SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from _______________ to ______________
Commission file number 0-21946
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)
Check whether the issuer: (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. [X]
State issuer's revenues for its most recent fiscal year: $10,483,576
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 27, 1998 was $30,177,789, computed by reference to
the closing bid price of the Common Stock on such date.
As of March 27, 1998, there were 9,110,276 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
The Company is primarily engaged in manufacturing, distributing, marketing
and selling solid waste handling equipment. Until February 1997, the Company was
primarily engaged in distributing, marketing and selling a proprietary automated
system known as the hi-rise system (the "Hi-Rise System") designed to collect
source-separated recyclables and other solid waste in multi-story residential
buildings. In February 1997, the Company expanded its product lines to include
sheet metal fabrication products, consisting primarily of rubbish and laundry
chutes. During the year ended December 31, 1997, sales of sheet metal
fabrication products accounted for approximately 39% of the Company's revenues.
In February 1998, the Company acquired Hesco Sales, Inc. ("Hesco"), a Florida
corporation engaged in the business of manufacturing, marketing and selling
solid waste handling equipment products. Hesco's product lines include waste
containers and trash compaction systems. The Company anticipates that in the
future Hesco's product lines will be the Company's single largest source of
revenue. In addition, the Company expects that its other principal sources of
revenue will be sales of rubbish and linen chutes, trash compaction systems and
the Hi-Rise System and sales-types leases of the Hi-Rise System.
The Hi-Rise System, which is marketed under the Hi-Rise Recycling
System/Trademark/ name, is easily adapted to and takes advantage of the
efficiency and convenience of 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 153 Hi-Rise Systems, of which 63 were
sold and 90 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. In 1996, the Company
focused its sales efforts with respect to the Hi-Rise System on the new
construction market.
The Company's backlog has grown from approximately $1.6 million at December
31, 1995 and $3.5 million at December 31, 1996 to approximately $5.1 million at
December 31, 1997.
As part of its plan to expand its operations into new geographic markets,
in February 1995, the Company acquired (the "IDC Merger") all of the outstanding
capital stock of IDC Systems, Inc., a then privately-held New York corporation
("IDC Systems"). Through IDC Systems, the Company is engaged in the business of
assembling, selling, installing and servicing trash compaction systems in New
York, New Jersey and Connecticut. As of December 31, 1997, through IDC Systems,
the Company serviced on a annual basis approximately 1,700 compaction customers,
many of which are multi-story residential buildings that are potential customers
for the Hi-Rise System.
The Company was incorporated in Florida in May 1990 as Recycling Systems,
Inc. and in March 1992, changed its name to Hi-Rise Recycling Systems, Inc. The
Company's executive offices are located at 16255 N.W. 54th Avenue, Miami,
Florida 33014, and its telephone number is (305) 624-9222. Unless otherwise
indicated, all references herein to the Company include its wholly-owned
subsidiaries, IDC Systems, Inc., Wilkinson Company, Inc., Dade County Recycling,
Inc., Atlantic Maintenance of Miami, Inc., NuReTec of Florida, Inc.,
Recycltech Enterprises Ltd. and Hesco Sales, Inc.
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RECENT EVENTS
WILKINSON ACQUISITION. On February 3, 1997, the Company acquired (the
"Wilkinson Acquisition") 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
Company consummated the Wilkinson Acquisition 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. 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, par value $0.01
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 Company, Inc. ("Wilkinson"), is
continuing the business previously conducted by the Wilkinson Seller. Wilkinson
has a network of approximately 65 domestic independent distributors. The Company
utilizes 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.
The Company is consolidating the manufacturing and engineering of certain of the
Company's products at Wilkinson's facility in Ohio, which the Company believes
will enable it to realize cost efficiencies.
1997 PRIVATE PLACEMENT. In late June and early July 1997, the Company sold
an aggregate of 200 shares of newly created Series B Convertible Preferred
Stock, $.01 par value per share (the "Series B Preferred Stock"), and warrants
(the "Warrants") to purchase an aggregate of 888,887 shares of the Common Stock,
in a private placement to accredited investors (the "1997 Private Placement")
for an aggregate purchase price of $2,000,000. The Series B Preferred Stock is
convertible, at the option of the holder thereof, into Common Stock at a
conversion price of $2.25. The conversion price is subject to adjustment for
various events such as stock dividends and recapitalizations. In addition, if
the average closing bid price (the "Trading Price") of the Common Stock, as
reported on the Nasdaq Small-Cap Market, during the three-month period
commencing on the 270th day after the date of the initial issuance of shares of
the Series B Preferred Stock and ending on the 360th day after such date is less
than 135% of the then applicable conversion price, the conversion price shall be
reduced to such price as shall equal the Trading Price divided by 1.35. Upon
conversion, the holder will be entitled to dividends at the rate of 8% per
annum, accrued from the date of issuance through the date of conversion payable
in Common Stock. The Series B Preferred Stock has no voting rights.
The Warrants are exercisable to purchase from the Company shares of Common
Stock at an exercise price of $2.25 per share. The exercise price is subject to
adjustment for various events such as stock dividends and recapitalizations. In
addition, if the Trading Price of the Common Stock, as reported on the Nasdaq
Small-Cap Market, during the three-month period commencing on the 270th day
after June 23, 1997 and ending on the 360th day after June 23, 1997 is less than
135% of the then applicable exercise price, the exercise price shall be reduced
to such price as shall equal the Trading Price divided by 1.35.
In connection with the sale of the Series B Preferred Stock and the
Warrants, the Company granted the purchasers certain registration rights with
respect to the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock and exercise of the Warrants.
In connection with the 1997 Private Placement, the Company issued to LBC
Capital Resources, the placement agent for the 1997 Private Placement, five-year
warrants to purchase 93,000 shares of Common Stock at an exercise price of $3.00
per share.
NURETEC ACQUISITION. In July 1997, the Company acquired (the "NRT Merger")
all of the issued and outstanding capital stock of NuReTec of Florida, Inc.
("NRT"), through the merger of NRT into NRT Acquisition Sub, Inc., a
wholly-owned subsidiary of the Company. In consideration for its acquisition of
the capital stock of NRT, the Company issued an aggregate of 150,000 shares of
its Common Stock, valued at $487,500, to the former sole shareholder of NRT.
HESCO AND ATLANTIC MAINTENANCE ACQUISITION. On February 20, 1998, HS
Acquisition Corp., a newly-formed wholly-owned subsidiary of the Company, merged
with and into Hesco Sales, Inc., a Florida corporation ("Hesco") owned by Evelio
Acosta ("Acosta"), with Hesco as the surviving corporation (the "Hesco Merger").
As a
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result of the Hesco Merger, Hesco became a wholly-owned subsidiary of the
Company. The consideration for the Hesco Merger paid by the Company was
$8,300,000 in cash (including $2,236,281 in repayment of shareholder loans). The
consideration for the Hesco Merger was partially funded by the net proceeds of
the 1998 Private Placement described below. Approximately $500,000 of the Hesco
Merger consideration was funded from the proceeds of a $500,000 five-year term
loan from Donald Engel, Chairman of the Board of Directors and Chief Executive
Officer of the Company. The remaining portion of the Hesco Merger consideration
was funded through the proceeds of a line of credit and a term loan from Ocean
Bank, N.A. ("Ocean Bank").
On February 20, 1998, AM Acquisition Corp., a newly-formed wholly-owned
subsidiary of the Company, merged with and into Atlantic Maintenance of Miami,
Inc., a Florida corporation ("Atlantic Maintenance") owned by Acosta, with
Atlantic Maintenance as the surviving corporation (the "Atlantic Maintenance
Merger"). As a result of the Atlantic Maintenance Merger, Atlantic Maintenance
became a wholly-owned subsidiary of the Company. The consideration for the
Atlantic Maintenance Merger consisted of 1,276,094 shares of Common Stock.
Hesco has been engaged primarily in manufacturing, marketing and selling
solid waste handling equipment products for the past 35 years. Hesco's product
lines include waste containers, trash compaction systems, roll-off hoists, tarp
systems, bailers and hoppers. In addition, Hesco recently commenced the sale of
rebuilt garbage trucks. Hesco markets its products to waste haulers and various
municipalities primarily in the State of Florida. The Company believes that the
acquisition of Hesco will enable the Company to offer a full line of solid waste
handling and disposal equipment products and expand horizontally into the waste
hauler and municipal waste equipment markets.
1998 PRIVATE PLACEMENT. On February 20, 1998, the Company sold an
aggregate of 1,299,098 shares of its Common Stock for $2.70 per share in a
private placement to accredited investors (the "1998 Private Placement") in
which it received aggregate gross proceeds of approximately $3,507,560. After
payment of fees, expenses and commissions, the net proceeds to the Company from
the 1998 Private Placement were approximately $3,200,000. The purchasers were
granted certain registration rights with respect to the shares purchased in the
1998 Private Placement.
In connection with the 1998 Private Placement, the Company issued to
Gilford Securities Incorporated, the placement agent for the 1998 Private
Placement ("Gilford"), five-year warrants to purchase 129,910 shares of the
Common Stock (the "Gilford Warrants"), which warrants are exercisable at $2.70,
the sales price per share of Common Stock in the 1998 Private Placement. The
Company granted to Gilford certain registration rights with respect to the
shares of Common Stock issuable upon exercise of the Gilford Warrants.
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. 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 is becoming
increasingly costly.
In response to these concerns, government authorities have adopted
regulations designed 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 recycling goals and/or tax incentives to encourage recycling.
During the past decade, according to the Environmental Protection Agency,
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45 states and the District of Columbia have established goals to recycle various
percentages, ranging from 25% to 50%, of solid waste by specified dates, and 33
states and the District of Columbia offer recycling tax incentives.
Various state and local legislation has been enacted requiring or
encouraging separation of solid waste materials prior to final disposal 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 solid
waste separation programs designed to reduce the volume of municipal solid waste
by at least 30% by the end of 1994. Many large Florida municipalities, including
those in Miami-Dade, Broward and Collier (West Coast Florida) Counties, mandate
that residents separate and recycle newspaper, aluminum cans, glass and plastic
bottles. The State of New York enacted legislation in 1988 requiring
municipalities to adopt ordinances by 1992 mandating source separation programs.
Additionally, many large cities, including New York City, Chicago and Toronto,
Canada, have enacted legislation mandating source separation programs for
multi-story buildings.
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 garbage at a
dirty-materials recovery facility, primarily by sorting through the refuse by
hand. The Company believes 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 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, newspaper and plastic, plus garbage.
By using 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.
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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 buildings 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.
In May 1997, the Company introduced the hi-rise trisorter system (the
"Hi-Rise Trisorter System"), a new alternate version of the Hi-Rise System. Of
the 153 Hi-Rise Systems presently sold and installed, 21 of such systems were
Hi-Rise Trisorter Systems. The Hi-Rise Trisorter System combines the Hi-Rise
System floor panels with a chute extension that directs waste into one of three
separate bins for garbage, paper or commingled recyclables, instead of the six
section carousel. The Company developed the Hi-Rise Trisorter System, which
requires less space than the original version of the Hi-Rise System, for the
existing building market.
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.
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, 1995, 1996 and 1997, sales and
sales-type leases of Hi-Rise Systems accounted for approximately 40%, 36% and
29%, respectively, of the Company's revenues.
PRODUCTS
HESCO PRODUCTS. Hesco products consist of its line of waste containers,
including roll-off containers, front load and rear load containers and recycling
containers. Waste containers are available in a number of sizes and are
constructed from heavy duty steel. Certain models of the waste containers are
also available in aluminum. Hesco also offers plastic molded lids with heavy
duty double wall construction for front load and rear load waste containers.
These lids have molded in handles for easy opening. Plastic molded lids are made
of high-density polyethylene resin which is resistant to stress, cracking,
chemicals and temperature extremes.
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In addition to waste containers, Hesco also sells trash compaction systems,
recycling equipment such as balers and hoppers, and specialized equipment for
use with waste handling trucks. Hesco's line of trash compaction systems are
available in a number of models designed primarily for use in multi-story
buildings and commercial establishments. Hesco offers roll-off hydraulic hoists
with triple cylinder design for hoisting waste containers on and off of waste
hauling trucks. Hesco also offers a fully automated hydraulic tarp mechanism
designed exclusively for the roll-off hoist. For the years ended October 31,
1996 and 1997, Hesco's sales of such products were $12,182,540 and $11,962,588,
respectively.
Additionally, the Company has recently begun the sale of rebuilt garbage
trucks through Hesco. The Company purchases used garbage trucks which it
refurbishes and then sells to its customers.
WILKINSON PRODUCTS. Wilkinson sells, manufactures, markets and installs
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.
During the year ended December 31, 1997, sales of such products accounted for
approximately 43% 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, 1995, 1996 and 1997,
sales of trash compaction systems accounted for approximately 25%, 14% and 11%,
respectively, of the Company's revenues.
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.
The Company has expanded its operations into new geographic markets
beginning in markets in which the Hi-Rise 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. Through IDC Systems,
the Company currently services on an annual basis 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' customer base and industry contacts. The Company
seeks to sell its Hi-Rise Systems and continues 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
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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'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 153 systems installed to date, 141 have
been installed in multi-story residential buildings (including 58 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, the European Community,
the Caribbean and South America.
HI-RISE SYSTEM SALES. Historically, the Company has derived a substantial
portion of its revenue from sales, leases and rentals of the Hi-Rise System. To
date, 153 Hi-Rise Systems have been installed in several urban communities,
including 113 systems in Florida, 24 in Toronto, Canada, 11 in New York City, 2
in the Washington, D.C. area and one each in Chicago, Illinois, the University
of Wisconsin and the University of Georgia.
MARKETING STRATEGY. The Company engages an independent sales force and
independent distributors in various regions throughout the United States, for
marketing the Hi-Rise System, Wilkinson's sheet metal fabrication products and
IDC System's trash compaction systems to multi-story building owners,
architects, building contractors and waste hauling companies. For the years
ended December 31, 1995 and 1996, one of such distributors, Recycltech
Enterprises Ltd., a Province of Ontario Corporation and now a wholly-owned
subsidiary of the Company ("Recycltech"), accounted for approximately 5% of the
Company's system sales. Although the 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 is
attempting to capitalize on IDC System's customer base and industry contacts.
The Company seeks to sell its Hi-Rise Systems through a sales force based at IDC
Systems and continues to sell compaction systems in New York City and the
surrounding geographic areas. In February 1995, the Company also acquired (the
"DCR Acquisition") 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 (the "Recycltech Acquisition") all of the
outstanding capital stock of 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.
The Company has a network of approximately 65 domestic and five
international distributors. The Company generally has contractual arrangements
with its distributors pursuant to which the distributor is granted the exclusive
right to market the Company's products in the specified territory. The
distributor typically is not required to meet sales quotas to maintain its
relationship with the Company. Most of the Company's distributors purchase the
Company's products for resale to their customers. Since the consummation of the
Wilkinson Acquisition, the Company has commenced marketing the Company's 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 its distributor network to offer a fully integrated
waste disposal system, it will be able to penetrate further the new construction
market.
Hesco markets its products to waste haulers, municipalities and residential
customers primarily in the State of Florida. Hesco solicits a significant
portion of its sales through participation in municipal bids and is listed on
the Florida Statewide Vendor List. Hesco's marketing efforts include monitoring
trade journals and other industry sources for bid solicitations by various
entities including government authorities and related instrumentalities, and
responding to such bid solicitations. Typically, a bidder submits a proposal
detailing its qualifications, the products to be provided and the cost of the
products to the soliciting entity which then, based upon its evaluation of the
proposals submitted, awards the order to the successful bidder. Hesco employs
one sales manager and three salesmen who receive salaries and sales commissions.
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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 153 systems installed to date, 92 have
been installed pursuant to lease agreements.
SHARED SAVINGS PROGRAMS
In connection with sales, leases and rentals of Hi-Rise Systems,
historically, the Company sought 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.
During the years ended December 31, 1995, 1996 and 1997, shared savings contract
revenue accounted for approximately 13%, 13% and 4%, respectively, of the
Company's revenues. The Company intends to decrease its emphasis on shared
savings agreement and anticipates that it will enter into these agreements on a
limited basis in the future. Accordingly, revenues from shared savings
agreements are expected to constitute a decreasing percentage of the Company's
revenues in the future. To date, the Company has entered into 35 shared savings
agreements.
MANUFACTURING AND SUPPLY
The Company manufactures the Hi-Rise Trisorter System, its sheet metal
fabrication products, including trash and linen chutes, and a majority of its
trash compaction systems at its facility in Stow, Ohio. However, the Company
obtains certain of its component parts, including carrousels, roll-away waste
collection bins and most of the components of the electronic control panel and
"controller" incorporated into the Hi-Rise System, and to a lesser extent
certain components of its trash compaction systems, from third-party
manufacturers. For the years ended December 31, 1995, 1996 and 1997,
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 manufacturers 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.
The Company's 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.
Through Wilkinson, the Company 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.
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However, failure or delay by the Company's suppliers in supplying materials for
its products would adversely affect the Company's ability to obtain and deliver
products on a timely and competitive basis. The Company has begun configuring
the facility to allocate space for new manufacturing. Certain of the Company's
existing equipment may be used for manufacturing of the Company's other products
and the Company intends to purchase additional equipment for this purpose.
The Company currently manufactures the Hesco line of produts at its 110,000
square foot facility in Miami, Florida and its 70,000 square foot facility in
Okahumpka, Florida. The manufacturing process for containers consists primarily
of decoiling and cutting the metal to length, forming, welding and assembly. The
containers are then washed with an acid bath, painted with red oxide primer to
inhibit rust and finished with two coats of high gloss finish paint. Plastic
lids are molded from high density polyethylene resin at the Company's facility
in Hialeah, Miami, Florida. The Company also purchases plastic lids from third
party manufacturers. The Company manufactures Hesco's trash compaction systems
and tarp and hoist systems at its facility in Miami, Florida utilizing
components obtained from third party manufacturers. The manufacturing process
consists primarily of welding, assembly and finishing.
The principal materials used by the Company in the manufacture of Hesco's
products are steel, aluminum and plastic. The Company currently has several
sources for its steel, aluminum and plastic requirements and the Company
believes that other sources are available. In addition, the Company obtains all
of its trash compaction system components and tarp and hoist system components
from third party manufacturers. The Company currently has alternative sources
for these components and the Company believes that additional sources are
available. Hesco does not maintain supply contracts with any of its material
suppliers or component manufacturers and purchases materials and components
pursuant to purchase orders placed from time to time in the ordinary course of
business. Failure or delay by Hesco's suppliers or manufacturers in supplying
necessary materials or components would adversely affect the Company's ability
to manufacture, obtain and deliver products on a timely basis.
The Company intends to manufacture products for its customers in the
Midwest and Northeast regions at its facility in Stow, Ohio, and products,
including chutes, for its customers in the Southeast region at its facilities in
Miami and Okahumpka, Florida. The Company also intends to use IDC Systems'
facility in New York as a distribution center for the Northeast.
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 time 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 for
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, 1997, the Company had a backlog of approximately $5,100,000
relating primarily to installations of Hi-Rise Systems in new buildings and
contracted compactor orders. At December 31, 1995 and 1996, the Company had a
backlog of approximately $1,600,000 and $3,500,000, respectively, relating to
installations of Hi-Rise Systems in new buildings and contracted compactor
orders. The Company believes that its present inventory level together with
readily available components and supplies is sufficient to satisfy the current
backlog.
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The minimum period of time required by the Company to fill an order for
its custom-designed Wilkinson products 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, the sales cycle
for the Company's Wilkinson products may range from six months to 18 months.
Purchase orders for the Company's Hesco waste containers, lids, roll-off
hoists and tarps are generally filled promptly from inventory. Trash compaction
systems are manufactured to the customer's order. The minimum period of time
required by Hesco to fill an order for a trash compaction system ranges from
four to six weeks. As a result, the sales cycle for the Company's Hesco products
may range from one day to two months depending on the type of product and
available inventory.
CUSTOMERS
To date, the Company has marketed the Hi-Rise System primarily to existing
and newly-constructed residential buildings. Since 1995, the Company has focused
on the new construction residential building market. The new construction market
in South Florida was a large source of orders for the Hi-Rise System during the
years ended December 31, 1995, 1996 and 1997. The Company plans to market the
Hi-Rise System beyond the residential building market to owners of existing
commercial buildings with waste disposal chutes and newly-constructed or
renovated 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 has enhanced 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.
A substantial portion of customers for Wilkinson's products consist of
architects and building contractors who specify its products in building
construction. These customers generally utilize these products in construction
of residential buildings, hotels and hospitals. The Company believes that the
Wilkinson Acquisition has enhanced its ability to penetrate the new construction
market.
The customers for Hesco's waste containers consist principally of waste
haulers and municipalities in the State of Florida. The Company markets Hesco's
trash compaction systems primarily to multi-story buildings and commercial
establishments. Rebuilt garbage trucks are marketed primarily to municipalities
in South America and the Caribbean. Hesco typically enters into blanket sales
orders with its municipal customers and certain waste haulers pursuant to which
it agrees to sell its products to the customer at prices which are fixed for a
specified period of time.
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, 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
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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 three
employees providing training and educational services.
In connection with Hi-Rise System sales, the Company offers a limited
warranty period of six months in the case of retrofit buildings, or a one year
in the case of new buildings, 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 System. Other than buildings which have
entered into lease agreements with the Company, to date, 13 buildings
(containing 17 systems) have entered into service contracts with the Company.
Revenues from these service contracts are not material.
The Company also provides central station monitoring services with each
Hi-Rise System. 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.
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 services if requested by the customer. 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.
In connection with sales of Hesco products, Hesco typically offers a
one-year limited warranty covering workmanship and materials, during which time
Hesco will repair or replace products or 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, 1995, 1996 and 1997,
product development expenditures by the Company were approximately $29,970,
$48,881 and $32,467, 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
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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 completed in 1995 and is being
actively marketed by the Company. 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. In 1997, the Company introduced the Hi-Rise
Trisorter System, designed primarily for the retrofit market.
COMPETITION
The waste management industry is characterized by intense competition. The
Company is aware of at least three companies that offer or are attempting to
offer solid waste collection alternatives for multi-story residential buildings.
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. The Company is aware of a
number of companies that offer trash compaction systems substantially similar to
those sold by the Company through IDC Systems. Through Wilkinson, the Company
competes with certain regional manufacturers of chutes and other sheet metal
fabrication products. Through Hesco, the Company competes with a number of
national and regional manufacturers and distributors of solid waste handling
equipment, including Marathon, McClain/EZ Pack and Waste Quip. Certain of the
Company's competitors are well established, have substantially greater
financial, personnel, marketing and other resources than the Company and have
established reputations. 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 Hi-Rise System currently competes
with other methods for separating and collecting recyclables and waste disposal.
Many 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,
quality and system flexibility.
PATENTS AND PROPRIETARY INFORMATION
The Company holds United States, Canadian and European Community patents,
which cover a system of separating waste in multi-story buildings with a chute
system. The Company's United States, Canadian and European Community patents
expire in 2008, 2013 and 2016, respectively. Functionally equivalent waste
collection and source-separation systems which may not be covered by the
Company's patents may be currently in commercial distribution by the Company's
competitors. The Company has applied for patents in Japan and Korea, 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. Through Wilkinson, the
Company holds United States patents covering certain recycling bins which expire
at various dates from 2009 through 2010 and has applications pending for
additional patents. Through Hesco, the Company also holds a United States patent
covering its hydraulic tarp mechanism, which expires in 2008. Additionally,
through Atlantic Maintenance, the Company has a United States patent pending
covering a compactor assembly for use with recycling bins, which if issued,
would expire in 2017.
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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 circumvented or invalidated. Although the Company believes that its
patents and products 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
products or obtain a license. Moreover, if one or more of the Company's products
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 December 31, 1997, the Company employed approximately 87 persons, of
which seven are in executive positions, 12 are in sales, 33 are in production,
two are in marketing, 18 are in service and installation, eleven are in
administration, two are in education and two are in engineering. Included in
such number of employees are the following employees: 18 persons employed by IDC
Systems, including one in an executive position and three in sales, two in
administration and 12 in service; and 40 persons employed by Wilkinson,
including four in administration, four in sales and 32 in production. At
December 31, 1997, Hesco employed approximately 130 persons, including two in
executive positions, five in clerical and administrative positions, four in
sales positions, one plant manager and approximately 115 shop personnel. The
Company believes that it will be able to retain such personnel and that its
employee relations are satisfactory.
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 Company's collective bargaining agreement with the IDC Union
expired on March 15, 1998 and the Company and the IDC Union are currently
negotiating the terms of a new agreement. 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. Hesco is not a party to any collective bargaining agreement.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
The Company's executive offices and assembly operations are currently
located in approximately 7,500 square feet of space in Miami, Florida which is
leased on a month-to-month basis at a current monthly rental of $3,410 per
month, with increases based on the consumer price index. The Company intends to
move its executive offices and assembly operations to Hesco's facilities in
Miami, Florida on or about May 1, 1998. The Company also leases office space in
New York City on a month-to-month basis at a monthly rental of $1,000.
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
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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 $13,000 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.
Recycltech's offices are located in approximately 3,472 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.
Hesco maintains its corporate headquarters and manufacturing facilities in
an approximately 110,000 square foot building situated on approximately six
acres of land in Miami, Florida. Prior to the Hesco Merger and the Atlantic
Maintenance Merger, in January 1998, the land and building were sold by United
Truck and Body Corporation, a subsidiary of Hesco, to an affiliate of Mr. Acosta
for a purchase price of approximately $1.3 million. Hesco also maintains a
manufacturing facility in an approximately 70,000 square foot building in
Okahumpka, Florida and an approximately 3,000 square foot shop in Hialeah,
Miami, Florida used for molding its plastic container lids. Rent for these
facilities are $27,000 per month for the Miami facility and $1,000 per month for
the Hialeah facility. The Okahumpka facility is rent free through August 1999.
The leases for these Hesco facilities were entered into between Hesco and Acosta
and/or affiliates of Acosta in connection with the Hesco Merger and Atlantic
Maintenance Merger and are subject to unconditional guaranties between the
Company and the respective landlords.
ITEM 3. LEGAL PROCEEDINGS
As a result of operations conducted in the ordinary course of business,
from time to time the Company may be, and curently is, 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 the Company's product liability insurance policy are
adequate and that any such claims will not have a material adverse effect on the
Company's financial condition or results of operations.
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 alleged 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 was seeking compensatory
damages of $600,000 for breach of contract and $600,000 for fraud and
misrepresentation. On March 2, 1998, the Company entered into a compromise
agreement with Mr. Payton pursuant to which (1) the Company agreed to pay Mr.
Payton $100,000, in cash and (2) Mr. Payton agreed to release all claims against
the Company.
On February 10, 1998, Edward Brown ("Mr. Brown"), an employee of the New
York City Housing Authority, filed a lawsuit in the Supreme Court of the State
of New York, County of Bronx, against International Dynetics Corp., Waste
Technology Corp., Precision Machinery Systems Inc., the Company, IDC Systems and
IDC Acquisition Sub, Inc. (collectively, the "Defendants"). Mr. Brown is
claiming damages seeking damages of $2,000,000 in negligence, strict liability
in tort and breach of express and implied warranties for injuries allegedly
sustained by Mr. Brown on July 30, 1996 when the casters on a trash container
installed by defendants in a New York Housing Authority building in the county
of Bronx, City and State of New York, broke off, causing the trash container to
fall unto Mr. Brown. The Company believes that such claim will not have a
material adverse affect on the Company's financial condition or results of
operations.
On March 10, 1998, World Business Brokers, Inc., a Florida corporation
("World Business Brokers"), filed a lawsuit in the Circuit Court of the Eleventh
Judicial Circuit for Dade County Florida against the Company. In
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general, the lawsuit alleges that the Company entered into an Information
Agreement with World Business Brokers pursuant to which the Company agreed to
pay a commission based upon industry standards to World Business Brokers in
connection with the Hesco Merger and the Atlantic Maintenance Merger. World
Business Brokers is seeking damages in excess of $15,000 and attorneys' fees.
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 in July 1993 (the "IPO"). 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.
PERIOD HIGH LOW
- ----------------------------------------- ------------- ---------------
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
Year ended December 31, 1997
1st Quarter $4-3/16 $3
2nd Quarter 3-5/8 2-1/2
3rd Quarter 4-11/16 2-5/8
4th Quarter 4-3/8 2-5/16
As of March 28, 1998, there were 101 holders of record of the Company's
Common Stock. The Company believes that there are in excess of 1,000 beneficial
owners of the Company's Common Stock. On March 27, 1997, the closing bid price
of the Common Stock was $3.50 per share.
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In late June and early July 1997, the Company sold an aggregate of 200
shares of Series B Convertible Preferred Stock and Warrants to purchase an
aggregate of 888,887 shares of the Common Stock, in a private placement to
accredited investors for an aggregate purchase price of $2,000,000 pursuant to
Rule 506 of Regulation D under the Securities Act. The Series B Preferred Stock
is convertible, at the option of the holder thereof, into Common Stock at a
conversion price of $2.25. The conversion price is subject to adjustment for
various events such as stock dividends and recapitalizations. In addition, if
the Trading Price of the Common Stock is less than 135% of the then applicable
conversion price, the conversion price shall be reduced to such price as shall
equal the Trading Price divided by 1.35. Upon conversion, the holder will be
entitled to dividends at the rate of 8% per annum, accrued from the date of
issuance through the date of conversion payable in Common Stock. The Series B
Preferred Stock has no voting rights.
The Warrants are exercisable to purchase from the Company shares of Common
Stock at an exercise price of $2.25 per share. The exercise price is subject to
adjustment for various events such as stock dividends and recapitalizations. In
addition, if the Trading Price of the Common Stock, as reported on the Nasdaq
Small-Cap Market, during the three-month period commencing on the 270th day
after June 23, 1997 and ending on the 360th day after June 23, 1997 is less than
135% of the then applicable exercise price, the exercise price shall be reduced
to such price as shall equal the Trading Price divided by 1.35.
In connection with the sale of the Series B Preferred Stock and the
Warrants, the Company granted the purchasers certain registration rights with
respect to the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock and exercise of the Warrants.
In connection with the DCR Acquisition, in February 1995, the Company
issued 18,000 shares of Common Stock, valued at $135,000, to the former
shareholders of DCR.
In connection with the IDC Merger, since February 1995, the Company has
issued 42,389 shares of Common Stock, and will issue 8,361 shares of Common
Stock, valued in the aggregate at $450,000, to the former shareholders of IDC
Systems.
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.
In connection with the Recycltech Acquisition, on September 25, 1996, the
Company issued 64,243 shares of Common Stock, valued at $300,000, to the former
shareholders of Recycltech.
In connection with the Wilkinson Acquisition, on February 3, 1997, the
Company issued 76,272 shares of Common Stock, valued at $300,000 to the
Wilkinson Seller.
In connection with the NRT Merger, in July 1997, the Company issued an
aggregate of 150,000 shares of Common Stock, valued at $487,500, to the former
sole shareholder of NRT.
In connection with the Atlantic Maintenance Merger, on February 20, 1998,
the Company issued 1,276,094 shares of Common Stock, valued at $3,500,000, to
Acosta.
On February 20, 1998, the Company issued 1,299,098 shares of Common Stock
in a private placement at a price of $2.70 per share pursuant to Rule 506 of
Regulation D under the Securities Act. All the net proceeds from this
transaction in the amount of approximately $3,200,000 were used for the Hesco
Merger.
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.
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 only began to generate significant
revenues in 1997, the first year in which the Company has been profitable.
The Company is primarily engaged in manufacturing, distributing, marketing
and selling solid waste handling equipment. Until February 1997, the Company was
primarily engaged in distributing, marketing and selling the Hi-Rise System, a
proprietary automated system designed to collect source-separated recyclables
and other solid waste in multi-story residential buildings. In February 1997,
the Company expanded its product lines to include sheet metal fabrication
products, consisting primarily of rubbish and laundry chutes. During the year
ended December 31, 1997, sales of sheet metal fabrication products accounted for
approximately 33% of the Company's revenues. In February 1998, the Company
acquired Hesco, a company engaged in the business of manufacturing, marketing
and selling solid waste handling equipment products. Hesco's product lines
include waste containers and trash compaction systems. The Company anticipates
that in the future Hesco's product lines will be the Company's single largest
source of revenue. In addition, the Company expects that its other principal
sources of revenue will be sales of rubbish and linen chutes, trash compaction
systems and the Hi-Rise System and sales-types leases of the Hi-Rise System.
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In July 1993, the Company consummated an underwritten 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.
During 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. 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). 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. 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 is consolidating manufacturing and engineering of certain
of the Company's products at its manufacturing facility in Ohio.
The Company's results of operations for the year ended December 31, 1997
include the results of Wilkinson from February 3, 1997, while the Company's
results of operations for the year ended December 31, 1996 do not include the
results of Wilkinson.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996. Total revenue during
the year ended December 31, 1997 was $10,483,576, an increase of $7,276,267,
compared to total revenue of $3,207,309 during the prior year. Revenue from
equipment sales, consisting of sales of Hi-Rise Systems, trash and linen chutes
and other sheet metal fabrication products, and trash compaction systems,
increased by $7,003,953 to $8,590,030 during the year ended December 31, 1997
from $1,586,077 during the prior year. One of the primary sources of the
increase is the inclusion of eleven months of Wilkinson's equipment sales in
the current year in the amount of $4,041,548. In addition, revenue from sales
of Hi-Rise Systems and trash compaction systems increased by $2,876,129 to
$4,462,206 during the year ended December 31, 1997, from $1,586,077 during the
prior year. Hi-Rise System sales for the current twelve months were $3,264,915,
compared to $972,752 for the previous year. The increase was a result of
installations during the current year of systems for which the Company executed
sales contracts during 1995 and 1996. In 1995 and 1996, the Company's emphasis
was on equipment sales in new construction buildings which resulted in increased
backlog. 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 months. The Company does not recognize revenue until
the installation of the system. Revenue from shared savings agreements increased
by $40,297 to $462,375 during the year ended December 31, 1997, compared to
$422,078 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 35 shared saving agreements in effect at December 31, 1997
compared to 31 at December 31, 1996. Revenue from service and parts increased by
$232,017 to $1,431,171 during the year ended December 31, 1997, compared to
$1,199,154 during the prior year. This increase is primarily due to the
inclusion of Wilkinson's revenues from parts in the current year of $406,059.
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During the year ended December 31, 1997, the Company had interest income
of $558,718, an increase of $142,360, compared to $416,358 during the prior
year.
Total operating costs and expenses during the year ended December 31, 1997
were $10,527,486, an increase of $4,495,577 compared to total operating expenses
of $6,031,909 during the prior year. A primary reason for the increase was the
inclusion of eleven months cost of sales for Wilkinson in the current year in
the amount of $3,293,778. The other primary reason for the increase was the
increase in sales of Hi-Rise Systems and increased costs related to those sales.
Cost of equipment sold increased by $3,793,983 to $5,378,144 during the current
year from $1,584,161 during the prior year. As a percentage of equipment sales
and service and parts revenue, cost of equipment sold decreased to 54% during
the year ended December 31, 1997 from 57% during the prior year. The decrease in
cost of equipment sold as a percentage of revenue was primarily attributable to
the increase in Hi-Rise System sales. Cost of equipment sold of Hi-Rise Systems
as a percentage of revenues from Hi-Rise System sales is typically lower than
the cost of equipment sold of trash and linen chutes and trash compaction
systems as a percentage of revenue from such sales. The Company has consolidated
manufacturing and engineering of certain of the Company's products at its
manufacturing facility in Stow, Ohio. The Company has configured the facility to
allocate space for new manufacturing. The Company believes that by consolidating
manufacturing of its products, it will be able to reduce the costs of sales of
its Hi-Rise System and trash compaction systems. Selling and marketing expenses
during the year ended December 31, 1997 were $697,747, an increase of $154,387,
compared to selling and marketing expenses of $543,360 during the prior year.
Selling and marketing expenses for the year ended December 31, 1997 include
$144,282 of additional expenses for Wilkinson for eleven months of 1997. General
and administrative expenses during the year ended December 31, 1997 were
$3,767,595, an increase of $386,231, compared to general and administrative
expenses of $3,381,364 during the prior year. General and administrative
expenses for the year ended December 31, 1997 include $452,390 of such expenses
for Wilkinson. Interest expense increased by $237,436 to $383,643, as compared
to the prior year, as a result of increased borrowings under the Company's lines
of credit to finance the acquisition of the Wilkinson Assets and under the
Company's lease financing arrangement.
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.
In March 1998, the Company agreed to an out of court settlement with Mr.
Milton Payton, a former employee. The Company incurred settlement expenses
totaling $100,000 in cash in connection with such settlement for the year ended
December 31, 1997.
As a result, the Company realized net income of $20,165 during the year
ended December 31, 1997, compared to a net loss of $2,639,151 during the year
ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had working capital of $4,488,494 and
cash and cash equivalents aggregating $1,134,131 compared to working capital of
$2,571,485 and cash and cash equivalents of $1,711,752 at December 31, 1996.
The Company's primary sources of working capital are the net proceeds of
approximately $1.8 million from the sale of Series B Preferred Stock in June and
July 1997 and a $3.0 million line of credit with Ocean Bank for its lease
financing arrangements.
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.
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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.
In late June 1997 and early July 1997, the Company sold a total of 200
shares of the Company's newly created Series B Convertible Preferred Stock, $.01
par value (" Preferred Stock"), and warrants to purchase an aggregate of 888,887
shares of Common Stock, in a Regulation D private placement for an aggregate
purchase price of $2,000,000. The Preferred Stock is convertible, at the option
of the holders thereof, into shares of the Company's Common Stock, at a
conversion price of $2.25 per share, subject to adjustments under certain
circumstances.
The Company has a line of credit with Ocean Bank under which 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 1.5% and is payable on demand. The line was
increased from $2.0 million to $3.0 million on or about September 30, 1997. As
of September 30, 1997, the outstanding balance under this line of credit was
$2,891,996.
