
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arbitration in accordance with the rules of the American Arbitration Association
then in effect (except to the extent that the procedures outlined below differ
from such rules). Within seven (7) days after receipt of written notice from
either party that a dispute exists and that arbitration is required, both
parties must within seven (7) business days agree on an acceptable arbitrator.
If the parties cannot agree on an arbitrator, then the parties shall list the
"Big Six" accounting firms in alphabetical order and the first firm that does
not have a conflict of interest and is willing to serve will be selected as the
arbitrator. The parties agree to act as expeditiously as possible to select an
arbitrator and conclude the dispute. The arbitrator must render his decision in
writing within thirty (30) days of his or its appointment. The cost and expenses
of the arbitration and of legal counsel to the prevailing party shall be borne
by the non-prevailing party. Each party will advance one-half of the estimated
fees and expenses of the arbitrator. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided that the Company shall be
entitled to seek a restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of Section 7 hereof.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida. Venue for any
action brought hereunder shall be in Dade County, Florida and the parties hereto
waive any claim that such forum is inconvenient.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
16255 N.W. 54th Avenue
Miami, Florida 33014
Attn: Chairman of the Board
If to the Executive:
Donald Engel
570 Park Avenue
New York, New York 10021
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
11. SURVIVAL. The provisions of paragraph 7 of this Agreement
shall survive, without limitation as to time, in accordance with their express
terms, the date on which the Executive's employment with the Company ceases or
is terminated for any reason.
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12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings any
action for the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable
arbitration or court costs and attorneys' fees of the other, whether such costs
and fees are incurred in an arbitration proceeding, a court of original
jurisdiction or one or more courts of appellate jurisdiction.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
By: /s/ Mark D. Shantzis
-----------------------------
THE EXECUTIVE:
/s/ Donald Engel
--------------------------------
Donald Engel
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ADDENDUM TO AGREEMENT
THIS ADDENDUM dated as of March 25, 1996 is a part of the Employment
Agreement dated as of March 25, 1996, by and between HI-RISE RECYCLING SYSTEMS,
INC., a Florida corporation (the "Company") and DONALD ENGEL (the "Executive"),
as follows:
Subject to the terms and conditions of the Employment Agreement, during
the Employment Period, the Executive shall be compensated by the Company for his
services as follows:
(a) BASE SALARY. The Executive's annual salary during the
Employment Period shall be $180,000 subject to increases in
accordance with the Consumer Price Index, payable by check in
equal installments as may be in accordance with the regular
payroll policies of the Company as from time to time in
effect, less such deductions or amounts to be withheld as
shall be required by applicable law and regulations.
(b) OTHER BENEFITS. The Executive shall be entitled to maintain
his current medical/dental insurance at the Company's expense.
(c) DISCRETIONARY BONUS. The Executive may receive a discretionary
bonus during each year of the Employment Period in an amount
determined by the Compensation Committee of the Board after
its annual performance review of the Executive.
(d) AUTOMOBILE ALLOWANCE; CELLULAR PHONE. The Company shall
provide the Executive with an automobile allowance of six
hundred dollars ($600) per month. The Executive shall be
responsible for all expenses associated with such automobile,
including, without limitation, insurance, gas and repairs. The
Executive shall be provided with a cellular phone and
reimbursed therefor, up to a maximum amount of $400 per month,
in accordance with the policies of the Company as in effect
from time to time.
(e) EXPENSE REIMBURSEMENT. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or
paid by him in the performance of his duties hereunder,
including travel and entertainment, in accordance with Company
policy and upon the presentation by the Executive of an
itemized account of such expenditures and such documentary
evidence as the Company may reasonably require.
(f) OFFICE. The Executive shall be provided with an office and
secretarial assistance in New York City consistent with those
maintained to date by the Executive and
1
<PAGE>
the Company shall maintain at its expense, at the home of the
Executive, a computer and phone connection to the Company's
offices.
IN WITNESS WHEREOF, the parties have set their hands and seals.
THE EXECUTIVE: THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
/s/ Donald Engel By: /s/ Mark D. Shantzis
- ----------------------------- ------------------------------
DONALD ENGEL
THE COMPANY:
2
EXHIBIT 10.31
EMPLOYMENT AND CONSULTING AGREEMENT
THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement") is made and
entered into as of the 25th day of March, 1996, by and between HI-RISE RECYCLING
SYSTEMS, INC., a Florida corporation (the "Company"), and MARK D. SHANTZIS (the
"Executive").
P R E L I M I N A R Y S T A T E M E N T
The Company desires to retain the Executive to serve as its Co-Chairman
of the Board ("Co-Chairman") and President for such period as the Company and
the Executive mutually desire and thereafter as a consultant to the Company, and
the Executive desires to be retained by the Company in such capacities.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1. EMPLOYMENT AND TERM. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein, for a period of three (3) years (the "Initial
Term") commencing on March 25, 1996 and expiring on March 24, 1999 (the
"Expiration Date") unless sooner terminated as hereinafter set forth. The
Initial Term of this Agreement, and the employment of the Executive hereunder,
will automatically be extended for successive one year terms unless either party
gives notice at least six months prior to the Expiration Date (three months, in
the case of any extension period after the Initial Term) of its intention not to
extend the term hereof. (The Initial Term and any extensions shall be
hereinafter referred to as the "Employment Period").
1.2. DUTIES OF THE EXECUTIVE. The Executive shall, during the
Employment Period, devote such time, energies, talents and efforts to serving in
the capacities of Co-Chairman and President in the best interests of the Company
as shall be consistent with the time and other considerations set forth below,
and shall perform the duties consistent with that office assigned to him from
time to time by the Chief Executive Officer of the Company (the "CEO") and/or
the Board of Directors of the Company or any properly constituted committee
thereof (the "Board") faithfully, efficiently and in a professional manner,
subject to such considerations. If, at any time during the Employment Period,
either the Company or the Executive believes that it is no longer in their
mutual best interests to have the Executive serve as Co-Chairman or President,
either may give notice to the other and, ten (10) days thereafter the Executive
shall cease being the Company's Co-Chairman and President and shall become a
consultant to the
<PAGE>
Company for the remainder of the Employment Period. The Company acknowledges
that, both prior to and after the time the Executive ceases to be the Company's
Co-Chairman and President, the Executive may have other business interests to
which Executive will devote time, energies and efforts and further acknowledges
that nothing in this Agreement shall be deemed to require the Executive to
devote any specified minimum amount of time in performing his duties hereunder.
Subject to the foregoing, Executive shall perform such services customary to the
offices described above, but only to the extent consistent with the services
performed by the Executive for the Company, during the twelve (12) months prior
to the execution of this Agreement. Executive shall report to, and shall be
subject solely to the supervision and direction of, the CEO and the Board. Prior
to the time that the Executive ceases to be Co-Chairman and President of the
Company, the Executive shall, at the request of the Board, accept election and
serve as an officer or director of the Company and/or any subsidiary of the
Company, without any additional compensation therefor other than that specified
herein, subject to the existence, to Executive's satisfaction, of appropriate
indemnification and/or insurance for his service in such capacities. The CEO
and/or the Board may delegate certain of the duties of the Executive set forth
herein or formerly performed by the Executive for the Company to other
individuals or entities employed or retained by the Company, without, however,
diminishing in any way the compensation due to the Executive hereunder.
1.3. PLACE OF PERFORMANCE. During the Employment Period, the
Company may request the Executive to travel in order to perform the nature and
extent of his duties hereunder. The Executive's obligation to travel at the
Company's request shall be subject to the Executive's prior written approval,
which approval shall not be unreasonably withheld, and such requested travel
shall not be inconsistent with the limitations on time and other considerations
set forth herein. In no event shall the demands on the Executive's time be such
as would reasonably require him to change his residence from Dade County,
Florida.
2. COMPENSATION. The Company shall pay to Executive compensation
for services provided hereunder as set forth in the Addendum to the Agreement
(the "Addendum"). Payments to Executive shall be less applicable social security
and withholding taxes and any other applicable payroll deductions, if any.
3. TERMINATION PROVISIONS.
3.1. TERMINATION. Either party to this Agreement shall have
the right to terminate this Agreement upon thirty (30) days prior written notice
to the other party. Upon the termination of Executive's employment and/or
consulting relationship with the Company pursuant to this Section 3.1, the
Executive shall, subject to the other provisions of this Agreement, only be
entitled to receive the compensation specified in Sections 4.1, 4.4 and 4.7
hereof.
3.2. DEATH. The Executive's employment and/or consulting
relationship with the Company shall terminate automatically upon the death of
the Executive, without any requirement of notice by the Company to the personal
representative or executor of the
2
<PAGE>
Executive's estate. Upon termination of the Executive's employment with the
Company pursuant to this Section 3.2, the Executive shall, subject to the other
provisions of this Agreement, only be entitled to the compensation specified in
Sections 4.2, 4.4 and 4.7 hereof.
3.3. NON-RENEWAL. In the event that this Agreement is not
renewed beyond the Initial Term as provided in Section 1.1 hereof, the last day
of the Initial Term shall automatically be the termination date for a
termination pursuant to this Section 3.3. Upon any termination of the
Executive's employment with the Company pursuant to this Section 3.3, the
Executive shall, subject to the other provisions of this Agreement, only be
entitled to the compensation specified in Sections 4.3, 4.5 and 4.7 hereof.
4. COMPENSATION AND BENEFITS UPON TERMINATION.
4.1. TERMINATION. Upon the termination of the Executive's
employment with the Company pursuant to Section 3.1 above, then (i) the Company
shall pay the Executive any unpaid amounts of his Base Salary and accrued bonus,
if any, through the date of termination; and (ii) in lieu of any further salary
payments to the Executive for periods subsequent to the date of termination and
in consideration of, among other things, the continuing obligations of the
Executive and rights of the Company under Section 7 hereof during the remainder
of the Employment Period, the Company shall pay, in a lump sum, the amount of
base salary that would have been paid through the scheduled end of the
Employment Period, as severance to the Executive.
4.2. DEATH. Upon the Executive's death, the Company shall pay
to the person designated by the Executive in a notice filed with the Company or,
if no person is designated, to the personal representative or executor of his
estate (i) in a single lump sum, any unpaid amounts of his Base Salary and
accrued bonus, if any, through the scheduled end of the Employment Period and
(ii) when, as and if received by the Company, any payments to Executive's
spouse, beneficiaries or estate may be entitled to receive pursuant to any
pension or employee benefit plan or life insurance policy or other plan or
policy then maintained by the Company. Any life insurance policy currently
maintained by the Company for the benefit of the Executive shall remain in full
force and effect and shall not be amended or modified except to allow for any
increase in benefits payable pursuant thereto.
4.3. NON-RENEWAL. If this Agreement terminates pursuant
to Section 3.3 hereof, the Company shall pay to the Executive any unpaid amounts
of his Base Salary through the termination date specified in Section 3.3.
4.4. HEALTH AND MEDICAL PLANS UPON TERMINATION. Upon
termination of this Agreement pursuant to Section 3.1 or Section 3.2, during the
remainder of the Employment Period the Executive and his spouse shall be
entitled to the continuation of all health, medical, hospitalization and other
programs as previously provided to Executive by the Company; provided that the
cost payable by the Company therefor shall not exceed the amount that would have
been payable had the Executive remained in the employ of the Company.
3
<PAGE>
4.5. HEALTH AND MEDICAL PLANS UPON NON-RENEWAL. The Executive
shall be entitled to all continuation of health, medical, hospitalization and
other programs as provided by any applicable law and such additional benefits as
may be provided under plans maintained by the Company from time to time to its
executives or employees upon termination of employment with the Company.
4.6. NO MITIGATION. The aggregate amount payable by the
Company to the Executive pursuant to the foregoing provisions shall not be
reduced or mitigated in any respect.
4.7. BONUS. If the Executive's employment is terminated with
the Company for any reason, the Executive shall be paid, solely in consideration
for services rendered by the Executive prior to such termination, any unpaid
Annual Incentive Bonus previously established in writing by the Board, or any
duly appointed committee thereof, with respect to the Company's fiscal year in
which the termination date occurs, equal to such Annual Incentive Bonus that
would have been payable to the Executive for the fiscal year if the Executive's
employment had not been terminated, multiplied by the number of days in the
fiscal year prior to and including the date of termination and divided by three
hundred sixty-five (365).
5. SUCCESSORS. This Agreement shall be binding upon, and inure to the
benefit of, the Company and its successors and assigns and any person acquiring,
whether by merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business. This Agreement and the
Executive's rights and obligations hereunder may not be assigned by the
Executive.
6. ENTIRE AGREEMENT. Except as otherwise provided in this Agreement,
this Agreement constitutes the entire agreement among the parties pertaining to
the subject matter hereof, and supersedes and revokes any and all prior or
existing agreements, written or oral, relating to the subject matter hereof,
including, without limitation, any Employment Agreement or Severance Agreement
entered into between the Executive and the Company Companies (which shall be
void and of no further force and effect), and this Agreement shall be solely
determinative of the subject matter hereof. Notwithstanding the foregoing, the
Indemnification Agreement by and between the Executive and the Company dated
_____________, 19__ shall remain in full force and effect and the Company shall
deliver a General Release in the form attached hereto as Exhibit __.
7. CONFIDENTIAL INFORMATION; NON-COMPETITION; EQUITABLE REMEDIES.
7.1. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company's
client list and manner of doing business is proprietary to the Company. Except
as may be required by the lawful order of a court or agency of competent
jurisdiction, the Executive shall keep secret and confidential indefinitely all
nonpublic information concerning the Company, its affiliates and its clients
which was acquired by or disclosed to the Executive during the course of his
employment
4
<PAGE>
with the Company including, without limitation, information relating to the
Company (including, without limitation, business methods, business policies,
procedures, techniques, trade secrets, client and/or customer lists,
compensation levels, costs, financial data and plans), the Company's clients,
and not to disclose the same, either directly or indirectly, to any other
person, firm or business entity, or to use it in any way; provided, however,
that the provisions of this paragraph 7.1 shall not apply to information which
is in the public domain; and provided further, that the Company recognizes that
the Executive has acquired, prior to his employment with the Company and shall
acquire during the course of his employment with the Company, certain general
information not specific to the Company and its clients which Executive may use
consistent with the provisions of applicable Federal or state laws or the
provisions of paragraph 7 hereof. While he is employed by the Company, the
Executive will not make any statement or disclosure which would be prohibited by
applicable Federal or state laws nor any statement or disclosure which is
intended or reasonably likely to be detrimental to the Company or any of its
subsidiaries or affiliates, or any of their clients.
(b) Upon the termination of the Executive's
employment with the Company for any reason whatsoever, the Executive shall
promptly return to the Company all documents, records, notebooks and other
materials which belong to the Company or any of its affiliates, clients or
clients' customers or sponsors and which are in the possession of the Executive,
including all copies thereof.
(c) In the event that the Executive is required,
by oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process, to disclose nonpublic
information, the Executive shall provide the Company with prompt notice thereof
so that the Company may seek an appropriate protective order and/or waive
compliance by the Executive with the provisions hereof; provided, however, that
if in the absence of a protective order or the receipt of such a waiver, the
Executive is, in the opinion of counsel for the Company, compelled to disclose
nonpublic information not otherwise disclosable hereunder to any legislative,
judicial or regulatory body, agency or authority, or else be exposed to
liability for contempt, fine or penalty or to other censure, such nonpublic
information may be so disclosed; provided that the Executive shall disclose only
that information that is required and shall redact or withhold all information
not required to be disclosed.