The Company has entered into a lease financing arrangement with Western
Finance and Lease, Inc., formerly known as First Sierra, Inc. ("Western
Finance"), pursuant to which Western Finance has agreed to purchase, from time
to time, eligible leases of Hi-Rise Systems from the Company for a purchase
price equal to the discounted present value of the leases purchased. In the
evennt that a lessee defaults under a lease purchsed by Western Finance, Western
Finance has the right to require the Company to repurchase 25% of the lease
obligations. At December 31, 1997, the Company's contingent repurchase
obligations under this arrangement equaled $185,015.
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 are secured by the Wilkinson Assets and bear interest at a rate per annum
equal to Citibank's prime rate plus 1%. As of December 31, 1997, the outstanding
balance under this line of credit was $815,189. The line of credit is due in
February 1999. The term loan is payable in monthly installments of principal and
interest through February 2002.
In order to fund part of the cash portion of the purchase price for the
Hesco Merger, in February 1998, the Company obtained a $3,000,000 line of credit
and a $3,000,000 term loan from Ocean Bank. The term loan was obtained on
December 31, 1997. The line of credit and the term loan are secured by Hesco's
accounts receivable, inventory and fixed assets and bear interest at a rate per
annum equal to Citibank's prime rate plus 1%. The line of credit is due in
February 1999. The term loan is payable in 100 monthly installments of principal
and interest through April 2006. Approximately $500,000 of the cash portion of
the purchase price for the Hesco Merger was funded from the proceeds of a
$500,000 five-year term loan, at an annual interest rate of 10%, from Donald
Engel, the Chairman of the Board of Directors and the Chief Executive Officer of
the Company. The remaining portion of the purchase price was funded from the
proceeds of the 1998 Private Placement.
Net cash used in operating activities was $2,864,052 and $3,940,726, during
the years ended December 31, 1997 and 1996, respectively. The decrease was
primarily attributable to the change from a net loss to net income. In addition,
accounts receivable increased by $1,327,665 from the previous year and accounts
payable and accrued liabilities increased by $893,076. The increase in accounts
receivable is the result of the installation of four Hi-Rise Systems at the end
of the current year, sales by Wilkinson and increased sales by IDC Systems.
Accounts payable and accrued liabilities increased as a result of raw material
and finished goods purchases for sales in the month of December and purchases of
equipment for systems expected to be installed in the first quarter the revenues
from which will be recognized at the time of installation. Net cash provided by
financing activities was $249,742 and $5,968,456 during the years ended December
31, 1996 and 1997, respectively. This is mainly the result of proceeds received
from the 1997 Private Placement and draws under the lines of credit in order to
provide working capital and to fund the cash portion of the purchase price for
the Wilkinson Assets. Net cash used in investing activities was $314,824 during
the year ended December 31, 1996. Net cash used in investing activities was
3,682,025 during the year ended December 31, 1997, relating to the purchase of
the Wilkinson Assets, acquisition of NRT and the proceeds of the term loan from
Ocean Bank.
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
and general and administrative expenses associated with the Company's plan for
expansion.
The Company anticipated, based on currently proposed plans and assumtions
relating to operations (including the anticipated costs associated with, and
timetable for, its proposed expansion), that cash flow from operations and funds
available under the Company's existing credit facilities will be sufficient to
satisfy the Company's contemplated cash requirements for at least 12 months. In
the event that the Company's plans change, its assumptions to change or prove to
be inaccurate or if its existing capital and cash flow otherwise prove to be
insufficient (due to unanticipated expenses, delays, problems, difficulties or
otherwise), the Company could be required to seek additional financing or may be
required to curtail its expansion or other activities. In the event that the
Company requires additional financing, the Company may seek to raise capital
through the sale of its equity securities, including at prices which represen
significang discounts from the market price of the Common Stock.
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CHANGES IN ACCOUNTING STANDARDS
During fiscal 1997, the Company implemented Statement of Financial
Accounting Standards ("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. Implementation of SFAS
No. 128, which included the restatement of historical per share data, had no
impact on the reported earnings per share for 1996 in the Company's consolidated
financial statements.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gain and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for public business enterprises to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes the standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS 131 requires a public business enterprise report financial and descriptive
information about its reportable operating segments. The financial information
is required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS 131 is effective for financial statements for
periods beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS 130 and SFAS
131 to determine whether additional disclosure is required.
YEAR 2000
The Company is currently in the process of evaluating its computer software
and databases to determine whether or not modifications will be required to
prevent problems related to the year 2000. There problems could cause
malfunctions in certain software and databases with respect to dates on or after
January 1, 2000, unless corrected. At this time, the Company has not yet
determined the cost of evaluating its computer software or databases or of
making any modifications required to correct any Year 2000 problems.
The Year 2000 issue may also effect the systems and applications of the
Company's customers or suppliers. The Company has initiated formal
communications with a number of its significant suppliers to determine the
extent to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The Company will
continue similar communication with major customers, and the balance of its
major suppliers, during 1998 to receive appropriate warranties and assurances
that those parties are, or will be, Year 2000 compliant. Although the Company
currently does not anticipate any material impact on its operations as a result
of Year 2000 issues of its customers or suppliers, at this stage of its review,
no assurance can be given that the failure by one or more of its major suppliers
or customers to become Year 2000 compliant will not have a material adverse
impact on its operations.
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis 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.
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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:
NAME AGE POSITION
- -------------------------------- --- ----------------------------------
Donald Engel.................... 64 Chairman of the Board of Directors
and Chief Executive Officer
J. Gary McAlpin................. 45 Chief Operating Officer
Bradley Hacker.................. 38 Chief Financial Officer
Michael Bracken................. 39 Executive Vice President of New
Construction
William J. Stone................ 51 Executive Vice President of Sales
Seymour Oestreicher............. 72 Vice President - Distribution
Development
Warren Adelson.................. 55 Director
Ira S. Merritt.................. 59 Director
Joel M. Pashcow................. 53 Director
DONALD ENGEL has been Chief Executive Officer of the Company since March 1996
and Chairman of the Board since May 1997. From March 1996 to May 1997, Mr. Engel
served as Co-Chairman of the Board. 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.
J. GARY MCALPIN has been Chief Operating Officer of the Company since March
1997. 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.
BRADLEY HACKER has been Chief Financial Officer of the Company since July
1997. Mr. Hacker joined the Company in July 1993 as controller. For the
prior seven years, Mr. Hacker was employed by various divisions of Campbell
Taggert, a subsidiary of Anheuser-Busch.
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.
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WILLIAM J. STONE has been Executive Vice President of Sales since May 1997.
Since 1990, Mr. Stone has founded a number of companies engaged in various
aspects of waste handling in high-rise buildings in South Florida. Prior to
1990, he was engaged in real estate development in Texas, Toronto and Florida.
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.
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 served 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.
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, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent (10%) beneficial owners were
complied with.
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 IPO 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
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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,
1995, 1996 and 1997, 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 Michael Bracken, Vice President of New Construction Sales (together,
the "Named Executive Officers"). No other executive officer of the Company had
aggregate compensation exceeding $100,000 during the year ended December 31,
1997. 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.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#)
--------------------------- ---- ------------ ------------
Donald Engel 1995 $ - -
Chairman of the Board and Chief 1996 138,750 500,000(2)
Executive Officer(1) 1997 180,000 200,000(2)
Michael Bracken 1995 $90,000 24,000(3)
Vice President-New Construction 1996 95,041 34,000(3)
Sales 1997 114,908 22,000(4)
(1) Mr. Engel has served as the Chief Executive Officer since March 1996,
served as Co-Chairman of the Board from March 1996 to May 1997 and has
served Chairman of the Board since May 1997
(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 and 200,000 at an exercise price of $3.25 per share.
(3) Represents options granted under the Company's 1993 Stock Option Plan to
purchase 24,000 shares of Common Stock at an exercise price of $4.75 and
34,000 shares of Common Stock at an exercise price of $4.125.
(4) Represents options granted under the Company's 1996 Stock Option Plan to
purchase 22,000 shares of Common Stock at an exercise price of $2.73.
24
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OPTION GRANT TABLE
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1997 to the Named
Executive Officers.
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
---- ---------- ------------- --------- ----------
Donald Engel...... 200,000 52.6% $2.97 7/24/2007
Michael Bracken... 22,000 5.5% 2.72 12/31/2007
FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised
stock options held by the Named Executive Officers as of December 31, 1997. No
stock options were exercised by the Named Executive Officers during the year
ended December 31, 1997. No stock appreciation rights have been granted or are
outstanding.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END (#) FY-END($)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Engel..... - - 700,000 - -(1) -(1)
Michael Bracken.. - - 72,400 27,600 -(1) -(1)
<FN>
- -----------------------------
(1) The closing bid price for the Company's Common Stock as reported on NASDAQ
on December 31, 1997 was $2.3125. Value is zero as the exercise prices for
all options are greater than the closing bid price at December 30, 1997.
</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
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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 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 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 solid-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 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. Mr Shantzis resigned as Co-Chairman of
the Board in May 1997 but continues to serve as a Consultant. 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 months prior to its expiration date (three 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 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 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
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.
The Company has entered into a five-year employment agreement with each of
J. Gary McAlpin (the "McAlpin Employment Agreement") and Bradley Hacker (the
"Hacker Employment Agreement"), effective as of March 10, 1998, which employment
agreements provide for the employment of Mr. McAlpin as Chief Operating Officer
and Mr. Hacker as Chief Financial Officer. The initial term of the McAlpin
Employment Agreement and the Hacker Employment Agreement will be automatically
extended for a five-year term upon a change of control of the Company, and for
successive one-year terms unless either party gives notice of its intent not to
extend the term at least six months prior to its expiration date (three months
in the case of any extension period after the initial term). The McAlpin
Employment Agreement provides for an annual base salary of $120,000 subject to
annual increases in accordance with the Consumer Price Index and an annual
incentive bonus of not less than $50,000 and the Hacker Employment Agreement
provides for an annual base salary of $85,000 subject to annual increases in
accordance with the Consumer Price Index and an annual incentive bonus of not
less than $25,000 . Pursuant to their respective employment agreements, Mr.
McAlpin and Mr. Hacker have each agreed that during the term of his employment
agreement and for a period of one 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. Upon the termination of Mr.
McAlpin's or Mr. Hacker's employment with the Company due to the non-renewal by
the Company of either the McAlpin Employment Agreement or the Hacker Employment
Agreement, the terminated executive will be entitled to
26
<PAGE>
receive any unpaid salary and bonus accrued through the date of termination plus
one-year's base salary. Upon the termination of Mr. McAlpin's or Mr. Hacker's
employment with the Company by the Company for cause or by the executive without
cause, the terminated executive will be entitled to receive any unpaid salary
and bonus accrued through the date of termination. Upon the termination of Mr.
McAlpin's or Mr. Hacker's employment with the Company by the Company without
cause, the terminated executive will be entitled to receive any unpaid salary
accrued through the date of termination, any bonus that would have been payable
to the executive for the fiscal year and a lump sum severance payment in the
amount of the base salary, benefits that would have been paid by the Company to
such executive through the scheduled end of the employment agreement plus
one-year's base salary.
In connection with the Hesco Merger and the Atlantic Maintenance Merger,
Hesco has entered into a five-year employment agreement with Acosta, effective
as of February 20, 1998, which provides for the employment of Acosta by Hesco.
Such agreement provides for an annual base salary of $75,000 subject to annual
increases in accordance with the Consumer Price Index. Acosta has agreed that
during the term of his employment and consulting agreement and for a period of
two years thereafter, he will not consult, compete or engage in or own in excess
of 1% of any business of the type and character engaged in and competitive with
the business of the Company. The employment and consulting agreement provides
that Acosta or Hesco may terminate such agreement upon 60 days notice. Upon the
termination of Acosta's employment with Hesco by Hesco without cause, Acosta
will be entitled to receive any unpaid salary and bonus 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 Hesco to Acosta 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 "1993
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 1993 Stock Option Plan
was increased by 150,000 shares to 500,000 shares. Under the 1993 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 1993 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 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 1993 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 1993 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, 1997, 496,106 options have
been granted and are outstanding under the Company's Stock Option Plan at an
average price of $4.87 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
27
<PAGE>
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 2,500 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 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, 1997, 912,500
options have been granted and are outstanding under the Company's Stock Option
Plan at an average price of $3.53 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 of Common Stock are 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 21,500 shares of Common
Stock under the New Directors Plan at an exercise price of $4.00 per share and
to Mr. Adelson options to purchase 1,000 shares of Common Stock under the New
Directors Plan at an exercise price of $4.00 per share.
28
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 25, 1998, 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:
AMOUNT AND
NATURE PERCENTAGE OF
NAME AND ADDRESS OF OF BENEFICIAL OUTSTANDING SHARES
BENEFICIAL OWNER(1) OWNERSHIP(2) OWNED
------------------- ------------- ------------------
Donald Engel ......................... 750,000(3) 7.6%
Evelio Acosta ....................... 1,276,094(4) 14.0%
Warren Adelson ....................... 790,012(5) 8.0%
Ira S. Merritt........................ 24,500(6) *
Joel M. Pashcow....................... 23,500(7) *
All directors and executive officers as
a group (8 persons)................. 1,714,112(8) 16.7%
- -----------------------------
* 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 700,000 shares of Common Stock issuable upon the exercise of
options granted under the 1996 Stock Option Plan.
(4) Includes 1,276,094 shares of Common Stock issued in connection with the
Atlantic Maintenance Merger.
(5) Includes 16,000 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 23,500 shares of Common Stock issuable upon the exercise of
options granted under the New Directors Plan.
(7) Consists of 23,500 shares of Common Stock issuable upon the exercise of
options granted under the New Directors Plan.
(8) Includes (i) 23,357 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) 5,000 shares of Common Stock issuable upon
the exercise of presently exercisable options to purchase Common Stock held
by Seymour Oestreicher, (iii) 27,600 shares of Common Stock issuable
upon the exercise of presently exercisable options to purchase Common Stock
held by Michael Bracken, (iv) 60,600 shares of Common Stock issuable upon
the exercise of presently exercisable options to purchase Common Stock
held by Gary McAlpin and (v) 32,000 shares of Common Stock issuable upon
the exercise of presently exercisable options to purchase Common Stock
held by Bradley Hacker. Does not include 5,295 shares of
29
<PAGE>
Common Stock issuable to Mrs. Oestreicher in two equal annual installments
commencing in February 1996. See notes (2) through (7) above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the years ended December 31, 1997 and 1996, product development
expenses of $0, and $7,666, 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, 1997 and 1996, the Company had a note receivable from Tekmar in the
amount of $33,223. 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 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 $433,334 has been paid and $67,666 is payable in one
final annual installment, 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 and 1997, an aggregate of
16,722 additional shares of Common Stock were issued to the former shareholders
of IDC Systems, of which Harriet Oestreicher received 10,590 shares.
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 March 1996, the Company entered into an employment agreement with Donald
Engel, the Company's Chairman of the Board and Chief Executive Officer, and an
employment and consulting agreement with Mark D. Shantzis, the Company's then
Co-Chairman of the Board. On March 10, 1998, the Company entered into an
employment agreement with each of J. Gary McAlpin, the Chief Operating Officer
of the Company, and Bradley Hacker, the Chief Financial Officer of the
Company. See Part III, Item 10 "Executive Compensation" above for a description
of these agreements.
In connection with the Hesco Merger and the Atlantic Maintenance Merger,
Hesco entered into, and the Company entered into unconditional guaranty relating
to, a lease with the Acosta Family Limited Partnership, an affiliate of Acosta,
for Hesco's corporate headquarters and manufacturing facilities in an
approximately 110,000 square foot building situated in Miami, Florida at a
monthly rent of approximately $27,000 per month. Prior to the Hesco Merger and
the Atlantic Maintenance Merger, in January 1998, the land and building were
sold by United Truck and Body Corporation, a subsidiary of Hesco, to the Acosta
Family Limited Partnership for a purchase price of approximately $1.3 million.
Also in connection with the Hesco Merger and the Atlantic Maintenance Merger,
Hesco entered into, and the Company entered into unconditional guaranty relating
to, a lease with Acosta and Gladys Acosta for an approximately 3,000 square foot
shop in Hialeah, Miami, Florida, at a monthly rent of approximately $1,000 per
month.
30
<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)
31
<PAGE>
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. (_)
10.33 Credit Agreement dated September 17, 1997 between the Company and
Ocean Bank.
10.34 Variable Rate Commercial Promissory Note, Commercial/Agricultural
Revolving or Draw Note-Variable Rate, Commercial Security Agreements
and Commercial Continuing Guaranties dated December 19, 1997 by the
Company and Hesco Sales, Inc. in favor of Ocean Bank.
10.35 Agreement and Plan of Merger dated as of February 11, 1998 by and
among the Company, AM Acquisition Corp., Atlantic Maintenance of
Miami, Inc. and Evelio Acosta. (_)
10.36 Agreement and Plan of Merger dated as of February 11, 1998 by and
among the Company, HS Acquisition Corp., Hesco Sales, Inc. and
Evelio Acosta. (_)
10.37 Business Lease dated February 20, 1998 between Evelio and Gladys
Acosta and Hesco Sales, Inc.
10.38 Business Lease dated February 20, 1998 between Acosta Family Limited
Partnership and Hesco Sales, Inc.
10.39 Unconditional Continuing Guaranty of Leases dated February 20, 1998
by and between the Company and Evelio and Gladys Acosta
32
<PAGE>
10.40 Unconditional Continuing Guaranty of Leases dated February 20, 1998
by and between the Company and Acosta Family Limited Partnership
10.41 Indemnification Agreement dated February 20, 1998 by and among the
Company, HS Acquisition Corp., AM Acquisition Corp., Hesco Sales,
Inc., Atlantic Maintenance of Miami, Inc. and Evelio Acosta
10.42 Employment Agreement dated February 20, 1998 between Hesco Sales,
Inc. and Evelio Acosta
10.43 Employment Agreement dated March 10 between the Company and J. Gary
McAlpin
10.44 Employment Agreement dated March 10 between the Company and Bradley
Hacker
10.45 Settlement Agreement and Mutual General Release between Milton
Payton and the Company dated March 2, 1998.
21.2 Subsidiaries of the Company.
23.1 Consent of Independent Accountants-Coopers and Lybrand L.L.P., dated
March 31, 1998.
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 10.24 filed with the Company's Form
10-KSB for the year ended December 31, 1996.
(13) Incorporated by reference to Exhibit 10.25 filed with the Company's Form
10-KSB for the year ended December 31, 1996.
(14) Incorporated by reference to Exhibit 10.32 filed with the Company's Form
10-KSB for the year ended December 31, 1996.
(15) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
Report on Form 8-K dated March 9, 1998.
(16) Incorporated by reference to Exhibit 2.2 filed with the Company's Current
Report on Form 8-K dated March 9, 1998.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on March 9, 1998 in
connection with the Hesco Merger and the Atlantic Maintenance Merger. Pro Forma
financial statements relating to the Hesco Merger and the Atlantic Maintenance
Merger are contained in this Form 10-KSB.
33
<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 31, 1998 By: /s/ DONALD ENGEL
----------------------------------
Donald Engel, 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 31, 1998 By: /s/ DONALD ENGEL
----------------------------------
Donald Engel, Chairman of the
Board and Chief Executive Officer
(principal executive officer)
Date: March 31, 1998 /s/ BRADLEY HACKER
----------------------------------
Bradley Hacker, Chief Financial
Officer
(Principal Financial and
Accounting Officer)
Date: March 31, 1998 /s/ WARREN ADELSON
----------------------------------
Warren Adelson, Director
Date: March 31, 1998 /s/ IRA S. MERRITT
----------------------------------
Ira S. Merritt, Director
Date: March 31, 1998 /s/ JOEL M. PASHCOW
----------------------------------
Joel M. Pashcow, Director
34
<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
<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, 1997 and 1996, 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, 1997 and 1996, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Miami, Florida
February 20, 1998, except as to the information in the second
paragraph of Note 15, for which the date is March 10, 1998.
F-1
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,134,131 $ 1,711,752
Restricted cash 3,022,035 0
Investments 0 597,973
Accounts receivable, net of allowance for doubtful accounts
of $120,108 and $147,299 in 1997 and 1996, respectively 3,071,380 765,024
Inventories 2,002,163 1,117,883
Other assets, net 613,006 329,738
------------ ------------
Total current assets 9,842,715 4,522,370
Property and equipment, net 1,172,692 757,370
Note receivable from related party 33,223 33,223
Net investment in sales type leases 4,888,526 3,157,812
Deferred acquisition costs 240,674 62,281
Goodwill 3,007,020 1,448,237
------------ ------------
Total assets $ 19,184,850 $ 9,981,293
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 943,212 $ 193,507
Income taxes payable 11,000 0
Unearned service agreement revenue 2,824 22,564
Revolving lines of credit 3,707,185 1,584,814
Current portion of long-term debt 690,000 150,000
------------ ------------
Total current liabilities 5,354,221 1,950,885
Long-term debt 3,195,020 150,000
------------ ------------
Total liabilities 8,549,241 2,100,885
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value per share; 2,000,000 shares authorized;
200 issued and outstanding at December 31, 1997, liquidation
preference of $2,000,000 2 0
Common stock, $.01 par value per share; 20,000,000 shares authorized;
6,468,539 and 6,231,119 shares issued and outstanding at December 31,
1997 and 1996, respectively 64,685 62,311
Additional paid-in capital 16,508,980 13,776,320
Accumulated deficit (5,938,058) (5,958,223)
------------ ------------
Total shareholders' equity 10,635,609 7,880,408
------------ ------------
Total liabilities and shareholders' equity $ 19,184,850 $ 9,981,293
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
------------ -----------
<S> <C> <C>
Revenues:
Equipment sales $ 8,590,030 $ 1,586,077
Shared savings contract revenue 462,375 422,078
Service and parts revenue 1,431,171 1,199,154
------------ -----------
Total revenues 10,483,576 3,207,309
------------ -----------
Costs and expenses:
Cost of equipment and parts sold 5,378,144 1,584,161
Shared savings contract expense 442,952 313,032
Selling and marketing 697,747 543,360
General and administrative 3,767,595 3,381,364
Other 241,048 209,992
------------ -----------
Total costs and expenses 10,527,486 6,031,909
------------ -----------
Operating loss (43,910) (2,824,600)
------------ -----------
Other income (expense):
Interest income 558,718 416,358
Interest expense (383,643) (146,207)
Litigation settlements (100,000) (84,702)
------------ -----------
75,075 185,449
------------ -----------
Income (loss) before income taxes 31,165 (2,639,151)
Provision for income taxes 11,000 0
------------ -----------
Net income (loss) $ 20,165 $(2,639,151)
============ ===========
Net income (loss) per common share:
Basic $ 0.00 $ 0.47
============ ===========
Diluted
$ 0.00 $ 0.47
============ ===========
Weighted average common shares outstanding:
Basic 6,361,254 5,578,333
============ ===========
Diluted 8,966,030 5,578,333
============ ===========
</TABLE>
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, 1997 AND 1996
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, 1996 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, 1996 6,231,119 0 62,311 13,776,320 (5,958,223) 7,880,408
Sale of preferred stock and
warrants 0 2 0 1,824,899 0 1,824,901
Issuance of common stock 237,413 0 2,374 869,960 0 872,334
Compensatory stock options 0 0 0 37,801 0 37,801
Net income 0 0 0 0 20,165 20,165
--------- --- ------- ------------ ----------- ------------
Balance at December 31, 1997 6,468,532 $ 2 $64,685 $ 16,508,980 $(5,938,058) $ 10,635,609
========= === ======= ============ =========== ============
</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, 1997 AND 1996
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 20,165 $(2,639,151)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 309,274 146,344
Bad debt expense 74,246 101,929
Compensation expense for stock options 37,801 67,280
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (1,572,872) (245,207)
Inventories (353,091) (509,624)
Other assets (283,268) (1,917)
Net investment in sales type leases (1,730,714) (599,462)
Accounts payable and accrued liabilities 644,531 (248,545)
Income taxes payable 11,000 0
Unearned service agreement revenue (21,124) (12,373)
----------- -----------
Net cash used in operating activities (2,864,052) (3,940,726)
----------- -----------
Cash flows from investing activities:
Increase in restricted cash (3,022,035) 0
Increase in deferred acquisition costs (178,393) (62,281)
Purchase of businesses, net of cash acquired (1,055,371) (60,630)
Purchase of property and equipment (24,199) (429,620)
Loans to related party 0 (376)
Proceeds from maturity of investments 597,973 238,083
----------- -----------
Net cash used in investing activities (3,682,025) (314,824)
----------- -----------
Cash flows from financing activities:
Net proceeds from revolving lines of credit 1,372,371 340,956
Payment on long-term debt (150,000) (116,667)
Proceeds from long-term debt 2,921,184 0
Proceeds from issuance of common stock 0 25,453
Proceeds from issuance of preferred stock 1,824,901 0
----------- -----------
Net cash provided by financing activities 5,968,456 249,742
----------- -----------
Net decrease in cash and cash equivalents (577,621) (4,005,808)
Cash and cash equivalents, beginning of year 1,711,752 5,717,560
----------- -----------
Cash and cash equivalents, end of year $ 1,134,131 $ 1,711,752
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 383,643 $ 136,117
=========== ===========
Purchase of businesses, net of cash acquired:
Working capital, other than cash $(1,280,921) $ (12,723)
Property and equipment (573,618) (2,525)
Cost in excess of net assets acquired, net (1,600,832) (383,382)
Revolving line of credit 750,000 0
Debt 900,000 38,000
Issuance of common stock 750,000 300,000
----------- -----------
Net cash used to acquire businesses $(1,055,371) $ (60,630)
=========== ===========
</TABLE>
Non-cash activities:
During 1997 and 1996, the Company acquired businesses as described in Note
2. The Company issued stock and notes payable in conjunction with these
acquisitions. During 1997 and 1996, the Company issued stock as payment on
debt as described in Note 9.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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. Wilkinson
Company, Inc. ("Wilkinson"), acquired in February 1997, is engaged in the
sale, manufacture, distribution and installation of sheet metal fabrication
products. NuReTec, Inc. ("NRT"), acquired in July 1997, distributes and sells
recycling collection equipment to high rise buildings in South Florida.
2. BUSINESS COMBINATIONS:
In July 1997 , the Company, through a newly formed wholly-owned subsidiary,
acquired all of the issued and outstanding capital stock of NRT, through a
merger of NRT and its newly formed subsidiary. In consideration of its
acquisition of NRT, the Company issued 150,000 shares of its common stock,
valued at $487,500, to the former shareholder of NRT. The Company also
entered into a three year employment agreement with the former shareholder of
NRT to serve as Executive Vice President of the Company.
In February 1997, the Company, through a newly formed wholly-owned
subsidiary, bought substantially all of the assets excluding real property,
and assumed certain of the liabilities of Wilkinson. The aggregate purchase
price of $2,786,827 consisted of $2,486,000 in cash 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.
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.
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 which consisted of U.S. government securities were carried at
amortized cost which approximated market and matured in 1997.
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
principally on the straight-line basis over the estimated useful lives of the
assets. 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.
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.
F-7
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
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 2007. 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 6 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. Wilkinson's revenue is recognized upon
installation of the chutes into the buildings.
F-8
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PER SHARE DATA
During fiscal 1997, the Company implemented SFAS No. 128, "Earnings Per Share
("EPS")" ("SFAS 128"). SFAS 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.
Implementation of SFAS 128 which included the restatement of historical per
share data, had no impact on the Company's reported earnings per share for
1996.
CHANGE IN ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gain and losses) in a full set of general-purpose
financial statements. SFAS 130 requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. SFAS 130 is effective for fiscal years beginning after
December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for public business enterprises to report information about
operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes the
standards for related disclosures about products and services, geographic
areas, and major customers. SFAS 131 requires a public business enterprise
report financial and descriptive information about its reportable operating
segments. The financial information is required to be reported on the basis
that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments. Operating segments are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS 131 is effective for
financial statements for periods beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS 130 and SFAS 131
to determine whether additional disclosure is required.
F-9
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. RESTRICTED CASH
As of December 31, 1997, cash of $3,022,035 was restricted because it mainly
represented proceeds from a borrowing from a financial institution to be
used for the financing of the business combination described in Note 16.
The cash was distributed subsequent to year end.
5. PROPERTY AND EQUIPMENT:
Property and equipment at December 31 consisted of the following:
1997 1996
---------- --------
Equipment $ 876,600 $333,995
Furniture and fixtures 203,800 176,937
Automobiles 132,315 127,857
Computers and software 411,973 321,691
---------- --------
1,624,688 960,480
Less accumulated depreciation 451,996 203,110
---------- --------
$1,172,692 $757,370
========== ========
6. NET INVESTMENT IN SALES TYPE LEASES:
The net investment in sales type leases at December 31 consisted of the
following:
1997 1996
----------- -----------
Minimum lease payments $ 5,710,755 $ 4,000,101
Unearned income (1,208,156) (1,036,028)
Estimated residual value of leased systems 385,927 193,739
----------- -----------
$ 4,888,526 $ 3,157,812
=========== ===========
Future minimum lease payments due from customers under sales-type leases as of
December 31, 1997 are as follows:
1998 $ 886,011
1999 886,011
2000 886,011
2001 886,011
2002 886,011
Thereafter 1,280,700
----------
$5,710,755
==========
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, 1997 and 1996 was approximately $401,000 and $547,000,
respectively.
F-10
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. RELATED PARTY TRANSACTIONS:
During 1996, product development expenses of $7,666 were paid to Tekmar, Inc.
("Tekmar"), a related party. At December 31, 1997 and 1996, the Company had a
note receivable from Tekmar amounting to $33,223. The note bears interest at
5.5% and is due 180 days after demand for repayment by the Company.
8. REVOLVING LINES OF CREDIT:
The Company has two revolving line of credit agreements with a financial
institution. The revolving credit loan agreements provide for borrowings up
to a maximum of $3,000,000 and $850,000, respectively. The line of credits
are collateralized by the Company's lease contracts receivable and
Wilkinson's accounts receivable and inventory. The revolving lines of credit
are payable on demand and bear interest at the prime rate plus 1 1/2% (10%
and 10.25% at December 31, 1997 and 1996, respectively) and are subject to
annual renewal.
9. LONG-TERM DEBT:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Promissory note, bears interest payable at the prime rate plus 1 1/2%
maturing April 2006, collateralized by equipment $3,000,000 $ 0
Promissory note, bears interest payable at the prime rate plus
1 1/2% maturing February 2002, collateralized by equipment 735,020 0
Acquisition obligation, payable in cash of $66,667, bearing interest
at a rate of 6.5%, and $83,333 in common stock
150,000 300,000
---------- --------
3,885,020 300,000
Less current portion 690,000 150,000
---------- --------
Long-term debt, net of current portion $3,195,020 $150,000
========== ========
</TABLE>
The minimum annual maturities of long-term debt after December 31, 1997 are as
follows:
1998 $ 690,000
1999 540,000
2000 540,000
2001 540,000
2002 540,000
Thereafter 1,035,020
-----------
$ 3,885,020
===========
F-11
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. COMMITMENTS:
The Company leases office facilities and equipment. Approximate future
minimum payments under noncancelable operating leases as of December 31,
1997, are as follows:
1998 $263,811
1999 256,467
2000 231,359
---------
$751,637
=========
Rental expense for the years ended December 31, 1997 and 1996 was
approximately $321,000 and $137,000, respectively.
In March 1996, the Company entered into a three-year employment and
consulting agreement (the "Agreement") with its former President. The
initial term of the 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 months prior to its expiration date. Such agreement
provides for an annual base salary of $180,000 subject to annual increase in
accordance with the Consumer Price Index. The Agreement provides that the
Company and its former President may terminate such agreement upon thirty
days notice. Upon termination of the former President's employment and/or
consulting relationship with the Company, the former President will be
entitled to receive any unpaid salary and bonus 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 its former President through the
scheduled end of the Agreement.
11. INCOME TAXES:
At December 31, 1997 and 1996, the significant components of the net deferred
tax asset were as follows:
1997 1996
------------- --------------
Net operating loss carryforward $ 1,682,360 $ 1,930,699
Other 231,230 67,565
Valuation allowance (1,913,590) (1,998,264)
------------- --------------
Net deferred tax asset $ 0 $ 0
============= ==============
The Company records 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 provision for income taxes does not include regular income taxes due to
the use of net operating loss carryforwards. The provision for income taxes
represents alternative minimum taxes paid on alternative minimum taxable
income, which differs from income before income taxes, mainly due to
non-deductible goodwill amortization and foreign subsidiary losses which are
not currently deductible in the U.S. At December 31, 1997, the Company had a
net operating loss carryforward of approximately $4,700,000 which expires in
various years commencing in 2010.
F-12
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. EQUITY TRANSACTIONS:
ISSUANCE OF PREFERRED STOCK
In June and July 1997, the Company sold 200 shares of newly created Series B
convertible preferred stock, par value of $.01 per share, and warrants to
purchase an aggregate of 888,887 shares of common stock, in a private
placement for an aggregate purchase price of $2,000,000. The Series B
preferred stock is convertible, at the option of the holder thereof, into
common stock at a conversion price of $2.25. The conversion price is subject
to adjustment for various events such as stock dividends and
recapitalizations. In addition, if the average closing bid price of the
common stock, as reported on the Nasdaq Small-Cap Market, during the three
month period commencing on the 270th day after the date of the initial
issuance of shares of Series B preferred stock and ending on the 360th day
after such date is less than 135% of the then applicable conversion price,
the conversion price shall be reduced to such price and shall equal the
trading price divided by 1.35. Upon conversion, the holder will be entitled
to dividends at the rate of 8% per annum, accrued from the date of issuance
through the date of conversion payable in common stock. The Series B
preferred stock has no voting rights. The warrants can be converted into
shares of common stock at an exercise price of $2.25 per share. The exercise
price is subject to adjustment with attributes similar to the conversion
price of the Series B preferred stock.
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.
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 grant of options to purchase 1,000,000 and 500,000 shares of
common stock , 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-13
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. EQUITY TRANSACTIONS, CONTINUED:
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, 1997 and 1996:
<TABLE>
<CAPTION>
WEIGHTED AVG. WEIGHTED AVG.
EXERCISE EXERCISE
1997 PRICE 1996 PRICE
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 1,072,106 $ 4.45 349,773 $ 5.33
Granted (exercise price = FMV at date of grant) 380,000 2.95 728,000 4.02
Exercised 0 0.00 (5,667) 5.00
------------ -------- ------------ -------
Options outstanding at end of year 1,452,106 $ 4.06 1,072,106 $ 4.45
============ ======== ============ =======
Options exercisable at end of year 866,369 $ 4.48 618,216 $ 4.75
============ ======== ============ =======
Price range of options outstanding at end of year $2.73-$9.75 - $4.00-$9.75 -
Options available for future grants at end of year 547,894 - 927,894 -
============ ======== ============ =======
Weighted avg. fair value of options granted 380,000 $ 2.29 728,000 $ 3.24
============ ======== ============ =======
</TABLE>
The Company has determined not to recognize 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, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Net income (loss) - as reported $ 20,165 $ (2,639,151)
Net loss - pro forma (1,052,870) (4,003,741)
Net income (loss) per common share - as reported:
Basic 0.00 (0.47)
Diluted 0.00 (0.47)
Net loss per common share - pro forma:
Basic (0.17) (0.72)
Diluted (0.17) (0.72)
</TABLE>
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 66%;
risk-free interest rate of 6.34%; and expected life of ten years.
During 1996, the Company granted 46,000 stock options to non-employees for
services rendered. These options vest twenty percent annually over a five
year period and resulted in compensation expense of $37,801 and $67,280 for
the years ended December 31, 1997 and 1996, respectively.
F-14
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. EARNINGS PER SHARE
The following table reconciles the weighted average shares used to calculate
basic and diluted earnings per share:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1997 1996
----------------------------------- -----------------------------------
INCOME SHARES PER SHARE LOSS SHARES PER SHARE
-------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 20,165 6,361,254 $ 0.00 ($2,639,151) 5,578,333 ($0.47)
Effect of dilutive
options and warrants - 2,604,776 - - - -
-------- --------- --------- ----------- --------- ------
Diluted EPS $ 20,165 8,966,030 $ 0.00 ($2,639,151) 5,578,333 ($0.47)
-------- --------- --------- ----------- --------- ------
</TABLE>
The effect of 679,500 shares of potential common stock were anti-dilutive
in 1996.
14. 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 74% 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.
15. LEGAL MATTERS:
During February 1998, an employee of the New York City Housing Authority
filed a lawsuit against several parties which included the Company and IDC
(collectively, the "defendants"). The employee is seeking damages of
$2,000,000 in negligence, strict liability in tort and breach of express and
implied warranties for injuries allegedly sustained by the employee on July
30, 1996 when the casters on a trash container installed by the defendants in
a New York Housing Authority building broke off, causing the trash container
to fall on the employee. The Company has liability insurance in excess of
the employee's claim and intends to contest vigorously the claims in the
lawsuit.
During March 1998, a corporation filed a lawsuit against the Company. In
general, the lawsuit alleges that the Company entered into an agreement with
the corporation pursuant to which the Company agreed to pay a commission
based upon industry standards to the corporation in connection with the
business combination discussed in Note 16. The corporation is seeking damages
in excess of $15,000 and attorneys' fees. The Company intends to contest
vigorously the claims in the lawsuit.
During 1997 and 1996, the Company entered into compromise agreements with
respect to lawsuits resulting in a charge of approximately $100,000 and
$84,000, respectively.
16. SUBSEQUENT EVENTS:
In February 1998, the Company sold an aggregate of 1,299,098 shares of its
common stock for $2.70 per share in a private placement in which it received
net proceeds of approximately $3,200,000. In connection with this placement,
the Company issued to the placement agent, five-year warrants to purchase
129,910 shares of the Company's common stock, which warrants are exercisable
at $2.70, the sales price per share of common stock in the placement.
In February 1998, the Company, pursuant to a merger agreement, bought
substantially all of the assets excluding real property, and assumed certain
of the liabilities of Hesco Sales, Inc. and Subsidiaries and Atlantic
Maintenance, Inc. (collectively "Hesco") together who are engaged in the
manufacture of waste collection containers and disposal equipment.
The aggregate purchase price of approximately $11,800,000 consisted of
approximately $8,300,000 in cash, and shares of the Company's common stock
valued at $3,500,000. Additional financing was obtained by the Company to
repay Hesco's outstanding shareholder loans of approximately $2,200,000.
Approximately $500,000 of the purchase price was funded from the proceeds of
a $500,000 five-year term loan from the Company's Chairman of the Board of
Directors and Chief Executive Officer. The remaining portion of the purchase
price was funded through the proceeds of the private placement and the
proceeds of a line 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, 1997 reflects the consolidated financial position of Hi-Rise
Recycling Systems, Inc. (the "Company"), after giving effect to the acquisition
of Hesco Sales, Inc. and Subsidiaries and Atlantic Maintenance, Inc.
(collectively "Hesco"), as if this transaction had been consummated as of
December 31, 1997. The unaudited pro forma condensed consolidated statement of
operations reflects the acquisition as if the transaction had been consummated
at January 1, 1997. 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 1998, the Company acquired all of the outstanding capital stock of
Hesco, who is engaged in the manufacturing of waste collection containers and
disposal equipment. The aggregate purchase price of approximately $11.8 million
was comprised of $8.3 million in cash and $3.5 million of the Company's Common
Stock.
The effects of the Company's acquisitions of NuReTec, Inc. ("NRT") in July 1997
and Wilkinson Company, Inc. ("Wilkinson") in February 1997 have not been
presented in the pro forma condensed consolidated financial statements. The
results of operations for NRT and Wilkinson were not material for the period
from January 1, 1997 to the date of their respective acquisitions.
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
PRO FORMA PRO FORMA
HI-RISE HESCO ADJUSTMENTS TOTAL
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents/
restricted cash $ 4,158,166 $ 1,369,600 $(8,300,000)(d) $ 3,925,766
3,500,000 (b)
3,200,000 (h)
Accounts receivable, net 3,071,380 2,390,583 0 5,461,963
Inventories 2,002,163 1,917,273 0 3,919,436
Deferred taxes 0 74,000 0 74,000
Other current assets, net 613,006 401,772 0 1,014,778
----------- ----------- ----------- -----------
Total current assets 9,842,715 6,153,228 (1,600,000) 14,395,943
Property and equipment, net 1,172,692 3,927,676 (3,300,000)(e) 1,800,368
Note receivable from related party 33,223 0 0 33,223
Net investment in sales type leases 4,888,526 0 0 4,888,526
Deferred acquisition costs 240,674 0 (240,674)(a) 0
Goodwill 3,007,020 0 7,559,728 (f) 10,566,748
----------- ----------- ----------- -----------
Total assets $19,184,850 $10,080,904 $ 2,419,054 $31,684,808
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued
liabilities $ 943,212 $ 1,061,669 $ 0 $ 2,004,881
Unearned service agreement revenue 2,824 0 0 2,824
Revolving lines of credit 3,707,185 760,656 3,000,000 (b) 7,467,841
Income taxes payable 11,000 250,845 0 261,845
Notes payable to shareholders 0 2,239,281 (2,239,281)(i) 0
Current portion of long-term debt 690,000 17,568 0 707,568
----------- ----------- ----------- -----------
Total current liabilities 5,354,221 4,330,019 760,719 10,444,959
Long term debt 3,195,020 18,040 500,000 (b) 3,713,060
----------- ----------- ----------- -----------
Total liabilities 8,549,241 4,346,059 1,260,719 14,158,019
Preferred stock 2 0 0 2
Common stock 64,685 5,950 (5,950)(g) 90,435
12,990 (h)
12,760 (c)
Additional paid-in-capital 16,508,980 191,180 3,187,010 (h) 23,374,410
3,487,240 (c)
Accumulated deficit (retained
earnings) (5,938,058) 5,535,715 (5,535,715)(g) (5,938,058)
----------- ----------- ----------- -----------
Total shareholders' equity 10,635,609 5,732,845 1,158,335 17,526,789
----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $19,184,850 $10,080,904 $ 2,419,054 $31,684,808
=========== =========== =========== ===========
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
PRO FORMA PRO FORMA
HI-RISE HESCO ADJUSTMENTS TOTAL
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Sales $10,483,576 $11,962,586 $ 0 $22,446,164
COSTS AND EXPENSES:
Cost of goods sold 5,378,144 7,991,143 13,369,287
Selling, general and administrative 4,465,342 2,954,562 375,000(j) 7,794,904
Other 684,000 0 684,000
----------- ----------- ----------- -----------
Total costs and expenses 10,527,486 10,945,705 375,000 21,848,191
----------- ----------- ----------- -----------
Operating income (loss) (43,910) 1,016,883 (375,000) 597,973
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 558,718 61,584 0 620,302
Interest expense (383,643) (115,877) (600,000)(k) (1,099,520)
Other (100,000) 238,462 0 138,462
----------- ----------- ----------- -----------
75,075 184,169 (600,000) (340,756)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 31,165 1,201,052 (975,000) 257,217
PROVISION FOR INCOME TAXES 11,000 452,000 (360,114)(l) 102,886
----------- ----------- ----------- -----------
NET INCOME $ 20,165 $ 749,052 $ (614,886) $ 154,331
=========== =========== =========== ===========
NET INCOME PER SHARE:
Basic $ 0.00 $ 0.02(m) $ 0.02
=========== =========== ===========
Diluted $ 0.00 $ 0.01(m) $ 0.01
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 6,361,254 2,641,737(m) 9,002,991
=========== =========== ===========
Diluted 8,966,030 2,771,647(m) 11,737,677
=========== =========== ===========
</TABLE>
See accompanying notes
<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, 1997 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, 1997.
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, 1997. Hesco's historical
financial information used in preparation of the pro forma condensed
consolidated financial statements has been derived from Hesco's audited
financial statements as of and for the twelve months ended October 31,
1997.
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.
b) Records the Company's $3 million borrowing on a line of credit and a
$500,000 loan with the Company's CEO which funded a portion of the
acquisition.
c) Represents 1,276,094 shares of common stock issued by the Company to
the former owner of Hesco and the related additional paid-in capital.
d) Represents the Company's payment of $8,300,000 in cash to Hesco's
former owner.
e) Represents property and equipment not purchased by the Company.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2) UNAUDITED PRO FORMA ADJUSTMENTS, CONTINUED
BALANCE SHEET, CONTINUED
f) Records the goodwill which resulted from the $11.3 million purchase
price and deferred acquisition costs offset by the net assets purchased
by the Company.
g) Adjustment eliminates Hesco's common stock and retained earnings.
h) Records cash of $3,200,000 received in the Company's private
placement for 1,299,098 shares of common stock.
i) Represents the Company's payment to satisfy Hesco's note payable to
its former owner.
STATEMENT OF OPERATION
j) Represents amortization of incremental goodwill created in the
acquisition for a full year. Amortization expense is calculated using
the pro forma balance sheet whereby goodwill is based on differences
between Hesco's October 31, 1997 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.
k) Represents an adjustment for interest expense related to the $6
million in funds borrowed in connection with the acquisition of Hesco.
The interest rate assumed, based on the terms of the debt, is prime rate
plus 1%. The impact of a 1/8% change in the rate would result in an
increase in interest expense of $7,500.
l) Represents an adjustment for the provision for income taxes based on
a 40% effective tax rate.
m) Represents the effect on the weighted average shares outstanding of
the issuance of common stock and warrants related to the acquisition.
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION
- -------- -----------
10.33 Credit Agreement dated September 17, 1997 between the Company and
Ocean Bank.
10.34 Variable Rate Commercial Promissory Note, Commercial/Agricultural
Revolving or Draw Note-Variable Rate, Commercial Security Agreements
and Commercial Continuing Guaranties dated December 19, 1997 by the
Company and Hesco Sales, Inc. in favor of Ocean Bank.
10.37 Business Lease dated February 20, 1998 between Evelio and Gladys
Acosta and Hesco Sales, Inc.
10.38 Business Lease dated February 20, 1998 between Acosta Family Limited
Partnership and Hesco Sales, Inc.
10.39 Unconditional Continuing Guaranty of Leases dated February 20, 1998
by and between the Company and Evelio and Gladys Acosta
10.40 Unconditional Continuing Guaranty of Leases dated February 20, 1998
by and between the Company and Acosta Family Limited Partnership
10.41 Indemnification Agreement dated February 20, 1998 by and among the
Company, HS Acquisition Corp., AM Acquisition Corp., Hesco Sales,
Inc., Atlantic Maintenance of Miami, Inc. and Evelio Acosta
10.42 Employment Agreement dated February 20, 1998 between Hesco Sales,
Inc. and Evelio Acosta
10.43 Employment Agreement dated March 10 between the Company and J. Gary
McAlpin
10.44 Employment Agreement dated March 10 between the Company and Bradley
Hacker
10.45 Settlement Agreement and Mutual General Release between Milton
Payton and the Company dated March 2, 1998.
21.2 Subsidiaries of the Company.
23.1 Consent of Independent Accountants-Coopers and Lybrand L.L.P., dated
March 31, 1998.
27.1 Financial Data Schedule.
EXHIBIT 10.33
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 17, 1997, 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").
WITNESSETH
WHEREAS, the Borrower has requested from the Bank a commitment to
extend a line of credit in the amount of THREE MILLION DOLLARS ($3,000,000.00)
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 TERM. 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.
"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.
<PAGE>
"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, THREE MILLION DOLLARS
($3,000,000.00).
"COMMITMENT EXPIRATION DATE" means the date which Lender notifies the
Borrower that payment in full of the Obligations is due.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) the Commitment Expiration Date; or
(b) the occurrence and continuance of any Event of Default.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule delivered to the
Lender by the Borrower on the date hereof.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"ELIGIBLE 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.
"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:
2
<PAGE>
(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 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 therefor 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 al I 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.
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"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(l)
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
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) THREE MILLION DOLLARS
($3,000,000.00) 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 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 of the recycling system
equipment; 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 and 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
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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.
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 $15,000.00.
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
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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 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-1), 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, 1996.
(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.
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(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.
(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
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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
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, 1996, 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
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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, 1996
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.
(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
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(ii) complaints, notices or inquiries to the Borrower
regarding potential liability under any Environmental
Law;
(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.
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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 finally paid and performed in full, the Borrower will perform the
obligations set fort 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 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
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accountants (and the Borrower hereby authorizes such independent public accounts
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, 1996, 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, 1996 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;
(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.
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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 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
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(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.
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
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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 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.
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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.
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.
/s/ BRAD HACKER By /s/ DONALD ENGEL
- --------------------------------- ------------------------------
Witness: Brad Hacker Name: Donald Engel
Title: CEO
/s/ ARACILE A. REINA
- --------------------------------
Witness: Aracile A. Reina Address:
Facsimile No.:
OCEAN BANK
/s/ ERNESTO SAPINES By /s/ ROBERT TRUJILLO
- --------------------------------- ------------------------------
Witness: Ernesto Sapines Name: Robert Trujillo
Title: Vice President
- ---------------------------------
Witness Address: 780 N.W. 42nd Avenue
Miami, Florida 33126
Facsimile No.:
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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
EXHIBIT 10.34
VARIABLE RATE
COMMERCIAL
PROMISSORY
NOTE
OCEAN BANK BORROWER
780 N.W. 42nd Avenue HI-RISE RECYCLING SYSTEMS, INC.
Miami, Florida 33126-5597 AND HESCO SALES, INC.
(305) 442-2660 16255 NW 54TH AVE
"LENDER" MIAMI, FL 33014
<TABLE>
<CAPTION>
OFFICER INITIALS INTEREST RATE PRINCIPAL AMOUNT FUNDING DATE MATURITY DATE CUSTOMER NUMBER LOAN NUMBER
<S> <C> <C> <C> <C> <C> <C>
TR VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
PROMISE TO PAY
For value received, Borrower promises to pay to the order of Lender indicated
above the principal amount THREE MILLION AND NO/100 Dollars ($3,000,000.00) 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 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 is no default under this Note, interest on this
Note shall be calculated at the variable rate of ONE AND 50/100 percent (1.50%)
per annum over the Index Rate. The initial Index Rate is currently EIGHT AND
50/100 percent (8.50%) per annum. Therefore, the initial interest rate on this
Note shall be TEN AND NO/100 percent (10.00%) 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 maximum interest
rate Lender is permitted to charge by law, whichever is less.
DEFAULT RATE: In the event of a default under this Note, the Lender may, in its
sole discretion, determine that all amounts owing to Lender shall bear interest
at the less 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:
99 PAYMENTS OF PRINCIPAL IN THE AMOUNT OF $30,000.00 PLUS ACCRUED INTEREST
BEGINNING JANUARY 19, 1998 AND CONTINUING AT MONTHLY TIME INTERVALS THEREAFTER.
A FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS ACCRUED INTEREST IS DUE AND
PAYABLE ON APRIL 19, 2006.
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 so assigned) that are now or in the future in Lender's custody or control.[X]
If 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 ACKNOWLEDGES 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.
DATED: DECEMBER 19, 1997
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER: HESCO SALES, INC.
BY:/S/ DONALD ENGEL BY:
----------------- --------------------------
DONALD ENGEL
TITLE: C.E.O., CHAIRMAN TITLE:
------------------- -----------------------
BORROWER: BORROWER:
BY: BY:
--------------------- --------------------------
TITLE: TITLE:
------------------- -----------------------
<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 other 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;
(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 Lender's address. Borrower 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 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 attorneys' 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>
CERTIFICATE FOR EXEMPTION FROM DOCUMENTARY STAMP TAX
(OUT OF STATE NOTE-NOT SECURED BY FLORIDA MORTGAGE)
Ocean Bank ("Bank") has granted a Term Loan to HI-RISE RECYCLING SYSTEMS, INC.
AND HESCO SALES, INC. ("Borrowers") in the amount of THREE MILLION AND NO/100
DOLLARS ($3,000,000.00) ("Loan"), evidenced by Variable Rate Commercial
Promissory Note executed simultaneously herewith (the "Note"). The Note has been
made, executed and delivered by Borrowers to Bank Agent in New York, New York.
Borrowers and Bank believe in good faith that the Note is exempt from Florida
documentary stamp tax pursuant to Regulation 12B-4.053 (35), Florida
Administrative Code. The Borrowers understand that the Bank is not collecting
Florida documentary stamp taxes from the Borrowers in connection with the
out-of-state execution of the Note, which Note, at Bank's option and sole
discretion, may be brought back into the State of Florida for safekeeping and
storage. In consideration of the Bank not collecting documentary stamp tax, the
Borrowers hereby covenants and agrees that: (i) Borrowers shall indemnify and
hold the Bank harmless from and against the payment of any and all documentary
stamp taxes due to the State of Florida or any department or agency thereof in
connection with the Loan and/or Note (as the same may be modified, extended, or
renewed, or any substitution thereof), together with all interest, fines,
penalties, costs or other charges thereon, regardless of when, or the party
against whom the same may be assessed or imposed; AND, (ii) in the event a
documentary stamp tax assessment is made against Borrowers or Bank in connection
with the Loan or the Note, Borrowers shall pay the full amount of such
assessment (including interest, fines, penalties, costs or other charges
thereon), within ten (10) days of receipt by Borrowers of written notice that
the tax is due and Borrowers shall not contest or otherwise challenge the
assessment except in connection with a request for a refund in accordance with
the applicable regulations adopted by the Florida Department of Revenue.
IN WITNESS WHEREOF, the Borrowers have executed this instrument and the
Note, and delivered both to Ocean Bank, in New York, New York, this ____ day of
December, 1997.
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
"BORROWER" "BORROWER"
/S/ DONALD ENGEL /S/ DONALD ENGEL
- ----------------- -----------------
BY: DONALD ENGEL BY: DONALD ENGEL
TITLE: CEO & CHAIRMAN OF THE BOARD TITLE: CEO & CHAIRMAN OF THE BOARD
IN WITNESS WHEREOF, the Bank, through its duly authorized Officer and
Agent Robert Trujillo acknowledges delivery and receipt of this instrument and
the Note in New York, New York, this ______ day of December, 1997.
OCEAN BANK
/S/ ROBERT TRUJILLO
--------------------
BY: ROBERT TRUJILLO
TITLE: VICE PRESIDENT & CORPORATE
BANKING OFFICER
STATE OF NEW YORK
SS.
COUNTY OF NEW YORK
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State and County aforesaid to take acknowledgments, personally
appeared Donald Engel as CEO & Chairman of the Board of HI-RISE RECYCLING
SYSTEMS, INC. AND HESCO SALES, INC. (the "Borrowers"), and Robert Trujillo, Vice
President (as Officer and Agent of OCEAN BANK), ( ) who presented the following
as identification NYS Driver's License & Florida Driver's License, respectively,
or ( ) who are well known to me to be the persons described in and who executed
the foregoing instrument, who in my presence and being by me first duly sworn:
(i) on the date hereof, the Borrowers through their CEO & Chairman of the Board
Donald Engel, executed a Note of even date herewith in the principal amount of
THREE MILLION DOLLARS AND NO/100 ($3,000,000.00) in favor of Ocean Bank, in New
York, New York and that (ii) the Borrowers personally delivered the Note to
Ocean Bank's representative Robert Trujillo, Vice President, Corporate Banking
Officer, who accepted the Note on behalf of Ocean Bank on the date hereof in New
York, New York.
Sworn to and subscribed before me on this 19th day of December, 1997.
/S/ WARREN LEIBOWITZ
----------------------
Name: Warren Leibowitz
NOTARY PUBLIC: State of New York
<PAGE>
COMMERCIAL
AGRICULTURAL
REVOLVING OR DRAW
NOTE-VARIABLE RATE
OCEAN BANK BORROWER
780 N.W. 42nd Avenue HI-RISE RECYCLING SYSTEMS, INC.
Miami, Florida 33126-5597 AND HESCO SALES, INC.
(305) 442-2660 16255 NW 54TH AVE
"LENDER" MIAMI, FL 33014
<TABLE>
<CAPTION>
OFFICER INITIALS INTEREST RATE PRINCIPAL AMOUNT/CREDIT LIMIT FUNDING DATE MATURITY DATE CUSTOMER NUMBER LOAN NUMBER
<S> <C> <C> <C> <C> <C> <C>
TR VARIABLE $3,000,000.00 12/19/97 12/19/02 100937428-63
</TABLE>
PROMISE TO PAY
For value received, Borrower promises to pay to the order of Lender indicated
above the principal amount of THREE MILLION AND NO/100 Dollars ($3,000,000.00)
or, if less, the aggregate unpaid principal amount of all loans or advances made
by the Lender to the Borrower, 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 fees and expenses, then to accrued interest, and then
to principal. INTEREST RATE: This Note has a variable 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 is no default under this Note,
interest on this Note shall be calculated at the variable rate of ONE AND 50/100
percent (1.50%) per annum over the Index Rate. The initial Index Rate is
currently EIGHT AND 50/100 percent (8.50%) per annum. Therefore, the initial
interest rate on this Note shall be TEN AND NO/100 percent (10.00%) 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, the 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:
ON DEMAND: INTEREST PAYABLE MONTHLY, PRINCIPAL ON DEMAND
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 so assigned) that are now or in the future in Lender's custody or control.
[X] If 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 ACKNOWLEDGES 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.
DATED: DECEMBER 19, 1997
BORROWER: HI-RISE RECYCLING SYSTEMS, INC. BORROWER:
AND HESCO SALES, INC.
BY:/S/ DONALD ENGEL BY:
---------------- ---------------------
DONALD ENGEL
TITLE: C.E.O. CHAIRMAN TITLE:
---------------- ------------------
BORROWER: BORROWER:
BY: BY:
-------------------- ---------------------
TITLE: TITLE:
- ----------------------- -------------------
<PAGE>
REVOLVING OR DRAW FEATURE: This Note possesses a revolving or draw feature as
indicated below.
[X] This Note possesses a revolving feature. Borrower shall be entitled to
borrow up to the full principal amount of the Note from time to time
during the term of this Note.
[ ] This Note possesses a draw feature. Borrower shall be entitled to make one
or more draws under this Note. The aggregate amount of such draws shall not
exceed the full principal amount of this Note.
Lender shall maintain a written ledger of the amounts loaned to and repaid
by Borrower under this Note. The aggregate unpaid principal amount shown on
such ledger shall be rebuttable presumptive evidence of the principal
amount owing and unpaid on this Note. The Lender's failure to record the
date and amount of any loan or advance on such ledger shall not limit or
otherwise affect the obligations of the Borrower under this Note to repay
the principal amount of the loans or advances together with all interest
accruing thereon. Lender shall not be obligated to provide Borrower with a
copy of the ledger on a periodic basis, however, Borrower shall be entitled
to inspect or obtain a copy of the ledger during Lender's business hours.
CONDITIONS FOR ADVANCES: Borrower shall be entitled to borrow monies under
this Note (subject to the limitations described above) under the following
conditions:
- -------------------------------------------------------------------------------
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 other 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: [X] 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 Lender's address. Borrower 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 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 attorneys' 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>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
780 N.W. 42nd Avenue HESCO SALES, INC.
Miami, Florida 33126 8505 NW 74th Street
(305) 442-2660 Miami, FL 33166
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 8505 NW 74th STREET
16255 NW 54TH AVENUE Miami, FL 33166
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
(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;
[ ] Other:
All monies, instruments, and savings, checking or other deposit accounts that
are 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.
5. RESIDENCY/LEGAL STATUS. Owner is a resident of 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;
<PAGE>
(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 Materials" 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 Section 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 wastes 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;
(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 except
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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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
2
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty immediately due
and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By:/S/ DONALD ENGEL BY:
------------------ ---------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
-------------------- ------------------
LENDER: OCEAN BANK OWNER:
By:/S/ ROBERT TRUJILLO By:
--------------------- --------------------
ROBERT TRUJILLO
Title: VICE PRESIDENT Title:
----------------- ------------------
4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
OCEAN BANK
780 N.W. 42nd Avenue HESCO SALES, INC.
Miami, Florida 33126 8505 NW 74th Street
(305) 442-2660 Miami, FL 33166
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 4125 E 11TH AVENUE
16255 NW 54TH AVENUE HIALEAH, FL
MIAMI, FL 33014
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 12/19/02 100937428-63
</TABLE>
(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 EXHIBIT "A"
All monies, instruments, and savings, checking or other deposit accounts that
are 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: 59-1700672.
5. RESIDENCY/LEGAL STATUS. Owner is a resident of 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
<PAGE>
Hazardous Materials. Owner shall not commit or permit such actions to be
taken in the future. The term "Hazardous Materials" 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 Section 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 wastes 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;
(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 except
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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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.
2
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty immediately due
and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By:/S/ DONALD ENGEL BY:
-------------------- ----------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
-------------------- -------------------
LENDER: OCEAN BANK OWNER:
By:/S/ ROBERT TRUJILLO BY:
-------------------- ----------------------
ROBERT TRUJILLO
Title: VICE PRESIDENT Title:
------------------- -------------------
4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
HESCO SALES CO.
4125 E. 11TH AVENUE, HIALEAH, FLORIDA
NOVEMBER 11, 1997
EXHIBIT "A"
<TABLE>
<CAPTION>
QUANTITY
<S> <C> <C>
1 Forklift. Nissan Type D. 5,000 lb.
1 Shop Vac. 10 gal.
2 Paint mixers, dual. 50 gals., no manufacturer, no model /S/ DONALD ENGEL
----------------
number. No serial number (could be shop made) (one in use), DONALD ENGEL
w/Kellogg American Generator S/N 8825801, in use C.E.O. & CHAIRMAN OF THE BOARD
1 Scale, Chathion, 30 lbs.
1 Welder, Hobart. W/hoses and torch tip
1 Storage rack, 17 sections. 39" x 56" each section
1 Steel band strapping machine
6 Lincoln welders, Model SP200 (not in use)
1 Lot. Assorted hand tools
1 Air compressor Dresser, Wayne. Model V16-5012 HD, S/N 20431
1 Welding Mask
1 Table vise. 10"
1 Cummins grinder/polisher. Floor model
1 Rockwood drill press, heavy duty, Model 4348,
1/2" chuck. 1/2 hp. 1980
1 Lot. One desk and two chairs
3 Rotational Molding Machines
2 machines (in use)
1 machine (parts only)
Fully automatic
McNeil Akron - Model 1500-88 oven with 2M BTU
burner w/door. Rotocast Machine cooling
chamber w/door
Both doors fully automatic on each
machine Mold arm on each machine
automatic Podium type, 1982-1987 Each
machine has main control Cabinet panel
- fire control Cabinet panel - damper
- cooling water and delay Each oven
shaft has tachometers 3 spindles, 220
vac. Cycle time NEW: $200,000
2 Jib cranes. W/ hoist - 500 lbs. And hooks
</TABLE>
TOTAL HIALEAH LOCATION
6
<PAGE>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
OCEAN BANK
780 N.W. 42nd Avenue UNITED TRUCK & BODY
Miami, Florida 33126 CORPORATION
(305) 442-2660 27137 COUNTRY ROAD #33
OKAHUMPKA, FL 34762
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. UNITED TRUCK & BODY CORPORATION
AND HESCO SALES, INC. 27137 COUNTRY ROAD #33
16255 NW 54TH AVENUE OLAHUMPKA, FL 34762
MIAMI, FL 33014
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
(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 EXHIBIT "A"
All monies, instruments, and savings, checking or other deposit accounts that
are 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.
5. RESIDENCY/LEGAL STATUS. Owner is a resident of 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
<PAGE>
Hazardous Materials. Owner shall not commit or permit such actions to be
taken in the future. The term "Hazardous Materials" 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 Section 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 wastes 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;
(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 except
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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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.
2
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty immediately due
and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
24. MODIFICATION WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: UNITED TRUCK & BODY CORPORATION OWNER:
By:/S/ DONALD ENGEL BY:
------------------ --------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
------------------- ------------------------
LENDER: OCEAN BANK OWNER:
By:/S/ ROBERT TRUJILLO BY:
----------------------- --------------------------
ROBERT TRUJILLO Title:
Title: VICE PRESIDENT
--------------------- -----------------------
4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
OCEAN BANK
780 N.W. 42nd Avenue HI-RISE RECYCLING SYSTEMS, INC.
Miami, Florida 33126 16255 8505 NW 74th Street
(305) 442-2660 Miami, FL 3310466
"LENDER"
TELEPHONE NUMBER
305-624-9222
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. OCEAN BANK
AND HESCO SALES, INC. 780 NW 42 Avenue
16255 NW 54TH AVENUE Miami, FL 33126
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
(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
are 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.
5.RESIDENCY/LEGAL STATUS. Owner is a resident of 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
<PAGE>
Hazardous Materials. Owner shall not commit or permit such actions to be
taken in the future. The term "Hazardous Materials" 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 Section 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 wastes 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;
(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 except
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 the 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 obligations 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 and 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
applicable 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 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
owning to Owner 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 the prepayment of any Indebtedness 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 or release any obligor or
collateral upon, or otherwise settle any of the Indebtedness 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.
2
<PAGE>
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 or a motor vehicle, Owner
will obtain comprehensive and collision coverage in amounts at least equal to
the actual cash value of the 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 or any draft or
negotiable instrument drawn by any insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible
for the performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty immediately due
and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HI-RISE RECYCLING SYSTEMS, INC. OWNER:
By:/S/ DONALD ENGEL BY:/S/ BRADLEY ALAN HACKER
---------------------- ------------------------
DONALD ENGEL Bradley Alan Hacker
Title: C.E.O., CHAIRMAN Title: AUTH. SIGNER
------------------- ----------------------
LENDER: OCEAN BANK OWNER:
By:/S/ ROBERT TRUJILLO BY:
---------------------- ------------------------
ROBERT TRUJILLO
Title: VICE PRESIDENT Title:
--------------------- ---------------------
4
<PAGE>
SCHEDULE A
5
<PAGE>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
OCEAN BANK
780 N.W. 42nd Avenue HESCO SALES, INC.
Miami, Florida 33126 8505 NW 74th Street
(305) 442-2660 Miami, FL 33166
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 8505 NW 74th STREET
16255 NW 54TH AVENUE Miami, FL 33166
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
(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 EXHIBIT "A"
All monies, instruments, and savings, checking or other deposit accounts that
are 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.
5.RESIDENCY/LEGAL STATUS. Owner is a resident of 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
<PAGE>
Hazardous Materials. Owner shall not commit or permit such
actions to be taken in the future. The term "Hazardous Materials"
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 Section 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 wastes 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;
(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 except 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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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.
2
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in
the event that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By:/s/ DONALD ENGEL BY:
-------------------------- --------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
-----------------------
LENDER: OCEAN BANK OWNER:
By:
By: /s/ ROBERT TRUJILLO --------------------------
--------------------------
ROBERT TRUJILLO Title:
Title: VICE PRESIDENT -----------------------
4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
*******
OWNER OF COLLATERAL
OB COMMERCIAL
OCEAN BANK SECURITY
780 N.W. 42nd Avenue HESCO SALES, INC. AGREEMENT
Miami, Florida 33126 8505 NW 74th Street
(305) 442-2660 Miami, FL 33166
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 8505 NW 74th STREET
16255 NW 54TH AVENUE Miami, FL 33166
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 12/19/02 100937428-63
</TABLE>
(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; 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;
[X] All standing timber located on the real property described on Schedule
B attached hereto and incorporated herein by this reference;
[ ] Other:
All monies, instruments, and savings, checking or other deposit accounts that
are 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: 59-1700672.
5.RESIDENCY/LEGAL STATUS. Owner is a resident of the state of: N/A Owner is
[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;
<PAGE>
(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 Materials"
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 Section 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 wastes 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;
(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 except 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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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
2
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By:/s/ DONALD ENGEL BY:
-------------------------- --------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
-----------------------
LENDER: OCEAN BANK OWNER:
By:
By: /s/ ROBERT TRUJILLO --------------------------
--------------------------
ROBERT TRUJILLO Title:
Title: VICE PRESIDENT -----------------------
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
COMMERCIAL
SECURITY
AGREEMENT
OWNER OF COLLATERAL
OB
OCEAN BANK
780 N.W. 42nd Avenue HESCO SALES, INC.
Miami, Florida 33126 4125 E. 11th Avenue
(305) 442-2660 Hialeah, FL
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 4125 E. 11th Avenue
16255 NW 54TH AVENUE Hialeah, FL
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 04/19/06 100937428-64
</TABLE>
(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 EXHIBIT "A"
All monies, instruments, and savings, checking or other deposit accounts that
are 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.
5.RESIDENCY/LEGAL STATUS. Owner is a resident of the state of: N/A Owner is
[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
<PAGE>
Hazardous Materials. Owner shall not commit or permit such
actions to be taken in the future. The term "Hazardous Materials"
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 Section 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 wastes 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;
(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 except 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 the 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 obligations 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 and 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
applicable 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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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.
<PAGE>
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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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 or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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.
3
<PAGE>
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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By:/s/ DONALD ENGEL BY:
-------------------------- --------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
-----------------------
LENDER: OCEAN BANK OWNER:
By:
By: /s/ ROBERT TRUJILLO --------------------------
--------------------------
ROBERT TRUJILLO Title:
Title: VICE PRESIDENT -----------------------
4
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
5
<PAGE>
OWNER OF COLLATERAL
OB COMMERCIAL
OCEAN BANK SECURITY
780 N.W. 42nd Avenue HESCO SALES, INC. AGREEMENT
Miami, Florida 33126 8505 NW 74th Street
(305) 442-2660 Miami, FL 33166
"LENDER"
TELEPHONE NUMBER
BORROWER LOCATION OF COLLATERAL
HI-RISE RECYCLING SYSTEMS, INC. HESCO SALES, INC.
AND HESCO SALES, INC. 8505 NW 74th STREET
16255 NW 54TH AVENUE Miami, FL 33166
MIAMI, FL 33014
TELEPHONE NUMBER TELEPHONE NUMBER
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 implied, 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:
<TABLE>
<CAPTION>
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C>
VARIABLE $3,000,000.00 12/19/97 12/19/02 100937428-63
</TABLE>
(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 EXHIBIT "A"
All monies, instruments, and savings, checking or other deposit accounts that
are 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.
<PAGE>
4.OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is: 59-1700672.
5. RESIDENCY/LEGAL STATUS. Owner is a resident of 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 Materials" 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 Section 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 wastes 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;
(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 except 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 the 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 obligations 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 and 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
applicable 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.
2
<PAGE>
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 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 owning to Owner
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 the prepayment of any Indebtedness 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 or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness 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 or a motor vehicle, Owner will obtain
comprehensive and collision coverage in amounts at least equal to the actual
cash value of the 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, canceling any policy or
endorsing Owner's name or any draft or negotiable instrument drawn by any
insurer.
15. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's 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.
18. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or the 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;
3
<PAGE>
(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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty 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 of 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 WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in 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, fails 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 result 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
4
<PAGE>
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.
31. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the
terms and conditions of this Agreement.
DATED: DECEMBER 19, 1997
OWNER: HESCO SALES, INC. OWNER:
By: /s/ DONALD ENGEL BY:
- -------------------------- ------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
---------------------
LENDER: OCEAN BANK OWNER:
By: /s/ ROBERT TRUJILLO By:
- --------------------------- ------------------------
ROBERT TRUJILLO
Title: VICE PRESIDENT Title:
---------------------
5
<PAGE>
SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
6
<PAGE>
HESCO SALES CO. A319
8505 NW 74 Street, Miami, Florida
October 29, 1997
QUANTITY
1 Word processor, w/ monitor, Brother WP7550J, Whisper Writer
1 Portable file, wire
DATA ENTRY
2 Chair, guest
1 Chair, task
1 Checkwriter, Paymaster 8000
2 Calculator, T15045SV
1 Terminal, WYSE, WY370, 14"
1 Typewriter, Brother WP-1700 MDS, 1.44 mb
1 Computer, tower, 1200 mb, Tape backup, w/ Micro Q monitor 1460,
13"; w/ UPS Power Backer 360; w/ Boca modem V.34; w/ U.S.
Robotics modem 14.4
1 Printer, OkiData 321
1 Work center, mica, w/ 48 slot hutch 30 x 65 + 30 + 32 + 84
1 Work center, mica, two lateral files, 20 x 75
KITCHEN
1 Microwave, Sanyo
1 Toaster oven, Black & Decker
1 Refrigerator/freezer, Compact, Sears Model 92SO2, 5.7 cu. ft.
1 Paper towel dispenser roll
1 Blender, Hamilton Beach
1 Fryer, Dazey, Pick A Pocket Plus
FILE ROOM
3 File cabinets, four drawer letter
2 File cabinets, four drawer legal, fireproof
8 File cabinet, four drawer legal
1 File cabinet, three drawer legal
1 Safe, floor, data storage, 5' x 30 x 25
1 Stool, vinyl/metal
1 Lot, miscellaneous equipment
1 sorter, 20 bin
2 printer, DM
3 calculators
1 binder
1 IBM typewriter
STORAGE
1 Generator, portable, Honda EM600, 600 VA
3 Bookcases, mica, 5 shelf, 7' x 32"
1 Bookcase, mica, 7 shelf, 7' x 30 + 18
1 Key cabinet, metal, 17 x 14 x 3
CONFERENCE ROOM
1 Flat file, metal, eleven drawer, 28"
1 Calculator, T15032, digital
1 Slide projector, Bell & Howell, 3 Dimension, TDC Selectron Viewer
1 Calculator, Facit
9 Chairs, junior executive, fabric, chrome base
1 Sofa, leather style, 3 cushion, 83"
1 Table, conference, mica, 5' x 124"
1 Wall unit, mica, three section, 7' x 121
1 Monitor, 9", security, Panasonic
1 Printer, Epson, T15130
1 Computer, tower, w/ tape backup
1 Television, 19" Panasonic, w/ remote
1 VCR, RCA
1 Monitor, DataS, 13"
1 Video Recorder, Sony AV3650
7
<PAGE>
HESCO SALES CO. A319
8505 NW 74 Street, Miami, Florida
October 29, 1997
QUANTITY
OFFICE MANAGER
2 Chairs, guest
1 Chair, task
1 Work center, mica, w/ hutch, four doors, 36 x 72 + 41 + 72
1 Calculator, T15630
2 Radio, portable, Motorola P110 and charger
1 Terminal, WYSE WY60, 14"
1 Computer tower, w/ CD; w/ Hurricane Systems 14" 14V39 monitor; w/
Colorado T1000E tape backup
1 Printer, Panasonic, KXP4430 Laser
1 Typewriter, Brother WP3900
1 Table, typing, mica
3 Files, lateral, two drawer, mica
1 Letter opener, Boston P400
PLANT MANAGER
2 Sectional chairs, vinyl, peach
1 Drop safe, metal, 10 x 12 x 12
1 Corner unit, mica, 16 x 37 x 37
1 Chair, task
1 Organizer, Rolodex, electronic
1 Calculator, Sharp EL 1197GH
1 Work center, mica, U-shaped, plus w/ hutch, 30 x 64 + 28 + 38 +
54 + 56
/s/ DONALD ENGEL
- ------------------------------
DONALD ENGEL
C.E.O. & CHAIRMAN OF THE BOARD
HESCO SALES CO. A319
8505 NW 74 Street, Miami, Florida
October 29, 1997
QUANTITY
1 Printer, HP Deskset 600C
1 Computer, HP Legend 4610 Tower, w/ 1020 13" monitor; w/ speakers
HALL
1 Telephone system, AT&T Merlin 1030; w/ Page Pac Amplicenter 100;
w/ GE answering machine; w/ ten desk telephones BIS-34D
PRESIDENT'S OFFICE
1 Desk, mica, custom, 36 x72
1 Credenza, mica, custom, 6 lateral files, 6 doors, 21 x 2' + 150"
2 Chairs, guest, leather style, metal base
1 Cart, portable, plastic, two tier
1 Table, typing, mica
1 Transcribing machine, Sony BM25
1 Computer, Apple MacIntosh SE30; w/ 9" monitor; w/ Radius 14"
monitor
1 Globe, floor model, wood
1 Organizer, Rolodex 64K
1 Lot, decorative frames
1 Chair, high back, executive, leather, metal base
1 Notebook, AT&T, Globalyst 250
STOREROOM
6 Metal cubby hole racks, 56 cubes per rack
2 Metal cabinets, 48 x 108
1 Toledo scale, 1,000 lbs. Floor model, Model 4182A, S/N
7709645-74T Metal storage shelving
4 sections, 48 x 25 x 60
2 sections, 48 x 25 x 96
48 sections, 48 x 25 x 120
PAINT SHOP
1 Building, steel construction, paint shop, w/overhead doors, 60
ft. x 30 ft.