7.2. NONCOMPETITION/NONSOLICITATION/NONDISPARAGEMENT.
In addition to the provisions of Section 7.1:
(i) For the period (the "Noncompetition Period")
commencing on the date hereof and continuing through the first anniversary of
the termination of the Executive's employment or consulting relationship
hereunder, the Executive will not serve as or be a consultant to or employee,
officer, agent, director or owner of more than five percent of another
corporation, partnership or other entity which engages in the business of
providing mechanical multi-story recycling (the "Business") and which operates
(excluding corporate offices) within any state in which the Company conducts
business.
5
<PAGE>
(ii) For the period (the "Nonsolicitation
Period") commencing on the Commencement Date and ending on the second
anniversary of the date on which the Executive's employment or consulting
relationship with the Company is terminated or ceases for any reason, the
Executive shall not solicit or accept business competitive with the Business
from any clients of the Company or its affiliates, from any prospective clients
whose business the Company or any affiliate of the Company is in the process of
soliciting at the time the Executive's employment with the Company terminated or
ceased, or from any former clients which had been doing business with the
Company within one (1) year prior to the time the Executive's employment with
the Company terminated or ceased.
7.3. EQUITABLE REMEDIES.
(a) The Executive acknowledges that the
restrictions contained in the foregoing paragraphs 7.1 and 7.2 in view of the
nature of the business in which the Company is engaged, are reasonable and
necessary in order to protect the legitimate interests of the Company, and that
any violation thereof would result in irreparable injuries to the Company, and
the Executive therefore acknowledges that, in the event of his violation of any
of these restrictions, the Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled.
(b) If the period of time specified in
paragraphs 7.1 and 7.2 above should be adjudged unreasonable in any proceeding,
then the period of time shall be reduced by such number of months so that such
restrictions may be enforced for such time as is adjudged to be reasonable.
8. ARBITRATION. Any dispute or controversy (except for disputes arising
under Section 7) arising under or in connection with this Agreement shall be
settled exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect (except to the extent that the procedures
outlined below differ from such rules). Within seven (7) days after receipt of
written notice from either party that a dispute exists and that arbitration is
required, both parties must within seven (7) business days agree on an
acceptable arbitrator. If the parties cannot agree on an arbitrator, then the
parties shall list the "Big Six" accounting firms in alphabetical order and the
first firm that does not have a conflict of interest and is willing to serve
will be selected as the arbitrator. The parties agree to act as expeditiously as
possible to select an arbitrator and conclude the dispute. The arbitrator must
render his decision in writing within thirty (30) days of his or its
appointment. The cost and expenses of the arbitration and of legal counsel to
the prevailing party shall be borne by the non-prevailing party. Each party will
advance one-half of the estimated fees and expenses of the arbitrator. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided that the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent any continuation of
any violation of Section 7 hereof.
6
<PAGE>
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida. Venue for any
action brought hereunder shall be in Dade County, Florida and the parties hereto
waive any claim that such forum is inconvenient.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
16255 N.W. 54th Avenue
Miami, Florida 33014
Attn: Chief Executive Officer
If to the Executive:
Mark D. Shantzis
Apt. #6F
6061 Collins Avenue
Miami Beach, Florida 33140
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
11. SURVIVAL. The provisions of paragraph 7 of this Agreement
shall survive, without limitation as to time, in accordance with their express
terms, the date on which the Executive's employment with the Company ceases or
is terminated for any reason.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
7
<PAGE>
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings any
action for the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable
arbitration or court costs and attorneys' fees of the other, whether such costs
and fees are incurred in an arbitration proceeding, a court of original
jurisdiction or one or more courts of appellate jurisdiction. During the
pendency of any claim for breach hereof or any other claim against the
Executive, the Company shall continue to make payments when due hereunder and
shall not set off or withhold funds, reserving any such determination of whether
any amounts are due from the Executive until finally adjudicated in accordance
with the provisions hereof.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
16. PAYMENTS TO DESIGNEE. The Executive may, by notice to the Company,
designate another person or entity to receive any payments to be made hereunder
to the Executive by the Company, and the Company shall thereafter make such
payments to such designee.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
By: /s/ Donald Engel
----------------------------
THE EXECUTIVE:
/s/ Mark D. Shantzis
-------------------------------
Mark D. Shantzis
9
<PAGE>
ADDENDUM TO AGREEMENT
THIS ADDENDUM dated as of March 25, 1996 is a part of the Employment
and Consulting Agreement dated as of March 25, 1996, by and between HI-RISE
RECYCLING SYSTEMS, INC., a Florida corporation (the "Company") and MARK D.
SHANTZIS (the "Executive"), as follows:
Subject to the terms and conditions of the Employment Agreement, during
the Employment Period, the Executive shall be compensated by the Company for his
services as follows:
(a) BASE SALARY. The Executive's annual salary during the
Employment Period shall be $180,000 subject to increases in
accordance with the Consumer Price Index, payable by check in
equal installments as may be in accordance with the regular
payroll policies of the Company as from time to time in
effect, less such deductions or amounts to be withheld as
shall be required by applicable law and regulations.
(b) OTHER BENEFITS. The Executive shall be entitled to participate
in such family medical/dental insurance and other benefit
plans and policies as the Company may provide for its
executive officers from time to time provided that the
policies may have standard co-insurance and deductible
provisions, and provided that, so long as commercially
practicable, the Company will maintain disability and life
insurance coverage consistent with prior practice.
(c) ANNUAL INCENTIVE BONUS AND DISCRETIONARY BONUS. The Executive
may receive a discretionary bonus during each year of the
Employment Period in an amount determined by the Compensation
Committee of the Board after its annual performance review of
the Executive.
(d) AUTOMOBILE ALLOWANCE; CELLULAR PHONE. The Company shall
provide the Executive with an automobile allowance of seven
hundred fifty dollars ($750) per month. The Executive shall be
responsible for all expenses associated with such automobile,
including, without limitation, insurance, gas and repairs. The
Executive shall be provided with a cellular phone and
reimbursed therefor, up to a maximum amount of $400 per month,
in accordance with the policies of the Company as in effect
from time to time.
(e) EXPENSE REIMBURSEMENT. The Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or
paid by him in the performance of his duties hereunder,
including travel and entertainment, in accordance with
Company policy and upon the presentation by the Executive
of an itemized
1
<PAGE>
of an itemized account of such expenditures and such
documentary evidence as the Company may reasonably require.
(f) OFFICE. The Executive shall be provided with an office and
secretarial assistance consistent with those provided to date
to the Executive by the Company and the Company shall maintain
at its expense, at the home of the Executive, a computer, fax
machine and phone connection to the Company's offices or as
otherwise required.
IN WITNESS WHEREOF, the parties have set their hands and seals.
THE EXECUTIVE: THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
/s/ Mark D. Shantzis By: /s/ Donald Engel
- ------------------------------ ------------------------------
MARK D. SHANTZIS
2
EXHIBIT 10.32
<PAGE>
BORROWER
O B VARIABLE RATE
O CEAN BANK COMMERCIAL
780 N.W.42ndAvenue HI -RISE RECYCLING SYSTEMS, INC. PROMISSORY
Miami, Florida 33126-5597 & WC ACQUISITION CORP. NOTE
(305)442-2660 16255 N.W. 54TH AVENUE
"LENDER" MIAMI, FL 33014
--------------------------------
Telephone Number
624-9222
--------------------------------
- -------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY DATE
INITIALS RATE CREDIT LIMIT AGREEMENT DATE
- -------------------------------------------------------------------------------
TR VARIABLE $900,000.00 02/03/97 02/03/02
- -------------------------------------------------------------------------------
CUSTOMER NUMBER LOAN NUMBER
- -----------------------------------
100932574-64
- -----------------------------------
For value received, Borrower promises to pay to the order of Lender Indicated
above the principal amount of NINE HUNDRED THOUSAND AND NO/100 Dollars
($900,000.00) plus interest on the unpaid principal balance at the rate and in
the manner described below. All amounts received by Lender shall be applied
first to late charges and expenses, then to accrued interest, and then to
principal.
INTEREST RATE: This Note has a variable interest rate feature. Interest on the
Note may change from time to time if the Index Rate identified below changes
Interest shall be computed on the basis of 360 days per year for the actual
number of days elapsed. So long as there of no default under this Note, interest
on this Note shall be calculated at the variable rate of TWO AND NO/100
percent (2.00%) per annum over the Index Rate. The Initial Index Rate is EIGHT
AND 25/100 percent (8.25%) per annum. Therefore, the initial interest rate on
this Note shall be TEN AND 25/100 percent (10.25%) per annum. Any change in
the interest rate resulting from a change in the Index Rate will be effective
on:
A DAILY BASIS
INDEX RATE: The Index Rate for this Note shall be:
CITIBANK OF NEW YORK PRIME RATE
MINIMUM RATE/MAXIMUM RATE: The minimum interest rate on this Note shall be n/a
percent ( n/a%) per annum. The maximum interest rate on this Note shall not
exceed EIGHTEEN AND NO/100 percent (18.00%) per annum or the maximum interest
rate Lender is permitted to charge by law, whichever is less.
DEFAULT RATE: In the event of a default under this Note, Lender may, in its sole
discretion, determine that all amounts owing to Lender shall bear interest
at the lesser of: 18.00 PERCENT RATE or the maximum interest rate Lender is
permitted to charge by law.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to the
following schedule:
59 PAYMENTS OF PRINCIPAL IN THE AMOUNT OF $15,000.00 PLUS ACCRUED INTEREST
BEGINNING MARCH 3, 1997 AND CONTINUING AT MONTHLY TIME INTERVALS THEREAFTER. A
FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS ACCRUED INTEREST IS DUE AND
PAYABLE ON FEBRUARY 3, 2002.
All payments will be made to Lender at its address described above and In lawful
currency of the United States of America.
RENEWAL: If checked, [ ] this Note is a renewal of Loan Number ________________
SECURITY: To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in, and pledges and
assigns to Lender all of Borrower's rights, title, and interest, in all monies,
instruments, savings, checking and other deposit accounts of Borrower's,
(excluding IRA, Keogh and trust accounts and deposits subject to tax penalties
If 80 assigned) that are now or in the future in Lender's custody or control.
[ ] In checked, the obligations under this Note are also secured by a lien
and/or security interest In the property described in the documents executed in
connection with this Note as well as any other property designated as security
now or in the future.
PREPAYMENT/MINIMUM FINANCE CHARGE: This Note may be prepaid in part or in full
on or before its maturity date. If this Note contains more than one installment,
all prepayments will be credited as determined by Lender and as permitted by
law. If this Note is prepaid in full, there will be: [x] No minimum finance
charge. [ ] A minimum finance charge of $__________, as permitted by law.
LATE PAYMENT CHARGE: If a payment is more than n/a days late, Borrower will be
charged a late payment charge of: [ ]______% of the unpaid late installment; [ ]
$_________ or __________% of the unpaid late installment, whichever is [ ]
greater [ ] less; to the extent permitted by law.
- -------------------------------------------------------------------------------
BORROWER ACKNOWLEDES THAT BORROWER HAS READ, UNDERSTANDS AND AGREES TO THE TERMS
AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE SIDE.
BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.
<TABLE>
<CAPTION>
DATE: FEBRUARY 3, 1997
<S> <C>
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER: HI-RISE RECYCLING SYSTEMS, INC.
& WC ACQUISITION CORP. & WC ACQUISITION CORP.
BY:________________________________________ BY:___________________________________________
DONALD ENGEL, For WC ACQUISITION CORP. DONALD ENGEL, For HI-RISE RECYCLING SYSTEMS, INC.
TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD
BORROWER: BORROWER:
BY: BY:
--------------------------------------- -------------------------------------------
TITLE: TITLE:
------------------------------------ ----------------------------------------
</TABLE>
<PAGE>
TERMS AND CONDITIONS
1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower or any guarantor:
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant to
Lender contained In this Note or any other present or future, written
agreement regarding this or any indebtedness of Borrower to Lender;
(c) provides or causes any false or misleading signature or representation to
be provided to Lender;
(d) allows the collateral securing this Note (if any) to be lost, stolen,
destroyed, damaged in any material respect, or subjected to seizure or
confiscation;
(e) permits the entry or service of any garnishment, judgment, tax levy,
attachment or lien against Borrower, any guarantor, or any of their
property;
(f) dies, becomes legally incompetent, is dissolved or terminated, ceases to
operate its business, becomes insolvent, makes an assignment for the
benefit of creditors, or becomes the subject of any bankruptcy,
insolvency or debtor rehabilitation proceeding; or
(g) causes Lender to deem itself insecure for any reason, or Lender, for any
reason, in good faith deems itself insecure.
2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note, Lender
will be entitled to exercise one or more of the following remedies without
notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this Note and
all other present and future obligations of Borrower immediately due and
payable in full;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to cease making additional advances under this Note or any other
agreement between Borrower and Lender;
(d) to take possession of any collateral in any manner permitted by law;
(e) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell, lease or otherwise dispose of any collateral and collect any
deficiency balance with or without resorting to legal process (if notice
to Borrower of the intended disposition of the collateral is required by
law, five (5) days notice shall constitute reasonable notification);
(g) to set-off Borrower's obligations against any amounts due to Borrower
including, but not limited to monies, instruments, and deposit accounts
maintained with Lender; and
(h) to exercise all other rights available to Lender under any other written
agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and in
any order. Lender's remedies under this paragraph are in addition to those
available at common law, such as the right of setoff.
3. DEMAND FEATURE: [ ] If checked, this Note contains a demand feature. Lender's
right to demand payment, at any time, and from time to time, shall be in
Lender's sole and absolute discretion, whether or not any default has occurred.
4. FINANCIAL INFORMATION: Borrower will provide Lender with current financial
statements including but not limited to balance sheets and profit and loss
statements and other information upon request
5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.
6. SEVERABILITY: If any provision of this Note violates the law or is
unenforceable, the rest of the Note will remain valid.
7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower in any manner.
8 NOTICE: Any notice or other communication to be provided to Borrower or Lender
under this Note shall be in writing and sent to the parties at the addresses
described in this Note or such other address as the parties may designate in
writing from time to time.
9. APPLICABLE LAW: This Note shall be governed by the laws of the state
indicated in Lenders address. Borrower consents to the jurisdiction and venue of
any court located in the state indicated in Lenders address In the event of any
legal proceeding under this Note.
10. COLLECTION COSTS: If Lender hires an attorney to assist in collecting any
amount due or enforcing any right or remedy under this Note, Borrower agrees to
pay Lender's attorney's fees and collection costs.
11. MISCELLANEOUS: This Note is being executed for commercial purposes. Borrower
and Lender agree that time is of the essence. Borrower waives presentment,
demand for payment, notice of dishonor and protest. BORROWER HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS
NOTE OR THE COLLATERAL SECURING THIS NOTE. If Lender obtains a judgment for any
amount due under this Note, interest will accrue on the judgment at the judgment
rate of interest permitted by law. All references to Borrower in this Note shall
include all of the parties signing this Note. If there is more than one
Borrower, their obligations will be joint and several. This Note and any related
documents represent the complete and integrated understanding between Borrower
and Lender pertaining to the terms and conditions of those documents.