8
<PAGE>
QUANTITY
1 Building, steel construction, paint shop, w/overhead doors, 30
ft. x 30 ft.
6 Paint pumps, 30.1. w/commercial mach #2, paint guns
50 Trolley rail rollers
MAINTENANCE SHOP
2 Golf carts, #55
1 FMC Sweeper, Model 66AD, S/N 66/1778 (in for repairs)
1 Sweeper mate
1 Comet 4" pump on portable stand
1 Table vise
1 Table polisher
1 Compressor, Ingersoll-Rand, Type 30, Model H2072A, S/N 229831,
5+5, 31/2x 4
2 Compressor, 10 gal. (parts only)
1 Lot, including but not limited to the following items, all in
shop for repair or parts: Lincoln Welder 250, Dayton SCR Grinder,
metal horses, welding hoses, motors, Lincoln Welder SP200, Miller
Welder 250TS
1 Fremont Phosphatizing System 1600, alkaline pre-wash
SALES OFFICE
LOBBY
1 Sectional sofa, peach vinyl, 84" - 36" - 30"
3 Decorative wall art, by Richard George, w/ o/p 44 x 14 1/2D
1 Pedestal, mica 28 x 13 D
1 Desk, reception, mica, curved, one pedestal, two drawer, 37 1/2x
87 + 40
1 Chair, task, vinyl
1 File cabinet, letter, 2 drawer
1 Terminal, WYSE, WY-60, 14"
1 Typewriter, Brother WP3900DS, w/monitor, Brother CT-1050, 12"
1 Credenza, mica, 2 drawer, w/hutch, 72"
1 Monitor, security, Burke, TC1910A, B/W, 9", w/2 cameras (one
camera not generating)
1 Monitor, Kayo, no number, 9"
1 Lot, desk accessories
1 Board, cork, 18" x 24"
CUBICLE AREA
4 Chairs, task, vinyl
1 Binding machine, Ibico, Ibimatic
1 Scanner, Mustek, MPS-6000CX, flat
/s/ DONALD ENGEL
- ------------------------------
DONALD ENGEL
C.E.O. & CHAIRMAN OF THE BOARD
HESCO SALES CO. A319
8505 NW 74 Street, Miami, Florida
October 29, 1997
QUANTITY
1 Printer, Apple, Laserwriter NTR, M2000
1 Computer, tower, HP, w/Colorado T1000 tape backup; CD, PC2; HD
1.99; 64 mb RAM; Pentium 133; w/MicroQ monitor 1460i, 13"
1 Lamp, flex arm, metal
1 Work station, mica, 2 pedestal, four sections, 24 x 84 + 81
1 File cabinet, letter, two drawer
1 Fax, Murata F70
1 Printer stand, mica, two drawer, portable
1 Copier, Gestetner 2130Z (not operating)
1 Copier, Gestetner 2430 w/stand
1 Stand, copier, metal, 32"
1 Paper cutter, Buddy Products, 12"
1 Calculator, T15045SV
1 File cabinet, letter, two drawer
1 File cabinet, lateral, 2 drawer, 30"
1 Work center, mica, 36 x 72 + 50
1 Calculator, TI5032, printing
1 Work center, mica, 24 x 84 + 78
2 Radio, portable, Motorola P100
1 Docking, charging station, Motorola, w/6 radio stations
1 Terminal, WYSE, WY-60, 14"
9
<PAGE>
QUANTITY
1 Computer tower
1 Chair, junior executive, fabric chrome base
1 Chair, guest, vinyl/metal
1 Chair, task, vinyl
1 Typewriter, Brother WP-3410, w/monitor, Brother, amber CT 1050,
12"
1 Radio Motorola P110, radios w/charger
1 Computer, tower, w/1460 DL Goldstar, 13"
1 Printer, Okidata 321
1 Workcenter, mica, U-shaped, w/hutch, 30 x 65 + 30 + 36 + 65
1 Portable file, wire basket
1 Calculator, T1504511
ACTION ENVIRONMENTAL
1 Chair, guest, vinyl/metal
1 Step stool, chrome
1 Chair, task, vinyl
1 Computer, IBM PS1 Consultant, Model 2168A-56C, w/ CD, w/PSI 14"
monitor, 73G3241 9/93
1 A./B switch
1 Computer work center, mica, 26"
1 Printer, Sharp JX400
1 Printer, Citizen GSX2200
1 Desk, secretarial, mica, 30 x 65
1 Storage cabinet, mica, two drawer, two doors, 6' x 38" X 20"
PURCHASING
2 Chairs, guest, vinyl/metal
1 Chair, task, vinyl
1 Organizer, Rolodex, The Electrodex Plus
1 Desk, mica, double pedestal, 30 x 65
1 Table, mica, portable, 30"
1 Terminal, WYSE WY60
2 Bookcases, mica, 4 shelf, 24 x 6'
1 Bookcase, mica, 1 shelf, two drawer, 40 x 48 x 18
1 Board, cork, wood frame, 18 x 24
MANAGER/PAYROLL
2 Chairs, guest, vinyl/metal
1 Chair, task/vinyl
1 Organizer, Rolodex 64K
1 Desk, double pedestal, mica, 30 x 65
1 Table, mica, 36"
1 Terminal, WYSE, WY60, 14"
1 Printer, OkiData 321
1 File cabinet, two drawer letter
1 Work center, mica, custom w/hutch, C-shaped, 20 x 72 + 22 + 56
1 Check signer, Paymaster 8500 series
VEHICLES
1 1989 Chevy truck, VIN 1GBJ7D1Y8KV114625, 65,501 miles
1 1989 Kalyn trailer, VIN 1K9348216K1005173
1 1991 Chevy truck, VIN 1GBL7H1J4MJ100217, 500,288 miles
1 1990 Kalyn trailer, VIN 1K9E48242L1005148
1 1991 Chevy Kodiak C70, VIN 1GBL7H1J9MJ104926, 500,831 miles
1 1991 Kalyn trailer, VIN 1K9E48238M1005339
1 1993 Kalyn trailer, VIN 1KF9E482441105027
1 1982 Mack truck, VIN GM111ASCB013939, 239,334 miles
1 1994 GMC truck, VIN 1GDJ6H1J6RJ504578, 332,305 miles
1 1994 Kalyn trailer, VIN 1K9F4823XP1005397
1 1994 Kalyn trailer, VIN IK9F823P1005396
1 1984 Mack truck, VIN 1M1W129Y9EA020941
1 1987 Aspt trailer, VIN FLT34362
1 1990 Ford pickup, VIN 1FTDF15Y81NB18891
1 1990 Ford F800, VIN 1FDXK85P51VA34645
1 1970 Lufk trailer, VIN 30247
PLANT
1 Table grinder, Chicago tool,3/4hp, Model 987S, S/N B777072
1 Wilton table vise, 6"
2 General Electric generators, 400 volts, 3 phrase Model 9T2383872
1 Bosch sander/polisher, Model 1357
1 Powermatic Band Saw, S/N 67-3790
10
<PAGE>
QUANTITY
1 Delta Rockwell power drill, Model 15-017, S/N 1533254
1 Cummins 9 speed drill press, Model C117F, 5/8" chuck, spindle
mount #2
1 Mubea punch press, Model K3L45-20, Optima
1 Enco Turret milling machine, S/N 2041091, 1982
1 Enco single speed lathe, Model 1236, S/N 10105
1 Lincoln spot welder
1 Mubea Ironworker Model KBL88-6F, S/N 135A/29506, 1972
1 Do All bank saw machine, 1 1/4", Model C305A, S/N 497-921-85
1 Do All Bank saw, 1", no model or serial number
1 Cincinnati Shear, Model 2512, S/N 19405, 3/8" x 120" capacity,
front operating power back gauge
1 Cincinnati Press Brakes, 9 series x 10 ft., S/N 36865, 3" stroke,
225 ton, bed length 12 ft.
1 Cincinnati Press Brakes, 5 series x 8 ft., S/N 37675, 1969, bed
length 10 ft., 135 ton
1 Stamco roll formers
1 Warco press brake, no model or serial number.
1 Edwards stamping press, no model or serial number
1 R&K stamping press, Model 4 1/2, S/N 3076/14
1 Rousselle stamping press, Model 4F, S/N 13391
1 Bliss press, Model 6, S/N 341P
1 Edwards press, Model EG2, 31/4
1 Cincinnati Shear Model 2512, Hydraulic, S/N 33721, front support
arms
1 Cincinnati Shear, Model 1408, power square shearing, S/N 19687,
3/16"
1 Bronx press, 30 ton, S/N 23855, Model L2030
1 Bliss press, Model 20C
1 Wysong and Miles power squaring shear, no model or serial number
1 Webb drill press, S/N 800641, 1980
1 Portable transformer
1 Multi-press Model NT127L-C404, S/N 30995
1 Dewalt arm saw Model M80, S/N 127498
1 Sears Craftsman Miter saw, 3 hp
1 Makita cut-off saw, Model 2414
1 Punch press, Sweeney blocksidge #9
1 Aeroquip crimp machine, Model FT1330
1 Aeroquip vise, 8"
1 Cummins drill press, 12 speed, Model 114, 5/8"
1 Grinder floor model (poor shape)
1 Sears Craftsman hand grinder
TOOL SHOP
1 Lathe welding machine cylinders, 9 1/2x 33, S/N 6246060, auto
controls
1 Table vise, Cleveland 6"
1 Table grinder
1 Skill hand grinder, 4 hp.
1 Bosch hand rip saw
1 Hydraulic 5 ton press, no model or serial number
1 Town radial drill, Model Marers, S/N 5110
1 Sharp planer, Boyer & Schultz, Model 612, S/N 20926
1 Alba Speillo sweeper, Model BEC, S/N 148469-40
1 Doringer floor model saw, Model D350, S/N 19126
1 Buffalo dual grinder, Model B-8D,3/4hp., S/N 1134
1 Table saw, Model 115-12A, S/N 12101
1 Lathe, Shell Tellus, S/N 251169
1 Lathe, Holbrook Model B, spindle speed, Model 17
1 Lathe, Lang, Model 20/108, w/Mitutoyo setting, Model LLDR100
1 Tool die clamp machine
1 Lathe, Warner & Swasey, Model 1420, no serial number, square head
1 Milling machine index 9 x 41, Model 645, S/N 6458813
1 Lot, assorted dies
1 Milling machine, Model FYAS32, 12 x 62, S/N 7534, 1968
1 Victoria milling machine, 12 x 48, S/N BEC2659
1 Royal cut off saw, 14", S/N 072873
1 Aeroquip crimp machine, Model FT1330
1 Wells grinder, Model HDOD, S/N 10773
1 Hand held grinder
1 Lot, assorted hand held tools
1 Waber tool cut-off saw
1 Lot, couplings, assorted sizes
1 Powermatic drill machine, Model 1200, S/N 2-3679-2
1 Victoria drill press (parts only)
1 Coleman Powermate generator, Model PM1500
1 Snap on fast charger, Model BC4200
11
<PAGE>
QUANTITY
MISCELLANEOUS
3 Cantilever racks, 60", double sided
5 Work tables, metal; 48" x 72"
1 Metal storage cabinets, 56 sections, 12 x 48
3 Metal cabinet, 4 shelves, 26 x 72
2 Cantilever racks, 96"
1 Metal rolling table
1 Industrial fan, mobile
1 Buffing machine, floor model
3 2 Wheel hand trucks
1 Metal table, w/shelf, 4 x 12
8 Sections metal shelving, 48 x 28
1 Office in welding section
1 Office in plant
15 Industrial column fans
1 Amano time clock, Model MJR8000
/s/ DONALD ENGEL
- ------------------------------
DONALD ENGEL
C.E.O. & CHAIRMAN OF THE BOARD
HESCO SALES CO. A319
8505 NW 74 Street, Miami, Florida
October 29, 1997
QUANTITY
24 Lincoln Welder, Ideaiarc, Model R35-325, 325 amps, Constant
voltage DC Arc welder, w/Lincoln wire feeder and wire feeder
boom, complete w/hoses, leads, torches:
S/N AC631332 S/N AC588579
S/N AC590907 S/N AC590906
S/N AC636802 S/N AC631317
S/N AC631330 S/N AC588573
S/N AC631332 S/N AC631335
S/N AC636798 S/N AC633775
S/N AC6367974 S/N AC572988
S/N AC572992 S/N AC6330478
S/N AC590908 S/N AC572987
S/N AC588583 S/N AC631328
S/N AC590905 S/N AC536593
S/N AC424161 S/N AC631327
1 Lincoln Model TM300, S/N AC251174, complete w/cables and
accessories
1 Lincoln Welder Model CV300, S/N AC79096, w/Lincoln LN7 wire
feeder
1 Lincoln Welder Model CP200, S/N 574983, complete
16 Hobart Welder, Model RC300, Welding System w/Hobart wire feeder
and wire feeder boom, complete, w/hoses, leads, torches
S/N 78WS306842 S/N 80WW508884
S/N 83WS06031 S/N 80WS508887
S/N 80WS08859 S/N 80WS05753
S/N 73WS2480 S/N 3992
S/N 80W50572 S/N 79WS13388
S/N 83WS06032 S/N 89WS09915
S/N 83WS09903 S/N 83WS010169
S/N 83WS10169 S/N 89H514378
1 Airco Wekler, Model 224BSM, S/N RH377421, DC Welder with Airco
Wire feeder and Bernard Boom Cart
1 Weld sale weider, Model CP250TS, S/N 72-615778
1 Bernard wire feeder crane, with wirespool
7 Hobart Welder, Model RC250, Tig welding system with Hobart wire
feeder and welding crane, 50 lbs., complete with hoses, leads,
torch
S/N 12RT-31062 S/N 12RT-33742
S/N 80W-508866 S/N 80WS08882
S/N 12RT 37490 S/N 12RT28177
S/N 12RT68987
1 Hobart Fabricator Model 2400, with wire feeder
1 Lot, including but not limtied to: terminal blocks, selector
switches, wire connectors, electric controls, pressure
switches, micro switches.
1 Steel Building, 8 ft x 24 ft.
2 CM Overhead hoist with hooks, 2 ton, electric control, with
traverse trolley
3 CM Overhead hoist with hoks, 5 ton, electric control, with
traverse trolley
12
<PAGE>
QUANTITY
17 CM Overhead hoist with hooks, 1 ton, electric control, with
traverse trolley
4 Coffing hoist with crane, 2 ton, electric control with traverse
trolley
3 YNX Hoise with hooks, 1 ton, electric control, with traverse
trolley
1 CM Overhead hoist with hooks,1/2ton, electric control with
traverse trolley
1 Miller welder, Model CP250TS, with DC Wire Feeder Welder,
Miller-matic 10E wire feed system, w/welding crane, complete with
hoses, leads, torch, S/N HD 700468
1 Miller SyncroWave 250 Constant Current Welder, foot control,
Model 903056, S/N KE66887
1 Lincoln Welder, Model DC250, DC Arc Welding with Lincoln Model
LN-7 Wire Feeder and Welding Crane, S/N AC755807
1 Merlin Thermal Arc Model PAK15C, with all accessories; Thermal
Dynamics Plasma Cutting System, with Plasma Torch
1 Lincoln Welder, Model SP125 Plus, table model, Arc Electric, S/N
110797G
4 Welding cylinder carts
1 Lincoln LN7 wire feeder
65 Welding helmets
MISCELLANEOUS
12 Metal work tables, 48x56
4 Two-wheel hand carts
2 Golf cart, Roberto
3 Cantilever racks, 3 ft. single sided
4 Sections of 12 gravity rollers
1 Table vise, 6' Columbian
1 1997 Nissan 50 dual tires, LP gas, sideshift, 5,500 lbs, Model
50KE1102A25V, S/N KEH02-900356
1 1997 Nissan 80, Cushion tires, LP gas, sideshift, 8,000 lbs,
Model 80-WGF0335V, S/N WGF03-920373
1 1983 Toyota, hard tires, LP gas, 5,000 lbs, Model 42-3FG-25, S/N
403FE2512468
1 1986 Toyota, hard tires, LP gas, 6,000 lbs, Model D2-3FGC30, S/N
3FGC30-1110
1 1980 Hyster, cushion tires, LP gas, tilt, sideshift, Model
H225-T, S/N C7P3459A (in repair shop)
1 1980 Hyster, cushion tires, LP gas, tilt, sideshift, Model
H225-T, S/N 3540390420D
1 1991 Hyster, cushion tires, LP gas, tilt, sideshift, Model H50XM,
S/N D177B07552R (in repair shop)
1 1991 Hyster, cushion tires, LP gas, tilt, sideshift, Model H50XM,
S/N D177P0755PR (in repair shop)
1 1991 TCM, LP gas, solid tires, 2,000 lbs, Model FCG10N7T, S/N
A36001059
1 1991 TCM, LP gas, solid tires, 2,000 lbs, Model FD25Z3T, S/N
A36001059
1 1991 TCM, LP gas, solid tires, 5,000 lbs, Model FD25Z3T, S/N
A24M42998
1 1991 TCM, LP gas, solid tires, 5,000 lbs, Model FD25Z3T, S/N
AFD25231
1 1991 TCM, LP gas, solid tires, 3,000 lbs, Model FG15N16L, S/N
A12306522
1 1991 TCM, LP gas, solid tires, 3,000 lbs, Model FCG10NZT, S/N
A36001060
1 1991 TCM, LP gas, solid tires, 5,000 lbs, Model VM330-14A, S/N
AZ16529
/s/ DONALD ENGEL
- ------------------------------
DONALD ENGEL
C.E.O. & CHAIRMAN OF THE BOARD
13
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- -------------------------------------------------------------------------------
GUARANTOR BORROWER
- -------------------------------------------------------------------------------
DADE COUNTY RECYCLING, INC. HI-RISE RECYCLING SYSTEMS
16255 nw 54TH Avenue INC. AND HESCO SALES, INC.
Miami, FL 33014 16255 NW 54TH AVENUE
MIAMI, FL 33014
- -------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- -------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender indicated
above to enter into one or more loans or other financial accommodations with or
on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ____________________________________ Dollars,
together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6. DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND.
GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: DADE COUNTY RECYCLING, INC. GUARANTOR:
By: /s/ DONALD ENGEL By:
- ------------------------------ ------------------------
DONALD ENGEL
Title:C.E.O., CHAIRMAN Title:
- ------------------------------ ----------------------
GUARANTOR: GUARANTOR:
By: By:
---------------------------- -------------------------
Title: Title:
------------------------- ----------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
HESCO EXPORT CORPORATION HI-RISE RECYCLING SYSTEMS, INC.
8505 NW 74th Street AND HESCO SALES, INC.
Miami, FL 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender indicated
above to enter into one or more loans or other financial accommodations with or
on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6. DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: HESCO EXPORT CORPORATION GUARANTOR:
By: /s/ DONALD ENGEL By:
--------------------------------- --------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ----------------------------------- ------------------------
GUARANTOR: GUARANTOR:
By: By:
- ----------------------------------- --------------------------
Title: Title:
- ----------------------------------- --------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
HESCO LEASING CO. HI-RISE RECYCLING SYSTEMS,
8505 NW 74th Street INC. AND HESCO SALES, INC.
Miami, FL 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6 6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: HESCO LEASING CO. GUARANTOR:
By:/s/ DONALD ENGEL By:
- ---------------------------- -------------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------------
Title: Title:
- ---------------------------- -------------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
IDC SYSTEMS, INC. HI-RISE RECYCLING SYSTEMS,
548 S. FULTON AVENUE INC. AND HESCO SALES, INC.
MOUNT VERNON, NY 10550 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6. DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: IDC SYSTEMS, INC. GUARANTOR:
By: By:
- ------------------------- -----------------------------
Title: Title:
- ------------------------- -----------------------------
GUARANTOR: GUARANTOR:
By: By:
- ------------------------- -----------------------------
Title: Title:
- ------------------------- -----------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24 . ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
NU RETECH OF FLORIDA, INC. HI-RISE RECYCLING SYSTEMS,
16255 NW 54th Avenue INC. AND HESCO SALES, INC.
Miami, FL 33014 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: NU RETECH OF FLORIDA, INC. GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
RECYCLTECH, LTD. HI-RISE RECYCLING SYSTEMS,
471 Champagne Drive INC. AND HESCO SALES, INC.
New York, Ontario 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: RECYCLTECH, LTD GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
UNITED TRUCK & BODY CORPORATION HI-RISE RECYCLING SYSTEMS,
27137 County Road #33 INC. AND HESCO SALES, INC.
Okahumpka, FL 34762 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: UNITED TRUCK & BODY CORPORATION GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
U.S. CONTAINER CORP. HI-RISE RECYCLING SYSTEMS,
8505 NS 74th Street INC. AND HESCO SALES, INC.
Miami, FL 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: U.S. CONTAINERS CORP. GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
U.S CYLINDER CO. HI-RISE RECYCLING SYSTEMS,
8505 NW 74th Street INC. AND HESCO SALES, INC.
Miami, FL 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: U.S. CYLINDER CO. GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
<PAGE>
COMMERCIAL CONTINUING
GUARANTY
- --------------------------------------------------------------------------------
GUARANTOR BORROWER
- --------------------------------------------------------------------------------
WILKINSON COMPANY, INC. HI-RISE RECYCLING SYSTEMS,
1530 Commerce ST INC. AND HESCO SALES, INC.
Stow, OH 44224 16255 NW 54TH AVENUE
MIAMI, FL 33014
- --------------------------------------------------------------------------------
TELEPHONE NUMBER TELEPHONE NUMBER
- --------------------------------------------------------------------------------
1. CONSIDERATION. This Guaranty is being executed to induce Lender
indicated above to enter into one or more loans or other financial
accommodations with or on behalf of Borrower.
2. GUARANTY. Guarantor hereby unconditionally guarantees the prompt and
full payment and performance of Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants (cumulatively
"Obligations") to Lender.
[x] UNLIMITED Guarantor's Obligations under the Guaranty shall be unlimited and
shall include, all present or future written agreements between Borrower
and Lender (whether executed for the same or different purposes), together
with all interest and all of Lender's expenses and costs, including
attorneys' fees, incurred in connection with the Obligations, including any
amendments, extensions, modifications, renewals, replacements or
substitutions thereto.
[ ] LIMITED TO: Guarantor's Obligations under this Guaranty shall be limited
to the principal amount of ___________________________________________
Dollars, together with all interest and all of Lender's expenses and costs,
including attorneys' fees, incurred in connection with the Obligations,
including any amendments, extensions, modifications, renewals, replacements
or substitutions thereto.
[ ] LIMITED TO THE FOLLOWING DESCRIBED NOTES/AGREEMENTS: Guarantor's
Obligations under this Guaranty shall be limited to the following described
notes and agreements, together with all interest and all of Lender's
expenses and costs, including attorneys' fees, incurred in connection with
the Obligations, including any amendments, extensions, modifications,
renewals, replacements or substitutions thereto:
- --------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. ABSOLUTE AND CONTINUING NATURE OF GUARANTY. Guarantor's obligations
under this Guaranty are absolute and continuing and shall not be affected or
impaired if Lender amends, renews, extends, compromises, exchanges, fails to
exercise, impairs or releases any of the obligations belonging to any Borrower,
Co-guarantor or third party or any of Lender's rights against any Borrower,
Co-guarantor, third party, or collateral. In addition, Guarantor's Obligations
under this Guaranty shall not be affected or impaired by the death,
incompetency, termination, dissolution, insolvency, business cessation, or other
financial deterioration of any Borrower, Guarantor, or third party.
4. DIRECT AND UNCONDITIONAL NATURE OF GUARANTY. Guarantor's Obligations
under this Guaranty are direct and unconditional and may be enforced without
requiring Lender to exercise, enforce, or exhaust any right or remedy against
any Borrower, Co-guarantor, third party, or collateral.
5. WAIVER OF NOTICE. Guarantor hereby waives notice of the acceptance of
this Guaranty; notice of present and future extensions of credit and other
financial accommodations by Lender to any Borrower; presentment for payment,
demand, protest, dishonor, default, and nonpayment pertaining to the Obligations
and this Guaranty and all other notices and demands pertaining to the
Obligations and this Guaranty as permitted by law.
6.DEFAULT. Guarantor shall be in default under this Guaranty in the event
that any Borrower or Guarantor:
(a) fails to pay any amount under this Guaranty or any other
indebtedness to Lender when due (whether such amount is due by
acceleration or otherwise);
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Guaranty or any other
present or future, written or oral, agreement;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) allows any collateral for the Obligations or this Guaranty to be
destroyed, lost or stolen, or damaged in any material respect;
(e) permits the entry or service of any garnishment, judgment, tax
levy, attachment or lien against Borrower, 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 in good faith for any
reason, or Lender, for any reason, in good faith deems itself
insecure.
GUARANTOR ACKNOWLEDGES GUARANTOR HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT INCLUDING THE TERMS AND CONDITIONS ON THE
REVERSE SIDE. GUARANTOR HAS EXECUTED THIS AGREEMENT WITH THE INTENTION TO BE
LEGALLY BOUND. GUARANTOR ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS
AGREEMENT.
DATED: DECEMBER 19, 1997
GUARANTOR: WILKINSON COMPANY, INC. GUARANTOR:
By: /s/ DONALD ENGEL By:
- ---------------------------- -------------------------
DONALD ENGEL
Title: C.E.O., CHAIRMAN Title:
- ---------------------------- -------------------------
GUARANTOR: GUARANTOR:
By: By:
- ---------------------------- -------------------------
Title: Title:
- ---------------------------- -------------------------
<PAGE>
7. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Guaranty,
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 Guarantor's Obligations under this Guaranty
immediately due and payable in full;
(b) to collect the outstanding obligations under this Guaranty with
or without resorting to judicial process;
(c) to set-off Guarantor's Obligations under this Guaranty against
any amounts due to Guarantor including, but not limited to,
monies, instruments, and deposit accounts maintained with Lender,
and
(d) 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.
8. SUBORDINATION. Any indebtedness of Borrower now or hereafter owed to or
held by Guarantor is hereby subordinated to the Obligations of Borrower to
Lender. Guarantor agrees that Lender shall be preferred to Guarantor in any
assignment for the benefit of creditors or any bankruptcy, insolvency,
liquidation, or reorganization proceeding commenced by or against Borrower in
any federal or state court.
9. INDEPENDENT INVESTIGATION. Guarantor's execution and delivery to Lender
of this Guaranty is based solely upon Guarantor's independent investigation of
Borrower's financial condition and not upon any written or oral representation
of Lender in any manner. Guarantor assumes full responsibility for obtaining any
additional information regarding Borrower's financial condition and Lender shall
not be required to furnish Guarantor with any information of any kind regarding
Borrower's financial condition.
10. ACCEPTANCE OF RISKS. Guarantor acknowledges the absolute and continuing
nature of this Guaranty and voluntarily accepts the full range of risks
associated herewith including, but not limited to, the risk that Borrower's
financial condition shall deteriorate or, if this Guaranty is unlimited, the
risk that Borrower shall incur additional Obligations to Lender in the future.
11. SUBROGATION. Guarantor, after performing under this Guaranty, shall not
be subrogated to any of Lender's rights against any Borrower which presently is
or may become the subject of any bankruptcy proceedings. Under these
circumstances, Guarantor specifically waives any rights and claims as a creditor
of such Borrower's bankruptcy estate. Other than as mentioned above, Guarantor,
after fully performing under this Guaranty, will be subrogated to any of
Lender's rights against any Borrower, any other guarantor, any third party or
any collateral which may secure the obligations of these parties.
12. APPLICATION OF PAYMENTS. Lender will be entitled to apply any payments
or other monies received from Borrower, any third party, or any collateral
against Borrower's present and future obligations to Lender in any order.
13. ESSENCE OF TIME. Guarantor and Lender agree that time is of the
essence.
14. TERMINATION. This Guaranty shall remain in full force and effect until
Lender executes and delivers to Guarantor a written release thereof.
15. ASSIGNMENT. Guarantor shall not be entitled to assign any of its rights
or obligations described in this Guaranty without Lender's prior written consent
which 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 Guaranty
without notice to or the prior consent of Guarantor in any manner. Unless the
Lender shall otherwise consent in writing, the Lender shall have an unimpaired
right prior and superior to that of any assignee, to enforce this Guaranty for
the benefit of the Lender, as to those Obligations that the Lender has not
assigned.
16. MODIFICATION WAIVER. The modification or waiver of any of Guarantor's
obligations or Lender's rights under this Guaranty must be contained in a
writing signed by Lender. Lender may delay in exercising or fail to exercise any
of its rights without causing a waiver of those rights. A waiver on one occasion
shall not constitute a waiver on any other occasion.
17. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon and inure
to the benefit of Guarantor and lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
18. NOTICE. Any notice or other communication to be provided under this
Guaranty shall be in writing and sent to the parties at the addresses described
in this Guaranty or such other addresses as the parties may designate in writing
from time to time.
19. SEVERABILITY. If any provision of this Guaranty violates the law or is
unenforceable, the rest of the Guaranty shall remain valid.
20. APPLICABLE LAW. This Guaranty shall be governed by the laws of the
state indicated in Lender's address. Guarantor consents to the jurisdiction and
venue of any court located in such state in the event of any legal proceeding
under this Guaranty.
21. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Guaranty, Guarantor
agrees to pay Lender's attorneys' fees, legal expenses and other costs as
permitted by law.
22. MISCELLANEOUS. This Guaranty is executed in connection with a
commercial loan. Guarantor will provide Lender with a current financial
statement upon request. All references to Guarantor in this Guaranty shall
include all entities or persons signing this Guaranty. If there is more than one
Guarantor, their obligations shall be joint and several. This Guaranty and any
related documents represent the complete and integrated understanding between
Guarantor and Lender pertaining to the terms and conditions of those documents.
23. REPRESENTATIONS OF GUARANTOR. Guarantor acknowledges receipt of
reasonably equivalent value in consideration for the execution of this Guaranty
and represents that, after giving effect to this Guaranty, the fair market value
of Guarantor's assets exceeds Guarantor's total liabilities, including
contingent, subordinate and unliquidated liabilities, that Guarantor has
sufficient cash flow to meet debts as they mature, and that Guarantor does not
have unreasonably small capital.
24. ADDITIONAL TERMS.
LENDER AND GUARANTOR SPECIFICALLY AGREE THAT THEY WAIVE ALL RIGHTS TO RELY
ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO OR SUBSEQUENT TO THE SIGNING OF
THIS DOCUMENT.
LENDER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS DOCUMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY MADE BEFORE, DURING, OR AFTER THE EXECUTION OF THIS DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING CREDIT TO BORROWER.
VENUE AND JURISDICTION SHALL BE IN DADE COUNTY, FLORIDA, FOR ANY
AFFIRMATIVE OR DEFENSIVE LEGAL PROCEEDING IN CONNECTION WITH THIS DOCUMENT
AND/OR ANY OTHER DOCUMENT SIGNED BY THE GUARANTOR IN FAVOR OF THE BANK.
2
EXHIBIT 10.37
BUSINESS LEASE
THIS LEASE, (the "Lease") made this 20th day of February, 1998, by and
between EVELIO ACOSTA and GLADYS ACOSTA (hereinafter called "Lessor") and HESCO
SALES, INC., a Florida corporation, (hereinafter called "Lessee").
WITNESSETH:
In consideration of the payments of rents and other charges provided
for herein and the covenants and conditions hereinafter set forth, Lessor and
Lessee hereby covenant and agree as follows:
1. PREMISES. The Lessor hereby demises and leases to Lessee, and
Lessee hereby leases from Lessor that certain premises shown on the attached
sketch containing a building of approximately 7,200 square feet (the "Building")
located on land as improved of approximately 10,340 square feet (the "Land")
(the Land and Building are "Premises") located at 4125 E. 1lth Avenue, Hialeah,
Florida, together with all parking areas, driveways, sidewalks, easements,
appurtenances and hereditaments, which benefit the Building and the improvements
now or hereafter situated an the land more fully described in Exhibit "A".
2. TERM. This Lease is for a term of five (5) years commencing upon
Landlord's delivery of possession unless sooner terminated or extended as
hereinafter set forth. Lessee and Lessor shall execute a letter agreement
confirming the commencement date after it occurs.
3. RENTAL. Lessee agrees to pay to Lessor, at the office of Lessor or
at such other place lessor may from time to time hereafter designate a rental to
be determined and payable as follows:
During each year of the term, the Lessee covenants and agrees to pay
base rent ("Base Rent") at the respective rates set forth herein in equal
monthly installments, plus applicable sales tax, promptly, in advance on the
first day of each month during the term of this lease. Lessee shall pay such
additional rent and other charges ("Additional Rent') required to be paid in
connection with this lease at the time herein provided for the payment thereof.
All Base Rent and Additional Rent (collectively "Rent") shall be paid to
landlord at its address herein set forth, or at such other address that Landlord
may designate in writing by Certified Mail. In the event that Lessee is more
than five (5) days late in payment of Base Rent or Additional Rent, in order to
defer Lessor's administrative costs, Lessee shall pay a late charge equal to
five (5%) percent of that delinquent installment. All unpaid rent shall bear
interest at the maximum legal rate until paid.
The Base Rent shall be One Thousand ($1,000.00) Dollars per month plus
sales tax for the term of the Lease.
The rental rate is net and therefore Lessee shall also pay for taxes,
utilities, repairs, insurance and all other items and expenses (including
maintenance) in connection with its use of the Premises.
Page 1
BUSINESS LEASE
<PAGE>
4. SECURITY DEPOSIT. Lessee shall pay Lessor One Thousand and no\100
($1,000.00) Dollars (hereinafter referred to as "Security Deposit'), to be held
by lessor as security for the full and faithful performance by Lessee of each
and every term, condition and covenant of this Lease on the part of Lessee to be
observed and performed. Such Security Deposit is not an advance for payment of
rental or measure of Lessor's damages in the case of default by Lessee. Lessor
will not be required to account for the use of such Security Deposit, to keep
such Security Deposit sequestered or to pay interest on it. The Lessor shall not
be obligated to, but may apply such deposit or any portion thereof to the curing
of any default that may exist, without prejudice to any other remedy or remedies
which the Lessor may have on account thereof, and upon such application Lessee
shall pay to Lessor on demand the amount so applied which shall be added to the
Security Deposit to restore same to its original amount. In the event Lessee
shall fully and faithfully comply with all of the terms, covenants and
conditions of this Lease and promptly pay all of the Base and Additional Rent as
they fall due, any remaining balance of such Security Deposit shall be returned
by Lessor to lessee within thirty (30) days following the date of the expiration
or termination of this Lease.
5. USE OF PREMISES. The Premises shall be used by Lessee initially
under the trade name "HESCO". Lessee's permitted use of the Premises (the
"Permitted Use") shall be limited to the following: factory and warehouse for
construction, distribution, storage, receipt and shipping of containers, waste
handling equipment, including recycling containers, and other products and
related office administrative and maintenance spaces, and such other uses as are
customarily incidental thereto. The Premises shall not be used in any manner to
create any nuisance, trespass or hazardous condition; nor in any manner to
materially and adversely affect the insurability or rate of any insurance which
does or may cover the Premises. Lessee or its employees or agents shall not
bring or maintain on the Premises any Hazardous Materials (as hereinafter
defined in Paragraph 48), other than Hazardous Materials that am of a type
customarily used or generated in operations consistent with the Permitted Use,
and provided Lessee's or its employees' or agents' handling, use, storage and
disposal of any such Hazardous Materials is in material compliance with all
applicable statutes, ordinances, rules, orders, regulations and requirements of
the federal, state, county and city government and of any and all the agencies,
departments and bureaus applicable to or having jurisdiction over the Premises.
6. CONDITION OF THE PREMISES. Lessee acknowledges that it has inspected
and accepts the Premises in their present "As Is" condition and that the
Premises are suitable for the uses as contemplated by this Lease.
7. LESSEE'S WORK AND APPROVAL OF LESSEE'S PLANS AND SPECIFICATIONS.
(a) In the event Lessee determines to make alterations or improvements
to the Premises, Lessee must first obtain Lessor's prior written consent
thereto. Lessee shall furnish plans and specifications incorporating Lessee's
proposed alterations and improvements for Lessor's prior written approval.
Lessor shall respond to Lessee within ten (10) days from receipt of such plans
and specifications as to its approval or disapproval which shall not be
unreasonably withheld. The approval by Lessor of the plans and specifications
shall not constitute the
Page 2
BUSINESS LEASE
<PAGE>
assumption of any liability on the part of the Lessor for compliance or
conformity with applicable building codes and the requirements of this Lease or
for their accuracy. The approval by Lessor of the plans and specifications shall
not constitute a waiver by lessor to the right to thereafter require Lessee to
amend the same to provide for any corrections or omissions by Lessee of items
required by building codes or this lease which may later be discovered. Lessee's
construction must be performed at its own cost and expense and in a workmanlike
manner and in accordance with all applicable codes and must comply with all
state, federal and local regulations, ordinances, statutes, codes, including
environmental.