12. ADDITIONAL TERMS:
IF PAYMENT IS NOT RECEIVED BY THE BANK ON/OR BEFORE TEN (10) DAYS AFTER DUE
DATE, THEREAFTER THE INTEREST RATE WILL AUTOMATICALLY INCREASE TO THE
MAXIMUM RATE THEN PERMITTED BY APPLICABLE LAW AND WILL REMAIN AT THE MAXIMUM
RATE THEN PERMITTED BY APPLICABLE LAW UNTIL THE ACCOUNT IS COMPLETELY
BROUGHT UP TO DATE AND CURRENT
<PAGE>
BORROWER
O B AGREEMENT
OCEAN BANK TO FURNISH
780 N.W.42ndAvenue HI -RISE RECYCLING SYSTEMS, INC. INSURANCE
Miami, Florida 33126-5597 & WC ACQUISITION CORP.
(305)442-2660 16255 N.W. 54TH AVENUE
"LENDER" MIAMI, FL 33014
--------------------------------
Telephone Number
624-9222
--------------------------------
- -------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY DATE
INITIALS RATE CREDIT LIMIT AGREEMENT DATE
- -------------------------------------------------------------------------------
TR VARIABLE $900,000.00 02/03/97 02/03/02
- -------------------------------------------------------------------------------
CUSTOMER NUMBER LOAN NUMBER
- -----------------------------------
100932574-64
- -----------------------------------
Dated: FEBRUARY 3, 1997
Borrower has borrowed money from Lender indicated above pursuant to a PROMISSORY
NOTE dated FEBRUARY 3, 1997.
Borrower hereby instructs Lender to disburse the initial or complete proceeds
from the PROMISSORY NOTE in the following manner:
PROCEEDS PAID DIRECTLY TO CUSTOMER $885,350.00
PAID ON ACCOUNT #1: n/a
PAID ON ACCOUNT #2: n/a
PAID ON ACCOUNT #3: n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
PAID TO n/a
LOAN POINTS/DISCOUNT n/a
LOAN ORIGINATION FEE $ 11,500.00
TAXES/FILING FEES PAID TO PUBLIC OFFICIALS n/a
APPRAISAL FEE: n/a
TITLE INSURANCE COMPANY: n/a
CREDIT REPORTING FEE: n/a
EXTENSION FEE n/a
VSI INSURANCE n/a
CONSTRUCTION LOAN FEE n/a
PAID TO INSURANCE COMPANY n/a
ATTORNEY FEES: n/a
MORTGAGE REGISTRATION TAX n/a
LENDER'S INSPECTION FEE: n/a
HAZARD INSURANCE PREMIUM: n/a
FLOOD INSURANCE PREMIUM: n/a
SETTLEMENT/CLOSING FEE: n/a
DOCUMENT PREPARATION FEE: n/a
NOTARY FEES: n/a
SURVEY: n/a
PEST INSPECTION: n/a
DOCUMENTARY STAMPS $ 3,150.00
INTANGIBLE TAX $ 0.00
* Paid in Cash
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE: FEBRUARY 3, 1997
<S> <C>
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER: HI-RISE RECYCLING SYSTEMS, INC.
& WC ACQUISITION CORP. & WC ACQUISITION CORP.
BY:________________________________________ BY:___________________________________________
DONALD ENGEL, For WC ACQUISITION CORP. DONALD ENGEL, For HI-RISE RECYCLING SYSTEMS, INC.
TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD
BORROWER BORROWER:
BY: BY:
--------------------------------------- -------------------------------------------
TITLE: TITLE:
------------------------------------ ----------------------------------------
</TABLE>
COPY
<PAGE>
OB
OCEAN BANK
780 N.W. 42nd Avenue
Miami, Florida 33126-5597
(305) 442-2660
"LENDER"
OWNER OF COLLATERAL
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OH 44224
COMMERCIAL SECURITY AGREEMENT
BORROWER
HI-RISE RECYCLING SYSTEMS, INC. &
WC ACQUISITION CORP.
16255 N.W. 54TH AVENUE
MIAMI, FL 33014
Telephone Number 624-9222
LOCATION OF COLLATERAL
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO 44224
1. SECURITY INTEREST. Owner of Collateral ("Owner") grants to Lender
identified above a continuing security interest in the Collateral described
below to secure the obligations described in this Agreement.
2. OBLIGATIONS. The Collateral shall secure the payment and performance of
all of Borrower's and Owner's present and future, joint and/or several, direct
and indirect, absolute and contingent, express and impiled, indebtedness,
(including costs of collection, legal expenses and attorneys' fees incurred by
Lender upon the occurrence of a default under this Agreement, in collecting or
enforcing payment of such indebtedness, or preserving, protecting or realizing
on the Collateral herein), liabilities, obligations and covenants (cumulatively
"Obligations") to Lender pursuant to:
a. this Agreement and the following promissory notes and agreements:
- -------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- -------------------------------------------------------------------------------
VARIABLE $900,000.00 02/03/97 02/03/02 100932574-64
- -------------------------------------------------------------------------------
b. all other present or future, written, agreements between Borrower or
Owner and Lender (whether executed for the same or different purposes
than the preceding documents);
c. all amendments, modifications, replacements or substitutions to any of
the foregoing; and
d. applicable law.
3. COLLATERAL. The Collateral shall consist of all of the
following-described property and Owner's rights, title and interest in such
property whether now owned or hereafter acquired by Owner and wheresoever
located:
[x] All accounts and contract rights including, but not limited to, the
accounts and contract rights described on Schedule A attached hereto
and incorporated herein by this reference;
[x] All chattel paper including, but not limited to, the chattel paper
described on Schedule A attached hereto and incorporated herein by
this reference;
[x] All documents including, but not limited to, the documents described
on Schedule A attached hereto and incorporated herein by this
reference;
[x] All equipment, including, but not limited to, the equipment described
on Schedule A attached hereto and incorporated herein by this
reference;
[x] All fixtures, including, but not limited to, the fixtures located or
to be located on the real property described on Schedule B attached
hereto and incorporated herein by this reference;
[x] All general intangibles including, but not limited to, the general
intangibles described on Schedule A attached hereto and incorporated
herein by this reference;
[x] All instruments including, but not limited to, the instruments
described on Schedule A attached hereto and incorporated herein by
this reference;
[x] All inventory including, but not limited to, the inventory described
and located at the locations indicated on Schedule A attached hereto
and incorporated herein by this reference;
[x] All minerals or the like located on or related to the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[x] All standing timber located on the real property described on
Schedule B attached hereto and incorporated herein by this
reference;
[x] Other: SEE ATTACHMENT "A" FOR LISTING OF COLLATERAL
All monies, instruments, and savings, checking or other deposit accounts that
ara now or in the future in Lender's custody or control (excluding IRA, Keogh,
trust accounts, and deposits subject to tax penalties if so assigned);
All accessions, accessories, additions, amendments, attachments, modifications,
replacements and substitutions to any of the above;
All proceeds and products of any of the above;
All policies of insurance pertaining to any of the above as well as any proceeds
and unearned premiums pertaining to such policies; and
All books and records pertaining to any of the above.
4. OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is:__________________________________
<PAGE>
5. RESIDENCY/LEGAL STATUS. Owner is a resident ot the state of: n/a
Owner is a: [x] Corporation; [ ] Partnership; [ ] Non-Profit Association;
duly organized, validly existing and in good standing under the laws of the
state of: OHIO
6. REPRESENTATIONS, WARRANTIES AND COVENANTS: Owner represents, warrants
and covenants to Lender that:
a. Owner is and shall remain the sole owner of the Collateral;
b. Neither Owner nor, to the best of Owner's knowledge, any other party
has used, generated, released, discharged, stored, or disposed of any
hazardous waste, toxic substance, or related material (cumulatively
"Hazardous Materials") or transported any Hazardous Materials. Owner
shall not commit or permit such actions to be taken in the future.
The term "Hazardous Materlals" shall mean any substance, material,
or waste which is or becomes regulated by any governmental authority
including, but not limited to, (i) petroleum; (ii) asbestos; (iii)
polychlorinated biphenyls; (iv) those substances, materials or wastes
designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act or listed pursuant to Sectlon 307 of the Clean Water
Act or any amendments or replacements to these statutes; (v) those
substances, materials or wastes defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery
Act or any amendments or replacements to that statute; or (vi)
those substances, materials or waste defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, or any
amendments or replacements to that statute;
Page 1 of 4_______________________Initials
<PAGE>
(c) Owner's chief executive office, chief place of business, office where
its business records are located, or residence is the address
identified above. Owner's other executive offices, places of business,
locations of its business records, or domiciles are described on
Schedule C attached hereto and incorporated herein by this reference.
Owner shall immediately advise Lender in writing of any change in or
addition to the foregoing addresses;
(d) Owner shall not become a party to any restructuring of its form of
business or participate in any consolidation, merger, liquidation or
dissolution without providing Lender with thirty (30) or more days'
prior written notice of such change;
(e) Owner shall notify Lender of the nature of any intended change of
Owner's name, or the use of any trade, name, and the effective date of
such change;
(f) The Collateral is and shall at all times remain free of all tax and
other liens, security interests, encumbrances and claims of any kind
excet for those belonging to Lender and those described on Schedule D
attached hereto and incorporated herein by this reference. Without
waiving the event of default as a result thereof, Owner shall take any
action and execute any document needed to discharge the foregoing
liens, security interests, encumbrances and claims;
(g) Owner shall defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein;
(h) All of the goods, fixtures, minerals or the like, and standing timber
constituting the Collateral is and shall be located at Owner's
executive offices, places of business, residence and domiciles
specifically described in this Agreement. Owner shall not change the
location of any Collateral without the prior written consent of Lender;
(i) Owner shall provide Lender with possession of all chattel paper and
instruments constituting the Collateral, and owner shall promptly mark
all chattel paper, instruments, and documents constituting the
Collateral to show that the same are subject to Lender's security
interest;
(j) All of Owner's accounts or contract rights; chattel paper; documents;
general intangibles; instruments; and federal, state, county, and
municipal government and other permits, licenses, trusts, liens,
contracts, leases, and agreements constituting the Collateral are and
shall be valid, genuine and legally enforceable obligations and rights
belonging to Owner against one or more third parties and not subject to
any claim, defense, set-off or counterclaim of any kind;
(k) Owner shall not amend, modify, replace, or substitute any account or
contract right; chattel paper; document; general intangible; or
instrument constituting the Collateral without the prior written
consent of Lender;
(l) Owner has the right and is duly authorized to enter into and perform
its obligations under this Agreement. Owner's execution and performance
of these obligations do not and shall not conflict with ths provisions
of any statute, regulation, ordinance, rule of law, contract or other
agreement which may now or hereafter be binding on Owner;
(m) No action or proceeding is pending against Owner which might result in
any material or adverse change in its business operations or financial
condition or materially affect the Collateral;
(n) Owner has not violated and shall not violate any applicable federal,
state, county or municipal statute, regulation or ordinance (including
but not limited to those governing Hazardous Materials) which may
materially and adversely affect its business operations or financial
condition or the Collateral;
(o) Owner shall, upon Lender's request, deposit all proceeds of the
Collateral into an account or accounts maintained by Owner or Lender at
Lender's institution; and
(p) This Agreement and the obligattions described in this Agreement are
executed and incurred for business and not consumer purposes.
7. SALE OF COLLATERAL. Owner shall not assign, convey, lease, sell or
transfer any of the Collateral to any third party without the prior written
consent of Lender except for sales of inventory to buyers in the ordinary course
of business.
8. FINANCING STATEMENTS AND OTHER DOCUMENTS. Owner shall take all actions
and execute all documents required by Lender to attach, perfect and maintain
Lender's security interest in the Collateral and establish and maintain Lender's
right to receive the payment of the proceeds of the Collateral including, but
not limited to, executing any financing statements, fixture filings,
continuation statements, notices of security interest and other documents
required by the Uniform Commercial Code and other applicable law. Owner shall
pay the costs of filing such documents in all offices wherever filing or
recording is deemed by Lender to be necessary or desirable. In lieu of filing
security agreements, financing statements, and effective financing statements,
Lender shall be entitled to perfect its security interest in the Collateral by
filing carbon, photographic or other reproductions of the aforementioned
documents with any authority required by the Uniform Commercial Code or other
appilcable law. Lender may execute and file any financing statements, as well as
extensions, renewals and amendments of financing statements in such form as
Lender may require to perfect and maintain perfection of any security interest
granted in this Agreement.
9. INQUIRIES AND NOTIFICATION TO THIRD PARTIES. Owner hereby authorizes
Lender to contact any third party and make any inquiry pertaining to Owner's
financial condition or the Collateral. In addition, Lender is authorized to
provide oral or written notice of its security interest in the Collateral to any
third party.
10. COLLECTION OF INDEBTEDNESS FROM THIRD PARTIES. Lender shall be entitled
to notify, and upon the request of Lender, Owner shall notify any account debtor
or other third party (including, but not limited to, insurance companies) to pay
any indebtedness or obligation owing to Owner and constituting the Collateral
(cumulatively "indebtedness") to Lender whether or not a default exists under
this Agreement. Owner shall diligently collect the indebtedness owing to Owner
<PAGE>
from its account debtors and other third parties until the giving of such
notification. In the event that Owner possesses or receives possession of any
instruments or other remittances with respect to the Indebtedness following the
giving of such notification or if the instruments or other remittances
constitute this prepayment of any indebtednsss or the payment of any insurance
proceeds, Owner shall hold such instruments and other remittances in trust for
Lender apart from its other property, endorse the instruments and other
remittances to Lender, and immediately provide Lender with possession of the
instruments and other remittances. Lender shall be entitled, but not required,
to collect (by legal proceedings or otherwise), extend the time for payment,
compromise, exchange or release any obligor or collateral upon, or otherwise
settle any of the indebtednsss whether or not an event of default exists under
this Agreement. Lender shall not be liable to Owner for any action, error,
mistake, omission or delay pertaining to the actions described in this
paragraph or any damages resulting therefrom.
11. POWER OF ATTORNEY. Owner hereby appoints Lender as its attorney-in-fact
to endorse Owner's name on all instruments and other remittances payable to
Owner with respect to the indebtedness or other documents pertaining to Lender's
actions in connection with the indebtedness. In addition, Lender shall be
entitled, but not required, to perform any action or execute any document
required to be taken or executed by Owner under this Agreement. Lender's
performance of such action or execution of such documents shall not relieve
Owner from any obligation or cure any default under this Agreement. The powers
of attorney described in this paragraph are coupled with an interest and are
irrevocable.
12. USE AND MAINTENANCE OF COLLATERAL. Owner shall use the Collateral
solely in the ordinary course of its business, for the usual purposes intended
by the manufacturer (if applicable), with due care, and in compliance with the
laws, ordinances, regulations, requirements and rules of all federal, state,
county and municipal authorities including environmental laws and regulations
and insurance policies. Owner shall not make any alterations, additions or
improvements to the Collateral without the prior written consent of Lender.
Without limiting the foregoing, all alterations, additions and improvements made
to the Collateral shall be subject to the security interest belonging to Lender,
shall not be removed without the prior written consent of Lender, and shall be
made at Owner's sole expense. Owner shall take all actions and make any repairs
or replacements needed to maintain the Collateral in good condition and working
order.