(b) If Lessor consents to the requested alterations, then, promptly
after lassor notifies Lessee that Lessee's plans are approved, Lessee shall
commence and complete with due diligence its construction work and installation
of fixtures in accordanre with plans and specifications approved by Lessor as
provided herein. If Lessee shall neglect, fail or refuse to commence or proceed
with and complete its work then lessor may complete Lessee's work at Lessee's
expense and charge Lessee the cost of such work as Rent or notify Lessee that
Lessee shall have twenty (20) days to cure the default and failing same, the
lease shall be in default.
8. LEASEHOLD IMPROVEMENTS. Lessor hereby agrees that Lessee may
construct within the interior of the Premises such improvements as are necessary
for Lessee's use thereof for the purpose specified hereunder, subject to the
prior written consent of Lessor, as set forth in paragraph 7 hereinabove. Lessee
may employ for such purposes such contractors and other persons as it shall deem
desirable; provided, however, that it is expressly understood between the
parties hereto that it shall be the responsibility of lessee to obtain at its
expense any and all permits, licenses, certificates or other such authorization
which may be required under the rules, regulations, statutes, and laws of any
governmental authority, having jurisdiction to require same, whether such
permission or authorization shall run in favor of Lessee, Lessor or any
contractor or other person so employed by Lessee. All additions, fixtures or
improvements which may be made by Lessee, except movable office furniture and
equipment shall become the property of the Lessor and remain upon the Premises
as a part thereof, and be surrendered with the Premises at the termination of
this Lease.
9. REMOVAL OF LIENS BY LESSEE - LESSOR'S RIGHT ON DEFAULT. Lessor shall
not be liable for any labor or materials furnished or to be furnished to Lessee
upon credit. The Lessee herein shall not have any authority to create any liens
for labor or materials on the Lessor's interest in the Premises, or the building
or property of which the Premises are a part, and all persons contracting with
the Lessor for the destruction or removal of any facilities or other
improvements or for the erection, installation, alteration, or repair of any
facilities or other improvements on or about the Premises, and a materialmen,
contractors, subcontractors, mechanics, and laborers are hereby charged with
notice that they must look only to the Lessee and to the Lessee's interests in
the Premises to secure the payment of any bill for work done or material
furnished at the request or instruction of Lessee. Lessee hereby indemnifies
Lessor against, and shall keep the Premises and structure free from any and all
mechanics liens or other such liens arising from any work performed, material
furnished or obligations incurred by Lessee.
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<PAGE>
Whenever any such lien shall have been filed based upon any act or
interest of Lessee or of anyone claiming through Lessee, or if any security
agreement shall have been filed for or affecting any materials, machinery, or
fixtures used in the construction, repair, or operation thereof or annex thereto
by Lessee, Lessee shall immediately take such action by bonding, deposit, or
payment as will remove the lien or security agreement. If Lessee has not removed
the lien to Lessor's satisfaction within thirty (30) days after notice to
Lessee, Lessor may, at its option, either immediately declare a default by
Lessee under this Lease or pay the amount of such lien or security agreement or
discharge the same by deposit, and any amount so paid or deposited, with
interest thereon shall be deemed Additional Rent or reserved under this Lease,
and shall be payable forthwith with interest at the rate of fifteen (15 %)
percent per annum from the date of such advance by Lessor, and with the same
remedies to the Lessor as in the case of default in the payment of rent as
herein provided.
10. NO REPAIRS BY LESSOR. This Lease is a net lease. Lessee shall keep
the Premises in good order including but not limited to all doors, windows,
glass, including plate glass, and all other parts of the Premises. Lessor agrees
to keep in good order and repair the roof, slab and exterior walls of the
Premises, except for any damage caused by or arising out of Lessee's use of the
Premises. Lessee shall, at its own expense, keep and maintain the Premises and
appurtenances and every part thereof, (including, without limitation, all
interior walls, floors, ceilings, doors, windows, glass, including plate glow,
all heating, air conditioning, water, sanitary and electrical systems, all
plumbing and sprinkler systems, if any, together with any and all fixtures
relating thereto, whether in, under, on or appurtenant to the Premises) in good
order and repair. Lessee further agrees that it shall be liable for any damage
to the Premises or any of said systems and fixtures and equipment. Lessee agrees
to return the Premises to Lessor at the expiration of this Lease in as good
condition and repair as when rent commenced hereunder after Lessee's
improvements have been completed, natural wear and tear excepted. At the
expiration of this Lease, Lessee shall leave all electrical wiring, connections,
improvements and fixtures in place upon the Premises and not remove same.
11. REPAIRS AND MAINTENANCE BY LESSEE.
(a) Lessee shall, at its sole cost and expense, at all times keep and
maintain the Premises and every part thereof in neat, clean and good condition
and repair, including, without limitation, the maintenance, replacement and
repair of any doors, window casements, glazing, plumbing, pipes, electrical
wiring and conduits, heating and air conditioning system. Lessee shall, upon the
expiration or sooner termination of this Lease, surrender the Premises to Lessor
in good condition, broom clean, ordinary wear and tear excepted.
(b) If Lessee refuses or neglects to make any repairs as required
hereunder to the reasonable satisfaction of Lessor within thirty (30) days after
written demand (or shorter period in the event of an emergency), Lessor may make
such repairs without liability to Lessee for any loss or damage that may occur
to Lessee's fixtures or other property or to Lessee's business by reason
thereof, and upon completion thereof, Lessee shall pay Lessor's costs for making
such repairs plus twenty percent (20%) for overhead, upon presentation, of a
bill therefor, as Additional Rent.
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<PAGE>
12. UTILITIES. Lessee shall be solely responsible for and promptly pay
any deposits and any charges for all gas, water, electricity, fuel, light, heat
and power bills for the Premises, and for such other materials or services as
are used by Lessee in connection therewith. If Lessee does not pay the same,
Lessor may pay the same and such payment shall be added to the rental of the
Premises as additional rent.
13. REAL ESTATE AND OTHER TAXES. Lessee shall promptly pay as
Additional Rent its proportionate share of any real estate taxes attributable to
the Premises from and after the time Lessee takes possession of the Premises and
continuing during die term of the Lease and any extensions thereof. The term
"real estate taxes" shall include all real estate taxes, assessments, water and
sewer rents and other governmental impositions and charges of every kind and
nature whatsoever, ordinary and extraordinary, general and special, foreseen and
unforeseen, and each and every installment thereof (including interest) which
shall be levied, assessed, imposed, due or payable, or liens upon, arising in
connection with the use, occupancy or possession of or become due and payable
out of, or for, the Premises and the building and real property of which the
Premises are a part or any part thereof, and all costs incurred by Lessor in
contesting or negotiating the same with a governmental authority ("Real Estate
Taxes").
Lessee shall pay to Lessor as Additional Rent the sum of One Hundred
Thirty ($130.00) Dollars per month commencing with the first monthly rental
payment under this Lease, on account of Lessee's Real Estate Taxes based upon
fifty (50%) percent of Lessor's estimate of Real Estate Taxes. Such payment
shall be due and payable on or before the first day of each month at the same
time and in the same manner as rent. Said payments shall be placed in an
interest bearing account and disbursed only for taxes. All interest shall be for
the account of Lessee. However, Lessee shall be responsible for one hundred
(100%) percent of its share of real estate taxes.
Lessor shall submit to Lessee, near the end of each calendar year, a
bill for Lessee's share of the Real Estate Taxes for the prior year. In the
event that Lessee's share shall exceed the amount paid for the prior year,
Lessee shall pay to Lessor such excess within ten (10) days following receipt
thereof. Lessor may, at its option, increase Lessee's monthly payments towards
Real Estate Taxes by one-twelfth (1/12) of the excess due for the prior year.
The official tax bills to Lessor for Real Estate Taxes shall be
conclusive evidence as to the amount of Reid Estate Taxes for the period
represented thereby. All calculations as to Real Estate Taxes shall be made with
allowance for any available discount. In the event official tax bills are not
rendered for any Real Estate Taxes in time for Lessor to make Lessor's expense
computation of Real Estate Taxes and/or Lessor's estimated expense computation
of Real Estate Taxes, Lessor may estimate such Real Estate Taxes based upon
prior years real estate taxes and adjust same subject to determination of actual
Real Estate Taxes. In the event Lessee has paid more than its share, such excess
shall be applied to the next year as a credit against monthly installment due.
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<PAGE>
14. SALES AND EXCISE TAX. Lessee shall pay as Additional Rent any and
all sales and excise taxes levied as a result of rents paid under this Lease,
whether or not assessed directly against Lessee, any such amounts being payable
together with each monthly installment of Base Rent payable pursuant to
paragraph 3 hereof.
15. PERSONAL PROPERTY TAXES. Lessee shall pay, or cause to be paid,
before delinquency any and all taxes levied or assessed and which become payable
during the term hereof upon Lessee's leasehold improvements, equipment,
furniture, fixtures, and/or any other personal property located in or about the
Premises. In the event any or all of Lessee's leasehold improvements, equipment,
furniture, fixtures and other personal property shall be assessed and taxed with
the real property, Lessee shall pay to Lessor its share of such taxes within ten
(10) days after delivery to Lessee by Lessor of a statement in writing setting
forth the amount of such taxes applicable to Lessee's property.
16. EXTERIOR SIGNS. Lessee shall not place or suffer to be placed or
maintained on any exterior door, wall or window of the Premises any decoration,
lettering, signs, awning or canopy, or advertising matter or other thing of any
kind, on the glass of any window or door of the Premises without first obtaining
Lessor's written approval and consent which shall not be unreasonably withheld
and without obtaining and complying with all governmental and/or municipal
permits, regulations, laws or otherwise. Any and all signs placed on the
Premises by Lessee and visible from the outside thereof shall be maintained in
compliance with rules and regulations of Lessor, if any, and all governments[ or
municipal agencies governing such signs and the Lessee shall be responsible to
Lessor for any damage caused by installation, use, or maintenance of said signs.
Lessee agrees to remove all of said signs at the expiration of this Lease and to
repair all damage incident to such removal.
17. INSURANCE. Throughout the term of this Lease, Lessee shall
maintain, at its sole expense, the following insurance coverages: (a) liability
insurance for bodily injury and property damage to protect Lessor and Lessee
against damages, costs and attorney's fees arising out of accidents of any kind
occurring on or about the Premises, with limits of not less than $1,000,000.00
primary coverage per occurrence in respect to bodily injury and for property
damage, and with limits of not less than $5,000,000.00 umbrella coverage for
same; (b) fire and extended coverage casualty insurance, windstorm and flood
insurance, to keep the Building and improvements on the Land insured in a sum
equal to full replacement cost for the benefit of Lessor, payable to Lessor and
with sufficient coverage to reimburse the loss of all of Lessee's improvements
to the Premises, and all of Lessee's fixtures, equipment, personal property and
inventory; (c) plate glass insurance to protect both Lessor and Lessee covering
the replacement value of all plate glass in or about the Premises; (d)
appropriate workers' compensation and any and all other insurance required by
law and (e) Lessee shall provide and maintain a policy in the name of Lessor
with loss payable to Lessor insuring against loss of Base Rent and other charges
payable by Lessee to lessor under this Lease for one (1) year (including all
taxes). Such coverage shall extend one (1) year beyond date of completion of
repairs or termination of this Lease due to casualty.
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<PAGE>
All insurance coverage shall be written by a reliable insurance company
or companies rated A by Best Key Rating Guide, authorized to do business in the
State of Florida, and approved by Lessor. AU insurance shall name Lessee and
Lessor as co-insureds, and a certificate or duplicate policies showing such
insurance in force shall be delivered to Lessor prior to the Commencement Date,
and such insurance and updated certificates or renewed policies shall be
maintained with Lessor throughout the term of this lease. No policy shall be
cancelled or subject to reduction in coverage or other change without at least
30 days advance written notice to Lessor. All policies shall be written as
primary policies not contributing with and not in excess of coverage Lessor may
carry. To the extent permitted by its insurers, Lessee hereby waives any right
of recovery against Lessor for any loss covered by insurance. Lessee shall apply
to its insurers to obtain such waiver and shall obtain any special endorsements
if required by its insurer to evidence compliance with such waiver.
18. INDEMNITY. Except for matters solely caused by Lessor's gross
negligence or intentional acts, Lessee shall indemnify Lessor and hold Lessor
harmless from and against all claims, actions, damages, liability (including
liability for negligence or in strict tort) and expense in connection with loss
of life, personal injury or damage to property (including environmental damage)
arising from or out of any occurrence in, upon or at the Premises, or caused by
the occupancy or use by Lessee of the leased Premises, or any part thereof, or
occasioned wholly or in part by any act or omission of Lessee, its agents,
contractors, employees, subcontractors or invitees including but not limited to
any such claims, actions, damages, liability and expense arising out of Lessee's
failure to comply with all environmental laws and regulations. In case Lessor
shall, be made a party to any litigation commenced by or against Lessee, then
Lessee shall protect and hold lessor harmless and shall pay all costs, expenses,
and reasonable attorney's fees incurred or paid by Lessor in connection with
such litigation.
19. GARBAGE AND TRASH REMOVAL. Lessee shall be solely responsible for
all garbage and trash removal in connection with Lessee's use of the Premises.
Lessee shall contract for and maintain in effect sufficient trash removal
services including the maintenance of an adequate number of dumpsters upon the
Premises and shall provide for the regular removal of garbage, trash and other
refuse so that the same does not accumulate on or about the Premises.
20. ALTERATIONS. Lessee shall make no alterations, additions, or
improvements in or to the Premises without the prior written consent of the
Lessor. All additions, together with non-removable fixtures and leasehold
improvements shall, when installed, attach to the freehold and become and remain
the property of Lessor-I provided, however, Lessor shall have the right to elect
to have Lessee remove any of the improvements, and Lessee shall repair any
damage occasioned by such removal, and in default thereof, Lessor may effect
such removals and repairs at Lessee's expense. All store fixtures or trade
fixtures, signs, carpeting and drapes or other window treatments shall remain
the property of Lessee, subject at all times to the lessor's lien for rent and
other sums which may become due to Lessor under this Lease.
21. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises are
totally destroyed by storm, fire, lightning, earthquake or other casualty, so
that the Premises are rendered untenantable in whole, this Lease shall terminate
as of the date of such destruction, and
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<PAGE>
rental shall be accounted for as between Lessor and Lessee as of that date. In
the event the Premises are so totally destroyed, Lessor shall have the option of
retaining the insurance proceeds paid on account of said casualty (except for
payment of Lessee's personal property), if any, or of rebuilding the Premises.
In the event less than twenty-five (25 %) percent of the Premises am
materially damaged by fire other perils covered and paid for by extended
coverage insurance or if the damage exceeds twenty-five (25 %) percent but is
less than fifty (50%) percent of the Premises and repairs can be completed
within twelve (12) months for substantially the same amount of square footage,
the Lessor agrees to forthwith repair same (exclusive of Lessee's leasehold
improvements, fixtures, etc.) provided further that Lessee shall be entitled to
a proportionate abatement of the Rent from the date of damage and while such
repairs am being made, such proportionate abatement to be based upon the extent
to which the damage and making such repairs shall reasonably interfere with the
business carried on by the Lessee in the Premises. If such damage is due to the
fault or neglect of Lessee, or its employees, however, there shall be no
abatement of Rent.
In the event that the material damage to the Premises exceeds fifty
(50%) percent of the property, Lessee and Lessor shall have the option to give
notice to the other at any time within sixty (60) days after such damage,
terminating this lease as of the date specified in such notice, which date shall
be no more than thirty (30) days after the giving of such notice. In the event
of giving such notice, this Lease shall expire and all interest of the Lessee in
the premises shall terminate on the date so specified in such notice and the
Rent, abated by a proportionate reduction based upon the extent, if any, to
which such damage interfered with the business carried on by the Lessee on the
Premises should be paid up to the date of such termination.
Notwithstanding any to the contrary contained in this paragraph, Lessor
shall not have any obligation whatsoever to repair, reconstruct or restore the
Premises when the damage resulting from any casualty covered under this
paragraph occurs during the last twenty-four (24) months of the term of this
lease or any extension thereof Lessor shall not be required to repair or replace
any injury or damage by fire or other cause or to make any repairs or
replacements of any leasehold improvements, fixtures or other personal property
of Lessee.
22. CONDEMNATION. If the whole of the Premises, or such portion thereof
as will make the Premises unusable for the purposes herein leased, be condemned
or otherwise taken by proceedings in the nature of condemnation or eminent
domain by any legally constituted authority for any public use or purpose, then
in either of said events the term hereby granted shall cease from the time when
possession thereof is taken by public authorities, and rental shall terminate.
Such termination, however, shall be without prejudice to the rights of Lessor to
recover compensation and damage caused by condemnation from the condemnor. It is
further agreed that the Lessee shall have no claim against Lessor or the
condemning authority for the value of any unexpired term of this Lease or in any
award made to the Lessor by any condemnation authority.
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<PAGE>
23. ASSIGNMENT AND SUBLETTING. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage or otherwise encumber all or any
part of Lessee's interest in this Lease, including Lessee's fixtures, or any of
Lessee's duties, obligations, right or rights hereunder, or sublet the Premises
or any part or portion thereof, and, if Lessee is a corporation, partnership or
trust, shall not permit a transfer of effective control of Lessee, or permit the
same or any part thereof to be used for any purpose other than the purpose set
forth in paragraph 5 hereinabove, except upon the prior written consent of
Lessor, which consent, in Lessor's sole discretion, may be unreasonably
withheld. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be deemed a nullity, and at Lessor's
option, constitute grounds for termination of this Lease. It is further agreed
that any permitted assignment or sublease by Lessee shall be made only upon such
terms and conditions as are acceptable to Lessor, such acceptability being in
Lessor's sole and complete discretion. Consent by lessor to any assignment or
sublease shall not destroy this provision or operate as a waiver, and all
subsequent assignments or subleases, if any, shall be made only according to the
terms and conditions hereof and upon the aforesaid written consent of Lessor.
Any assignee or sublessee of Lessee shall, at the option of Lessor, become
directly liable to Lessor for all obligations of Lessee under this Lease but no
assignment or sublease by Lessee shall I relieve Lessee of any of its liability
or obligations hereunder.
No subletting or assignment, even with the consent of Lessor shall
relieve Lessee of its obligations to pay the Rent and to perform all of the
other obligations to be performed by Lessee hereunder. The acceptance of Rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision of this Lease or to be a consent to any assignment or subletting. If
at any time during the term of this Lease any part or all of the interests or
shares of Lessee shall be transferred by bequest, inheritance, or operation of
law, lessee shall promptly notify Lessor in writing of such change.
24. GOVERNMENTAL ORDERS. Lessee, at its sole cost and expense, agrees
promptly to execute and comply with all statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State, County and City Government
and of any and all the agencies, departments and bureaus applicable to said
Premises (including environmental), for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
Premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the Southeastern Underwriters Association for
the prevention of fires, at its own costs and expense provided that such
compliance is necessitated due to the Lessee's use of the promises.
25. DEFAULT OF LESSEE.
(a a) It is mutually agreed that in the event the Lessee shall
default in the payment of Base or Additional Rent herein reserved, when due and
fails to cure such default within five (5) days after written notice of default
from Lessor; or if Lessee shall be in default in performing any of the terms or
provisions of this Lease other than the provisions requiring the payment of
Rent, and fails to cure such default within ten (10) days after the date of
receipt of written notice of default from Lessor if such default is monetary or
thirty (30) days written notice
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<PAGE>
if such default is non-monetary; or if Lessee permanently vacates or abandons
the Premises; or if Lessee is adjudicated bankrupt; or if a permanent receiver
is appointed for Lessee's property; or if, whether voluntarily or involuntarily,
Lessee takes advantage of any debtor relief proceedings under any present or
future law, whereby the rent or any part thereof is, or is proposed to be,
reduced or payment thereof deferred; or if Lessee makes an assignment for
benefits of creditors; or if Lessee's assets should be levied upon or attached
under process against Lessee, and is not satisfied or dissolved within thirty
(30) days after written notice from Lessor to Lessee to obtain satisfaction
thereof; or Lessee fails to observe or perform any of the covenants, conditions
or provisions of this Lease to be observed or performed by Lessee, other than as
described in this paragraph, where such failure shall continue for a period of
thirty (30) days after written notice thereof by Lessor to Lessee; then, and in
the event of any such default or breach by Lessee, Lessor may at any time
thereafter, in its sole discretion, with or without notice or demand and without
limiting Lessor in the exercise of a right or remedy which Lessor may have by
reason of such default or breach:
(i) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. Upon such
termination by Lessor, Lessee will at once surrender possession of the Premises
to lessor and remove of all Lessee's effects therefrom which Lessee is
authorized hereunder to remove; and Lessor may forthwith re-enter the Premises
and repossess himself thereof, and remove all persons and effects therefrom,
using such force as may be reasonably necessary, and no such act shall render
Lessor guilty of trespass, forcible entry or detainer or other tort. In such
event, Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises; past due Rent, reasonable
attorney's fees and court costs; the value at the time of award by the court
having jurisdiction thereof of the amount by which the unpaid Rent and other
charges called for herein for the balance of the term after the time of such
award exceeds the amount of such loss for the same period that Lessee proves
could be reasonably avoided; and that portion of any leasing commission paid by
Lessor applicable to the unexpired term of this Lease; or
(ii) Maintain Lessee's right to possession, in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises; and in such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the Rent
and any other charges as may become due hereunder or to obtain specific
performance, injunctive relief or other equitable relief necessary to require
lessee to fulfill all of its obligation and duties set forth herein; or
(iii) Declare the, balance of the entire Rent for the remainder of the
term of this Lease to be immediately due and payable, and then proceed
immediately to collect the unpaid rent called for by this Lease by distress or
otherwise.
(iv)Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of Florida.
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<PAGE>
Nothing herein contained shall be construed as precluding Lessor from
having such remedy as may become necessary in order to preserve Lessor's right
or the interest of Lessor in the Premises and in this Lease, even before the
expiration of the grace or notice periods provided for in this Lease, if under
particular circumstances then existing the allowance of such grace or the giving
of such notice will prejudice or will endanger the rights and estate of Lessor
in this Lease or in the Premises. All rights and remedies granted in this Lease
to Lessor or available at law shall be cumulative and not mutually exclusive.
Lessee hereby pledges and assigns to Lessor as security for payment of
any and all Rent or other sums or amounts provided for herein, all of the
furniture, fixtures, equipment, goods and chattels of Lessee which shall or may
be brought or put on or into the Premises, and Lessee agrees that said lien may
be enforced by distress, foreclosure or otherwise, at Lessor's election. Lessee
expressly waives and renounces any and all exemption rights it may now or
hereafter acquire under or by virtue of the constitution and laws of the State
of Florida or of any other state, or of the United States, as against the
payment of said Rent or any other obligation or damage that may accrue under the
terms of this Lease.
Any notice provided in this paragraph may be given either by Lessor or
its attorney.
(b) NO WAIVER OF DEFAULT. Failure of Lessor to declare any
default immediately upon occurrence thereof, or delay in taking action in
connection therewith, shall not waive such default, but Lessor shall have the
right to declare any such default at any time and take such action as might be
lawful or authorized hereunder, in law and/or in equity. The acceptance of Rent
by Lessor hereunder whether accompanied by Lessee's denial of default or
otherwise shall in no event ever be construed or deemed a waiver or acceptance
of any default by Lessee; and no waiver of any term, provision, condition or
covenant of this Lease by Lessor shall ever be deemed to imply or constitute a
further waiver by Lessor of such default or a waiver of any other term,
provision, condition or covenant of this Lease.
(c) WAIVER OF JURY TRIAL/COUNTERCLAIMS. The parties hereby waive
trial by jury in any action, proceeding or counterclaim brought by either party
against the other on any matter whatsoever arising out of, or in any way
connected with this lease, the relationship of Lessor and Lessee created hereby,
Lessee's use or occupancy of the Premises, and/or any claim for injury or
damage. In the event Lessor commences any proceedings for non-payment of Rent,
Base Rent or Additional Rent, Lessee will not interpose any counterclaim (except
a compulsory counterclaim) of whatever nature or description in any such
proceedings. This shall not, however, be construed as a waiver of Lessee's right
to assert such claims in any separate action or actions brought by Lessee.
26. RELETTING BY LESSOR. Should Lessor elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or pursuant
to any notice provided for by law, it may either terminate this Lease, make such
alterations and repairs as may be necessary or desirable in order to relet the
Premises, and relet said Premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this Lease) and at such
rental or rentals and upon such other terms and conditions as Lessor in its sole
discretion may
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<PAGE>
deem advisable; upon each such reletting all rentals received by Lessor shall be
applied first to the payment of any indebtedness other than base rent or any
item of additional rent due from Lessee to Lessor, second to the payment of any
costs and expenses of such reletting, including brokerage fees and attorney's
fees and of costs of such alterations and repairs; third to the payment of rent
due and unpaid hereunder, and the residue, if any shall be held by Lessor and
applied in payment of future rent as the same may become due and payable
hereunder. If such rentals received from such reletting during any month during
the term of this Lease be less than that to be paid during that month by Lessee,
Lessee shall pay any such deficiency to Lessor. No such re-entry or taking of
possession of said Premises by Lessor shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Lessee or unless the termination be decreed by a court of competent
jurisdiction.
27. ATTORNEY'S FEES. If any action is brought to enforce the terms of
the Lease, the prevailing party shall be entitled to recover and the
non-prevailing party shall pay to the prevailing party the reasonable attorney's
fees and all expenses of the prevailing party incurred in connection with such
action, including fees prior to suit and those incurred during appeals.
28. PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee shall be in default
hereunder, including any default resulting from the failure or refusal of Lessee
to pay its obligations owed to third parties pursuant to the provisions hereof,
lessor may cure such default on behalf of Lessee, in which event Lessee shall
reimburse Lessor for all sums paid to effect such cure, together with interest
at the rate of eighteen (18 %) percent per annum from the date of such cure by
Lessor and reasonable attorneys' fees, said sums to be deemed Additional Rent
hereunder. In order to collect such reimbursement lessor shall have all the
remedies available under this Lease for a default in the payment of Rent.
29. ENTRY BY LESSOR. The Lessor, or any of his agents, shall have the
right to enter the Premises during all reasonable hours, to examine the same to
make such repairs, additions or alterations as may be deemed by Lessor necessary
for the safety, comfort, or preservation thereof, or to exhibit said Premises,
and to put or keep upon the doors or windows thereof a notice "FOR RENT" at any
time within ninety (90) days before the expiration of this Lease. The right of
entry shall likewise exist for the purpose of removing placards, signs,
fixtures, alterations, or additions, which do not conform to this Lease.
30. EFFECT OF TERMINATION OF LEASE. No termination of this Lease prior
to the normal ending thereof, by lapse of time or otherwise, shall affect
Lessor's right to collect Rent for the period prior to termination thereof.
Termination of this Lease shall also terminate any option to extend or purchase.
31. ACTS OF THIRD PARTIES. Lessor and Lessee hereby agree that Lessor
shall not be liable to Lessee for any damages which are the direct or indirect
result of the act, conduct or activity of a third party not a party to this
Lease.
32. LESSOR'S LIABILITY. Except for Lessor's gross negligence or
intentional acts, Lessor shall not be liable for any damage or injury to
Lessee's property or to Lessee's agents,
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BUSINESS LEASE
<PAGE>
employees, contractors, subcontractors or invitees upon the Premises regardless
of the cause of such damage or injury nor for any condition of the Premises
whatsoever. This provision is not intended to be a measure or agreed amount of
Lessor's liability with respect to any particular breach, and shall not be used
for the purposes of determining say liability of Lessor hereunder, except only
as a maximum not to be exceeded in any event. All personal liability of Lessor,
of every sort, if any, is hereby expressly waived by Lessee, and that so far as
Lessor is concerned, Lessee shall look solely to the property for the payment
thereof. All personal property located, placed or moved in, on or about the
Premises shall be at the risk of Lessee and Lessor shall not be liable for any
damage, or injury to said personal property or to the Lessee, its employees,
agents, officers, or invitees, or to any other person arising out of or
resulting from the breakage, leakage, or obstruction of the water, sewer or soil
pipes, other leakage in or about the Premises, any defect in electrical systems,
any other defect or structural deficiency in the Premises.
33. SUBORDINATION, ESTOPPEL CERTIFICATE AND ATTORNMENT. Lessee agrees
that this Lease shall be subordinate to any mortgage or other financing lien now
or hereinafter enforced or placed against the Premises or the building or real
property of which the Premises are a part, provided lessee receives from all
lenders an executed non-disturbance agreement providing for Lessee's continued
occupancy of the Premises in the event of a default by Lessor to Lender. Lessee
agrees to execute any documents requested by Lessor to confirm any such
subordination. Lessee agrees to deliver an estoppel certificate to any existing
or proposed mortgagee or purchaser or person designated by Lessor certifying
that the Lease is in full force and effect. Lessee shall in the event of any
sale of the Premises attorn to the purchaser and recognize that purchaser as
Lessor under this Lease.
34. HOLDING OVER. If Lessee remains in possession of Premises after
expiration of the term or extended term hereof, with Lessor's acquiescence and
without compliance with paragraph 2 or any other express agreement of the
parties, Lessee shall be a tenant at will on a month to month basis at rental
rate in effect at the end of this Lease; and there shall be no renewal of this
Lease by operation of law. In such event, if either Lessor or Lessee wishes to
terminate said occupancy at the end of a month after the termination of the
lease, the party so desiring to terminate same shall give the other party at
least thirty (30) days written notice to that effect. Failure on the part of
Lessee to give such notice shall obligate Lessee to pay Rent for an additional
month following the month in which Lessee has vacated the Premises. If such
occupancy continues without the consent of Lessor, Lessee shall pay to Lessor,
as liquidated damages, 200% of the amount of Rent at the highest rate specified
in the Lease for the time Lessee retains possession of the Premises or any part
thereof after termination of the term by lapse of time or otherwise.
35. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon lessor and Lessee shall be cumulative but not restricted to those
given by or existing at law.
36. NOTICE. Notices to either party hereunder shall be mailed by U.S.
Mail, Certified, Return Receipt Requested or by overnight courier service or by
hand delivery or facsimile and shall be deemed effect upon date of delivery, as
follows:
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BUSINESS LEASE
<PAGE>
To Lessor: Evelio Acosta and Gladys Acosta
7905 N.W. 164th Terrace
Miami, FL 33169
Copy To: Goldstein & Tanen, P.A.
#3250, One Biscayne Tower
Miami, FL 33131
Attention: Jeffrey S. Tanen, Esquire
(305) 374-7632 - fax
To Lessee: Hesco Acquisition Corp.
505 N.W. 74th Street
Miami, FL 33166
Copy To: Fern S. Watts, Esquire
Greenberg Traurig et al
1221 Brickell Avenue
21st Floor Miami, FL 33131
(305) 579-0717 - fax
37. WAIVER OF RIGHTS. No failure of either Lessor or Lessee to exercise
any power given them hereunder, or to insist upon strict compliance with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Lessor's or Lessee's right to
demand exact compliance with the terms hereof. Any waiver of rights by Lessor or
Lessee hereunder must be in writing to be effective.
38. TIME OF ESSENCE. Time is of the essence as to this agreement and of
each and every provision hereof.
39. DEFINITIONS. "Lessor" as used in this Lease shall include the first
party and its successors and assigns. "Lessee" shall include the second party
and its successors and assigns, In construing this Lease, the singular shall be
held to include the plural, the plural shall include the singular, the use of
any gender shall include every other and all genders, and captions and paragraph
headings shall be disregarded.
40. CAPTIONS. The captions or paragraph headings contained in this
Lease are for convenience and reference only and do not limit, vary or in any
other manner affect the substance of any provision hereof.
41. BUSINESS ENTITY. If Lessor or Lessee is a corporation, partnership,
or other business entity, each individual executing this Lease on behalf of said
corporation, partnership or other business entity represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, partnership, or other business entity, and that this Lease is
binding upon said corporation, partnership, or other business entity.
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BUSINESS LEASE
<PAGE>
42. FORCE MAJEURE. This Lease and the obligations of Lessee hereunder
shall not be affected or impaired and Lessor shall not be liable in the event
Lessor is unable to fulfill any of its obligations hereunder or is delayed in
doing so if such inability or delay is caused by `force majeure". The term
"force majeure" as used in this Lease shall mean "Acts of God", labor disputes
(whether lawful or not), material or labor shortages, restrictions by any
governmental authority, civil riots, floods, interruption or malfunction of any
utility or telephone service or other cause beyond Lessor's control.
43. ENTIRE AGREEMENT. The Lease and the Exhibits, if any, attached
hereto, contain the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect. Except as
herein otherwise provided, no subsequent alteration, amendment, change Or
addition to this Lease shall be binding upon Lessor or Lessee unless reduced to
writing and signed by both parties.
44. PARTIAL INVALIDITY. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this lease shall be
valid and be enforced to the fullest extent permitted by law.
45. BROKERAGE. The parties acknowledge that no broker, person, or
similar entity acted in any manner in connection with bringing about this Lease,
nor is anyone else entitled to a commission or fee in connection therewith,
except as provided in this Paragraph 45. Lessor and Lessee agree to indemnify
and save each other harmless from and against any and all claims, suits,
liabilities, costs, judgments and expenses, including reasonable attorneys'
fees, for any leasing commissions or other commissions, fees, changes or
payments resulting from or arising out of their respective actions in connection
with bringing about this Lease. The foregoing indemnification obligations shall
survive the expiration or earlier termination of this Lease.
46. NO ESTATE IN LAND. This contract shall create the relationship of
landlord and tenant between Lessor and Lessee. No estate shall pass out of
Lessor. Lessee has only a leasehold, not subject to levy and sale, and not
assignable by Lessee except by Lessor's consent. Neither this Lease nor any
short form or memorandum thereof shall be recorded in the Public Records,
without Lessor's prior written consent and approval of such memorandum which
shall not be unreasonably withheld.
47. GOVERNING LAW. This agreement shall be interpreted in accordance
with the laws of the State of Florida, and the parties agree that in the event
of any action or litigation hereon, that venue shall be in the county where the
Leased Premises are situated.
48. COMPLIANCE WITH ENVIRONMENTAL LAWS. Lessee, at its sole cost and
expense, agrees that it will comply with all local, state, and federal laws,
regulations and codes concerning the storage, handling, transportation, and
disposal of toxic, solid and hazardous waste
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BUSINESS LEASE
<PAGE>
materials. Lessee agrees to indemnify, defend and hold harmless Lessor against
any and all claims made by any governmental or private entity or person relating
to the Lessee's improper storage, handling, transportation or disposal of any
toxic, solid or hazardous waste materials, either on or off the Premises.
Lessee's obligations under this paragraph 48 shall not apply to conditions
existing prior to the commencement of the term of this Lease.
Lessee shall not cause or permit any Hazardous Material to be brought
upon, kept or used in or about the Premises by Lessee, its agents, employees,
contractors or invitees. If Lessee breaches this obligation, Lessee shall
indemnify, defend and hold Lessor harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities or losses (including, without
limitation diminution in value of the Premises, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
Premises, damages arising from any adverse impact on marketing of spare, and
sums paid in settlement of claims, attorneys' fees, consultant fees and expert
fees) which arise during or after the Lease term as a result of such
contamination. This indemnification of Lessor by lessee includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by a
Federal, State or local government agency or political subdivision because of
Hazardous Material present in the soil or ground water on or under the Premises.
Without limiting the foregoing, if the presence of any Hazardous Material on the
Premises caused by Lessee results in any contamination of the Premises, Lessee
shall promptly take all actions at its sole expense as are necessary to return
the Premises to the conditions existing prior to the introduction of any such
Hazardous Material to the Premises; provided that Lessor's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse
long-term or short-term effect on the Premises. The foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
As used herein, the term "Hazardous Material" means any hazardous or
toxic substance, material or waste, including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302) and
amendments thereto, or such substances, materials and wastes that are or become
regulated under any applicable local, state or Federal law.
Lessor and its agents shall have the right, but not the duty, to
inspect the Premises at any time to determine whether Lessee is complying with
the terms of this Lease. If Lessee is not in compliance with this Lease, Lessor
shall have the right to immediately enter upon the Premises to remedy any
contamination caused by Lessee's failure to comply notwithstanding any other
provision of this Lease, lessor shall use its best efforts to minimize
interference with Lessee's business but shall not be liable for any interference
caused thereby. All inspections to be at business hours only. Any default under
this Section shall be a material default enabling Lessor to exercise any of the
remedies set forth in this Lease.
49. RADON DISCLOSURE. Florida Statute ss.404.056 requires this
statement to be included in all contracts for sale and purchase or in any rental
agreements of any buildings:
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BUSINESS LEASE
<PAGE>
RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
50. COVENANT OF QUIET ENJOYMENT. Lessor covenants that Lessee may
feasibly hold and enjoy the Premises with exclusive control and possession
thereof during the term of this Lease, subject only to the terms and conditions
of this Lease and provided only that Lessee performs and observes the terms,
conditions and covenants of this Lease.
51. CROSS DEFAULTS. Lessee covenants and agrees that a default under
this lease shall constitute a default under two other leases executed by Lessee,
one with Acosta Family Limited Partnership for premises located at 8505 N.W. 74
Street, Miami, Florida and the other with Evelio Acosta and Gladys Acosta for
premises located at 27137 Highway 33, Okahumpka, FL 34762. A default under this
lease or said other leases shall also constitute a default under that certain
Employment Agreement between Evelio Acosta and Hi-Rise Recycling Systems, Inc.
Lessee shall be in material default under this lease in the event that
Lessee or any of its affiliates (as defined for purposes of Rule 144) defaults
on any of its respective obligations to Lessor, Evelio Acosta and Gladys Acosta
under any other agreement or document (whether now existing or hereafter
executed and as amended or modified from time to time). lessee's obligations
under this lease shall be absolute and unconditional, and Lessee shall have no
rights or offset or any other similar Tight under this lease with respect to any
obligations of Lessor or its affiliates under any other agreement or document.