13. LOSS OR DAMAGE. Owner shall bear the entire risk of any loss, theft,
destruction or damage (cumulatively "Loss or Damage") to all or any part of the
Collateral. In the event of any Loss or Damage, Owner will either restore the
Collateral to its previous condition, replace the Collateral with similar
property acceptable to Lender in its sole discretion, or pay or cause to be paid
to Lender the decrease in the fair market value of the affected Collateral.
14. INSURANCE. The Collateral will be kept insured for its full value
against all hazards including loss or damage caused by fire, collision, theft or
other casualty. If the Collateral consists of a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at lease equal to the actual
cash value of ths vehicle with deductibles not to exceed $500. Owner may obtain
insurance on the Collateral from such companies as are acceptable to Lender in
its sole discretion. The insurance policies shall require the insurance company
to provide Lender with at least thirty (30) days' written notice before such
policies are altered or cancelled in any manner. The insurance policies shall
name Lender as a loss payee and provide that no act or omission of Owner or any
other person shall affect the right of Lender to be paid the insurance proceeds
pertaining to the loss or damage of the Collateral. In the event Owner fails to
acquire or maintain insurance, Lender (after providing notice as may be required
by law) may in its discretion procure appropriate insurance coverage upon the
Collateral and charge the insurance cost as an advance of principal under the
promissory note. Owner shall furnish Lender with evidence of insurance
indicating the required coverage. Lender may act as attorney-in-fact for Owner
in making and settling claims under insurance policies, cancelling any policy or
endorsing Owner's name on any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owners obligations with respect to the Collateral under
any circumstances. Owner shall immediately provide Lender with written notice of
and indemnify and hold Lender and its shareholders, directors, officers,
employees and agents harmless from all claims, damages, liabilities (including
attorneys' fees and legal expenses), causes of action, actions, suits and other
legal proceedings (cumulatively "Claims") pertaining to its business operations
or the Collateral including, but not limited to, those arising from Lender's
performance of Owner's obligations with respect to the Collateral. Owner, upon
the request of Lender, shall hire legal counsel to defend Lender from such
Claims, and pay the attorneys' fees, legal expenses and other costs incurred in
connection therewith. In the alternative, Lender shall be entitled to employ its
own legal counsel to defend such Claims at Owner's cost.
16. TAXES AND ASSESSMENTS. Owner shall execute and file all tax returns and
pay all taxes, licenses, fees and assessments relating to its business
operations and the Collateral (including, but not limited to income taxes,
personal property taxes, withholding taxes, sales taxes, use taxes, excise taxes
and workers' compensation premiums) in a timely manner.
17. INSPECTION OF COLLATERAL AND BOOKS AND RECORDS. Owner shall allow
Lender or its agents to examine, inspect and make abstracts and copies of the
Collateral and Owner's books and records pertaining to Owner's business
operations and financial condition or the Collateral during normal business
hours. Owner shall provide any assistance required by Lender for these
purposes. All of the signatures and information pertaining to the Collateral or
contained in the books and records shall be genuine, true, accurate and
complete in all respects. Owner shall note the existence of Lender's security
interest in its books and records pertaining to the Collateral.
Page 2 of 4____________________________Initials
<PAGE>
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or any guarantor:
(a) fails to make any payment under this Agreement or any other
indebtedness to Lender when due;
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Agreement or any other
present or future, written or oral, agreement regarding this or
any other indebtedness to Lender;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows the Collateral to be destroyed, lost or stolen, damaged in
any material respect, or subjected to seizure or confiscation;
(e) seeks to revoke, terminate or otherwise limit its liability under
any continuing guaranty;
(f) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Owner, any guarantor, or any of
their property;
(g) dies, becomes legally incompetent, is dissolved or terminated,
ceases to operate its business, becomes insolvent, makes an
assignment for the benefit of creditors, or becomes the subject
of any bankruptcy, insolvency or debtor rehabilitation proceeding;
(h) allows the Collateral to be used by anyone to transport or store
goods, the possession, transportation, or use of which, is
illegal; or
(i) causes Lender to deem itself insecure for any reason.
19. RIGHTS OF LENDER ON DEFAULT. If there is a default under this
Agreement, Lender shall be entitled to exercise one or more of the following
remedies without notice or demand (except as required by law):
(a) to declare the Obligations immediately due and payable in full;
(b) to collect the outstanding Obligations with or without resorting
to Judicial process;
(c) to change Owner's mailing address, open Owner's mail, and retain
any instruments or other remittances constituting the Collateral
contained therein;
(d) to take possession of any Collateral in any manner permitted by
law;
(e) to apply for and obtain, without notice and upon ex parte
application, the appointment of a receiver for the Collateral
without regard to Owner's financial condition or solvency,
the adequacy of the Collateral to secure the payment or
performance of the obligations, or the existence of any waste to
the Collateral;
(f) to require Owner to deliver and make available to Lender any
Collateral at a place reasonably convenient to Owner and Lender;
(g) to sell, lease or otherwise dispose of any Collateral and collect
any deficiency balance with or without resorting to legal
process (if notice to Borrower of the intended disposition of the
Collateral is required by law, five (5) days notice shall
constitute reasonable notification);
(h) to set-off Owner's obligations against any amounts due to Owner
including, but not limited to, monies, instruments, and deposit
accounts maintained with Lender; and
(i) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and
in any order. If notice to Owner of intended disposition of Collateral is
required by law, five (5) days' notice shall constitute reasonable
notification. In the event that Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of a prejudgment remedy
in an action against Owner, Owner waives the posting of any bond which might
otherwise be required. Lender's remedies under this paragraph are in addition
to those available at common law, such as setoff.
20. WAIVER OF JURY TRIAL LENDER AND OWNER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN
CONJUNCTION WITH THE PROMISSORY NOTE, THIS AGREEMENT AND ANY OTHER AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH OR THEREWITH, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER MAKING THE LOAN EVIDENCED BY THE PROMISSORY NOTE.
21. APPLICATION OF PAYMENTS. Whether or not a default has occurred under
this Agreement, all payments made by or on behalf of Owner and all credits due
to Owner from the disposition of the Collateral or otherwise may be applied
against the amounts paid by Lender (including attorneys' fees and legal
expenses) in connection with the exercise of its rights or remedies described
in this Agreement and any interest thereon and then to the payment of the
remaining Obligations in whatever order Lender chooses.
22. REIMBURSEMENT OF AMOUNTS EXPENDED BY LENDER. Owner shall reimburse
Lender for all amounts (including attorneys' fees and legal expenses) expended
by Lender in the performance ot any action required to be taken by Owner or
the exercise of any right or remedy belonging to Lender under this
Agreement, together with interest thereon at the lower of the highest rate
described in any promissory note or credit agreement executed by Borrower or
Owner or the highest rate allowed by law from the date of payment until the
date of reimbursement. These sums shall be included in the definition of
Obligations, shall be secured by the Collateral identified in this Agreement
and shall be payable upon demand.
23. ASSIGNMENT. Owner shall not be entitled to assign any of its rights,
remedies or obligations described in this Agreement without the prior written
consent of Lender. Consent may be withheld by Lender in its sole discretion.
Lender shall be entitled to assign some or all of its rights and remedies
described in this Agreement without notice to or the prior consent of Owner in
any manner.
24. MODIFICATION AND WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in a
writing signed by Lender. Lender may perform any of Owner's Obligations or
delay or fail to exercise any of its rights without causing a waiver of those
Obligations or rights. A waiver on one occasion shall not constitute a waiver
on any other occasion. Owner's Obligations under this Agreement shall not be
affected if Lender amends, compromises, exchanges, falls to exercise, impairs
or releases any of the obligations belonging to any Owner or third party or
any of its rights against any Owner, third party or collateral.
25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Owner and Lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
26. NOTICES. Any notice or other communication to be provided under this
Agreement shall be in writing and sent to the parties at the addresses
described in this Agreement or such other address as the parties may designate
in writing from time to time.
27. SEVERABILITY. If any provision of this Agreement violates the law or is
unenforceable, the rest of the Agreement shall remain valid.
28. APPLICABLE LAW. This Agreement shall be governed by the laws of the
state identified in Lender's address. Owner consents to the jurisdiction and
venue of any court located in the state indicated in Lender's address in the
event of any legal proceeding under this Agreement.
29. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Agreement, Owner
agrees to pay Lender's attorneys' fees and collection costs (subject to any
restrictions imposed by law).
30. MISCELLANEOUS. This Agreement is executed for commercial purposes.
Owner shall supply information regarding Owner's business operations and
financial condition or the Collateral in the form and manner requested by
Lender. All information furnished by Owner to Lender shall be true, accurate
and complete in all respects. Owner and Lender agree that time is of the
essence. Owner waives presentment, demand for payment, notice of dishonor and
protest except as required by law. All references to Owner in this Agreement
shall include all parties signing below except Lender. If there is more than
one Owner, their obligations shall be joint and several. This Agreement shall
remain in full force and effect until Lender provides Owner with written
notice of termination. This Agreement and any related documents represent the
complete and integrated understanding between Owner and Lender pertaining to
the terms and conditions of those documents.
<PAGE>
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the terms
and conditions of this Agreement.
Dated: FEBRUARY 3, 1997
OWNER: WC ACQUISITION CORP. OWNER:
BY: /s/ DONALD ENGEL BY: ___________________________
-------------------
Donald Engel
TITLE: C.E.0 & CO- CHAIRMAN OF THE BOARD TITLE: ________________________
OWNER: OWNER:
BY: _____________________________________ BY: ___________________________
TITLE: __________________________________ TITLE: ________________________
LENDER: OCEAN BANK
BY: /s/ ROBERT TRUJILLO
--------------------------------------
ROBERT TRUJILLO
TITLE: VICE PRESIDENT
Page 3 of 4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
Page 4 of 4 _____________________ Initials
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
2 ROCKWELL MOD: 61E-602A PNEUM. HAND-HELD BELT SANDERS
50 ASST. STEEL-FRAME LAY-OUT / SHOP TABLES @ 200.00
1 DESOUTTER MOD: AFT-40 PNEUM. HORIZONTAL GUN DRILL
#10107
2 ASST. WALL CLOCKS @ 87.50
30 ASST. STEEL WIRE TOTE BIN CRIBS @ 37.50
1 HOBART MOD: ML-20A "SIMPLIFIED" 200-AMP ARC WELDER
#5C2W-32259
1 PORTABLE 4' X 6' STEEL PLATE WELDING TABLE W/ FAMCO
"S" MANUAL ARSOR PRESS
5 ASST. WALL MOUNTED ELEC. FANS @ 80.00
1 ROL-LIFT HYDRAULIC PALLET JACK #A-21175
1 ARBOR "MINI-MAX" MOD: L-55 6" X 10' HORIZONTAL BELT
SANDER #AM/031009 W/ POWER LAY-OUT TABLE & BELT CLAMP
1 MASTER-LINE ELEC. DEL.-BLADE TABLE SAW #NSN
2 DAYTON MOD: 3Z579 PORTABLE CANNISTER INDUSTRIAL SHOP
VACUUMS @ 137.50
1 DELTA ROCKWELL NO. 34-338 TABLE SAW #FF-7450 W/ ROLLER
"SKATE" FEED CONVEYOR, POWER DUST COLLECTOR / EXHAUST
BLOWER & RAIL-TRACK MOUNTED STEEL LAYOUT TABLE
1 ROCKWELL TABLE-MOUNTED 3 H.P. ELEC. CUT-OFF SAW
#91-5075
1 DELTA ROCKWELL PEDESTAL DRILL PRESS #110-7840
6 ASST. SKID-MOUNTED TILTING STEEL SCRAP HOPPERS @ 375.00
5 ASST. 4-WHL. SHOP TRUCKS @ 120.00
5 3' X 20' ORANGE STEEL STORAGE RACKS W/ WOOD SHELVES
@ 200.00
2 SECTIONS 3' X 12' X 15'H STEEL PALLET RACK STORAGE
SHELVING @ 300.00
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
6 ASST. ELEC. PEDESTAL FLOOR FANS @ 137.50
1 MILLER MOD: MPS-20 20KVA SPOT WELDER #JC-631158
W/ MILLER COOLANT PUMP & WELDING JIG
8 LINDE MOD: VI-252 250 AMP DC MIG ARC WELDERS W/
WIRE FEED ATTACHMENTS @ 1,000.00
8 PORTABLE 3' X 5' STEEL PLATE WELDING TABLES W/ DWR.
& COLUMBIAN BENCH VISES @ 300.00
3 DELTA-ROCKWELL NO. 15-665 PEDESTAL DRILL PRESSES
#'S 1507690, 1507689 & 1578879 @ 900.00
1 ROCKWELL NO. 15-061 PEDESTAL DRILL PRESS #1676241
1 WILKINSON 18" X 50' 2-TIER MOTORIZED BELT CONVEYOR
#NSN
1 DREIS & KRUMP "CHICAGO" 4' & 14 GAUGE MANUAL BENDING
BRAKE #57200
1 TAYLOR-WINFIELD NO. 704 50 KVA SPOT WELDER #E-384965-6
1 TAYLOR-WINFIELD 50 KVA SPOT WELDER #NOT READABLE
1 SCHREIBER MOD: 100 AC REFRIG. AFTER COOLER #1485
1 NIAGARA NO. 3A 3' BENCH-TOP MANUAL BENDING BRAKE #59544
1 DREIS & KRUMP MOD: 68-B "CHICAGO" 36 TON X 8' POWER
PRESS BRAKE #L-12512
2 LINCOLN NO. 10151 "INVERTEC STT" SURFACE TENSION
TRANSFER WELDERS #U1950902243 & NSN W/ MOD: LN-742
WIRE FEED ATTACHMENTS #U1940204305 & 1940204313
@ 2,500.00
LOT (52) DRS. LYON STEEL CLOTHES LOCKERS
1 6' X 10' X 15'H STEEL STORAGE RACK W/ WOOD SHELVES
1 SIMPLEX ELEC. TIME CLOCK W/ (10) RACKS
5 ASST. 2-DR. UPRIGHT METAL STORAGE CABIENTS @ 100.00
1 WOOD VERTICAL STEEL AIR RECEIVING TANK #695541
(MNFR., 1977)
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 ROWE RICHARDSON "MAGNA-WEIGH" 2400-LB. DIAL SCALE
W/ 4' X 5' INGROUND PLATFORM
8 ASST. 2-WHL. HAND TRUCKS @ 37.50
1 WEBER MOD: 40 BENCH-TOP ELEC. LABEL PRINTER
1 3' X 4' METAL DOCK PLATE
8 ASST. PORTABLE STEEL BANDING MACHINES @ 250.00
1 ACETYLENE WELDING UNIT W/ TORCH, GAUGES, HOSE & CART
40 ASST. STEEL FRAME CANVAS WELDING SCREENS @ 50.00
2 LINDE 300 AMP. DC "SHORT" ARC WELDERS #NSNS W/ WIRE
FEED ATTACHMENTS @ 875.00
1 NIAGARA NO. 180 POWER PEDESTAL SHEET METAL ROLL FORMER
#72669 (MNFR., 1961)
1 VILRU "791 X 80" HORIZONTAL SCREW-TYPE SHEET METAL
ROLLER #NSN
1 NIAGARA NO. 172 POWER PEDESTAL SHEET METAL ROLL
FORMER #NSN
1 LOWN MOD: B-400 4' POWER PYRAMID SHEET METAL ROLLER
#NSN
1 PERKINS-WARD MOD: A NO. 2 BENCH TOP PUNCH PRESS #B4581
1 LOWN MOD: B-300 4' POWER PYRAMID SHEET METAL ROLLER
#B5241
1 LOCKFORMER 14-GAUGE POWER EDGE / CLEAT / ROLL FORMER
#11976
LOT (30) FDT. 14" STEEL ROLLER CONVEYOR
1 SAN ANGELO 5' POWER PYRAMID ROLLER #NSN
1 16 GAUGE ELEC. CIRCLE SHEAR #NSN W/ TRIPOD STAND
1 ROPER-WHITNEY MOD: 230 "C-FRAME" POWER PUNCH #285 9 70
1 PEXTO NO. 382 3' MANUAL "PYRAMID" SHEET METAL ROLLER
#NSN
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 LINDE MOD: VI-250 A 300 AMP. DC ARC WELDER #B2690509
W/ WIRE FEED ATTACHMENT
1 LINCOLN MOD: TIG-300/300 "IDEALARC" 300 AMP AC-DC
TIG ARC WELDER #AC-319379
1 LINDE MOD: VI-252 CV/DC 300-AMP DC MEG ARC WELDER
#B-77011280 W/ MOD: 28-A POWER SUPPLY
1 WELDTRONIC SPOT SELDER (NEEDS REPAIR)
5 WALK-BEHIND BATTERY-OP. FORK LIFTS #NSNS @ 1,000.00
1 MAN PLATFORM FORK LIFT ATTACHMENT
1 BLACK & DECKER / DE WALT MOD: 3500 3 H.P. RADIAL ARM
CROSS-CUT SAW #2080051
10 ASST. PNEUM. HAND-HELD INDUSTRIAL STAPLERS @ 262.50
1 CROWN 4,000 LB. HYDRAULIC PALLET JACK #L-88120
1 PACIFIC MOD: K300-12 300 TON 3/8" X 12' POWER PRESS
BRAKE #6556 W/ AUTOMEC "AUTOGAUGE CNC 1000" CONTROLS
1 TRUMPF MOD: CN 700 COPY & COORDINATE NIBBLER #784
W/ TOOLING
1 W.A. WHITNEY MOD: 630-A "C-FRAME" 1/2" PUNCH
#630-4078245
1 MILLER "SYNCHROWAVE 300" 300 AMP AC-DC GAS TUNGSTEN
ARC WELDER #JB580118
1 8' FREE-STANDING JIB CRANE W/ DRILL PRESS HEAD
1 K. RAMPE TELESCOPIC FORK LIFT BOOM ATTACHMENT
1 DAKE NO. 4M2 BENCH TOP MANUAL ARBOR PRESS
1 EXIDE 60 AMP-DC INDUSTRIAL BATTERY CHARGER
#29926-11-BC
1 HILL ACME KLING NO. 4 MECHANICAL IRONWORKER #504454
1 HEM MOD: H75A HORIZONTAL BAND SAW #271788 W/ NUMERICAL
CONTROLS & ROLLER FEED CONVEYOR
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 DELTA MILWAUKEE / BALDOR NO. M3565 3/4 H.P. 12" DISC
GRAINDER #1078
LOT FABRILINE HYDRAULIC "GUILLOTINE" ANGLE SHEAR W/
HYDRAULIC "C-FRAME" PUNCH & ANGLED STEEL ROLLER FEED
CONVEYOR
1 MILLER "TWO FIFTY TWIN" AC-DC ARC WELDER #HD-714639
LOT 5,000 LB. GANTRY-TYPE BRIDGE CRANE W/ P&H 3 TON ELEC.
CHAIN HOIST & PENDANT CONTROLS
1 AMERICAN MOD: 60 6,000 LB. POWER RE / UN COILER #1527
LOT NIAGARA MOD: 14 "ONE SERIES" 14 GAUGE X 4' POWER
SHEET SHEAR #62312 W/ POWER SHEET FEED & TAKE-OFF
CONVEYOR, POWER 4' SHEET METAL ROLLER & CONTROLS
1 NIAGARA NO. 610 10 GAUGE X 10' POWER SQUARING
SHEAR #52809 W/ BACK GAUGE
1 NIAGARA MOD: 1R6 10 GAUGE X 6' POWER SQUARING SHEAR
#61655 W/ BACK-GAUGE
1 PULLMAX TYPE P7 UNIVERSAL "C-FRAME" SHEARING & CIRCLE
FORMING MACHINE #54808
1 ROCKWELL NO. 70-400 PEDESTAL DRILL PRESS #1441185
3 ASST. TAPPING HEAD ATTACHMENTS @ 225.00
1 DREIS & KRUMP MOD: 810-l "CHICAGO" 90 TON X 10'
POWER PRESS BRAKE #L-18705 W/ HURCO "AUTOBEND IV"
DIGITAL CONTROLS
1 DREIS & KRUMP MOD: 810-l "CHICAGO" 90 TON X 8' POWER
PRESS BRAKE #L-19531
1 DREIS & KRUMP MOD: 810-L "CHICAGO" 90 TON X 8' POWER
PRESS BRAKE #L-16881
1 DELTA-ROCKWELL MOD: 15-65 BENCH-TOP PEDESTAL DRILL
PRESS #1469480 W/ PORTABLE PLATFORM STEEL CART
1 DREIS & KRUMP NO. 410-D SP "CHICAGO" 10 GAUGE X 10'
POWER PRESS BRAKE #P-8052 W/ AUTOMEC "AUTOGAUGE G24"
DIGITAL READ OUT
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 FALLS MOD: 101 "D-BUR-R" PORTABLE DEBURRING MACHINE #2696
1 NIAGARA NO. A3 O.B.I. PUNCH PRESS #22714 W/ MECHANICAL
CLUTCH
1 CLARK MOD: C-500Y-45 4,500 LB. GAS CP. FORK LIFT
#Y###-##-#### W/ OROFS, CASCADE SIDE-SHIFTER
ATTACEMENT & PNEUM. TIRES
1 WARNER & SWASEY NO. W-4560 "WIEDEMATIC MACH II" CNC
ROTARY MULTI-SPINIDLE TURRET PUNCH #NSN W/ WARNER
& SWASEY 2-AXIS COMPUTER CONTROLS, TRAVEL TABLE, DIES
& MOTORIZED CHIP / SCRAP CONVEYOR
6 ASST. STEEL "A-FRAME" & UPRIGHT STEEL BAR STOCK
RACKS @ 450.00
5 ASST. PORTABLE STEEL SHEET METAL CARTS @ 350.00
2 ASST. PORTABLE METAL PLATFORM LADDERS @ 225.00
1 ROL-LIFT PORTABLE HYDRAULIC PALLET JACK #19628
1 TOLEDO MOD: 8570 DIGITAL BENCH-TOP PLATFORM SCALE
1 BOYER-SCHULTZ MOD: H-612 "CHALLENGER" HAND-FEED SURFACE
GRINDER #25878 W/ HITACHI MOD: SAU-5 MAGNETIC CHUCK
1 WALES-STRIPPIT BENCH-TOP ELEC. PUNCH & DIE GRINDER
#72150 000
1 G.E. 30-KVA TRANSFORMER #9125 8 3882
1 BUFFALO NO. 22 PEDESTAL DRILLING / TAPPING MACHINE
#NSN
1 CLAUSING MOD: 2275 PEDESTAL DRILL PRESS #516244
1 KALAMAZOO MOD: H9AW HORIZONTAL BAND SAW #8355 W/ ROLLER
FEED CONVEYOR
1 HILL ACME KLING MOD: 4 IRONWORKER #540266 W/ ROLLER FEED
CONVEYOR & LAYOUT TABLE
2 WOODFORD 15,000 LB. 4' X 5' METAL DOCK PLATES @ 375.00
1 WHITNEY-JENSEN "C-FRAME" ELEC. POWER PUCNH #NSN (I.D.
#0047) NOT IN OPERATION
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
2 10,000 LB. BRIDGE CRANES W/ P&H ELEC. CHAIN HOISTS
& PENDANT CONTROLS @ 37,500.00
1 HYDROWAY 10,000 LB. CRANE SCALE #27410078
1 CADY 10-TON SHEET METAL HOIST GRAPPING DEVISE
1 LODGE & SHIPLEY ENGINE LATHE #NSN
1 GARDNER NO. 17 30" DISC GRINDER #NSN
1 U.S. MOD: V-2 VERTICAL MILLING MACHINE #1157
1 1997 CHEVROLET "CHEYENE 3500" 12' STAKE BED TRUCK
#1GBJC34K3RE113827
1 15' X 10' X 10'h GALV. PAINT SPRAY BOOTH W/ EXHAUST
2 STEEL PEDESTAL FRAME EXPLOSION PROOF LIGHTS @ 450.00
1 DAYTON MOD: 30049 24" INDUSTRIAL BLOWER
1 THERMAL ARC "PAK 10" 100-AMP FLASMA WELDER #H80901A177028E
1 MILWAUKEE NO. 4200 MAGNETIC DRILL PRESS #302-1557
1 TIMESAVER MOD: 325M-1 "SPEEDBELT" 24" WIDE-BELT SANDER
#6039
1 ROUSSELLE NO. 6 O.B.I. PUNCH PRESS #FASA-8685 W/ AIR
CLUTCH & HYDRAULIC FEED TABLE
1 DURANT MOD: MD-10 POWER COIL STRAIGHTENER #906 W/
UN-COIL / RE-COIL STATION
1 DREIS & KRUMP MOD: UA12250 "CHICAGO" 1/4" X 12' POWER
SQUARING SHEAR #DS1559 W/ POWER BACK GAUGE
1 WEST BEND MOD: ST-20TC "WELD-BILT" 10 TON RAIL MOUNTED
HYDRAULIC "SCISSOR" PLATFORM SHEET LIFT #ST-TC 2276
6 LINDE ASST "VI" MODEL ARC WELDERS (NEED REPAIRS)
@ 87.50
1 YALE "WORKSAVER" WALK-BEHIND BATTERY-OP. FORK LIFT
#356106 (NEEDS REPAIR)
LOT MISC. IN REAR MAINTENANCE SHOP
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 CUPRUM 16' FIBERGLASS STEP LADDER
LOT MISC. ALUM. STEP LADDERS & WALK PLANKS
1 LOCKFORMER (NEEDS REPAIR)
1 RIDGID MOD: 535 PORTABLE ELEC. PIPE THREADER W/
CUTTER & REAMER
1 LOCKFORMER 24 GAUGE POWER EDGE / CLEAT / ROLL FORMER
#6455
LOT DE VILBISS ARRESTOR TYPE CONVEYORIZED AUTOMATIC TYPE
PAINT SPRAY SYSTEM W/ (2) SPRAY BOOTHS, OVERHEAD HOOK-
TYPE CHAIN CONVEYOR, REGULATORS, CONTROLS, HYDRAULIC
PUMPS & HEATERS (GAS FIRED)
LOT MISC. STEEL PALLET RACK & STORAGE SHELVING
LOT MISC. METAL WIRE TOOL CRIB CAGES
LOT MISC. POWER HAND TOOLS (ELEC. & PNEUM. DRILLS,
SAWS, GRINDERS, SHEARS, NIBBLERS, SANDERS, ETC.)
LOT MISC. MACHINE TOOLING, PUNCHES, DIES, ARBORS, TOOL
HOLDERS, ETC.
LOT MISC. TOOL CABINETS, PARTS BINS, ETC.
1 SULLAIR MOD: 16-75H SKID MOUNTED ROTARY SCREW AIR
COMPRESSOR #46507 CGI
1 DAVEY 50 H.P. SKID MOUNTED AIR COMPRESSOR #NSN
(I.D. # 0038)
1 VAN AIR MOD: D 11 A REFRIG. AIR DRYER #808854
1 VERTICAL STEEL AIR RECEIVING TANK (IN COMPRESSOR ROOM)
===============================================================================
BY: /S/ DONALD ENGEL
-----------------------------------
DONALD ENGEL
C.E.O. & CO-CHAIRMAN OF THE BOARD
<PAGE>
OB
OCEAN BANK
780 N.W. 42nd Avenue
Miami, Florida 33126-5597
(305) 442-2660
"LENDER"
OWNER OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC.
16255 N.W. 54TH AVENUE
MIAMI, FL 33014
COMMERCIAL SECURITY AGREEMENT
BORROWER
HI-RISE RECYCLING SYSTEMS, INC. &
WC ACQUISITION CORP.
16255 N.W. 54TH AVENUE
MIAMI, FL 33014
Telephone Number 624-9222
LOCATION OF COLLATERAL
OCEAN BANK
780 N.W 42 AVENUE
MIAMI, FLORIDA 33125
1. SECURITY INTEREST. Owner of Collateral ("Owner") grants to Lender
identified above a continuing security interest in the Collateral described
below to secure the obligations described in this Agreement.
2. OBLIGATIONS. The Collateral shall secure the payment and performance of
all of Borrower's and Owner's present and future, joint and/or several, direct
and indirect, absolute and contingent, express and impiled, indebtedness,
(including costs of collection, legal expenses and attorneys' fees incurred by
Lender upon the occurrence of a default under this Agreement, in collecting or
enforcing payment of such indebtedness, or preserving, protecting or realizing
on the Collateral herein), liabilities, obligations and covenants (cumulatively
"Obligations") to Lender pursuant to:
a. this Agreement and the following promissory notes and agreements:
- -------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- -------------------------------------------------------------------------------
VARIABLE $900,000.00 02/03/97 02/03/02 100932574-64
- -------------------------------------------------------------------------------
b. all other present or future, written, agreements between Borrower or
Owner and Lender (WHETHER EXECUTED FOR THE SAME OR DIFFERENT PURPOSES
THAN THE PRECEDING DOCUMENTS);
c. all amendments, modifications, replacements or substitutions to any of
the foregoing; and
d. applicable law.
3. COLLATERAL. The Collateral shall consist of all of the
following-described property and Owner's rights, title and interest in such
property whether now owned or hereafter acquired by Owner and wheresoever
located:
[ ] All accounts and contract rights including, but not limited to, the
accounts and contract rights described on Schedule A attached hereto
and incorporated herein by this reference;
[ ] All chattel paper including, but not limited to, the chattel paper
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All documents including, but not limited to, the documents described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All equipment, including, but not limited to, the equipment described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All fixtures, including, but not limited to, the fixtures located or
to be located on the real property described on Schedule B attached
hereto and incorporated herein by this reference;
[ ] All general intangibles including, but not limited to, the general
intangibles described on Schedule A attached hereto and incorporated
herein by this reference;
[ ] All instruments including, but not limited to, the instruments
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All inventory including, but not limited to, the inventory described
and located at the locations indicated on Schedule A attached hereto
and incorporated herein by this reference;
[ ] All minerals or the like located on or related to the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All standing timber located on the real property described on
Schedule B attached hereto and incorporated herein by this
reference;
[x] Other: SEE SCHEDULE "A" FOR LISTING OF COLLATERAL
All monies, instruments, and savings, checking or other deposit accounts that
ara now or in the future in Lender's custody or control (excluding IRA, Keogh,
trust accounts, and deposits subject to tax penalties if so assigned);
All accessions, accessories, additions, amendments, attachments, modifications,
replacements and substitutions to any of the above;
All proceeds and products of any of the above;
All policies of insurance pertaining to any of the above as well as any proceeds
and unearned premiums pertaining to such policies; and
All books and records pertaining to any of the above.
4. OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is: 65-0222933.
<PAGE>
5. RESIDENCY/LEGAL STATUS. Owner is a resident ot the state of: n/a
Owner is a: [x] Corporation; [ ] Partnership; [ ] Non-Profit Association;
duly organized, validly existing and in good standing under the laws of the
state of: FLORIDA
6. REPRESENTATIONS, WARRANTIES AND COVENANTS: Owner represents, warrants
and covenants to Lender that:
a. Owner is and shall remain the sole owner of the Collateral;
b. Neither Owner nor, to the best of Owner's knowledge, any other party
has used, generated, released, discharged, stored, or disposed of any
hazardous waste, toxic substance, or related material (cumulatively
"Hazardous Materials") or transported any Hazardous Materials. Owner
shall not commit or permit such actions to be taken in the future.
The term "Hazardous Materlals" shall mean any substance, material,
or waste which is or becomes regulated by any governmental authority
including, but not limited to, (i) petroleum; (ii) asbestos; (iii)
polychlorinated biphenyls; (iv) those substances, materials or wastes
designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act or listed pursuant to Sectlon 307 of the Clean Water
Act or any amendments or replacements to these statutes; (v) those
substances, materials or wastes defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery
Act or any amendments or replacements to that statute; or (vi)
those substances, materials or waste defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, or any
amendments or replacements to that statute;
Page 1 of 4_______________________Initials
<PAGE>
(c) Owner's chief executive office, chief place of business, office where
its business records are located, or residence is the address
identified above. Owner's other executive offices, places of business,
locations of its business records, or domiciles are described on
Schedule C attached hereto and incorporated herein by this reference.
Owner shall immediately advise Lender in writing of any change in or
addition to the foregoing addresses;
(d) Owner shall not become a party to any restructuring of its form of
business or participate in any consolidation, merger, liquidation or
dissolution without providing Lender with thirty (30) or more days'
prior written notice of such change;
(e) Owner shall notify Lender of the nature of any intended change of
Owner's name, or the use of any trade, name, and the effective date of
such change;
(f) The Collateral is and shall at all times remain free of all tax and
other liens, security interests, encumbrances and claims of any kind
excet for those belonging to Lender and those described on Schedule D
attached hereto and incorporated herein by this reference. Without
waiving the event of default as a result thereof, Owner shall take any
action and execute any document needed to discharge the foregoing
liens, security interests, encumbrances and claims;
(g) Owner shall defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein;
(h) All of the goods, fixtures, minerals or the like, and standing timber
constituting the Collateral is and shall be located at Owner's
executive offices, places of business, residence and domiciles
specifically described in this Agreement. Owner shall not change the
location of any Collateral without the prior written consent of Lender;
(i) Owner shall provide Lender with possession of all chattel paper and
instruments constituting the Collateral, and owner shall promptly mark
all chattel paper, instruments, and documents constituting the
Collateral to show that the same are subject to Lender's security
interest;
(j) All of Owner's accounts or contract rights; chattel paper; documents;
general intangibles; instruments; and federal, state, county, and
municipal government and other permits, licenses, trusts, liens,
contracts, leases, and agreements constituting the Collateral are and
shall be valid, genuine and legally enforceable obligations and rights
belonging to Owner against one or more third parties and not subject to
any claim, defense, set-off or counterclaim of any kind;
(k) Owner shall not amend, modify, replace, or substitute any account or
contract right; chattel paper; document; general intangible; or
instrument constituting the Collateral without the prior written
consent of Lender;
(l) Owner has the right and is duly authorized to enter into and perform
its obligations under this Agreement. Owner's execution and performance
of these obligations do not and shall not conflict with ths provisions
of any statute, regulation, ordinance, rule of law, contract or other
agreement which may now or hereafter be binding on Owner;
(m) No action or proceeding is pending against Owner which might result in
any material or adverse change in its business operations or financial
condition or materially affect the Collateral;
(n) Owner has not violated and shall not violate any applicable federal,
state, county or municipal statute, regulation or ordinance (including
but not limited to those governing Hazardous Materials) which may
materially and adversely affect its business operations or financial
condition or the Collateral;
(o) Owner shall, upon Lender's request, deposit all proceeds of the
Collateral into an account or accounts maintained by Owner or Lender at
Lender's institution; and
(p) This Agreement and the obligattions described in this Agreement are
executed and incurred for business and not consumer purposes.
7. SALE OF COLLATERAL. Owner shall not assign, convey, lease, sell or
transfer any of the Collateral to any third party without the prior written
consent of Lender except for sales of inventory to buyers in the ordinary course
of business.
8. FINANCING STATEMENTS AND OTHER DOCUMENTS. Owner shall take all actions
and execute all documents required by Lender to attach, perfect and maintain
Lender's security interest in the Collateral and establish and maintain Lender's
right to receive the payment of the proceeds of the Collateral including, but
not limited to, executing any financing statements, fixture filings,
continuation statements, notices of security interest and other documents
required by the Uniform Commercial Code and other applicable law. Owner shall
pay the costs of filing such documents in all offices wherever filing or
recording is deemed by Lender to be necessary or desirable. In lieu of filing
security agreements, financing statements, and effective financing statements,
Lender shall be entitled to perfect its security interest in the Collateral by
filing carbon, photographic or other reproductions of the aforementioned
documents with any authority required by the Uniform Commercial Code or other
appilcable law. Lender may execute and file any financing statements, as well as
extensions, renewals and amendments of financing statements in such form as
Lender may require to perfect and maintain perfection of any security interest
granted in this Agreement.
9. INQUIRIES AND NOTIFICATION TO THIRD PARTIES. Owner hereby authorizes
Lender to contact any third party and make any inquiry pertaining to Owner's
financial condition or the Collateral. In addition, Lender is authorized to
provide oral or written notice of its security interest in the Collateral to any
third party.
10. COLLECTION OF INDEBTEDNESS FROM THIRD PARTIES. Lender shall be entitled
to notify, and upon the request of Lender, Owner shall notify any account debtor
or other third party (including, but not limited to, insurance companies) to pay
any indebtedness or obligation owing to Owner and constituting the Collateral
(cumulatively "indebtedness") to Lender whether or not a default exists under
this Agreement. Owner shall diligently collect the indebtedness owing to Owner
<PAGE>
from its account debtors and other third parties until the giving of such
notification. In the event that Owner possesses or receives possession of any
instruments or other remittances with respect to the Indebtedness following the
giving of such notification or if the instruments or other remittances
constitute this prepayment of any indebtednsss or the payment of any insurance
proceeds, Owner shall hold such instruments and other remittances in trust for
Lender apart from its other property, endorse the instruments and other
remittances to Lender, and immediately provide Lender with possession of the
instruments and other remittances. Lender shall be entitled, but not required,
to collect (by legal proceedings or otherwise), extend the time for payment,
compromise, exchange or release any obligor or collateral upon, or otherwise
settle any of the indebtednsss whether or not an event of default exists under
this Agreement. Lender shall not be liable to Owner for any action, error,
mistake, omission or delay pertaining to the actions described in this
paragraph or any damages resulting therefrom.
11. POWER OF ATTORNEY. Owner hereby appoints Lender as its attorney-in-fact
to endorse Owner's name on all instruments and other remittances payable to
Owner with respect to the indebtedness or other documents pertaining to Lender's
actions in connection with the indebtedness. In addition, Lender shall be
entitled, but not required, to perform any action or execute any document
required to be taken or executed by Owner under this Agreement. Lender's
performance of such action or execution of such documents shall not relieve
Owner from any obligation or cure any default under this Agreement. The powers
of attorney described in this paragraph are coupled with an interest and are
irrevocable.
12. USE AND MAINTENANCE OF COLLATERAL. Owner shall use the Collateral
solely in the ordinary course of its business, for the usual purposes intended
by the manufacturer (if applicable), with due care, and in compliance with the
laws, ordinances, regulations, requirements and rules of all federal, state,
county and municipal authorities including environmental laws and regulations
and insurance policies. Owner shall not make any alterations, additions or
improvements to the Collateral without the prior written consent of Lender.
Without limiting the foregoing, all alterations, additions and improvements made
to the Collateral shall be subject to the security interest belonging to Lender,
shall not be removed without the prior written consent of Lender, and shall be
made at Owner's sole expense. Owner shall take all actions and make any repairs
or replacements needed to maintain the Collateral in good condition and working
order.
13. LOSS OR DAMAGE. Owner shall bear the entire risk of any loss, theft,
destruction or damage (cumulatively "Loss or Damage") to all or any part of the
Collateral. In the event of any Loss or Damage, Owner will either restore the
Collateral to its previous condition, replace the Collateral with similar
property acceptable to Lender in its sole discretion, or pay or cause to be paid
to Lender the decrease in the fair market value of the affected Collateral.
14. INSURANCE. The Collateral will be kept insured for its full value
against all hazards including loss or damage caused by fire, collision, theft or
other casualty. If the Collateral consists of a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at lease equal to the actual
cash value of ths vehicle with deductibles not to exceed $500. Owner may obtain
insurance on the Collateral from such companies as are acceptable to Lender in
its sole discretion. The insurance policies shall require the insurance company
to provide Lender with at least thirty (30) days' written notice before such
policies are altered or cancelled in any manner. The insurance policies shall
name Lender as a loss payee and provide that no act or omission of Owner or any
other person shall affect the right of Lender to be paid the insurance proceeds
pertaining to the loss or damage of the Collateral. In the event Owner fails to
acquire or maintain insurance, Lender (after providing notice as may be required
by law) may in its discretion procure appropriate insurance coverage upon the
Collateral and charge the insurance cost as an advance of principal under the
promissory note. Owner shall furnish Lender with evidence of insurance
indicating the required coverage. Lender may act as attorney-in-fact for Owner
in making and settling claims under insurance policies, cancelling any policy or
endorsing Owner's name on any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owners obligations with respect to the Collateral under
any circumstances. Owner shall immediately provide Lender with written notice of
and indemnify and hold Lender and its shareholders, directors, officers,
employees and agents harmless from all claims, damages, liabilities (including
attorneys' fees and legal expenses), causes of action, actions, suits and other
legal proceedings (cumulatively "Claims") pertaining to its business operations
or the Collateral including, but not limited to, those arising from Lender's
performance of Owner's obligations with respect to the Collateral. Owner, upon
the request of Lender, shall hire legal counsel to defend Lender from such
Claims, and pay the attorneys' fees, legal expenses and other costs incurred in
connection therewith. In the alternative, Lender shall be entitled to employ its
own legal counsel to defend such Claims at Owner's cost.
16. TAXES AND ASSESSMENTS. Owner shall execute and file all tax returns and
pay all taxes, licenses, fees and assessments relating to its business
operations and the Collateral (including, but not limited to income taxes,
personal property taxes, withholding taxes, sales taxes, use taxes, excise taxes
and workers' compensation premiums) in a timely manner.
17. INSPECTION OF COLLATERAL AND BOOKS AND RECORDS. Owner shall allow
Lender or its agents to examine, inspect and make abstracts and copies of the
Collateral and Owner's books and records pertaining to Owner's business
operations and financial condition or the Collateral during normal business
hours. Owner shall provide any assistance required by Lender for these
purposes. All of the signatures and information pertaining to the Collateral or
contained in the books and records shall be genuine, true, accurate and
complete in all respects. Owner shall note the existence of Lender's security
interest in its books and records pertaining to the Collateral.
Page 2 of 4____________________________Initials
<PAGE>
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or any guarantor:
(a) fails to make any payment under this Agreement or any other
indebtedness to Lender when due;
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Agreement or any other
present or future, written or oral, agreement regarding this or
any other indebtedness to Lender;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows the Collateral to be destroyed, lost or stolen, damaged in
any material respect, or subjected to seizure or confiscation;
(e) seeks to revoke, terminate or otherwise limit its liability under
any continuing guaranty;
(f) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Owner, any guarantor, or any of
their property;
(g) dies, becomes legally incompetent, is dissolved or terminated,
ceases to operate its business, becomes insolvent, makes an
assignment for the benefit of creditors, or becomes the subject
of any bankruptcy, insolvency or debtor rehabilitation proceeding;
(h) allows the Collateral to be used by anyone to transport or store
goods, the possession, transportation, or use of which, is
illegal; or
(i) causes Lender to deem itself insecure for any reason.
19. RIGHTS OF LENDER ON DEFAULT. If there is a default under this
Agreement, Lender shall be entitled to exercise one or more of the following
remedies without notice or demand (except as required by law):
(a) to declare the Obligations immediately due and payable in full;
(b) to collect the outstanding Obligations with or without resorting
to Judicial process;
(c) to change Owner's mailing address, open Owner's mail, and retain
any instruments or other remittances constituting the Collateral
contained therein;
(d) to take possession of any Collateral in any manner permitted by
law;
(e) to apply for and obtain, without notice and upon ex parte
application, the appointment of a receiver for the Collateral
without regard to Owner's financial condition or solvency,
the adequacy of the Collateral to secure the payment or
performance of the obligations, or the existence of any waste to
the Collateral;
(f) to require Owner to deliver and make available to Lender any
Collateral at a place reasonably convenient to Owner and Lender;
(g) to sell, lease or otherwise dispose of any Collateral and collect
any deficiency balance with or without resorting to legal
process (if notice to Borrower of the intended disposition of the
Collateral is required by law, five (5) days notice shall
constitute reasonable notification);
(h) to set-off Owner's obligations against any amounts due to Owner
including, but not limited to, monies, instruments, and deposit
accounts maintained with Lender; and
(i) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and
in any order. If notice to Owner of intended disposition of Collateral is
required by law, five (5) days' notice shall constitute reasonable
notification. In the event that Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of a prejudgment remedy
in an action against Owner, Owner waives the posting of any bond which might
otherwise be required. Lender's remedies under this paragraph are in addition
to those available at common law, such as setoff.
20. WAIVER OF JURY TRIAL LENDER AND OWNER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN
CONJUNCTION WITH THE PROMISSORY NOTE, THIS AGREEMENT AND ANY OTHER AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH OR THEREWITH, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER MAKING THE LOAN EVIDENCED BY THE PROMISSORY NOTE.
21. APPLICATION OF PAYMENTS. Whether or not a default has occurred under
this Agreement, all payments made by or on behalf of Owner and all credits due
to Owner from the disposition of the Collateral or otherwise may be applied
against the amounts paid by Lender (including attorneys' fees and legal
expenses) in connection with the exercise of its rights or remedies described
in this Agreement and any interest thereon and then to the payment of the
remaining Obligations in whatever order Lender chooses.
22. REIMBURSEMENT OF AMOUNTS EXPENDED BY LENDER. Owner shall reimburse
Lender for all amounts (including attorneys' fees and legal expenses) expended
by Lender in the performance ot any action required to be taken by Owner or
the exercise of any right or remedy belonging to Lender under this
Agreement, together with interest thereon at the lower of the highest rate
described in any promissory note or credit agreement executed by Borrower or
Owner or the highest rate allowed by law from the date of payment until the
date of reimbursement. These sums shall be included in the definition of
Obligations, shall be secured by the Collateral identified in this Agreement
and shall be payable upon demand.
23. ASSIGNMENT. Owner shall not be entitled to assign any of its rights,
remedies or obligations described in this Agreement without the prior written
consent of Lender. Consent may be withheld by Lender in its sole discretion.
Lender shall be entitled to assign some or all of its rights and remedies
described in this Agreement without notice to or the prior consent of Owner in
any manner.