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BUSINESS LEASE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease, on the
day and year first above written.
LESSEE:
HESCO SALES, INC.
By: /s/ J. GARY MCALPIN
- ---------------------------- -------------------------
J. Gary McAlpin, President
- ---------------------------
LESSOR:
/s/ EVELIO ACOSTA
- ---------------------------- ----------------------------
Evelio Acosta
- ---------------------------
- ---------------------------- /s/ EVELIO ACOSTA
-----------------------------
- ---------------------------- Gladys Acosta
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BUSINESS LEASE
<PAGE>
EXHIBIT "A"
Lot 10 and the north 44 feet of Lot 11, Block 32, Ingleside Park, according to
the Plat thereof, recorded in Plat Book 10, Page 3 1, in the Public Records of
Miami-Dade County, Florida.
EXHIBIT 10.38
BUSINESS LEASE
THIS LEASE (the "Lease"), made this 20th day of February 1998, by and
between ACOSTA FAMILY LIMITED PARTNERSHIP, a Florida Limited Partnership,
(hereinafter called "Lessor") and HESCO SALES, INC., a Florida corporation,
(hereinafter called "Lessee").
WITNESSETH:
In consideration of the payments of rents and other charges provided
for herein and the covenants and conditions hereinafter set forth, Lessor and
Lessee hereby covenant and agree as follows:
1. PREMISES. The Lessor hereby demises and leases to Lessee, and LeAsee
hereby leases from Lessor that certain premises shown on the attached sketch
including a building and offices (the "Building") and land used in connection
with and appurtenant to the Building (the 'Land") located at 8505 N.W. 74
Street, Miami, Florida, together with all parking areas, driveways, sidewalks,
easements, appurtenances and hereditaments, which benefit the Building and the
improvements now or hereafter situated on the Land more fully described in
Exhibit "A". The Land, Building and improvements are the "Premises".
2. TERM. This Lease is for a term of seven (7) years commencing upon
landlord's delivery of possession unless sooner terminated or extended as
hereinafter set forth. Lessee and Lessor shall execute a letter agreement
confirming the commencement date after it occurs. Provided Lessee is current in
all of its obligations hereunder, Lmsee shall have the right to extend the term
of this Lease for one (1) term of three (3) years upon six (6) months prior
written notice exercising its option to renew contained in paragraph 35 pursuant
to paragraph 37 of this Lease.
3. RENTAL. Lessee agrees to pay to Lessor, at the office of Lessor or
at such other place lessor may from time to time hereafter designate a rental to
be determined and payable as follows:
During each year of the term, the Lessee covenants and agrees to pay
base rent ("Base Rent") at the respective rates set forth herein in equal
monthly installments, plus applicable sales tax, promptly, in advance on the
first day of each month during the term of this lease. Lessee shall pay such
additional rent and other charges ("Additional Rent") required to be paid in
connection with this lease at the time herein provided for the payment thereof.
All Base Rent and Additional Rent (collectively "Rent") shall be paid to
landlord at its address herein set forth, or at such other address that landlord
may designate in writing by Certified Mail. In the event that Lessee is more
than five (5) days late in payment of Base Rent or Additional Rent, in order to
defer Lessor's administrative costs, Lessee shall pay a late charge equal to
five (5 %) percent of that delinquent installment. All unpaid rent shall bear
interest at the maximum legal rate until paid.
The parties stipulate that the Building contains 82,518 rentable square
feet and the Land contains 280,170 rentable square feet. The Base Rent shall be
computed according to the following schedule:
<PAGE>
Year 1 $2.25 per square foot for the Building plus $.50 per square
foot for the Land; $325,750.50 per annum; $27,145.80 per
month, plus sales tax
Year 2 $2.25 per square foot for the Building plus $.50 per square
foot for the Land; $325,750.50 per annum; $27,145.80 per
month, plus sales tax
Year 3 $3.25 per square foot for the Building plus $.50 per square
foot for the Land, $408,268.50 per annum; $34,022.00 per
month, plus sales tax
Year 4 $3.25 per square foot for the Building plus $.50 per square
foot for the Land; $408,268.50 per annum; 34,022.00 per
month, plus sales tax
Year 5 $5.00 per square foot for the Building plus $.50 per square
foot for the Land; $552,675.00 per annum; $46,056.25 per
month, plus sales tax
Years 6-7 Fair market value to be determined as provided in paragraph
53 hereinbelow
The rental rate is net and therefore Lessee shall also pay for taxes,
utilities, repairs, insurance and all other items and expenses (including
maintenance) in connection with its use of the Premises.
4. SECURITY DEPOSIT. Lessee shall pay Lessor Twenty-Seven Thousand One
Hundred Fifty and no/100 ($27,150.00) Dollars (hereinafter referred to as
"Security Deposit"), to be held by Lessor as security for the full and faithful
performance by Lessee of each and every term, condition and covenant of this
Lease on the part of Lessee to be observed and performed. Such Security Deposit
is not an advance for payment of rental or measure of Lessor's damages in the
case of default by Lessee. Lessor will not be required to account for the use of
such Security Deposit, to keep such Security Deposit sequestered or to pay
interest on it. The Lessor shall not be obligated to, but may apply such deposit
or any portion thereof to the curing of any default that may exist, without
prejudice to any other remedy or remedies which the Lessor may have on account
thereof, and upon such application Lessee shall pay to Lessor on demand the
amount so applied which shall be added to the Security Deposit to restore same
to its original amount. In the event Lessee shall fully and faithfully comply
with all of the terms, covenants and conditions of this lease and promptly pay
all of the Base and Additional Rent as they fall due, any remaining balance of
such Security Deposit shall be returned by Lessor to Lessee within thirty (30)
days following the date of the expiration or termination of this Lease.
5. USE OF PREMISES. The Premises shall be used by Lessee initially
under the trade name "HESCO". Lessee's permitted use of the Premises (the
"Permitted Use") shall be limited to the following: factory and warehouse for
construction, distribution, storage, receipt and shipping of containers, waste
handling equipment including recycling containers, and other products and
related office administrative and maintenance spaces, and such other uses as are
customarily incidental thereto. The Premises shall not be used in any manner to
create any nuisance, trespass or hazardous condition; nor in any manner to
materially and adversely affect the insurability or rate of any insurance which
does or may cover the Premises. Lessee or its employees or agents shall not
bring or maintain on the Premises any Hazardous Materials (as hereinafter
defined in Paragraph 49), other than Hazardous Materials that are of a type
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<PAGE>
customarily used or generated in operations consistent with the Permitted Use,
and provided Lessee's or its employees' or agents' handling, use, storage and
disposal of any such Hazardous Materials is in material compliance with all
applicable statutes, ordinances, rules, orders, regulations and requirements of
the federal, state, county and city government and of any and all the agencies,
departments and bureaus applicable to or having jurisdiction over the Premises.
6. CONDITION OF THE PREMISES. Lessee acknowledges that it has inspected
and accepts the Premises in their present "As Is" condition and that the
Premises are suitable for the uses as contemplated by this Lease.
7. LESSEE'S WORK AND APPROVAL OF LESSEE'S PLANS AND SPECIFICATIONS.
(a) In the event Lessee determines to make alterations or
improvements to the Premises, Lessee must first obtain Lessor's prior written
consent thereto. Lessee shall furnish plans and specifications incorporating
Lessee's proposed alterations and improvements for Lessor's prior written
approval. Lessor shall respond to Lessee within ten (10) days from receipt of
such plans and specifications as to its approval or disapproval which shall not
be unreasonably withheld. The approval by Lessor of the plans and specifications
shall not constitute the assumption of any liability on the part of the Lessor
for compliance or conformity with applicable building codes and the requirements
of this Lease or for their accuracy. The approval by Lessor of the plans and
specifications shall not constitute a waiver by Lessor to the right to
thereafter require Lessee to amend the same to provide for any corrections or
omissions by Lessee of items required by building codes or this Lease which may
later be discovered. Lessee's construction Must be performed at its own cost and
expense and in a workmanlike manner and in accordance with all applicable codes
and must comply with all state, federal and local regulations, ordinances,
statutes, codes, including environmental.
(b) If Lessor consents to the requested alterations, then,
promptly after Lessor notifies lessee that Lessee's plans are approved, Lessee
shall commence and complete with due diligence its construction work and
installation of fixtures in accordance with plans and specifications approved by
Lessor as provided herein. If Lessee shall neglect, fail or refuse to commence
or proceed with and complete its work then Lessor way complete Lessee's work at
Lessee's expense and charge Lessee the cost of such work as Rent or notify
Lessee that Lessee shall have twenty (20) days to cure the default and failing
same, the Lease shall be in default.
8. LEASEHOLD IMPROVEMENTS. Lessor hereby agrees that Lessee may
construct within the interior of the Premises such improvements as are necessary
for Lessee's use thereof for the purpose specified hereunder, subject to the
prior written consent of Lessor, as set forth in paragraph 7 hereinabove. Lessee
may employ for such purposes such contractors and other persons as it shall deem
desirable; provided, however, that it is expressly understood between the
parties hereto that it shall be the responsibility of Lessee to obtain at its
expense any and all permits, licenses, certificates or other such authorization
which may be required under the rules, regulations, statutes, and laws of any
governmental authority, having jurisdiction to require same, whether such
permission or authorization shall run in favor of Lessee, Lessor or any
contractor or other person so employed by Lessee. All additions, fixtures or
improvements which may be made by Lessee, except movable office furniture,
removable equipment and machinery and other similar items not permanently
affixed to the Premises shall become the property of the
-3-
<PAGE>
Lessor and remain upon the Premises as a part thereof, and be surrendered with
the Premises at the termination of this Lease. All damage caused by installation
and removal of said removable equipment and machinery shall be repaired by
Lessee and the Premises restored to original condition.
9. REMOVAL OF LIENS BY LESSEE - LESSOR'S RIGHT ON DEFAULT. Lessor shall
not be liable for any labor or materials furnished or to be furnished to Lessee
upon credit. The Lessee herein shall not have any authority to create any liens
for labor or materials on the Lessor's interest in the Premises, or the building
or property of which the Premises are a part, and all persons contracting with
the Lessee for the destruction or removal of any facilities or other
improvements or for the erection, installation, alteration, or repair of any
facilities or other improvements on or about the Premises, and all materialmen,
contractors, subcontractors, mechanics, and laborers are hereby charged with
notice that they must look only to the Lessee and to the Lessee's interests in
the Premises to secure the payment of any bill for work done or material
furnished at the request or instruction of Lessee. Lessee hereby indemnifies
Lessor against, and shall keep the Premises and structure free from any and all
mechanics liens or other such liens arising from any work performed, material
furnished or obligations incurred by Lessee.
Whenever any such lien shall have been filed based upon any act or
interest of Lessee or of anyone claiming through Lessee, or if any security
agreement shall have been filed for or affecting any materials, machinery, or
fixtures used in the construction, repair, or operation thereof or annex thereto
by Lessee, Lessee shall immediately take such action by bonding, deposit, or
payment as will remove the lien or security agreement. If Lessee has not removed
the lien to Lessor's satisfaction within thirty (30) days after notice to
Lessee, Lessor may, at its option, either immediately declare a default by
Lessee under this Lease or pay the amount of such lien or security agreement or
discharge the same by deposit, and any amount so paid or deposited, with
interest thereon shall be deemed Additional Rent or reserved under this Lease,
and shall be payable forthwith with interest at the rate of fifteen (15%)
percent per annum from the date of such advance by Lessor, and with the same
remedies to the Lessor as in the case of default in the payment of rent as
herein provided.
10. NO REPAIRS BY LESSOR. This Lease is a net lease. Lessee shall keep
the Premises in good order and repair including but not limited to the HVAC,
plumbing, electrical, paving, all doors, windows, glass, including plate glass,
and all other parts of the Premises. Lessor agrees to keep in good order and
repair the roof, slab and exterior walls of the Premises, except for any damage
caused by or arising out of Lessee's use of the Premises. In no event shall this
Lease obligate Lessor to maintain or to make any other repairs of any kind in or
upon the Premises. Lessee shall, at its own expense, keep and maintain the
Premises and appurtenances and every part thereof, (including, without
limitation, all walls, floors, ceilings, doors, windows, glass, including plate
glass, all heating, air conditioning, water, sanitary and electrical systems,
all plumbing and sprinkler systems, if any, together with any and all fixtures
relating thereto, whether in, under, on or appurtenant to the Premises) in good
order and repair. Lessee further agrees that it shall be liable for any damage
to the Premises or any of said systems and fixtures and equipment. lessee agrees
to return the Premises to Lessor at the expiration of this lease in as good
condition and repair as when Rent commenced hereunder after Lessee's
improvements have been completed, natural wear and tear excepted. At the
expiration of this Lease, Lessee shall
-4-
<PAGE>
leave all electrical wiring, connections, improvements and fixtures in place
upon the Premises and not remove same.
11. REPAIRS AND MAINTENANCE BY LESSEE.
(a) Lessee shall, at its sole cost and expense, at all times keep
and maintain the Premises and every part thereof in neat, clean and good
condition and repair, including, without limitation, the maintenance,
replacement and repair of any doors, window casements, glazing, plumbing, pipes,
electrical wiring and conduits, heating and air conditioning system. Lessee
shall, upon the expiration or sooner termination of this Lease, surrender the
Premises to Lessor in good condition, broom clean, ordinary wear and tear
excepted.
(b) If Lessee refuses or neglects to make any repairs as required
hereunder to the reasonable satisfaction of Lessor within thirty (30) days after
written demand (or shorter period in the event of an emergency), Lessor may make
such repairs without liability to Lessee for any loss or damage that may occur
to Lessee's fixtures or other property or to Lessee's business by reason
thereof, and upon completion thereof, Lessee shall pay lessor's costs for making
such repairs plus twenty (20%) percent for overhead, upon presentation, of a
bill therefor, as Additional Rent.
12. UTILITIES. Lessee shall be solely responsible for and promptly pay
any deposits and any charges for all gas, water, electricity, fuel, light, heat
and power bills for the Premises, and for such other materials or services as
are used by lessee in connection therewith. If Lessee does not pay the same,
lessor may pay the same and such payment shall be added to the rental of the
Premises as Additional Rent.
13. REAL ESTATE AND OTHER TAXES. Lessee shall promptly pay as
Additional Rent its proportionate share of any real estate taxes attributable to
the Premises from and after the time Lessee takes possession of the Premises and
continuing during the term of the Lease and any extensions thereof. The term
"real estate taxes" shall include all real estate taxes, assessments, water and
sewer rents and other governmental impositions and charges of every kind and
nature whatsoever, ordinary and extraordinary, general and special, foreseen and
unforeseen, and each and every installment thereof (including interest) which
shall be levied, assessed, imposed, due or payable, or liens upon, arising in
connection with the use, occupancy or possession of or become due and payable
out of, or for, the Premises and the building and real property of which the
Promises are a pail or any part thereof, and all costs incurred by Lessor in
contesting or negotiating the same with a governmental authority ("Real Estate
Taxes").
Lessee shall pay to Lessor as Additional Rent the sum of Two Thousand
and no/100 ($2,000.00) Dollars per month commencing with the first monthly
rental payment under this Lease, on account of Lessee's Real Estate Taxes based
upon fifty (50% percent of Lessor's estimate of Real Estate Taxes. Such payment
shall be due and payable on or before the first day of each month at the same
time and in the same manner as rent. Said payments shall be placed in an
interest bearing account and disbursed only for taxes. All interest shall be for
the account of Lessee. However, Lessee shall be responsible for One Hundred
(100%) percent of its share of Real Estate Taxes.
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Lessor shall submit to Lessee, near the end of each calendar year, a
bill for Lessee's share of the Real Estate Taxes for the prior year. In the
event that Lessee's share shall exceed the amount paid for the pr.-or year,
Lessee shall pay to Lessor such excess within ten (10) days following receipt
thereof. Lessor may, at its option, increase Lessee's monthly payments towards
Real Estate Taxes by one-twelfth (1/12) of the excess due for the prior year. In
the event Lessee has paid more than its share, such excess shall be applied to
the next year as a credit against monthly installments due.
The official tax bills to Lessor for Real Estate Taxes shall be
conclusive evidence as to the amount of Real Estate Taxes for the period
represented thereby. All calculations as to Real Estate Taxes shall be made with
allowance for the maximum available discount. In the event official tax bills
are not rendered for any Real Estate Taxes in time for Lessor to make lessor's
expense computation of Real Estate Taxes and/or Lessor's estimated expense
computation of Real Estate Taxes, Lessor may estimate such Real Estate Taxes
based upon prior years real estate taxes and adjust same subject to
determination of actual Real Estate Taxes.
14. SALES AND EXCISE TAX. Lessee shall pay as Additional Rent to Lessor
any and all sales and excise taxes levied as a result of rents paid under this
Lease, whether or not assessed directly against Lessee, any such amounts being
payable together with each monthly installment of Base Rent payable pursuant to
paragraph 3 hereof.
15. PERSONAL PROPERTY TAXES. lessee shall pay, or cause to be paid,
before delinquency any and all taxes levied or assessed and which become payable
during the term hereof upon Lessee's leasehold improvements, equipment,
furniture, fixtures, and/or any other personal property located in or about the
Premises. In the event any or all of Lessee's leasehold improvements, equipment,
furniture, fixtures and other personal property shall be assessed and taxed with
the real property, Lessee shall pay to Lessor its sham of such taxes within ten
(10) days after delivery to Lessee by Lessor of a statement in writing setting
forth the amount of such taxes applicable to Lessee's property.
16. EXTERIOR SIGNS. lessee shall not place or suffer to be placed or
maintained on any exterior door, wall or window of the Premises any decoration,
lettering, signs, awning or canopy, or advertising matter or other thing of any
kind, on the glass of any window or door of the Premises without first obtaining
Lessor's written approval and consent which shall not be unreasonably withheld
and without obtaining and complying with all governmental and/or municipal
permits, regulations, laws or otherwise. Any and all signs placed on the
Premises by Lessee and visible from the outside thereof shall be maintained in
compliance with rules and regulations of Lessor, if any, and all governmental or
municipal agencies governing such signs and the Lessee shall be responsible to
Lessor for any damage caused by installation, use, or maintenance of said signs.
Lessee agrees to remove all of said signs at the expiration of this Lease and to
repair all damage incident to such removal.
17. INSURANCE. Throughout the term of this Lease, Lessee shall
maintain, at its sole expense, the following insurance coverages: (a) liability
insurance for bodily injury and property damage to protect lessor and Lessee
against damages, costs and attorney's fees arising out of accidents of any kind
occurring on or about the Premises , with limits of not less than $1,000,000.00
primary coverage per occurrence in respect to bodily injury and for property
damage, and with limits of not less than $5,000,000.00 umbrella coverage for
same; (b) fire and
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extended coverage casualty insurance, windstorm and flood insurance, to keep the
Building and improvements on the Land insured in a sum equal to full replacement
cost for the benefit of Lessor, payable to Lessor and with sufficient coverage
to reimburse the loss of all of Lessee's improvements to the Premises, and all
of lessee's fixtures, equipment, personal property and inventory; (c) plate
glass insurance to protect both Lessor and Lessee covering the replacement value
of all plate glass in or about the Premises; (d) appropriate workers'
compensation and any and all other insurance required by law and (e) Lessee
shall provide and maintain a policy in the name of lessor with loss payable to
Lessor insuring against loss of Rent and other charges payable by Lessee to
Lessor under this Lease for one (1) year (including all taxes). Such coverage
shall extend one (1) year beyond date of completion of repairs or termination of
this Lease due to casualty.
All insurance coverage shall be written by a reliable insurance company
or companies rated A by Best Key Rating Guide, authorized to do business in the
State of Florida, and approved by Lessor. All insurance shall name Lessee and
Lessor as co-insureds, and a certificate or duplicate policies showing such
insurance in force shall be delivered to Lessor prior to the Commencement Date,
and such insurance and updated certificates or renewed policies shall be
maintained with Lessor throughout the term of this Lease. No policy shall be
cancelled or subject to reduction in coverage or other change without at least
30 days advance written notice to Lessor. All policies shall be written as
primary policies not contributing with and not in excess of coverage Lessor may
carry. To the extent permitted by its insurers, Lessee hereby waives any right
of recovery against Lessor for any loss covered by insurance. Lessee shall apply
to its insurers to obtain such waiver and shall obtain any special endorsements
if required by its insurer to evidence compliance with such waiver.
18. INDEMNITY. Except for matters solely caused by Lessor's gross
negligence or intentional acts, Lessee shall indemnify Lessor and hold Lessor
harmless from and against all claims, actions, damages, liability (including
liability for negligence or in strict tort) and expense in connection with loss
of life, personal injury or damage to property (including environmental damage)
arising from or out of any occurrence in, upon or at the leased Premises, or
caused by the occupancy or use by Lessee of the leased Promises, or any part
thereof, or occasioned wholly or in part by any act or omission of Lessee, its
agents, contractors, employees, subcontractors or invitees including but not
limited to any such claims, actions, damages, liability and expense arising out
of Lessee's failure to comply with all environmental laws and regulations. In
caw Lessor shall, be made a party to any litigation commenced by or against
Lessee, then Lessee shall protect and hold Lessor harmless and shall pay all
costs, expenses, and reasonable attorney's fees incurred or paid by Lessor in
connection with such litigation.
19. GARBAGE AND TRASH REMOVAL. Lessee shall be solely responsible for
all garbage and trash removal in connection with Lessee's use of the Premises.
Lessee shall contract for and maintain in effect sufficient trash removal
services including the maintenance of an adequate number of dumpsters upon the
Premises and shall provide for the regular removal of garbage, trash and other
refuse so that the same does not accumulate on or about the Premises.
20. ALTERATIONS. Lessee shall make no alterations, additions, or
improvements in or to the Premises without the prior written consent of the
Lessor. All additions, together with non-removable fixtures and leasehold
improvements shall, when installed, attach to the freehold and become and remain
the property of Lessor; provided, however, Lessor shall have the right to
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elect to have Lessee remove any of the improvements upon thirty (30) days
written notice prior to the expiration or earlier termination of the term of the
Lease and Lessee shall repair any damage occasioned by such removal, and in
default thereof, Lessor may effect such removals and repairs at Lessee's
expense. All store fixtures or trade fixtures, signs, carpeting and drapes or
other window treatments shall remain the property of Lessee, subject at a times
to the Lessor's lien for Rent and other sums which may become due to Lessor
under this Lease.
21. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises are
totally destroyed by storm, fire, lightning, earthquake or other casualty, so
that the Premises are rendered untenantable in whole, this Lease shall terminate
as of the date of such destruction, and rental shall be accounted for as between
Lessor and Lessee as of that date. In the event the Premises are so totally
destroyed, Lessor shall have the option of retaining the insurance proceeds paid
on account of said casualty (except for payment of Lessee's personal property),
if any, or of rebuilding the Premises.
In the event less than twenty-five (25 %) percent of the Premises are
materially damaged by fire other perils covered and paid for by extended
coverage insurance or if the damage exceeds twenty-five (25 %) percent but is
less than fifty (50%) percent of the Premises and repairs can be completed
within twelve (12) months for substantially the same amount of square footage,
the Lessor agrees to forthwith repair same (exclusive of Lessee's leasehold
improvements, fixtures, etc.) provided further that Lessee shall be entitled to
a proportionate abatement of the Rent from the date of damage and while such
repairs are being made, such proportionate abatement to be based upon the extent
to which the damage and making such repairs shall reasonably interfere with the
business carried on by the Lessee in the Premises. If such damage is due to the
fault or neglect of Lessee, or its employees, however, there shall be no
abatement of Rent.
In the event that the material damage to the Premises exceeds fifty
(50%) percent of the property, Lessee and Lessor shall have the option to give
notice to the other at any time within sixty (60) days after such damage,
terminating this lease as of the date specified in such notice, which date shall
be no more than thirty (30) days after the giving of such notice. In the event
of giving such notice, this Lease shall expire and all interest of the Lessee in
the premises shall terminate on the date so specified in such notice and the
Rent, abated by a proportionate reduction based upon the extent, if any, to
which such damage interfered with the business carried on by the Lessee on the
Premises should be paid up to the date of such termination.
Notwithstanding any to the contrary contained in this paragraph, Lessor
shall not have any obligation whatsoever to repair, construct or restore the
Premises when the damage resulting from any casualty covered under this
paragraph occurs during the last twenty-four (24) months of the term of this
lease or any extension thereof. lessor shall not be required to repair or
replace any injury or damage by fire or other cause or to make any repairs or
replacements of any leasehold improvements, fixtures or other personal property
of Lessee.
22. CONDEMNATION. If the whole of the Premises, or such portion thereof
as will make the Premises unusable for the purposes herein leased, be condemned
or otherwise taken by proceedings in the nature of condemnation or eminent
domain by any legally constituted authority for any public use or purpose, then
in either of said events the term hereby granted shall cease from the time when
possession thereof is taken by public authorities, and rental shall
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terminate. Such termination, however, shall be without prejudice to the rights
of Lessor to recover compensation and damage caused by condemnation from the
condemnor. It is further agreed that the Lessee shall have no claim against
Lessor or the condemning authority for the value of any unexpired term of this
Lease or in any award made to the Lessor by any condemnation authority.
23. ASSIGNMENT AND SUBLEASING. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage or otherwise encumber all or any
part of Lessee's interest in this Lease, including Lessee's fixtures, or any of
Lessee's duties, obligations, right or rights hereunder, or sublet the Premises
or any part or portion thereof, and, if Lessee is a corporation, partnership or
trust, shall not permit a transfer of effective control of Lessee, or permit the
same or any part thereof to be used for any purpose other than the purpose set
forth in paragraph 5 hereinabove, except upon the prior written consent of
Lessor, which consent, in Lessor's sole discretion, may be unreasonably
withheld. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be deemed a nullity, and at Lessor's
option, constitute grounds for termination of this Lease. It is further agreed
that any permitted assignment or sublease by Lessee shall be made only upon such
terms and conditions as are acceptable to Lessor, such acceptability being in
Lessor's sole and complete discretion. Consent by Lessor to any assignment or
sublease shall not destroy this provision or operate as a waiver, and all
subsequent assignments or subleases, if any, shall be made only according to the
terms and conditions hereof and upon the aforesaid written consent of Lessor.
Any assignee or sublessee of Lessee shall, at the option of Lessor, become
directly liable to Lessor for all obligations of Lessee under this Lease but no
assignment or sublease by Lessee shall relieve Lessee of any of its liability or
obligations hereunder.
No subletting or assignment, even with the consent of Lessor shall
relieve Lessee of its obligations to pay the Rent and to perform all of the
other obligations to be performed by Lessee hereunder. The acceptance of Rent by
lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision of this Lease or to be a consent to any assignment or subletting. If
at any time during the term of this Lease any part or all of the interests or
shares of Lessee shall be transferred by bequest, inheritance, or operation of
law, Lessee shall promptly notify Lessor in writing of such change.
24. GOVERNMENTAL ORDERS. Lessee, at its sole cost and expense, agrees
promptly to execute and comply with all statutes, ordinances, rules, orders,
regulations and requirements of the Federal, State, County and City Government
and of any and all the agencies, departments and bureaus applicable to said
Premises (including environmental), for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
Premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the Southeastern Underwriters Association for
the prevention of fires, at its own costs and expense provided that such
compliance is necessitated due to the Lessee's use of the Premises.
25. DEFAULT OF LESSEE.
(a) It is mutually agreed that in the event the Lessee shall
default in the payment of Base or Additional Rent herein reserved, when due and
fails to cure such default within five (5) days after receipt of written notice
of default from Lessor; or if Lessee shall be in
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default in performing any of the terms or provisions of this Lease other than
the provisions requiring the payment of Rent, and fails to cure such default
within ten (10) days after the date of receipt of written notice of default from
lessor if such default is monetary or thirty (30) days written notice if such
default is non-monetary; or if Lessee permanently vacates or abandons the
Premises; or if Lessee is adjudicated bankrupt; or if a permanent receiver is
appointed for Lessee's property; or if, whether voluntarily or involuntarily,
Lessee takes advantage of any debtor relief proceedings under any present or
future law, whereby the Rent or any part thereof is, or is proposed to be,
reduced or payment thereof deferred; or if Lessee makes an assignment for
benefits of creditors; or if Lessee's assets should be levied upon or attached
under process against Lessee, and is not satisfied or dissolved within thirty
(30) days after written notice from Lessor to Lessee to obtain satisfaction
thereof; or Lessee fails to observe or perform any of the covenants, conditions
or provisions of this Lease to be observed or performed by Lessee, other than as
described in this paragraph, where such failure shall continue for a period of
thirty (30) days after written notice thereof by Lessor to Lessee; then, and in
the event of any such default or breach by Lessee, Lessor may at any time
thereafter, in its sole discretion, with or without notice or demand and without
limiting Lessor in the exercise of a right or remedy which Lessor may have by
reason of such default or breach:
(i) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession
of the Premises to lessor. Upon such termination by Lessor,
Lessee will at once surrender possession of the Premises to
Lessor and remove of all Lessee's effects therefrom which
Lessee is authorized hereunder to remove; and Lessor may
forthwith m-enter the Premises and repossess himself thereof,
and remove all persons and effects therefrom, using such
force as may be reasonably necessary, and no such act shall
render Lessor guilty of trespass, forcible entry or detainer
or other tort. In such event, lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason
of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of
the Premises; past due Rent, reasonable attorney's fees and
court costs; the value at the time of award by the court
having jurisdiction thereof of the amount by which the unpaid
Rent and other charges called for herein for the balance of
the term after the time of such award exceeds the amount of
such loss for the same period that Lessee proves could be
reasonably avoided; and that portion of any leasing
commission paid by Lessor applicable to the unexpired term of
this Lease; or
(ii) Maintain Lessee's right to possession, in which
case this Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises; and in such event
Lessor shall be entitled to enforce all of Lessor's rights
and remedies under this Lease, including the right to recover
the Rent and any other charges as may become due hereunder or
to obtain specific performance, injunctive relief or other
equitable relief necessary to require Lessee to fulfill all
of its obligation and duties set forth herein; or
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(iii) Declare the balance of the entire Rent for the
remainder of the term of this Lease to be immediately due and
payable, and then proceed immediately to collect the unpaid
Rent called for by this Lease by distress or otherwise.
(iv) Pursue any other remedy now or hereafter available
to Lessor under the laws or judicial decisions of Florida.
Nothing herein contained shall be construed as precluding Lessor from
having such remedy as may become necessary in order to preserve Lessor's right
or the interest of Lessor in the Premises and in this Lease, even before the
expiration of the grace or notice periods provided for in this Lease, if under
particular circumstances then existing the allowance of such grace or the giving
of such notice will prejudice or will endanger the rights and estate of Lessor
in this I-ease or in the Premises. All rights and remedies granted in this Lease
to Lessor or available at law shall be cumulative and not mutually exclusive.
Lessee hereby pledges and assigns to Lessor as security for payment of
any and all Rent or other sums or amounts provided for herein, all of the
furniture, fixtures, equipment, goods and chattels of Lessee which shall or may
be brought or put on or into the Premises, and Lessee agrees that said lien may
be enforced by distress, foreclosure or otherwise, at Lessor's election. lessee
expressly waives and renounces any and all exemption rights it may now or
hereafter acquire under or by virtue of the constitution and laws of the State
of Florida or of any other state, or of the United States, as against the
payment of said Rent or any other obligation or damage that may accrue under the
terms of this Lease.
Any notice provided in this paragraph may be given either by lessor or
its attorney.
(b) NO WAIVER OF DEFAULT. Failure of Lessor to declare any default
immediately upon occurrence thereof, or delay in taking action in connection
therewith, shall not waive such default, but Lessor shall have the right to
declare any such default at any dm and take such action as might be lawful or
authorized hereunder, in law and/or in equity. 'Me acceptance of Rent by Lessor
hereunder whether accompanied by Lessee's denial of default or otherwise shall
in no event ever be construed or deemed a waiver or acceptance of any default by
Lessee; and no waiver of any term, provision, condition or covenant of this
lease by Lessor shall ever be deemed to imply or constitute a further waiver by
Lessor of such default or a waiver of any other term, provision, condition or
covenant of this Lease.
(c) WAIVER OF JURY TRIAL/COUNTERCLAIM. The parties hereby waive
trial by jury in any action, proceeding or counterclaim brought by either party
against the other on any matter whatsoever arising out of, or in any way
connected with this lease, the relationship of lessor and Lessee created hereby,
Lessee's use or occupancy of the Premises, and/or any claim for injury or
damage. In the event Lessor commences any proceedings for non-payment of Rent,
Base Rent or Additional Rent, Lessee will not interpose any counterclaim (except
a compulsory counterclaim) of whatever nature or description in any such
proceedings. This shall not, however, be construed as a waiver of Lessee's right
to assert such claims in any separate action or actions brought by Lessee.
26. RELETTING BY LESSOR. Should Lessor elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or pursuant
to any notice provided for
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by law, it may either terminate this Lease, make such alterations and repairs as
may be necessary or desirable in order to relet the Premises, and relet said
Premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Lessor in its sole discretion may deem
advisable; upon each such reletting all rentals received by Lessor shall be
applied first to the payment of any indebtedness other than base rent or any
item of additional rent due from lessee to Lessor, second to the payment of any
costs and expenses of such reletting, including brokerage fees and attorney's
fees and of costs of such alterations and repairs; third to the payment of rent
due and unpaid hereunder, and the residue, if any shall be held by Lessor and
applied in payment of future rent as the same may become due and payable
hereunder. If such rentals received from such reletting during any month during
the term of this Lease be less than that to be paid during that month by Lessee,
Lessee shall pay any such deficiency to Lessor. No such reentry or taking of
possession of said Premises by Lessor shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Lessee or unless the termination be decreed by a court of competent
jurisdiction.
27. ATTORNEY'S FEES. If any action is brought to enforce the terms of
the Lease, the prevailing party shall be entitled to recover and the
non-prevailing party shall pay to the prevailing party the reasonable attorney's
fees and all expenses of the prevailing party incurred in connection with such
action, including fees prior to suit and those incurred during appeals.
28. PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee shall be in default
hereunder, including any default resulting from the failure or refusal of Lessee
to pay its obligations owed to third parties pursuant to the provisions hereof,
Lessor may cure such default on behalf of Lessee, in which event Lessee shall
reimburse Lessor for all sums paid to effect such cure, together with interest
at the rate of eighteen (18 %) percent per annum from the date of such cure by
Lessor and reasonable attorneys' fees, said sums to be deemed Additional Rent
hereunder. In order to collect such reimbursement lessor shall have all the
remedies available under this Lease for a default in the payment of Rent.
29. ENTRY BY LESSOR. The Lessor, or any of his agents, shall have the
right to enter the Premises during all reasonable hours, to examine the same to
make such repairs, additions or alterations as may be deemed by Lessor necessary
for the safety, comfort, or preservation thereof, or to exhibit said Premises,
and to put or keep upon the doors or windows thereof a notice 'FOR RENT" at any
time within ninety (90) days before the expiration of this Lease. The right of
entry shall likewise exist for the purpose of removing placards, signs,
fixtures, alterations, or additions, which do not conform to this Lease.
30. EFFECT OF TERMINATION OF LEASE. No termination of this Lease prior
to the normal ending thereof, by lapse of time or otherwise, shall affect
Lessor's right to collect Rent for the period prior to termination thereof.
Termination of this Lease shall also terminate any option to extend or purchase.
31. ACTS OF THIRD PARTIES. Lessor and Lessee hereby agree that Lessor
shall not be liable to Lessee for any damages which are the direct or indirect
result of the act, conduct or activity of a third party not a party to this
Lease.
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32. LESSOR'S LIABILITY. Except for Lessor's gross negligence or
intentional acts, Lessor shall not be liable for any damage or injury to
Lessee's property or to Lessee's agents, employees, contractors, subcontractors
or invitees upon the Premises regardless of the cause of such damage or injury
nor for any condition of the Premises whatsoever. This provision is not intended
to be a measure or agreed amount of Lessor's liability with respect to any
particular breach, and shall not be used for the purposes of determining any
liability of Lessor hereunder, except only as a maximum not to be exceeded in
any event. All personal liability of Lessor, of every sort, if any, is hereby
expressly waived by Lessee, and- that so far as Lessor is concerned, Lessee
shall look solely to the property for the payment thereof. All personal property
located, placed or moved in, on or about the Premises shall be at the risk of
Lessee and Lessor shall not be liable for any damages or injury to said personal
property or to the Lessee, its employees, agents, officers, or invitees, or to
any other person arising out of or resulting from the breakage, leakage, or
obstruction of the water, sewer or soil pipes, other leakage in or about the
Premises, any defect in electrical systems, any other defect or structural
deficiency in the Premises.
33. SUBORDINATION, ESTOPPEL CERTIFICATE AND ATTORNMENT. Lessee agrees
that this Lease shall be subordinate to any mortgage or other financing lien now
or hereinafter enforced or placed against the Premises or the building or real
property of which the Premises are a part, provided Lessee receives from all
such lenders an executed non-disturbance agreement providing for Lessee's
continued occupancy of the Premises in the event of default by Lessor to Lender.
Lessee agrees to execute any documents requested by Lessor to confirm any such
subordination. Lessee agrees to deliver an estoppel certificate to any existing
or proposed mortgagee or purchaser or person designated by lessor certifying
that the Lease is in full force and effect. Lessee shall in the event of any
sale of the Premises attorn to the purchaser and recognize that purchaser as
Lessor under this Lease.
34. HOLDING OVER. If Lessee remains in possession of Premises after
expiration of the term or extended term hereof, with Lessor's acquiescence and
without compliance with paragraph 2 or any other express agreement of the
parties, lessee shall be a tenant at will on a month to month basis at rental
rate in effect at the end of this Lease; and there shall be no renewal of this
Lease by operation of law. In such event, if either Lessor or Lessee wishes to
terminate said occupancy at the end of a month after the termination of the
Lease, the party so desiring to terminate same shall give the other party at
least thirty (30) days written notice to that effect. Failure on the part of
Lessee to give such notice shall obligate Lessee to pay rent for an additional
month following the month in which Lessee has vacated the Premises. If such
occupancy continues without the consent of Lessor, Lessee shall pay to Lessor,
as liquidated damages, 200% of the amount of Rent at the highest rate specified
in the Lease for the time Lessee retains possession of the Premises or any part
thereof after termination of the term by lapse of time or otherwise.
35. OPTION TO RENEW. Provided no default beyond applicable notice and
cure periods then exists, Lessee is hereby granted an option to renew this Lease
for one (1) term of three (3) years, upon the terms, conditions and rents set
forth in this Lease. Said option to be exercised by Lessee giving Lessor written
notice of its election to extend the term of this Lease not later than six (6)
months prior to the expiration of the initial term.
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36. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon Lessor and Lessee shall be cumulative but not restricted to those
given by or existing at law.
37. NOTICE. Notices to either party hereunder shall be mailed by U.S.
Mail, Certified, Return Receipt Requested or by overnight courier service or by
hand delivery or by facsimile and shall be deemed effective upon date of
delivery, as follows:
To lessor: Acosta Family Limited Partnership
7905 N.W. 164 Terrace
Miami, FL 33169
Copy To: Goldstein & Tanen, P.A.
#3250, One Biscayne Tower
Miami, FL 33131
Attention: Jeffrey S. Tanen, Esquire
Fax: (305) 374-7632
To lessee: Hesco Sales, Inc.
8505 N.W. 74th Street
Miami, FL 33166
Attention: Gary McAlpin
Fax: (305) 594-4228
Copy To: Greenberg Traurig et al
1221 Brickell Avenue
21st Floor
Miami, FL 33131
Attention: Fern Watts, Esquire
(305) 579-0717 - fax
38. WAIVER OF RIGHTS. No failure of either lessor or Lessee to exercise
any power given them hereunder, or to insist upon strict compliance with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Lessor's or Lessee's right to
demand exact compliance with the terms hereof. Any waiver of rights by lessor or
Lessee hereunder must be in writing to be effective.
39. TIME OF ESSENCE. Time is of the essence as to this agreement and of
each and every provision hereof.
40. DEFINITIONS. "Lessor" as used in this Lease shall include the first
party and its successors and assigns. "Lessee" shall include the second party
and its successors and assigns. In construing this Lease, the singular shall be
held to include the plural, the plural shall include the singular, the use of
any gender shall include every other and all genders, and captions and paragraph
headings shall be disregarded.
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41. CAPTIONS. The captions or paragraph headings contained in this
Lease are for convenience and reference only and do not limit, vary or in any
other manner affect the substance of any provision hereof.
42. BUSINESS ENTITY. If Lessor or Lessee is a corporation, partnership,
or other business entity, each individual executing this Lease on behalf of said
corporation, partnership or other business entity represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, partnership, or other business entity, and that this Lease is
binding upon said corporation, partnership, or other business entity.
43. FORCE MAJEURE. This Lease and the obligations of Lessee hereunder
shall not be affected or impaired and Lessor shall not be liable in the event
Lessor is unable to fulfill any of its obligations hereunder or is delayed in
doing so if such inability or delay is caused by "force majeure". The term
"force majeure" as used in this Lease shall mean "Acts of God", labor disputes
(whether lawful or not), material or labor shortages, restrictions by any
governmental authority, civil riots, floods, interruption or malfunction of any
utility or telephone service or other cause beyond Lessor's control.
44. ENTIRE AGREEMENT. This lease and the Exhibits, if any, attached
hereto, contain the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect. Except as
herein otherwise provided, no subsequent alteration, amendment, change or
addition to this Lease shall be binding upon Lessor or Lessee unless reduced to
writing and signed by both parties.
45. PARTIAL INVALIDITY. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this lease shall be
valid and be enforced to the fullest extent permitted by law.
46. BROKERAGE. The parties acknowledge that no broker, person, or
similar entity acted in any manner in connection with bringing about this lease,
nor is anyone else entitled to a commission or fee in connection therewith,
except as provided in this Paragraph 46. Lessor and Lessee agree to indemnify
and save each other harmless from and against any and all claims, suits,
liabilities, costs, judgments and expenses, including reasonable attorneys'
fees, for any leasing commissions or other commissions, fees, changes or
payments resulting from or arising out of their respective actions in connection
with bringing about this Lease. The foregoing indemnification obligations shall
survive the expiration or earlier termination of this Lease.
47. NO ESTATE IN LAND. This contract shall create the relationship of
landlord and tenant between Lessor and Lessee. No estate shall pass out of
Lessor. lessee has only a leasehold, not subject to levy and sale, and not
assignable by Lessee except by Lessor's consent. Neither this lease nor any
short form or memorandum thereof shall be recorded in the Public Records,
without Lessor prior written consent and approval of such memorandum which shall
not be unreasonably withheld.
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<PAGE>
48. GOVERNING LAW. This agreement shall be interpreted in accordance
with the laws of the State of Florida, and the parties agree that in the event
of any action or litigation hereon, that venue shall be in the county where the
Leased Premises are situated.
49. COMPLIANCE WITH ENVIRONMENTAL LAWS. Lessee, at its sole cost and
expense, agrees that it will comply with all local, state, and federal laws,
regulations and codes concerning the storage, handling, transportation, and
disposal of toxic, solid and hazardous waste materials. Lessee agrees to
indemnify, defend and hold harmless Lessor against any and all claims made by
any governmental or private entity or person relating to the Lessee's improper
storage, handling, transportation or disposal of any toxic, solid or hazardous
waste materials, either on or off the Premises. Lessee's obligations under this
paragraph 49 shall not apply to conditions existing prior to the commencement of
the term of this Lease.
Lessee shall not cause or permit any Hazardous Material to be brought
upon, kept or used in or about the Premises by Lessee, its agents, employees,
contractors or invitees. If Lessee breaches this obligation, Lessee shall
indemnify, defend and hold Lessor harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities or losses (including, without
limitation diminution in value of the Premises, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
Premises, damages arising from any adverse impact on marketing of space, and
sums paid in settlement of claims, attorneys' fees, consultant fees and expert
fees) which arise during or after the lease term as a result of such
contamination. This indemnification of Lessor by Lessee includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by a
Federal, State or local government agency or political subdivision because of
Hazardous Material present in the soil or ground water on or under the Premises.
Without limiting the foregoing, if the presence of any Hazardous Material on the
Premises caused by Lessee results in any contamination of the Premises, Lessee
shall promptly take all actions at its sole expense as are necessary to return
the Premises to the conditions existing prior to the introduction of any such
Hazardous Material to the Premises; provided that Lessor's approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse
long-term or short-term effect on the Premises. The foregoing indemnity shall
survive the expiration or earlier termination of this lease.
As used herein, the term "Hazardous Material" means any hazardous or
toxic substance, material or waste, including, but not limited to, those
substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172. 101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302) and
amendments thereto, or such substances, materials and wastes that are or become
regulated under any applicable local, state or Federal law. Lessor and its
agents shall have the right, but not the duty, to inspect the Premium at any
time to determine whether Lessee is complying with the terms of this Lease. If
Lessee is not in compliance with this lease, Lessor shall have the right to
immediately enter upon the Premises to remedy any contamination caused by
Lessee's failure to comply notwithstanding any other provision of this lease,
Lessor shall use its best efforts to minimize interference with Lessee's
business but shall not be liable for any interference caused thereby. All
inspections to be at business hours only. Any default under this Section shall
be a material default enabling lessor to exercise any of the remedies set forth
in this lease.
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<PAGE>
50. RADON DISCLOSURE. Florida Statute ss.404.056 requires this
statement to be included in all contracts for sale and purchase or in any rental
agreements of any buildings:
RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities,
may present health risks to persons who are exposed to it over
time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county
public health unit.
51. COVENANT OF QUIET ENJOYMENT. Lessor covenants that Lessee may
feasibly hold and enjoy the Premises with exclusive control and possession
thereof during the term of this Lease, subject only to the terms and conditions
of this Lease and provided only that Lessee performs and observes the terms,
conditions and covenants of this Lease.
52. CROSS DEFAULTS. Lessee covenants and agrees that a default under
this lease shall constitute a default under two other leases executed by lessee,
one with Evelio Acosta and Gladys Acosta for premises located at 4125 E. 11th
Avenue, Hialeah, Florida and the other with Evelio Acosta and Gladys Acosta for
premises located at 27137 Highway 33, Okahumpka, FL 34762. A default under this
lease or said other leases shall also constitute a default under that certain
Employment Agreement between Evelio Acosta and Hi-Rise Recycling Systems, Inc.
Lessee shall be in material default under this lease in the event that
Lessee or any of its affiliates (as defined for purposes of Rule 144) defaults
on any of its respective obligations to Lessor, Evelio Acosta and Gladys Acosta
under any other agreement or document (whether now existing or hereafter
executed and as amended or modified from time to time). Lessee's obligations
under this lease shall be absolute and unconditional, and Lessee shall have no
rights or offset or any other similar right under this lease with respect to any
obligations of Lessor or its affiliates under any other agreement or document.
53. DETERMINATION OF FAIR MARKET VALUE. Unless the parties otherwise
agree in writing, six (6) months prior to the expiration of the fifth (5th) full
year of the term of this lease, Lessee shall have the property appraised as to
its fair market rental value by an appraiser selected by Lessee who shall be a
member of the Appraiser's Institute or other comparable designation in the state
of Florida. Said appraiser being herein referenced as "Lessee's Appraiser". If
the Lessor disagrees to the value indicated by lessee's Appraiser, then Lessor
shall select an appraiser ("Lessor's Appraiser") and Lessee's Appraiser and
Lessor's Appraiser shall select a third appraiser (the "Neutral Appraiser"). All
such Appraisers shall be members of the Appraiser's Institute or comparable
Florida designation. The appraisals performed by the three Appraisers shall then
be averaged and the average so determined shall be the new rental amount for the
Base Rent for the property. All of the other terms and conditions of the lease
shall remain in full force and effect. In the event Lessee fails to provide
lessee's appraisal within the time specified herein, Lessee shall be deemed to
have waived its rights to determine the rental by appraisal and the rental for
the sixth (6th) year and seventh (7th) year of the lease shall be deemed to be
the same as year five (5) increased by CPI.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease, on the
day and year first above written.
LESSEE:
____________________________________ Hesco Sales, Inc.
____________________________________ By: /s/ J. GARY MCALPIN
---------------------------------
President
LESSOR:
____________________________________
ACOSTA FAMILY LIMITED PARTNERSHIP,
A FLORIDA LIMITED PARTNERSHIP
____________________________________
By: Acosta Realty Investments, Inc.,
its General Partner
By: /s/ EVELIO ACOSTA
------------------------------
Evelio Acosta, President
-18-
EXHIBIT 10.39
UNCONDITIONAL CONTINUING GUARANTY OF LEASE
THIS UNCONDITIONAL CONTINUING GUARANTY OF LEASE made this 20th day of
February, 1998, by and between HI-RISE RECYCLING SYSTEMS, INC., a Florida
corporation, 8505 N.W. 74th Street, Miami, Florida 33166, Fax (305) 594-4228
(hereinafter called "Guarantor") and EVELIO ACOSTA and GLADYS ACOSTA, (
hereinafter called "Landlord").
WHEREAS, HESCO SALES, INC., a Florida corporation, a wholly owned
subsidiary of Guarantor, (hereinafter called "Corporation"), wishes to lease
from Landlord certain premises located in Hialeah, Florida, and enter into a
lease agreement (the "Lease"); and
WHEREAS, Guarantor has a financial interest in Corporation and Landlord
is unwilling to enter into the Lease with Corporation unless it receives an
unconditional and continuing guaranty from Guarantor as to all obligations
arising under the Lease; and
WHEREAS, Guarantor is desirous that Landlord enter into the Lease with
Corporation.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and in order to induce Landlord to enter into the Lease
with Corporation, Guarantor hereby absolutely and unconditionally guarantees to
Landlord and its successors and assigns, the full and prompt payment of any
amounts due or to become due to Landlord under the Lease and the full payment
and performance of all Corporation's obligations to Landlord under the Lease.
Guarantor covenants and agrees
1. Guarantor expressly agrees to pay all legal expenses and reasonable
attorneys' fees (including those relative to appellate proceedings, if any)
actually incurred by Landlord in any collection relative to the obligations
hereby guaranteed or in enforcing this Guaranty against the undersigned.
2. This Guaranty will continue unchanged by any bankruptcy,
reorganization or insolvency of Corporation or any successor or assignee thereof
or by any disaffirmance or abandonment by a trustee of Corporation.
3. This Guaranty is and shall remain an unconditional and continuing
guaranty of payment and performance and not of collection, shall remain in full
force and effect. To that end, Guarantor hereby expressly waives any right to
require Landlord to bring any action against Corporation or any other person(s)
or to require that resort be had to any security. Guarantor acknowledges that
its liabilities and obligations hereunder are primary rather than secondary.
4. Time is of the essence hereof. Any notice(s) to Guarantor shall be
sufficiently given, if mailed by certified mail, postage prepaid, return receipt
requested, or by overnight delivery services or by facsimile to the first above
stated address(es) of Guarantor.
5. This Unconditional Continuing Guaranty of Lease shall be binding
upon Guarantor, and the legal representatives, successors and assigns of
Guarantor, and it shall inure to the benefit of, and be enforceable by Landlord,
and its successors, transferees and assigns. It further shall be deemed to have
been made under and shall be governed by the Laws of the State of Florida in all
respects, including matters of construction, validity and performance.
<PAGE>
6. No waiver by Landlord or any default(s) by Guarantor or Corporation
shall operate as a waiver of any other default or of the same default or of the
same default on a future occasion. If more than one person has signed this
Guaranty, such parties are jointly and severally obligated hereunder. Further,
use of the masculine or neuter pronoun herein shall include the masculine,
feminine and neuter, and also the plural.
7. Guarantor hereby waives: (i) notice of acceptance of this Guaranty;
(ii) presentment and/or demand for payment or performance of any of the
obligations of Corporation under the Lease; (iii) protest or notice of dishonor
or default to Guarantor or to any other person with respect to any of the
obligations of Corporation under the Lease, and (iv) any demand for payment
under this Guaranty.
WITNESS the hand(s) and seal(s) of the undersigned, this Unconditional
Continuing Guaranty of Lease being executed and delivered on the date first
above written.
HI-RISE RECYCLING SYSTEMS, INC.
a Florida Corporation
By: /s/ J. GARY MCALPIN
-------------------------------
J. Gary McAlpin
Chief Operating Officer
EXHIBIT 10.40
UNCONDITIONAL CONTINUING GUARANTY OF LEASE
THIS UNCONDITIONAL CONTINUING GUARANTY OF LEASE made this 20th day of
February, 1998, by and between HI-RISE RECYCLING SYSTEMS, INC., a Florida
corporation, 8505 N.W. 74th Street, Miami, Florida 33166, Fax (305) 594-4228
(hereinafter called "Guarantor") and ACOSTA FAMILY LIMITED PARTNERSHIP, a
Florida Limited Partners, ( hereinafter called "Landlord").
WHEREAS, HESCO SALES, INC., a Florida corporation, an wholly owned
subsidiary of Guarantor, (hereinafter called "Corporation"), wishes to lease
from Landlord certain premises located in Miami, Florida, and enter into a lease
agreement (the "Lease"); and
WHEREAS, Guarantor has a financial interest in Corporation and Landlord
is unwilling to enter into the Lease with Corporation unless it receives an
unconditional and continuing guaranty from Guarantor as to all obligations
arising under the Lease; and
WHEREAS, Guarantor is desirous that Landlord enter into the Lease with
Corporation.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and in order to induce Landlord to enter into the Lease
with Corporation, Guarantor hereby absolutely and unconditionally guarantees to
Landlord and its successors and assigns, the full and prompt payment of any
amounts due or to become due to Landlord under the Lease and the full payment
and performance of all Corporation's obligations to Landlord under the Lease.
Guarantor covenants and agrees
1. Guarantor expressly agrees to pay all legal expenses and reasonable
attorneys' fees (including those relative to appellate proceedings, if any)
actually incurred by Landlord in any collection relative to the obligations
hereby guaranteed or in enforcing this Guaranty against the undersigned.
2. This Guaranty will continue unchanged by any bankruptcy,
reorganization or insolvency of Corporation or any successor or assignee thereof
or by any disaffirmance or abandonment by a trustee of Corporation.
3. This Guaranty is and shall remain an unconditional and continuing
guaranty of payment and performance and not of collection, shall remain in full
force and effect. To that end, Guarantor hereby expressly waives any right to
require Landlord to bring any action against Corporation or any other person(s)
or to require that resort be had to any security. Guarantor acknowledges that
its liabilities and obligations hereunder are primary rather than secondary.
4. Time is of the essence hereof. Any notice(s) to Guarantor shall be
sufficiently given, if mailed by certified mail, postage prepaid, return receipt
requested, or by overnight delivery services or by facsimile to the first above
stated address(es) of Guarantor.
5. This Unconditional Continuing Guaranty of Lease shall be binding
upon Guarantor, and the legal representatives, successors and assigns of
Guarantor, and it shall inure to the benefit of, and be enforceable by Landlord,
and its successors, transferees and assigns. It further shall be deemed to have
been made under and shall be governed by the Laws of the State of Florida in all
respects, including matters of construction, validity and performance.
<PAGE>
6. No waiver by Landlord or any default(s) by Guarantor or Corporation
shall operate as a waiver of any other default or of the same default or of the
same default on a future occasion. If more than one person has signed this
Guaranty, such parties are jointly and severally obligated hereunder. Further,
use of the masculine or neuter pronoun herein shall include the masculine,
feminine and neuter, and also the plural.
7. Guarantor hereby waives: (i) notice of acceptance of this Guaranty;
(ii) presentment and/or demand for payment or performance of any of the
obligations of Corporation under the Lease; (iii) protest or notice of dishonor
or default to Guarantor or to any other person with respect to any of the
obligations of Corporation under the Lease, and (iv) any demand for payment
under this Guaranty.
WITNESS the hand(s) and seal(s) of the undersigned, this Unconditional
Continuing Guaranty of Lease being executed and delivered on the date first
above written.
HI-RISE RECYCLING SYSTEMS, INC.
a Florida Corporation
By: /s/ J. GARY MCALPIN
----------------------
J. Gary McAlpin
Chief Operating Officer
EXHIBIT 10.41
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of
the 20th day of February, 1998, by and among HI-RISE RECYCLING SYSTEMS, INC., a
Florida corporation ("Hi-Rise"), HS ACQUISITION CORP., a Florida corporation
wholly-owned by Hi-Rise ("Hesco Merger Sub"), AM ACQUISITION CORP., a Florida
corporation wholly-owned by Hi-Rise ("Atlantic Maintenance Merger Sub," and
together with Hi-Rise and Hesco Merger Sub, the "Hi-Rise Affiliates"), HESCO
SALES, INC. ("Hesco"), ATLANTIC MAINTENANCE OF MIAMI, INC. ("Atlantic
Maintenance"), and EVELIO ACOSTA (the "Shareholder," and together with Hesco and
Atlantic Maintenance, the "Hesco Affiliates").
W I T N E S S E T H
WHEREAS, Parent, Hesco Merger Sub, Hesco and the Shareholder are
parties to an Agreement and Plan of Merger, dated as of February 11, 1998, (the
"Hesco Merger Agreement"), a copy of which is attached hereto as Exhibit "A";
and
WHEREAS, Parent, Atlantic Maintenance Merger Sub, Atlantic Maintenance
and the Shareholder are parties to an Agreement and Plan of Merger, dated as of
February 11, 1998 (the "Atlantic Maintenance Merger Agreement," and together
with the Hesco Merger Agreement, the "Merger Agreements"), a copy of which is
attached hereto as Exhibit "B"; and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Merger Agreements that the Hesco Affiliates, on
the one hand, and the Hi-Rise Affiliates, on the other hand, execute and deliver
this Agreement, and the execution and delivery hereof by all of such parties is
a material inducement to the consummation of the transactions contemplated by
the Merger Agreements;
NOW, THEREFORE, in consideration of the premises and the mutual
benefits to be derived from this Agreement and the Merger Agreements, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INDEMNITY.
(a) Upon the terms and subject to the limitations and conditions
set forth herein, the Hesco Affiliates, jointly and severally, hereby agree to
indemnify and defend and hold harmless the Hi-Rise Affiliates against and with
respect to any and all damages, claims, losses, penalties, liabilities, actions,
fines, costs and expenses (including, without limitation, reasonable attorney's
fees and expenses) (all of the foregoing hereinafter collectively referred to as
a "Loss" or "Losses"), regardless of whether an action has been filed or
asserted against any of the Hi-Rise Affiliates after the
<PAGE>
Closing Date (as defined in the Merger Agreements), arising from, in connection
with or with respect to the following items: (i) (A) any misrepresentation or
breach of warranty by any of the Hesco Affiliates under the Merger Agreements or
any Related Agreement (as defined in the Merger Agreements), or (B) any failure
to fulfill any agreement or covenant on the part of the Hesco Affiliates
contained in the Merger Agreements or any Related Agreement; and (ii) any and
all actions, suits, proceedings, judgments, settlements (to the extent approved
or entered into by any of the Hesco Affiliates as hereinafter provided), costs,
penalties and legal and other expenses incident to any of the foregoing.
(b) Upon the terms and subject to the limitations and conditions
set forth herein, the Hi-Rise Affiliates, jointly and severally, hereby agree to
indemnify and defend and hold harmless the Hesco Affiliates against and with
respect to any and all Losses, regardless of whether an action has been filed or
asserted against the Hesco Affiliates after the Closing Date, arising from, in
connection with or with respect to the following items: (i) (A) any
misrepresentation, breach of any warranty, or failure to fulfill any agreement
or covenant on the part of the Hi-Rise Affiliates under the Merger Agreements or
any Related Agreement, or (B) any failure to fulfill any agreement or covenant
on the part of the Hi-Rise Affiliates contained in the Merger Agreements or any
Related Agreement; and (ii) any and all actions, suits, proceedings, judgments,
settlements (to the extent approved or entered into by the Hi-Rise Affiliates as
hereinafter provided), costs, penalties and legal and other expenses incident to
any of the foregoing.
(c) Any claim for indemnification under this Agreement may only be
asserted by written notice by a date which is no more than one (1) year
following the Closing Date, except that (i) any claim based upon a breach by the
Hesco Affiliates of the representations and warranties contained in the Merger
Agreements relating to Taxes and environmental compliance may be asserted until
the applicable statute of limitations shall have expired, (ii) any claim based
upon a claim relating to fraud may be asserted with no such time limitation. Any
claim for indemnification must state specifically the provision of the Merger
Agreements with respect to which the claim is made, the facts giving rise to an
alleged basis for such claim and, if then determinable, the amount of such
Losses by reasons thereof.
(d) If any action or proceeding shall be commenced, or if any
claim, demand or assessment shall be asserted, in respect of which any party
("Indemnitee") proposes to hold any other party ("Indemnitor") liable under this
Agreement (a "Claim"), then if the Indemnitor, at its option, acknowledges that
the Claim is, in whole or in part, subject to the Indemnitor's indemnification
obligations and notifies Indemnitee of its election to contest or defend any
such Claim, such Indemnitor shall be entitled, at its sole cost and expense, to
contest or defend the same with counsel of its own choosing, and Indemnitee
shall not admit any liability with respect thereto or settle, compromise, pay or
discharge the same without the prior written consent of the Indemnitor so long
as any Indemnitor is contesting or defending the same in good faith, and
Indemnitee (and its successors and assigns) shall cooperate with the Indemnitor
in the contest or defense
2
<PAGE>
thereof (and the Indemnitor shall reimburse Indemnitee for the Indemnitee's
reasonable actual out-of-pocket expenses incurred in connection with such
cooperation) and Indemnitee shall enter into any settlement with respect thereto
recommended by Indemnitor so long as the amount of such settlement is paid by
the Indemnitor and no obligation to perform or refrain from performing any
material act shall be imposed upon Indemnitee by reason thereof and such
settlement otherwise is reasonable.
(e) Notwithstanding the foregoing, any Indemnitee shall be
entitled to conduct its own defense at the reasonable cost and expense of the
Indemnitor if not doing so would materially prejudice the Indemnitee due to the
nature of any claims or counterclaims presented or by virtue of a conflict
between the interest of the Indemnitee and the Indemnitor, and provided further
that in any event the Indemnitee may participate in such defense at its own
expense. If Indemnitee shall have given Indemnitor at least thirty (30) days
prior written notice that it intends to assume the defense of any Claim and if
the Indemnitor fails to assume the defense of such Claim as provided above by
the end of such thirty (30) day period or such later reasonable time (which
shall be such period of time as will not result in prejudice to the rights of
the Indemnitee), then the Indemnitee shall have the right to prosecute and
conduct its own defense by counsel of its choice, and in connection therewith
shall have full right to conduct the defense thereof and to enter into any
compromise or settlement thereof with the consent of the Indemnitor (which shall
not unreasonably be withheld, conditioned or delayed). Such defense shall be at
the cost and expense of the Indemnitor if it is subsequently determined that the
Indemnitor was obligated to defend or indemnify the Indemnitee with respect to
such action, proceeding, claim, demand or assessment.
2. LIMITATIONS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the Hesco Affiliates shall have no obligation to indemnify the
Hi-Rise Affiliates hereunder:
(i) unless, with respect to matters unrelated to Taxes (as
defined in the Merger Agreements), the aggregate amount of Losses incurred by
the Hi-Rise Affiliates to which the Hi-Rise Affiliates have the right to be
indemnified under this Agreement exceeds $250,000 (and then from the first
dollar of such Losses) (the "Hesco Basket"); and
(ii) with respect to matters related to Taxes (including, but
not limited to penalties and interest), unless and only to the extent the
aggregate amount of Losses incurred by the Hi-Rise Affiliates to which the
Hi-Rise Affiliates have the right to be indemnified hereunder exceeds $350,000
without giving effect to the Hesco Basket (the "Hesco Tax Basket"); PROVIDED,
HOWEVER, that the Hesco Tax Basket shall be inapplicable with respect to (A)
Losses arising from Taxes directly attributable to the disallowance of
deductions claimed by the Hesco Affiliates which are determined by applicable
taxing authorities to be expenses of or benefiting the Shareholder and/or (B)
3
<PAGE>
Losses arising from Taxes directly attributable to the underreporting of gross
income of the Hesco Affiliates as determined by applicable taxing authorities;
and
(iii) for any amount of Losses in excess of $4,500,000, it
being understood that the sole recourse of the Hi-Rise Affiliates to recover
such $4,500,000 shall be to (i) $1,000,000 cash and (b) the shares of the common
stock, par value $.01, of Hi-Rise received by the Shareholder pursuant to the
terms of the Merger Agreements (and the proceeds thereof) (the "Hesco Cap");
PROVIDED, HOWEVER, the Hesco Basket, the Hesco Tax Basket and the Hesco Cap
shall not apply to any Losses relating to the breach of any representation
and/or warranty contained in the Merger Agreements relating to (i) the ownership
of the capital stock of Hesco and its subsidiaries and Atlantic Maintenance and
(ii) environmental liabilities; PROVIDED FURTHER, HOWEVER, the Hesco Cap shall
not apply to Losses relating to the breach of any representation and/or warranty
contained in the Merger Agreement relating to Taxes.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Hi-Rise Affiliates shall have no obligation to indemnify the
Hesco Affiliates hereunder:
(i) unless the aggregate amount of Losses incurred by the
Hesco Affiliates to which the Hesco Affiliates have the right to be indemnified
under this Agreement exceeds $ 250,000 (and then from the first dollar of such
Losses) (the "Hi-Rise Basket"); and
(ii) for any amount of Losses in excess of $4,500,000 (the
"Hi-Rise Cap").
(d) Notwithstanding anything to the contrary contained herein, no
party shall be liable for incidental, consequential, exemplary, punitive or
similar damages in connection herewith.
(e) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, absent fraud including, without limitation,
misrepresentations which are clearly shown to be made with the intent to
deceive, the remedies of the parties under this Agreement and the Merger
Agreements with respect to breaches of representations and warranties shall be
strictly limited to those contained in Section 1 hereof, and except for
equitable remedies such indemnification obligations shall be the sole and
exclusive remedies of the parties subsequent to the Closing Date with respect to
any matter relating to this Agreement or the Merger Agreements.
(f) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, Losses shall be calculated after giving effect to any
insurance benefits or tax benefits actually realized in respect of the Losses
for which indemnification payments are sought.
4
<PAGE>
(g) Notwithstanding anything to the contrary set forth herein or
in the Merger Agreements, none of the Hi-Rise Affiliates shall have any right of
set-off with respect to any obligations to any of the Hesco Affiliates.
3. AMENDMENT; WAIVER. This Agreement may not be amended or modified in
any respect, except by the mutual written agreement of the parties hereto. No
provision of this Agreement may be modified, waived, or discharged unless such
waiver, modification, or discharge is agreed to in writing and signed by the
party to be bound thereby. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties hereto in separate counterparts, each
of which shall be deemed to be one and the same instrument.
5. BINDING EFFECT; 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 that the Hesco Affiliates may not
assign this Agreement.
6. APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the internal laws of the
State of Florida.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first above written.
HESCO SALES, INC.
By: /s/ EVELIO ACOSTA
------------------------------------
Name: Evelio Acosta
Title: Chief Executive Officer
ATLANTIC MAINTENANCE
OF MIAMI, INC.
By: /s/ EVELIO ACOSTA
------------------------------------
Name: Evelio Acosta
Title: Chief Executive Officer
/s/ EVELIO ACOSTA
-----------------------------------
EVELIO ACOSTA
HI-RISE RECYCLING SYSTEMS, INC.
By: /s/ J. GARY MCALPIN
---------------------------------------
Name: J. Gary McAlpin
Title: Chief Operating Officer
HS ACQUISITION CORP.
By: /s/ J. GARY MCALPIN
---------------------------------------
Name: J. Gary McAlpin
Title: Chief Operating Officer
AM ACQUISITION CORP.
By: /s/ J. GARY MCALPIN
---------------------------------------
Name: J. Gary McAlpin
Title: Chief Operating Officer
6
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of February 20, 1998,
between HESCO SALES, INC., a Florida corporation (the "Employer"), and EVELIO
ACOSTA (the "Employee").
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee, and
Employee desires to be employed by Employer, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
agrees to serve, as an employee of the Employer during the Term of Employment
(as defined below), with such duties and responsibilities as shall from
time-to-time be assigned to Employee by Employer. During the Term of Employment
employee shall use, during his working hours, his best efforts to promote the
interests of Employer and devote his time and energies with Employer to the
business and affairs of Employer. Employee shall be required to work no more
than eighty hours per month hereunder during the Term of Employment. Employer's
offices from which Employee shall be required to perform such services shall be
within a 20-mile radius of the Employer's existing offices located in Miami,
Florida; PROVIDED, HOWEVER, that Employee may be required to engage in a
reasonable amount of travel, as reasonably determined by Employer and Employee,
in the performance of his duties and responsibilities hereunder. Such duties
shall be consistent with those reasonably expected of a manager of Employer.
2. TERM OF EMPLOYMENT. Employee's employment hereunder shall be for the
period commencing on the date hereof and ending on the earliest to occur of the
fifth anniversary hereof or such time as Employee's employment may be terminated
in accordance with Section 4 hereof (the "Term of Employment").
3. COMPENSATION.
(a) BASE SALARY; COST OF LIVING ADJUSTMENTS. As compensation for
Employee's services hereunder and in consideration of his other agreements
contained herein (including without limitation his agreements contained in
Section 6 hereof), during the Term of Employment Employer shall pay Employee a
base salary at the rate of $75,000 per annum (the "Base Salary"), which shall be
payable in approximately equal installments in accordance with the normal
payroll practices of Employer as from time-to-time in effect (less payroll taxes
and other applicable payroll deductions, if any). Employee shall also be
entitled to annual cost of living adjustments in his Base Salary during the Term
of Employment in such amounts as shall be reasonably determined by Employer's
Board of Directors, which adjustments shall not be less
<PAGE>
than the percentage increase in the Consumer Price Index for the southern region
of the United States.
(b) OPTIONS. In addition to the Base Salary, during each year of
the Term of Employment Employee shall, to the extent provided below, be granted
options to purchase a number of shares of the common stock, par value $.01 per
share (the "Hi-Rise Common Stock"), of Hi-Rise Recycling Systems, Inc., a
Florida corporation and parent of Employer ("Hi-Rise"), having a fair market
value equal to but not exceeding the Employee's Base Salary (the "Target
Options"). Specifically, Target Options shall be granted to Employee during each
year of the Term of Employment in accordance with the following criteria: (A)
Employee shall be entitled to receive 50% of the Target Options if the
Employer's net profit before taxes, interest, depreciation, amortization of
goodwill, amortization of other assets the cost of which has been written off,
affiliated party transactions with Employer or its affiliates (other than Evelio
Acosta) which are not on an arms-length basis, and overhead of Employer's
shareholder increases by at least one percent (1%) as compared to the average of
the Employer's net profit before taxes, interest, depreciation, amortization of
goodwill, amortization of other assets the cost of which has been written off,
affiliated party transactions with Employer or its affiliates (other than Evelio
Acosta) which are not on an arms-length basis, and overhead of Employer's
shareholder during the three previous years; and (B) Employee shall be entitled
to receive 50% of the Target Options if Employer's revenue projections for such
calendar year are achieved or exceeded. Such target revenues for the first year
shall be an increase from $12 million to $18 million, and shall be adjusted
annually thereafter. In the event the target revenue is not achieved, the
percentage of the Target Options attributable to revenue increases will be
adjusted pro-rata based on actual revenues achieved. By way of example, if the
revenue achieved for the first calendar year is $14 million (as opposed to the
target of $18 million), Employee would receive one-third of the Target Options
attributable to revenue projections (i.e., 16 2/3% of the total Target Options).
All Target Options granted to Employee hereunder shall (A) be granted under the
Hi-Rise Recycling Systems, Inc. 1996 Stock Option Plan, as amended from time to
time, or such other employee stock option plan adopted by Hi-Rise (each, a
"Plan"); (B) be exercisable at a price per share equal to the Fair Market Value
(as defined in the Plan) of the Hi-Rise Common Stock on the date of grant; (C)
vest equally over a five-year period; (D) be subject to such termination and
other provisions as are customarily included in option grants under the Plan
(including the requirement that the Employee enter into a customary form of
stock option agreement); (E) be subject to all of the provisions of the Plan;
(F) be granted within 60 days of the end of each calendar year during the Term
of Employment, commencing with the calendar year ended December 31, 1998; and
(G) be subject to an appropriate and equitable adjustment in the event that the
fifth year of Employee's employment hereunder is not a full calendar year.
Notwithstanding the foregoing, in the event that Employee's employment hereunder
does not continue following the expiration of the Term of Employment, all Target
Options then granted to the Employee which have not vested as of such date,
shall immediately vest and become exercisable by the Employee in accordance with
the terms of the Plan or any applicable stock option agreement(s).
(c) BENEFITS. Employee shall also be entitled to the following
during the Term of Employment: (i) the use of the two automobiles (the
"Vehicles") owned by Employer and heretofore used by Employee (which Vehicles
are more particularly described on Exhibit A
2
<PAGE>
hereto); (ii) payment of usual and routine maintenance, repairs and insurance
for the Vehicles; (iii) the right to participate in Employer's regular health
insurance plan for its employees as from time-to-time in effect (upon and
subject to the provisions of Employer's policies generally applicable to such
plan); and (iv) payment of the net annual premiums of that certain life
insurance policy on Employee's life which is payable to and held by Employee and
is more particularly described on Exhibit B hereto.
4. EARLY TERMINATION
(a) Employer may terminate Employee's employment for Cause (as
defined below) effective upon written notice by Employer to Employee of such
termination. The Employee shall be considered to have been terminated for
"Cause" if he is discharged by the Employer on account of one or more of the
following events: (i) Employee's repeated failure or refusal to perform specific
directives of Employer (after notice and a reasonable opportunity to cure), when
such directives are consistent with the scope and nature of Employee's duties
and responsibilities as set forth in Section 1 hereof, which failure is
determined by the Board of Directors of Employer to be material; (ii) dishonesty
of Employee in financial dealings with or financial dealings related to
Employer; (iii) Employee's conviction of a felony or of any crime involving
moral turpitude, fraud or misrepresentation; (iv) gross negligence or willful
misconduct of Employee resulting in substantial loss to Employer, substantial
damage to Employer's reputation or theft from Employer; or (v) Employee violates
Section 6 hereof.
(b) Employee's employment with Employer shall terminate
automatically upon the death of Employee, without any requirement of notice by
Employer.
(c) Employee may terminate his employment with Employer hereunder
upon not less than sixty (60) days prior written notice to Employer.
(d) Employer may terminate Employee's employment upon the
Disability (as defined below) of Employee, effective upon written notice by
Employer to Employee of such termination. For purposes of this Agreement,
"Disability" shall mean the absence of Employee from Employee's duties with
Employer for (i) three (3) consecutive months, or (ii) four (4) months (whether
or not consecutive) within any consecutive 12-month period, as a result of
incapacity due to mental or physical illness.
5. COMPENSATION UPON EARLY TERMINATION.
(a) If Employee's employment is terminated by Employer for Cause,
Employer shall pay Employee his accrued and unpaid Base Salary through the
termination date specified in Employer's notice of termination. Employee's
rights under any unexercised options to purchase Hi-Rise Common Stock granted to
Employee hereunder shall terminate on such termination date and Employee shall
have no further rights under or by virtue of this Agreement.