24. MODIFICATION AND WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in a
writing signed by Lender. Lender may perform any of Owner's Obligations or
delay or fail to exercise any of its rights without causing a waiver of those
Obligations or rights. A waiver on one occasion shall not constitute a waiver
on any other occasion. Owner's Obligations under this Agreement shall not be
affected if Lender amends, compromises, exchanges, falls to exercise, impairs
or releases any of the obligations belonging to any Owner or third party or
any of its rights against any Owner, third party or collateral.
25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Owner and Lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
26. NOTICES. Any notice or other communication to be provided under this
Agreement shall be in writing and sent to the parties at the addresses
described in this Agreement or such other address as the parties may designate
in writing from time to time.
27. SEVERABILITY. If any provision of this Agreement violates the law or is
unenforceable, the rest of the Agreement shall remain valid.
28. APPLICABLE LAW. This Agreement shall be governed by the laws of the
state identified in Lender's address. Owner consents to the jurisdiction and
venue of any court located in the state indicated in Lender's address in the
event of any legal proceeding under this Agreement.
29. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Agreement, Owner
agrees to pay Lender's attorneys' fees and collection costs (subject to any
restrictions imposed by law).
30. MISCELLANEOUS. This Agreement is executed for commercial purposes.
Owner shall supply information regarding Owner's business operations and
financial condition or the Collateral in the form and manner requested by
Lender. All information furnished by Owner to Lender shall be true, accurate
and complete in all respects. Owner and Lender agree that time is of the
essence. Owner waives presentment, demand for payment, notice of dishonor and
protest except as required by law. All references to Owner in this Agreement
shall include all parties signing below except Lender. If there is more than
one Owner, their obligations shall be joint and several. This Agreement shall
remain in full force and effect until Lender provides Owner with written
notice of termination. This Agreement and any related documents represent the
complete and integrated understanding between Owner and Lender pertaining to
the terms and conditions of those documents.
<PAGE>
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the terms
and conditions of this Agreement.
Dated: FEBRUARY 3, 1997
OWNER: HI-RISE RECYCLING, INC. OWNER:
BY: /s/ DONALD ENGEL
-----------------------------------
DONALD ENGEL BY: ___________________________
TITLE: C.E.0 & CO- CHAIRMAN OF THE BOARD TITLE: ________________________
OWNER: OWNER:
BY: _____________________________________ BY: ___________________________
TITLE: __________________________________ TITLE: ________________________
LENDER: OCEAN BANK
BY: /s/ ROBERT TRUJILLO
--------------------------------------
ROBERT TRUJILLO
TITLE: VICE PRESIDENT
Page 3 of 4
<PAGE>
SCHEDULE A
OCEAN BANK CD #100768642-32 (50146) I/N/O HI-RISE RECYCLING SYSTEMS, INC. I/A/O
$500,000 AT THE RATE: 5.75. MATURITY 01-22-98.
SCHEDULE B
SCHEDULE C
SCHEDULE D
Page 4 of 4 _____________________ Initials
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
2 ROCKWELL MOD: 61E-602A PNEUM. HAND-HELD BELT SANDERS
50 ASST. STEEL-FRAME LAY-OUT / SHOP TABLES @ 200.00
1 DESOUTTER MOD: AFT-40 PNEUM. HORIZONTAL GUN DRILL
#10107
2 ASST. WALL CLOCKS @ 87.50
30 ASST. STEEL WIRE TOTE BIN CRIBS @ 37.50
1 HOBART MOD: ML-20A "SIMPLIFIED" 200-AMP ARC WELDER
#5C2W-32259
1 PORTABLE 4' X 6' STEEL PLATE WELDING TABLE W/ FAMCO
"S" MANUAL ARSOR PRESS
5 ASST. WALL MOUNTED ELEC. FANS @ 80.00
1 ROL-LIFT HYDRAULIC PALLET JACK #A-21175
1 ARBOR "MINI-MAX" MOD: L-55 6" X 10' HORIZONTAL BELT
SANDER #AM/031009 W/ POWER LAY-OUT TABLE & BELT CLAMP
1 MASTER-LINE ELEC. DEL.-BLADE TABLE SAW #NSN
2 DAYTON MOD: 3Z579 PORTABLE CANNISTER INDUSTRIAL SHOP
VACUUMS @ 137.50
1 DELTA ROCKWELL NO. 34-338 TABLE SAW #FF-7450 W/ ROLLER
"SKATE" FEED CONVEYOR, POWER DUST COLLECTOR / EXHAUST
BLOWER & RAIL-TRACK MOUNTED STEEL LAYOUT TABLE
1 ROCKWELL TABLE-MOUNTED 3 H.P. ELEC. CUT-OFF SAW
#91-5075
1 DELTA ROCKWELL PEDESTAL DRILL PRESS #110-7840
6 ASST. SKID-MOUNTED TILTING STEEL SCRAP HOPPERS @ 375.00
5 ASST. 4-WHL. SHOP TRUCKS @ 120.00
5 3' X 20' ORANGE STEEL STORAGE RACKS W/ WOOD SHELVES
@ 200.00
2 SECTIONS 3' X 12' X 15'H STEEL PALLET RACK STORAGE
SHELVING @ 300.00
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
6 ASST. ELEC. PEDESTAL FLOOR FANS @ 137.50
1 MILLER MOD: MPS-20 20KVA SPOT WELDER #JC-631158
W/ MILLER COOLANT PUMP & WELDING JIG
8 LINDE MOD: VI-252 250 AMP DC MIG ARC WELDERS W/
WIRE FEED ATTACHMENTS @ 1,000.00
8 PORTABLE 3' X 5' STEEL PLATE WELDING TABLES W/ DWR.
& COLUMBIAN BENCH VISES @ 300.00
3 DELTA-ROCKWELL NO. 15-665 PEDESTAL DRILL PRESSES
#'S 1507690, 1507689 & 1578879 @ 900.00
1 ROCKWELL NO. 15-061 PEDESTAL DRILL PRESS #1676241
1 WILKINSON 18" X 50' 2-TIER MOTORIZED BELT CONVEYOR
#NSN
1 DREIS & KRUMP "CHICAGO" 4' & 14 GAUGE MANUAL BENDING
BRAKE #57200
1 TAYLOR-WINFIELD NO. 704 50 KVA SPOT WELDER #E-384965-6
1 TAYLOR-WINFIELD 50 KVA SPOT WELDER #NOT READABLE
1 SCHREIBER MOD: 100 AC REFRIG. AFTER COOLER #1485
1 NIAGARA NO. 3A 3' BENCH-TOP MANUAL BENDING BRAKE #59544
1 DREIS & KRUMP MOD: 68-B "CHICAGO" 36 TON X 8' POWER
PRESS BRAKE #L-12512
2 LINCOLN NO. 10151 "INVERTEC STT" SURFACE TENSION
TRANSFER WELDERS #U1950902243 & NSN W/ MOD: LN-742
WIRE FEED ATTACHMENTS #U1940204305 & 1940204313
@ 2,500.00
LOT (52) DRS. LYON STEEL CLOTHES LOCKERS
1 6' X 10' X 15'H STEEL STORAGE RACK W/ WOOD SHELVES
1 SIMPLEX ELEC. TIME CLOCK W/ (10) RACKS
5 ASST. 2-DR. UPRIGHT METAL STORAGE CABIENTS @ 100.00
1 WOOD VERTICAL STEEL AIR RECEIVING TANK #695541
(MNFR., 1977)
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 ROWE RICHARDSON "MAGNA-WEIGH" 2400-LB. DIAL SCALE
W/ 4' X 5' INGROUND PLATFORM
8 ASST. 2-WHL. HAND TRUCKS @ 37.50
1 WEBER MOD: 40 BENCH-TOP ELEC. LABEL PRINTER
1 3' X 4' METAL DOCK PLATE
8 ASST. PORTABLE STEEL BANDING MACHINES @ 250.00
1 ACETYLENE WELDING UNIT W/ TORCH, GAUGES, HOSE & CART
40 ASST. STEEL FRAME CANVAS WELDING SCREENS @ 50.00
2 LINDE 300 AMP. DC "SHORT" ARC WELDERS #NSNS W/ WIRE
FEED ATTACHMENTS @ 875.00
1 NIAGARA NO. 180 POWER PEDESTAL SHEET METAL ROLL FORMER
#72669 (MNFR., 1961)
1 VILRU "791 X 80" HORIZONTAL SCREW-TYPE SHEET METAL
ROLLER #NSN
1 NIAGARA NO. 172 POWER PEDESTAL SHEET METAL ROLL
FORMER #NSN
1 LOWN MOD: B-400 4' POWER PYRAMID SHEET METAL ROLLER
#NSN
1 PERKINS-WARD MOD: A NO. 2 BENCH TOP PUNCH PRESS #B4581
1 LOWN MOD: B-300 4' POWER PYRAMID SHEET METAL ROLLER
#B5241
1 LOCKFORMER 14-GAUGE POWER EDGE / CLEAT / ROLL FORMER
#11976
LOT (30) FDT. 14" STEEL ROLLER CONVEYOR
1 SAN ANGELO 5' POWER PYRAMID ROLLER #NSN
1 16 GAUGE ELEC. CIRCLE SHEAR #NSN W/ TRIPOD STAND
1 ROPER-WHITNEY MOD: 230 "C-FRAME" POWER PUNCH #285 9 70
1 PEXTO NO. 382 3' MANUAL "PYRAMID" SHEET METAL ROLLER
#NSN
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 LINDE MOD: VI-250 A 300 AMP. DC ARC WELDER #B2690509
W/ WIRE FEED ATTACHMENT
1 LINCOLN MOD: TIG-300/300 "IDEALARC" 300 AMP AC-DC
TIG ARC WELDER #AC-319379
1 LINDE MOD: VI-252 CV/DC 300-AMP DC MEG ARC WELDER
#B-77011280 W/ MOD: 28-A POWER SUPPLY
1 WELDTRONIC SPOT SELDER (NEEDS REPAIR)
5 WALK-BEHIND BATTERY-OP. FORK LIFTS #NSNS @ 1,000.00
1 MAN PLATFORM FORK LIFT ATTACHMENT
1 BLACK & DECKER / DE WALT MOD: 3500 3 H.P. RADIAL ARM
CROSS-CUT SAW #2080051
10 ASST. PNEUM. HAND-HELD INDUSTRIAL STAPLERS @ 262.50
1 CROWN 4,000 LB. HYDRAULIC PALLET JACK #L-88120
1 PACIFIC MOD: K300-12 300 TON 3/8" X 12' POWER PRESS
BRAKE #6556 W/ AUTOMEC "AUTOGAUGE CNC 1000" CONTROLS
1 TRUMPF MOD: CN 700 COPY & COORDINATE NIBBLER #784
W/ TOOLING
1 W.A. WHITNEY MOD: 630-A "C-FRAME" 1/2" PUNCH
#630-4078245
1 MILLER "SYNCHROWAVE 300" 300 AMP AC-DC GAS TUNGSTEN
ARC WELDER #JB580118
1 8' FREE-STANDING JIB CRANE W/ DRILL PRESS HEAD
1 K. RAMPE TELESCOPIC FORK LIFT BOOM ATTACHMENT
1 DAKE NO. 4M2 BENCH TOP MANUAL ARBOR PRESS
1 EXIDE 60 AMP-DC INDUSTRIAL BATTERY CHARGER
#29926-11-BC
1 HILL ACME KLING NO. 4 MECHANICAL IRONWORKER #504454
1 HEM MOD: H75A HORIZONTAL BAND SAW #271788 W/ NUMERICAL
CONTROLS & ROLLER FEED CONVEYOR
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 DELTA MILWAUKEE / BALDOR NO. M3565 3/4 H.P. 12" DISC
GRAINDER #1078
LOT FABRILINE HYDRAULIC "GUILLOTINE" ANGLE SHEAR W/
HYDRAULIC "C-FRAME" PUNCH & ANGLED STEEL ROLLER FEED
CONVEYOR
1 MILLER "TWO FIFTY TWIN" AC-DC ARC WELDER #HD-714639
LOT 5,000 LB. GANTRY-TYPE BRIDGE CRANE W/ P&H 3 TON ELEC.
CHAIN HOIST & PENDANT CONTROLS
1 AMERICAN MOD: 60 6,000 LB. POWER RE / UN COILER #1527
LOT NIAGARA MOD: 14 "ONE SERIES" 14 GAUGE X 4' POWER
SHEET SHEAR #62312 W/ POWER SHEET FEED & TAKE-OFF
CONVEYOR, POWER 4' SHEET METAL ROLLER & CONTROLS
1 NIAGARA NO. 610 10 GAUGE X 10' POWER SQUARING
SHEAR #52809 W/ BACK GAUGE
1 NIAGARA MOD: 1R6 10 GAUGE X 6' POWER SQUARING SHEAR
#61655 W/ BACK-GAUGE
1 PULLMAX TYPE P7 UNIVERSAL "C-FRAME" SHEARING & CIRCLE
FORMING MACHINE #54808
1 ROCKWELL NO. 70-400 PEDESTAL DRILL PRESS #1441185
3 ASST. TAPPING HEAD ATTACHMENTS @ 225.00
1 DREIS & KRUMP MOD: 810-l "CHICAGO" 90 TON X 10'
POWER PRESS BRAKE #L-18705 W/ HURCO "AUTOBEND IV"
DIGITAL CONTROLS
1 DREIS & KRUMP MOD: 810-l "CHICAGO" 90 TON X 8' POWER
PRESS BRAKE #L-19531
1 DREIS & KRUMP MOD: 810-L "CHICAGO" 90 TON X 8' POWER
PRESS BRAKE #L-16881
1 DELTA-ROCKWELL MOD: 15-65 BENCH-TOP PEDESTAL DRILL
PRESS #1469480 W/ PORTABLE PLATFORM STEEL CART
1 DREIS & KRUMP NO. 410-D SP "CHICAGO" 10 GAUGE X 10'
POWER PRESS BRAKE #P-8052 W/ AUTOMEC "AUTOGAUGE G24"
DIGITAL READ OUT
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 FALLS MOD: 101 "D-BUR-R" PORTABLE DEBURRING MACHINE #2696
1 NIAGARA NO. A3 O.B.I. PUNCH PRESS #22714 W/ MECHANICAL
CLUTCH
1 CLARK MOD: C-500Y-45 4,500 LB. GAS CP. FORK LIFT
#Y###-##-#### W/ OROFS, CASCADE SIDE-SHIFTER
ATTACEMENT & PNEUM. TIRES
1 WARNER & SWASEY NO. W-4560 "WIEDEMATIC MACH II" CNC
ROTARY MULTI-SPINIDLE TURRET PUNCH #NSN W/ WARNER
& SWASEY 2-AXIS COMPUTER CONTROLS, TRAVEL TABLE, DIES
& MOTORIZED CHIP / SCRAP CONVEYOR
6 ASST. STEEL "A-FRAME" & UPRIGHT STEEL BAR STOCK
RACKS @ 450.00
5 ASST. PORTABLE STEEL SHEET METAL CARTS @ 350.00
2 ASST. PORTABLE METAL PLATFORM LADDERS @ 225.00
1 ROL-LIFT PORTABLE HYDRAULIC PALLET JACK #19628
1 TOLEDO MOD: 8570 DIGITAL BENCH-TOP PLATFORM SCALE
1 BOYER-SCHULTZ MOD: H-612 "CHALLENGER" HAND-FEED SURFACE
GRINDER #25878 W/ HITACHI MOD: SAU-5 MAGNETIC CHUCK
1 WALES-STRIPPIT BENCH-TOP ELEC. PUNCH & DIE GRINDER
#72150 000
1 G.E. 30-KVA TRANSFORMER #9125 8 3882
1 BUFFALO NO. 22 PEDESTAL DRILLING / TAPPING MACHINE
#NSN
1 CLAUSING MOD: 2275 PEDESTAL DRILL PRESS #516244
1 KALAMAZOO MOD: H9AW HORIZONTAL BAND SAW #8355 W/ ROLLER
FEED CONVEYOR
1 HILL ACME KLING MOD: 4 IRONWORKER #540266 W/ ROLLER FEED
CONVEYOR & LAYOUT TABLE
2 WOODFORD 15,000 LB. 4' X 5' METAL DOCK PLATES @ 375.00
1 WHITNEY-JENSEN "C-FRAME" ELEC. POWER PUCNH #NSN (I.D.
#0047) NOT IN OPERATION
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
2 10,000 LB. BRIDGE CRANES W/ P&H ELEC. CHAIN HOISTS
& PENDANT CONTROLS @ 37,500.00
1 HYDROWAY 10,000 LB. CRANE SCALE #27410078
1 CADY 10-TON SHEET METAL HOIST GRAPPING DEVISE
1 LODGE & SHIPLEY ENGINE LATHE #NSN
1 GARDNER NO. 17 30" DISC GRINDER #NSN
1 U.S. MOD: V-2 VERTICAL MILLING MACHINE #1157
1 1997 CHEVROLET "CHEYENE 3500" 12' STAKE BED TRUCK
#1GBJC34K3RE113827
1 15' X 10' X 10'h GALV. PAINT SPRAY BOOTH W/ EXHAUST
2 STEEL PEDESTAL FRAME EXPLOSION PROOF LIGHTS @ 450.00
1 DAYTON MOD: 30049 24" INDUSTRIAL BLOWER
1 THERMAL ARC "PAK 10" 100-AMP FLASMA WELDER #H80901A177028E
1 MILWAUKEE NO. 4200 MAGNETIC DRILL PRESS #302-1557
1 TIMESAVER MOD: 325M-1 "SPEEDBELT" 24" WIDE-BELT SANDER
#6039
1 ROUSSELLE NO. 6 O.B.I. PUNCH PRESS #FASA-8685 W/ AIR
CLUTCH & HYDRAULIC FEED TABLE
1 DURANT MOD: MD-10 POWER COIL STRAIGHTENER #906 W/
UN-COIL / RE-COIL STATION
1 DREIS & KRUMP MOD: UA12250 "CHICAGO" 1/4" X 12' POWER
SQUARING SHEAR #DS1559 W/ POWER BACK GAUGE
1 WEST BEND MOD: ST-20TC "WELD-BILT" 10 TON RAIL MOUNTED
HYDRAULIC "SCISSOR" PLATFORM SHEET LIFT #ST-TC 2276
6 LINDE ASST "VI" MODEL ARC WELDERS (NEED REPAIRS)
@ 87.50
1 YALE "WORKSAVER" WALK-BEHIND BATTERY-OP. FORK LIFT
#356106 (NEEDS REPAIR)
LOT MISC. IN REAR MAINTENANCE SHOP
<PAGE>
ATTACHMENT "A"
WC ACQUISITION CORP.
1530 COMMERCE DRIVE
STOW, OHIO
===============================================================================
1 CUPRUM 16' FIBERGLASS STEP LADDER
LOT MISC. ALUM. STEP LADDERS & WALK PLANKS
1 LOCKFORMER (NEEDS REPAIR)
1 RIDGID MOD: 535 PORTABLE ELEC. PIPE THREADER W/
CUTTER & REAMER
1 LOCKFORMER 24 GAUGE POWER EDGE / CLEAT / ROLL FORMER
#6455
LOT DE VILBISS ARRESTOR TYPE CONVEYORIZED AUTOMATIC TYPE
PAINT SPRAY SYSTEM W/ (2) SPRAY BOOTHS, OVERHEAD HOOK-
TYPE CHAIN CONVEYOR, REGULATORS, CONTROLS, HYDRAULIC
PUMPS & HEATERS (GAS FIRED)
LOT MISC. STEEL PALLET RACK & STORAGE SHELVING
LOT MISC. METAL WIRE TOOL CRIB CAGES
LOT MISC. POWER HAND TOOLS (ELEC. & PNEUM. DRILLS,
SAWS, GRINDERS, SHEARS, NIBBLERS, SANDERS, ETC.)
LOT MISC. MACHINE TOOLING, PUNCHES, DIES, ARBORS, TOOL
HOLDERS, ETC.
LOT MISC. TOOL CABINETS, PARTS BINS, ETC.
1 SULLAIR MOD: 16-75H SKID MOUNTED ROTARY SCREW AIR
COMPRESSOR #46507 CGI
1 DAVEY 50 H.P. SKID MOUNTED AIR COMPRESSOR #NSN
(I.D. # 0038)
1 VAN AIR MOD: D 11 A REFRIG. AIR DRYER #808854
1 VERTICAL STEEL AIR RECEIVING TANK (IN COMPRESSOR ROOM)
===============================================================================
BY: /s/ Donald Engel
-----------------------------------
DONALD ENGEL
C.E.O. & CO-CHAIRMAN OF THE BOARD
<PAGE>
BORROWER
O B AGREEMENT
OCEAN BANK TO FURNISH
780 N.W.42ndAvenue HI-RISE RECYCLING SYSTEMS, INC. INSURANCE
Miami, Florida 33126-5597 & WC ACQUISITION CORP.
(305)442-2660 16255 N.W. 54TH AVENUE
"LENDER" MIAMI, FL 33014
--------------------------------
Telephone Number
624-9222
--------------------------------
- -------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY DATE
INITIALS RATE CREDIT LIMIT AGREEMENT DATE
- -------------------------------------------------------------------------------
TR VARIABLE $850,000.00 02/03/97 02/03/02
- -------------------------------------------------------------------------------
CUSTOMER NUMBER LOAN NUMBER
- -----------------------------------
100932574-63
- -----------------------------------
INSURANCE REQUIREMENT:
The Borrower identified above understands that one of the requirements of the
loan or financial accommodation is that the property pledged as collateral on
the loan must be insured.
INSURANCE COVERAGE:
The insurance coverage must provide at least fire, theft, combined additional
coverages, and in addition, $ n/a deductible comprehensive and collision
coverage on motor vehicles. The insurance policy must contain a loss payable
clause endorsement naming the Lender.
INSURANCE COMPANY:
BORROWER UNDERSTANDS THAT BORROWER MAY CHOOSE THE PERSON THROUGH WHOM THE
INSURANCE IS TO BE OBTAINED, AND THAT IF IT IS OBTAINED THROUGH LENDER, THE COST
OF THE INSURANCE WILL BE $ n/a . The insurance coverage must be provided by an
insurance company reasonably acceptable to Lender.
DURATION OF INSURANCE COVERAGE:
The insurance coverage identified above must remain in effect during the term of
the loan or financial accommodation.
FAILURE TO PROVIDE INSURANCE:
Proof of the required insurance coverage with an effective date the same or
earlier than the Funding/Agreement Date indicated above must be delivered to
Lender within ten (10) days from the Funding /Agreement Date. Borrower
acknowledges and understands that if Borrower fails to provide proof of the
required insurance or fails to maintain such insurance at any time during the
term of the loan or financial accommodation, the Lender may obtain a policy
protecting Lender's interest in the collateral for the remaining term of the
loan. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT IF LENDER PURCHASES ANY SUCH
INSURANCE COVERAGE THE INSURANCE COVERAGE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL UP TO THE AMOUNT OF THE LOAN.
Borrower further acknowledges that: Any equity in the collateral will not be
insured; the insurance coverage will not provide any public liability or
property damage indemnification, and will not meet the requirements of any
financial responsibility law.
AUTHORIZATION:
Borrower authorizes Lender to obtain insurance coverage to protect Lender's
interest in the collateral and to add the premium to the loan or account balance
in the event that Borrower fails to provide proof of the required insurance
coverage, or if such insurance coverage is cancelled or terminated. Interest on
the premium shall accrue at the interest rate indicated on the promissory note
or agreement and shall be charged from the date the premium is added to the loan
amount.
PROPERTY TO BE INSURED:
INSURER:
Borrower has arranged for the required insurance to be provided through the
insurance company shown below and requested an insurance agent of the company to
note a loss payable clause endorsement in favor of Lender on the policy and to
send proof of such coverage to Lender.
INSURANCE COMPANY:
AGENT:_____________________________________ PHONE:____________________________
POLICY OR BINDER DATE:_____________________ NO.:______________________________
EFFECTIVE DATE:____________________________ EXPIRATION DATE:__________________
- --------------------------------------------------------------------------------
Borrower has read, understands and agrees to the terms and conditions of this
Agreement and acknowledges receipt of an exact copy of this Agreement.
<TABLE>
<CAPTION>
DATE: FEBRUARY 3, 1997
<S> <C>
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER: HI-RISE RECYCLING SYSTEMS, INC.
& WC ACQUISITION CORP. & WC ACQUISITION CORP.
/s/ Donald Engel /s/ Donald Engel
- ---------------------------------------- -------------------------------------------------
DONALD ENGEL, For WC ACQUISITION CORP. DONALD ENGEL, For HI-RISE RECYCLING SYSTEMS, INC.
TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD
BORROWER BORROWER:
BY: BY:
--------------------------------------- -------------------------------------------
TITLE: TITLE:
------------------------------------ ----------------------------------------
</TABLE>
<PAGE>
BORROWER
O B AGREEMENT
OCEAN BANK TO FURNISH
780 N.W. 42nd Avenue HI -RISE RECYCLING SYSTEMS, INC. INSURANCE
Miami, Florida 33126-5597 & WC ACQUISITION CORP.
(305)442-2660 16255 N.W. 54TH AVENUE
"LENDER" MIAMI, FL 33014
--------------------------------
Telephone Number
624-9222
--------------------------------
- -------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY DATE
INITIALS RATE CREDIT LIMIT AGREEMENT DATE
- -------------------------------------------------------------------------------
TR VARIABLE $900,000.00 02/03/97 02/03/02
- -------------------------------------------------------------------------------
CUSTOMER NUMBER LOAN NUMBER
- -----------------------------------
100932574-64
- -----------------------------------
INSURANCE REQUIREMENT:
The Borrower identified above understands that one of the requirements of the
loan or financial accommodation is that the property pledged as collateral on
the loan must be insured.
INSURANCE COVERAGE:
The insurance coverage must provide at least fire, theft, combined additional
coverages, and in addition, $ n/a deductible comprehensive and collision
coverage on motor vehicles. The insurance policy must contain a loss payable
clause endorsement naming the Lender.
INSURANCE COMPANY:
BORROWER UNDERSTANDS THAT BORROWER MAY CHOOSE THE PERSON THROUGH WHOM THE
INSURANCE IS TO BE OBTAINED, AND THAT IF IT IS OBTAINED THROUGH LENDER, THE COST
OF THE INSURANCE WILL BE $ n/a . The insurance coverage must be provided by an
insurance company reasonably acceptable to Lender.
DURATION OF INSURANCE COVERAGE:
The insurance coverage identified above must remain in effect during the term of
the loan or financial accommodation.
FAILURE TO PROVIDE INSURANCE:
Proof of the required insurance coverage with an effective date the same or
earlier than the Funding/Agreement Date indicated above must be delivered to
Lender within ten (10) days from the Funding /Agreement Date. Borrower
acknowledges and understands that if Borrower fails to provide proof of the
required insurance or fails to maintain such insurance at any time during the
term of the loan or financial accommodation, the Lender may obtain a policy
protecting Lender's interest in the collateral for the remaining term of the
loan. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT IF LENDER PURCHASES ANY SUCH
INSURANCE COVERAGE THE INSURANCE COVERAGE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL UP TO THE AMOUNT OF THE LOAN.
Borrower further acknowledges that: Any equity in the collateral will not be
insured; the insurance coverage will not provide any public liability or
property damage indemnification, and will not meet the requirements of any
financial responsibility law.
AUTHORIZATION:
Borrower authorizes Lender to obtain insurance coverage to protect Lender's
interest in the collateral and to add the premium to the loan or account balance
in the event that Borrower fails to provide proof of the required insurance
coverage, or if such insurance coverage is cancelled or terminated. Interest on
the premium shall accrue at the interest rate indicated on the promissory note
or agreement and shall be charged from the date the premium is added to the loan
amount.
PROPERTY TO BE INSURED:
INSURER:
Borrower has arranged for the required insurance to be provided through the
insurance company shown below and requested an insurance agent of the company to
note a loss payable clause endorsement in favor of Lender on the policy and to
send proof of such coverage to Lender.
INSURANCE COMPANY:
AGENT:_________________________________________ PHONE:_______________________
POLICY OR BINDER DATE:_________________________ NO.: ________________________
EFFECTIVE DATE:________________________________ EXPIRATION DATE: ____________
- -------------------------------------------------------------------------------
Borrower has read, understands and agrees to the terms and conditions of this
Agreement and acknowledges receipt of an exact copy of this Agreement.
<TABLE>
<CAPTION>
DATE: FEBRUARY 3, 1997
<S> <C>
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER: HI-RISE RECYCLING SYSTEMS, INC.
& WC ACQUISITION CORP. & WC ACQUISITION CORP.
BY:________________________________________ BY:___________________________________________
DONALD ENGEL, For WC ACQUISITION CORP. DONALD ENGEL, For HI-RISE RECYCLING SYSTEMS, INC.
TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD TITLE: C.E.O. & CO-CHAIRMAN OF THE BOARD
BORROWER BORROWER:
BY: BY:
--------------------------------------- -------------------------------------------
TITLE: TITLE:
------------------------------------ ----------------------------------------
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
IDC Systems, Inc. New York
Dade County Recycling, Inc. Florida
Wilkinson Company, Inc. Ohio
Recycltech Enterprises, Inc. Ontario, Canada
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Hi-Rise Recycling Systems, Inc. on Form S-3 Amendment No. 1 (File No. 333-01206)
of our report dated February 28, 1997, on our audits of the consolidated
financial statements of Hi-Rise Recycling Systems, Inc. as of December 31, 1996
and 1995, and for the years ended December 31, 1996, and 1995, which report is
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
/s/ COOPERS & LYBRAND L.L.P.
Miami, Florida
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,711,752
<SECURITIES> 597,973
<RECEIVABLES> 912,323
<ALLOWANCES> 147,299
<INVENTORY> 1,117,883
<CURRENT-ASSETS> 4,522,370
<PP&E> 960,480
<DEPRECIATION> 203,110
<TOTAL-ASSETS> 9,981,293
<CURRENT-LIABILITIES> 1,950,885
<BONDS> 0
0
0
<COMMON> 62,311
<OTHER-SE> 7,818,097
<TOTAL-LIABILITY-AND-EQUITY> 9,981,293
<SALES> 3,202,309
<TOTAL-REVENUES> 3,207,309
<CGS> 1,587,161
<TOTAL-COSTS> 6,031,909
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,207
<INCOME-PRETAX> (2,553,449)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,553,449)
<DISCONTINUED> 0
<EXTRAORDINARY> 84,702
<CHANGES> 0
<NET-INCOME> (2,639,151)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> 0
</TABLE>