(b) If Employee's employment is terminated by Employer on account
of the Disability of Employee, Employer shall pay Employee his accrued and
unpaid Base Salary through the termination date specified in Employer's notice
of termination. Thereafter,
3
<PAGE>
Employee shall have no further rights under or by virtue of this Agreement;
PROVIDED, HOWEVER, that such termination shall not terminate Employee's rights,
if any, under (i) any unexercised options to purchase Hi-Rise Common Stock
granted to Employee hereunder (except to the extent otherwise contemplated by
such options, stock option agreement(s) related to the grant of such options and
the provisions of the Plan) or (ii) any employee benefit plan of Employer in
which Employee is then a participant if and to the extent that the terms of such
plan and Employer's policies related thereto contemplate continued participation
in the event of disability.
(c) In the event Employee terminates his employment hereunder
prior to the expiration of the Term of Employment, Employer shall pay Employee
his accrued and unpaid Base Salary through the termination date specified in the
notice set forth in Section 4(c) above. Thereafter, Employee shall have no
further rights under or by virtue of this Agreement; PROVIDED, HOWEVER, such
termination shall not terminate Employee's rights under any vested and
unexercised options to purchase Hi-Rise Common Stock granted to Employee
hereunder (except to the extent otherwise contemplated by such options, stock
option agreement(s) related to the grant of such options and the provisions of
the Plan).
(d) Upon Employee's death, Employer shall pay to the person
designated by Employee in a notice filed by Employee with Employer for such
purpose (or, if no such person is designated, to the personal representative or
executor of his estate) his (i) accrued and unpaid Base Salary through
Employee's date of death, and (ii) when, as and if received by Employer, any
payments Employee's spouse, beneficiaries or estate may be entitled to receive
upon the death of Employee pursuant to any employee benefit plan then maintained
by Employer in which Employee is then a participant. Thereafter, Employee shall
have no further rights under or by virtue of this Agreement; PROVIDED, HOWEVER,
that such termination shall not terminate Employee's rights under any
unexercised options to purchase Hi-Rise Common Stock granted to Employee
hereunder (except to the extent otherwise contemplated by such options, stock
option agreement(s) related to the grant of such options and the provisions of
the Plan).
6. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY
(a) COVENANT NOT TO COMPETE. During the Term of Employment and for
a period of two (2) years thereafter, Employee will not, within any jurisdiction
in the United States in which Employer or any affiliated corporation conducts
its business operations, directly or indirectly own, manage, operate, control,
be employed by or participate in the ownership, management, operation or control
of, or be connected in any manner with, any business of the type and character
engaged in and competitive with that conducted by Employer or any affiliated
corporation as of the date hereof. The decision of Employer's Board of Directors
as to what constitutes a competing business shall be final and binding upon
Employee. For these purposes, Employee's ownership of securities of a public
company not in excess of 1% of any class of such securities shall not be
considered to be competition with Employer.
During the Term of Employment and for a period of two (2) years
thereafter, Employee further agrees to refrain from (i) interfering with the
employment relationship between Employer
4
<PAGE>
or any affiliated corporation and its or such affiliated corporation's other
employees by soliciting any of such individuals to participate in independent
business ventures, and (ii) soliciting competitive business from any client or
prospective client of Employer or any affiliated corporation.
It is the desire and intent of the parties that if the provisions of
this Section 6(a) shall be adjudicated to be invalid or unenforceable, this
Section 6(a) shall be deemed amended to delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, such amendment to apply only
with respect to the operation of this Section 6(a) in the particular
jurisdiction in which such adjudication is made. The provisions of this Section
6(a) shall survive the termination of this Agreement except to the extent as
provided in Section 9 hereof.
(b) INTELLECTUAL PROPERTY. During the Term of Employment, Employee
will disclose to Employer all ideas, inventions and business plans developed by
Employee during such period which relate directly or indirectly to the business
of Employer or any affiliated corporation, including without limitation any
process, operation, product or improvement which may be patentable or
copyrightable. Employee agrees that such will be the property of Employer and
that Employee will, at Employer's request and expense, do whatever is necessary
to secure the rights thereto by patent, copyright or otherwise to Employer.
(c) CONFIDENTIALITY. Employee agrees that Employee will not
divulge to anyone (other than Employer or any persons employed or designated by
Employer) any knowledge or information of any type whatsoever of a confidential
nature relating to the business of Employer or any affiliated corporation,
including without limitation all types of trade secrets (unless readily
ascertainable from public or published information or trade sources), unless
disclosure is required by law. Employee further agrees not to disclose, publish
or make use of any such knowledge or information of a confidential nature
without the prior written consent of Employer (unless readily ascertainable from
public or published information or trade sources), unless disclosure or use is
required by law. The provisions of this Section 6(c) shall survive the
termination of this Agreement.
7. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be
reimbursed for reasonable travel and other expenses incurred in connection with
Employee's services to Employer pursuant to and during the Term of Employment
under this Agreement in a manner consistent with the normal policies of Employer
from time-to-time in effect.
8. BREACH BY EMPLOYEE. Both parties recognize that the services to be
rendered under this Agreement by Employee are special, unique and extraordinary
in character, and that in the event of the breach by Employee of the terms and
conditions of this Agreement to be performed by Employee, or in the event
Employee performs services for any person, firm, corporation or other entity
engaged in a competing line of business with Employer or any affiliated
corporation, Employer shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, either in law or
in equity, to obtain damages for any breach of this Agreement, or to enforce the
specific performance thereof by Employee, or
5
<PAGE>
to enjoin Employee from performing services for any such other person, firm,
corporation or other entity.
9. CROSS-DEFAULT. In the event that Employer defaults under any of the
following lease agreements:
(a) Lease between Evelio Acosta and Gladys Acosta and Hesco Sales,
Inc. dated February 20, 1998 as to property located in Hialeah,
Florida;
(b) Lease between Evelio Acosta and Gladys Acosta and Hesco Sales,
Inc. dated February 20, 1998 as to property located in Okahumpka,
Florida; or
(c) Lease between Acosta Family Limited Partnership and Hesco
Sales, Inc. dated February 20, 1998 as to property located in Miami,
Florida;
then Employee's obligations under Section 6(a) of this Agreement
shall terminate.
10. TRANSFER OF VEHICLES. In the event that Employee's employment
hereunder is not terminated pursuant to the provisions of Sections 4 of this
Agreement prior to the fifth anniversary hereof, Employer will transfer and
deliver title to the Vehicles to Employee as promptly as is reasonably
practicable following the expiration of the Term of Employment.
11. ASSIGNMENT. This Agreement is a personal contract and, except as
specifically set forth herein, Employee's rights and obligations hereunder may
not be sold, transferred, assigned, pledged or hypothecated by Employee. The
rights and obligations of Employer hereunder may, in whole or in part, be sold,
transferred or assigned by Employer to any affiliated or successor corporation;
PROVIDED, HOWEVER, that any such transfer will not relieve Employer of its
obligations hereunder.
12. GOVERNING LAW; CAPTIONS. This Agreement contains the entire
agreement between the parties and shall be governed by the laws of the State of
Florida. It may not be changed orally, but only by agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought. Caption headings are for convenience of reference only and
shall not be considered a part of this Agreement.
13. PRIOR AGREEMENTS. This Agreement supersedes and terminates all
prior agreements between Employer and Employee relating to the subject matter
hereof.
14. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by telecopy
or by registered or certified mail, postage prepaid, (i) in Employer's case,
addressed to Employer in care of the Chairman of the Board of its parent
corporation, as follows: Hi-Rise Recycling Systems, Inc., 16255 N.W. 54th
Avenue, Miami, Florida 33014; or (ii) in Employee's case, addressed as follows:
c/o Jeffrey S. Tanen, Goldstein & Tanen, P.A., One Biscayne Tower, Suite 3250,
Two South Biscayne Boulevard, Miami, Florida 33131; or to such other address or
number as shall be furnished in
6
<PAGE>
writing by either party to the other in the fashion indicated above. Any such
notice or other communication shall be deemed to have been given as of the date
so delivered in person, sent by telecopier or sent by mail.
7
<PAGE>
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and year
first above written.
HESCO SALES, INC.
By:/s/ J. GARY MCALPIN
----------------------------
Name: J. GARY MCALPIN
Title: _CHIEF OPERATING OFFICER
/s/ EVELIO ACOSTA
-------------------------------
EVELIO ACOSTA
8
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
1. DESCRIPTION OF VEHICLES:
VEHICLE ID STATE WHERE LICENSE PLATE
MAKE MOD COLOR YEAR NO. REGISTERED NO.
---- ----- ----- ---- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
(a) Automobile Mercedes S420V White 95 WDBBA43 Florida WYC22I
E25A217099
(b) Automobile Mercedes E320W Green 95 WDBEA32E3 Florida QNV77B
SC15755
</TABLE>
9
<PAGE>
EXHIBIT B
2. DESCRIPTION OF INSURANCE (AND RELATED PREMIUMS):
None
10
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
10th day of March, 1998, by and between HI-RISE RECYCLING SYSTEMS, INC., a
Florida corporation (the "Company"), and J. GARY McALPIN (the "Executive").
PREMLIMINARY STATEMENT
A. The Executive is currently the Chief Operating Officer of the Company.
B. The Executive possesses intimate knowledge of the business and affairs
of the Company, its policies, methods and personnel.
C. The Board of Directors (the "Board") of the Company recognizes that the
Executive's contribution, as Chief Operating Officer of the Company, to the
growth and success of the Company has been substantial and desires to assure the
Company of the Executive's continued employment in an executive capacity and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to make his services available to the Company
on the terms and conditions hereinafter set forth.
AGREEMENT
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 shall continue to employ the
Executive and the Executive shall continue to serve the Company, on the terms
and conditions set forth herein, for the period commending on the date hereof
and expiring February 15, 2003 (the "Initial Term") 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").
Notwithstanding the foregoing, in the event of a "Change of Control"
(as defined below), the Initial Term of this Agreement, and the employment of
the Executive hereunder, will automatically be extended for an additional five
(5) year term. For purposes of this Agreement,
<PAGE>
a "Change of Control" shall mean the approval by the shareholders of the Company
of (A) a reorganization, merger or consolidation with respect to which persons
who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities or (B) the sale of all or substantially all of the
assets of the Company, unless the approved reorganization, merger,
consolidation, liquidation, dissolution or sale is subsequently abandoned.
1.2. DUTIES OF THE EXECUTIVE. The Executive shall serve as the Chief
Operating Officer of the Company and shall have the powers and authority
commensurate with such position, shall diligently perform all services as may be
reasonably assigned to him by the Chief Executive Officer of the Company (the
"CEO") and/or the Board or any properly constituted committee thereof, and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall devote substantially all of his working time
and attention to the business and affairs of the Company. 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. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations; provided, HOWEVER,
that the Company's offices from which the Executive shall be required to perform
such services shall be within a 50-mile radius of the Employer's existing
principal executive offices located in Miami, Florida.
2. COMPENSATION. The Company shall pay to Executive compensation for
services provided hereunder as set forth in the Addendum to this 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 FOR CAUSE. Notwithstanding anything contained herein
to the contrary, this Agreement may be terminated by the Company for "Cause." As
used in this Agreement, "Cause" shall only mean (i) subject to the following
sentences, any action or omission of the Executive which constitutes a willful
and material breach of this Agreement which is not cured or as to which diligent
attempts to cure have not commenced within thirty (30) business days after
receipt by the Executive of notice of same, (ii) fraud, embezzlement or
misappropriation as against the Company or (iii) the conviction of Executive for
any criminal act which is a felony. Upon any determination by the Board that
Cause exists under clause (i) of the preceding sentence, the Company shall cause
a special meeting of the Board to be called and held at a time mutually
convenient to the Board and Executive, but in no event later than ten (10)
2
<PAGE>
business days after Executive's receipt of the notice contemplated by clause (i)
Executive shall have the right to appear before such special meeting of the
Board with legal counsel of his choosing to refute any determination of Cause
specified in such notice, and any termination of Executive's employment by
reason of such Cause determination shall not be effective until Executive is
afforded such opportunity to appear. Any termination for Cause pursuant to
clause (ii) or (iii) of the first sentence of this Section 3.1 shall be made in
writing to Executive, which notice shall set forth in detail all acts or
omissions upon which the Company is relying for such termination. Upon any
termination 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 Section 4.1 hereof.
3.2 TERMINATION WITHOUT CAUSE. 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 BY THE COMPANY of the
Executive's employment pursuant to this Section 3.2, the Executive shall,
subject to the other provisions of this Agreement, only be entitled to receive
the compensation specified in Sections 4.2, 4.6 and 4.8 hereof. Upon the
termination BY THE EXECUTIVE of the Executive's employment pursuant to this
Section 3.2, the Executive shall, subject to the other provisions of this
Agreement, only be entitled to receive the compensation specified in Section 4.1
hereof.
3.3 DISABILITY. The Company shall at all times have the right, upon
written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, become unable to perform the essential
functions of his position, with or without reasonable accommodation, for a
period of 90 consecutive days or a period of 120 days during any 12 month
period. Upon 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,
4.6 and 4.8 hereof.
3.4 DEATH. The Executive's employment 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 3.4, the Executive shall, subject to the other provisions of
this Agreement, only be entitled to the compensation specified in Sections 4.4,
4.6 and 4.8 hereof.
3.5 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 3.5. Upon any termination of the Executive's employment with the
Company pursuant to this Section 3.5, the Executive shall, subject to the other
provisions of this Agreement, only be entitled to the compensation specified in
Sections 4.5, 4.7 and 4.8 hereof.
3
<PAGE>
4. COMPENSATION AND BENEFITS UPON TERMINATION OR CHANGE OF CONTROL.
4.1 TERMINATION FOR CAUSE. Upon the termination of the Executive's
employment with the Company pursuant to Section 3.1 above, or upon termination
BY THE EXECUTIVE of the Executive's employment pursuant to Section 3.2 above,
the Company shall pay the Executive any unpaid Base Salary (as defined in the
Addendum) accrued through the effective date of termination specified in the
notice of termination as provided above in Section 3.1 or Section 3.2. Except as
provided in the preceding sentence and other than for reimbursement for
reasonable business expenses incurred prior to the date of termination, the
Company shall have no further liability hereunder.
4.2 TERMINATION OTHER THAN FOR CAUSE OR NON-RENEWAL. Upon the
termination BY THE COMPANY of the Executive's employment pursuant to Section 3.2
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, as severance to the Executive, (a) the amount of Base Salary and
Other Benefits that would have been paid to the Executive through the remainder
of the Employment Period AND (b) an amount equal to the Executive's than annual
Base Salary and Other Benefits. Any life insurance policy currently maintained
by the Company for the benefit of the Executive shall remain in full force and
effect through the remainder of the Employment Period and shall not be amended
or modified except to allow for any increase in benefits payable pursuant
thereto.
4.3 DISABILITY. Upon the termination of the Executive's employment with
the Company pursuant to Section 3.3 above, the Company shall pay to the
Executive (i) in a single lump sum, any unpaid amounts of his Base Salary and
accrued bonus, if any, through the date of termination and (ii) in a single lump
sum, the remainder of (a) the amount of Base Salary and Other Benefits that
would have been paid to the Executive from the date of termination through the
remainder of the Employment Period MINUS (b) the amount of any payments that the
Executive would be entitled to receive under any disability policy then
maintained by the Company.
4.4 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 date of death; (ii) in a single lump sum, the amount
of Base Salary and Other Benefits that would have been paid to the Executive
from the date of death through the remainder of the Employment Period and (iii)
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.
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4.5 NON-RENEWAL. If this Agreement terminates pursuant to Section 3.5
hereof, then the Company shall pay the Executive (i) any unpaid amounts of his
Base Salary through the termination date specified in Section 3.5 and (ii) in a
lump sum, an amount equal to the Executive's than annual Base Salary and Other
Benefits, as severance to the Executive.
4.6 HEALTH AND MEDICAL PLANS UPON TERMINATION OTHER THAN FOR
NON-RENEWAL. Upon termination of the Executive's employment pursuant to Sections
3.2 and 3.3, 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.
4.7 HEALTH, DISABILITY AND MEDICAL PLANS UPON NON-RENEWAL. Upon
termination of this Agreement pursuant to Section 3.5, during the one (1) year
period following such termination the Executive shall be entitled to the
continuation of all health, disability, medical, hospitalization and other
programs as previously provided to Executive by the Company.
4.8 BONUS. If the Executive's employment is terminated with the Company
for any reason other than "Cause" pursuant to Section 3.1 hereof, the Executive
shall be paid, solely in consideration for services rendered by the Executive
prior to such termination, an amount equal to the Annual Incentive Bonus (as
defined in the Addendum) that would have been payable to Executive for the
fiscal year if the Executive's employment had not been terminated.
4.9 ACCELERATION OF VESTING OF OPTIONS UPON A CHANGE OF Control.
Notwithstanding the terms of any stock option plan adopted by the Company or the
terms of any options (the "Options") to purchase shares of the common stock, par
value $.01 per share (the "Common Stock"), of the Company previously granted to
the Executive pursuant to such plan or plans, all Options issued to the
Executive which have not vested immediately prior to a Change of Control, shall
vest and become immediately exercisable by the Executive upon a Change of
Control.
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. OPTIONS. The Company shall use its best efforts to adopt within 6 months
of the date hereof a stock option plan for the purchase by the Executive of
shares of the Common Stock of the Company.
7. ENTIRE AGREEMENT. Except as otherwise provided in this Agreement and the
Addendum, 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,
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written or oral, relating to the subject matter hereof, and this Agreement shall
be solely determinative of the subject matter hereof.
8. CONFIDENTIAL INFORMATION; NON-COMPETITION; EQUITABLE REMEDIES.
8.1. 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 8.1 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 8 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.
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8.2. NONCOMPETITION/NONSOLICITATION/NONDISPARAGEMENT.
In addition to the provisions of Section 8.1:
(i) For the period (the "Noncompetition Period") commencing on the
date hereof and continuing through the first anniversary of date of termination
of the Executive's employment 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; PROVIDED, HOWEVER, that in the event that the
Executive's employment with the Company is terminated without cause BY THE
COMPANY pursuant to Section 3.2 hereof, the Noncompetition Period shall continue
only through the date of termination of the Executive's employment.
(ii) For the period (the "Nonsolicitation Period") commencing on
the date on which the Executive's employment with the Company is terminated or
ceases for any reason other than without cause BY THE Company pursuant to
Section 3.2 hereof (the "Consummation Date") and ending on the first anniversary
of the Consummation Date, 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.
8.3. EQUITABLE REMEDIES.
(a) The Executive acknowledges that the restrictions contained in
the foregoing paragraphs 8.1 and 8.2 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 8.1 and 8.2
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.
9. SECTION 162(M) LIMITS. Notwithstanding any other provision of this
Agreement to the contrary, if and to the extent that any remuneration payable by
the Company to the
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Executive for any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended (the "Code"), payment of the portion
of the remuneration for that year that would not be so deductible under Section
162(m) shall, in the sole discretion of the Board, be deferred and become
payable at such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at the "short-term
applicable rate" as such term is defined in Section 1274(d) of the Code.
10. ARBITRATION. Any dispute or controversy (except for disputes arising
under Section 8) 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 8 hereof.
11. 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.
12. 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
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If to the Executive:
J. Gary McAlpin
11360 N.W. 5th Street
Plantation, Florida 33325
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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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18. 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.
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
----------------------------------
Donald Engel
Chairman of the Board of
Directors and
Chief Executive Officer
THE EXECUTIVE:
/s/ J. GARY MCALPIN
-------------------------------------
J. Gary McAlpin
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ADDENDUM TO AGREEMENT
THIS ADDENDUM dated as of March 10, 1998 is a part of the Employment
Agreement dated as of March 10, 1998, by and between HI-RISE RECYCLING SYSTEMS,
INC., a Florida corporation (the "Company") and J. GARY MCALPIN (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 $120,000 subject to increases in accordance with the Consumer
Price Index or policies established, from time to time, by the
Company's Board of Directors, 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. The Executive shall be
entitled to receive a monthly allowance for an automobile in an amount
equal to the allowance received by the Executive for such purpose in
the period immediately preceding the date hereof.
(c) ANNUAL INCENTIVE BONUS. The Executive shall receive an annual incentive
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; PROVIDED, HOWEVER, that such annual bonus
shall not be less than $50,000 during any year of the Employment
Period. Additionally, on or about June 1, 1998, the Compensation
Committee of the Board may determine, in its sole discretion, to pay
Executive an additional incentive bonus in an amount not to exceed
$50,000 for services rendered by the Executive during the year ended
December 31, 1997.
(d) 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.
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IN WITNESS WHEREOF, the parties have set their hands and seals.
THE EXECUTIVE: THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
/s/ J. GARY MCALPIN By: /s/ DONALD ENGEL
- ----------------------- ----------------------------------
J. GARY McALPIN Donald Engel
Chairman of the Board of
Directors and Chief Executive
Officer
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EXHIBIT 10.44
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
10th day of March, 1998, by and between HI-RISE RECYCLING SYSTEMS, INC., a
Florida corporation (the "Company"), and BRADLEY ALAN HACKER (the "Executive").
PRELIMINARY STATEMENT
A. The Executive is currently the Chief Operating Officer of the Company.
B. The Executive possesses intimate knowledge of the business and affairs
of the Company, its policies, methods and personnel.
C. The Board of Directors (the "Board") of the Company recognizes that the
Executive's contribution, as Chief Operating Officer of the Company, to the
growth and success of the Company has been substantial and desires to assure the
Company of the Executive's continued employment in an executive capacity and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to make his services available to the Company
on the terms and conditions hereinafter set forth.
AGREEMENT
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 shall continue to employ the
Executive and the Executive shall continue to serve the Company, on the terms
and conditions set forth herein, for the period commending on the date hereof
and expiring February 15, 2003 (the "Initial Term") 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").
Notwithstanding the foregoing, in the event of a "Change of Control" (as
defined below), the Initial Term of this Agreement, and the employment of the
Executive hereunder, will automatically be extended for an additional five (5)
year term. For purposes of this Agreement,
<PAGE>
a "Change of Control" shall mean the approval by the shareholders of the Company
of (A) a reorganization, merger or consolidation with respect to which persons
who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged or consolidated company's then
outstanding voting securities or (B) the sale of all or substantially all of the
assets of the Company, unless the approved reorganization, merger,
consolidation, liquidation, dissolution or sale is subsequently abandoned.
1.2. DUTIES OF THE EXECUTIVE. The Executive shall serve as the Chief
Financial Officer of the Company and shall have the powers and authority
commensurate with such position, shall diligently perform all services as may be
reasonably assigned to him by the Chief Executive Officer of the Company (the
"CEO") and/or the Board or any properly constituted committee thereof, and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall devote substantially all of his working time
and attention to the business and affairs of the Company. 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. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations; PROVIDED, HOWEVER,
that the Company's offices from which the Executive shall be required to perform
such services shall be within a 50-mile radius of the Employer's existing
principal executive offices located in Miami, Florida.
2. COMPENSATION. The Company shall pay to Executive compensation for
services provided hereunder as set forth in the Addendum to this 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 FOR CAUSE. Notwithstanding anything contained herein
to the contrary, this Agreement may be terminated by the Company for "Cause." As
used in this Agreement, "Cause" shall only mean (i) subject to the following
sentences, any action or omission of the Executive which constitutes a willful
and material breach of this Agreement which is not cured or as to which diligent
attempts to cure have not commenced within thirty (30) business days after
receipt by the Executive of notice of same, (ii) fraud, embezzlement or
misappropriation as against the Company or (iii) the conviction of Executive for
any criminal act which is a felony. Upon any determination by the Board that
Cause exists under clause (i) of the preceding sentence, the Company shall cause
a special meeting of the Board to be called and held at a time mutually
convenient to the Board and Executive, but in no event later than ten (10)
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business days after Executive's receipt of the notice contemplated by clause (i)
Executive shall have the right to appear before such special meeting of the
Board with legal counsel of his choosing to refute any determination of Cause
specified in such notice, and any termination of Executive's employment by
reason of such Cause determination shall not be effective until Executive is
afforded such opportunity to appear. Any termination for Cause pursuant to
clause (ii) or (iii) of the first sentence of this Section 3.1 shall be made in
writing to Executive, which notice shall set forth in detail all acts or
omissions upon which the Company is relying for such termination. Upon any
termination 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 Section 4.1 hereof.
3.2 TERMINATION WITHOUT CAUSE. 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 BY THE COMPANY of the Executive's
employment pursuant to this Section 3.2, the Executive shall, subject to the
other provisions of this Agreement, only be entitled to receive the compensation
specified in Sections 4.2, 4.6 and 4.8 hereof. Upon the termination BY THE
EXECUTIVE of the Executive's employment pursuant to this Section 3.2, the
Executive shall, subject to the other provisions of this Agreement, only be
entitled to receive the compensation specified in Section 4.1 hereof.
3.3 DISABILITY. The Company shall at all times have the right, upon written
notice to the Executive, to terminate the Executive's employment hereunder, if
the Executive shall, as the result of mental or physical incapacity, illness or
disability, become unable to perform the essential functions of his position,
with or without reasonable accommodation, for a period of 90 consecutive days or
a period of 120 days during any 12 month period. Upon 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, 4.6 and 4.8 hereof.
3.4 DEATH. The Executive's employment 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 3.4, the Executive shall, subject to the other provisions of
this Agreement, only be entitled to the compensation specified in Sections 4.4,
4.6 and 4.8 hereof.
3.5 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 3.5. Upon any termination of the Executive's employment with the Company
pursuant to this Section 3.5, the Executive shall, subject to the other
provisions of this Agreement, only be entitled to the compensation specified in
Sections 4.5, 4.7 and 4.8 hereof.
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4. COMPENSATION AND BENEFITS UPON TERMINATION OR CHANGE OF CONTROL.
4.1 TERMINATION FOR CAUSE. Upon the termination of the Executive's
employment with the Company pursuant to Section 3.1 above, or upon termination
BY THE EXECUTIVE of the Executive's employment pursuant to Section 3.2 above,
the Company shall pay the Executive any unpaid Base Salary (as defined in the
Addendum) accrued through the effective date of termination specified in the
notice of termination as provided above in Section 3.1 or Section 3.2. Except as
provided in the preceding sentence and other than for reimbursement for
reasonable business expenses incurred prior to the date of termination, the
Company shall have no further liability hereunder.
4.2 TERMINATION OTHER THAN FOR CAUSE OR NON-RENEWAL. Upon the
termination BY THE COMPANY of the Executive's employment pursuant to Section 3.2
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, as severance to the Executive, (a) the amount of Base Salary and
Other Benefits that would have been paid to the Executive through the remainder
of the Employment Period AND (b) an amount equal to the Executive's than annual
Base Salary and Other Benefits. Any life insurance policy currently maintained
by the Company for the benefit of the Executive shall remain in full force and
effect through the remainder of the Employment Period and shall not be amended
or modified except to allow for any increase in benefits payable pursuant
thereto.
4.3 DISABILITY. Upon the termination of the Executive's employment
with the Company pursuant to Section 3.3 above, the Company shall pay to the
Executive (i) in a single lump sum, any unpaid amounts of his Base Salary and
accrued bonus, if any, through the date of termination and (ii) in a single lump
sum, the remainder of (a) the amount of Base Salary and Other Benefits that
would have been paid to the Executive from the date of termination through the
remainder of the Employment Period MINUS (b) the amount of any payments that the
Executive would be entitled to receive under any disability policy then
maintained by the Company.
4.4 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 date of death; (ii) in a single lump sum, the amount
of Base Salary and Other Benefits that would have been paid to the Executive
from the date of death through the remainder of the Employment Period and (iii)
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.
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4.5 NON-RENEWAL. If this Agreement terminates pursuant to Section 3.5
hereof, then the Company shall pay the Executive (i) any unpaid amounts of his
Base Salary through the termination date specified in Section 3.5 and (ii) in a
lump sum, an amount equal to the Executive's than annual Base Salary and Other
Benefits, as severance to the Executive.
4.6 HEALTH AND MEDICAL PLANS UPON TERMINATION OTHER THAN FOR
NON-RENEWAL. Upon termination of the Executive's employment pursuant to Sections
3.2 and 3.3, 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.
4.7 HEALTH, DISABILITY AND MEDICAL PLANS UPON NON-RENEWAL. Upon
termination of this Agreement pursuant to Section 3.5, during the one (1) year
period following such termination the Executive shall be entitled to the
continuation of all health, disability, medical, hospitalization and other
programs as previously provided to Executive by the Company.
4.8 BONUS. If the Executive's employment is terminated with the
Company for any reason other than "Cause" pursuant to Section 3.1 hereof, the
Executive shall be paid, solely in consideration for services rendered by the
Executive prior to such termination, an amount equal to the Annual Incentive
Bonus (as defined in the Addendum) that would have been payable to Executive for
the fiscal year if the Executive's employment had not been terminated.
4.9 ACCELERATION OF VESTING OF OPTIONS UPON A CHANGE OF CONTROL.
Notwithstanding the terms of any stock option plan adopted by the Company or the
terms of any options (the "Options") to purchase shares of the common stock, par
value $.01 per share (the "Common Stock"), of the Company previously granted to
the Executive pursuant to such plan or plans, all Options issued to the
Executive which have not vested immediately prior to a Change of Control, shall
vest and become immediately exercisable by the Executive upon a Change of
Control.
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. OPTIONS. The Company shall use its best efforts to adopt within 6 months
of the date hereof a stock option plan for the purchase by the Executive of
shares of the Common Stock of the Company.
7. ENTIRE AGREEMENT. Except as otherwise provided in this Agreement and the
Addendum, this Agreement constitutes the entire agreement among the parties
pertaining to the
5
<PAGE>
subject matter hereof, and supersedes and revokes any and all prior or existing
agreements, written or oral, relating to the subject matter hereof, and this
Agreement shall be solely determinative of the subject matter hereof.
8. CONFIDENTIAL INFORMATION; NON-COMPETITION; EQUITABLE REMEDIES.
8.1. 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 8.1 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 8 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.
6
<PAGE>
8.2. NONCOMPETITION/NONSOLICITATION/NONDISPARAGEMENT.
In addition to the provisions of Section 8.1:
(i) For the period (the "Noncompetition Period") commencing on
the date hereof and continuing through the first anniversary of date of
termination of the Executive's employment 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; PROVIDED, HOWEVER, that in the event that
the Executive's employment with the Company is terminated without cause BY THE
COMPANY pursuant to Section 3.2 hereof, the Noncompetition Period shall continue
only through the date of termination of the Executive's employment.
(ii) For the period (the "Nonsolicitation Period") commencing on
the date on which the Executive's employment with the Company is terminated or
ceases for any reason other than without cause BY THE COMPANY pursuant to
Section 3.2 hereof (the "Consummation Date") and ending on the first anniversary
of the Consummation Date, 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.
8.3. EQUITABLE REMEDIES.
(a) The Executive acknowledges that the restrictions
contained in the foregoing paragraphs 8.1 and 8.2 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 8.1 and 8.2
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.
7
<PAGE>
9. SECTION 162(M) LIMITS. Notwithstanding any other provision of this
Agreement to the contrary, if and to the extent that any remuneration payable by
the Company to the Executive for any year would exceed the maximum amount of
remuneration that the Company may deduct for that year under Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year that would not
be so deductible under Section 162(m) shall, in the sole discretion of the
Board, be deferred and become payable at such time or times as the Board
determines that it first would be deductible by the Company under Section
162(m), with interest at the "short-term applicable rate" as such term is
defined in Section 1274(d) of the Code.
10. ARBITRATION. Any dispute or controversy (except for disputes arising
under Section 8) 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 8 hereof.
11. 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.
12. 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
8
<PAGE>
If to the Executive:
Bradley Alan Hacker
10808 Nashville Drive
Cooper City, Florida 33026
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
9
<PAGE>
18. 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.
10
<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
----------------------------
Donald Engel
Chairman of the Board of Directors and
Chief Executive Officer
THE EXECUTIVE:
/s/ BRADLEY ALAN HACKER
-------------------------------
Bradley Alan Hacker
11
<PAGE>
ADDENDUM TO AGREEMENT
THIS ADDENDUM dated as of March 10, 1998 is a part of the Employment
Agreement dated as of March 10, 1998, by and between HI-RISE RECYCLING SYSTEMS,
INC., a Florida corporation (the "Company") and BRADLEY ALAN HACKER (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 $85,000 subject to increases in accordance with the
Consumer Price Index or policies established, from time to time, by
the Company's Board of Directors, 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. The Executive shall be
entitled to receive a monthly allowance for an automobile in an amount
equal to the allowance received by the Executive for such purpose in
the period immediately preceding the date hereof.
(c) ANNUAL INCENTIVE BONUS. The Executive shall receive an annual
incentive 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; PROVIDED, HOWEVER, that such
annual bonus shall not be less than $25,000 during any year of the
Employment Period. Additionally, on or about June 1, 1998, the
Compensation Committee of the Board may determine, in its sole
discretion, to pay Executive an additional incentive bonus in an
amount not to exceed $25,000 for services rendered by the Executive
during the year ended December 31, 1997.
(d) 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.
1
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals.
THE EXECUTIVE: THE COMPANY:
HI-RISE RECYCLING SYSTEMS, INC.
/s/ BRADLEY ALAN HACKER By: /s/ DONALD ENGEL
- ------------------------- ------------------------
BRADLEY ALAN HACKER Donald Engel
Chairman of the Board of Directors
and Chief Executive Officer
EXHIBIT 10.45
SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
IN CONSIDERATION OF the mutual covenants contained herein and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto, MILTON
PAYTON (hereinafter "PAYTON"), and HI-RISE RECYCLING SYSTEMS, INC., a Florida
corporation (hereinafter "HI-RISE"), their respective successors, heirs,
assigns, executors and administrators, as follows:
1. The parties have entered into this agreement to settle all issues
between them, with specific reference to case number 96C 7348 in the United
States District Court for the Northern District of Illinois, Eastern Division
(the "Lawsuit").
2. On March 2, 1998, HI-RISE shall pay to PAYTON the sum of One Hundred
Thousand Dollars ($100,000.00) to compromise and settle any and all claims of
PAYTON against HI-RISE. HI-RISE shall make the settlement check payable to
"Milton Payton and Peter J. Segal, his attorney."
3. Upon the execution of this agreement, PAYTON shall cause to be
dismissed with prejudice and without costs case number 96C 7348 in the United
States District Court for the Northern District of Illinois, Eastern Division.
4. PAYTON, on the one hand, and HI-RISE, on the other hand, and their
respective affiliates, agents, employees, representatives, successors,
predecessors, related companies, and assigns, hereby release, remise and forever
discharge each other for all claims, demands, debts, duties, obligations,
damages, accounts, liabilities, suits, actions and/or causes of action, of every
kind or nature, including costs, expenses, and attorneys' fees related thereto,
whether arising at law, in equity, or by statute, presently known or unknown,
contingent or actual, liquidated or unliquidated, which might or could arise
under federal, state, local or common law, which each party now has or has had
from the beginning of the world to the date of this Settlement Agreement and
Mutual General Release, for, upon, by reason of, or arising out of any cause,
act, occurrence, transaction, event or thing. Notwithstanding the foregoing,
nothing in this paragraph shall release the parties hereto from the obligations
set forth in this Settlement Agreement and Mutual General Release.
5. None of the parties hereto recognizes or acknowledges, admits or
confesses, in any manner, directly or indirectly, by inference, innuendo or
otherwise, any wrongdoing or liability whatsoever in connection with any
transaction or occurrence relating to the matters involved in the Lawsuit, and
nothing contained in this Settlement Agreement and Mutual General Release shall
be construed as an admission of liability or wrongdoing by any of the parties
hereto.
<PAGE>
6. PAYTON and HI-RISE acknowledge that the payment set forth herein is
in settlement of PAYTON's allegations against HI-RISE that he has suffered
emotional distress necessitating psychological treatment and causing
consequential occupational damages, as well as allegations of fraud, harm to
reputation, breach of contract, and resulting attorneys' fees and costs, which
allegations HI-RISE denies. HI-RISE will not issue an IRS Form 1099 or similar
state tax form. PAYTON agrees that if any part of the settlement payment is
determined to be taxable income to him, except for the employer portion of FICA
taxes for which HI-RISE is responsible, PAYTON shall be solely responsible for
paying all such taxes.
7. The parties executing this Settlement Agreement and Mutual General
Release represent and warrant that he or she is duly authorized to enter into
this Settlement Agreement and Mutual General Release on behalf of the party on
whose behalf he or she has executed this agreement and, in the case of PAYTON,
is the sole and absolute legal and equitable owner of all of the claims or
demands released hereby and has not assigned or transferred any such claims.
8. If either party shall be required to incur attorneys' fees and costs
for the enforcement of this agreement, the party determined to have breached
this agreement shall be required to pay all reasonable attorneys' fees and costs
of the other party.
9. PAYTON and HI-RISE agree that the contents of this Settlement
Agreement and Mutual General Release shall not be disclosed to any person or
entity, and maintained in strict confidence, except as follows: (i.) as required
by any court of law or equity or administrative proceeding, process, or
regulation; (ii) if properly requested in any legal action or proceeding, or any
administrative proceeding or process, whether by summons, subpoena, or
otherwise; (iii) if requested by the IRS; (iv) as otherwise required by law; (v)
to the parties' attorneys or accountants; (vi) to the SEC or any other
governmental entity; and (vii) in a report to the shareholders of HI-RISE.
10. This Settlement Agreement and Mutual General Release has been
prepared jointly by the parties hereto with the advice and consent of their
respective attorneys and may be executed in counterparts.
11. This Settlement Agreement and Mutual General Release shall be
governed by and construed in accordance with the laws of the State of Illinois.
2
<PAGE>
WHEREFORE, PAYTON AND HI-RISE have entered into this Settlement
Agreement and Mutual General Release, consisting of three pages, on the date
written below.
HI-RISE RECYCLING SYSTEMS, INC.
3/2/98
Dated By: /s/ J. GARY MCALPIN
----------------------------
Its Chief Operating Officer
Attest:
/s/ BRADLEY HACKER
- ----------------------------
3/2/98 By: /s/ MILTON PAYTON
Dated -------------------------
MILTON PAYTON
Attest:
- ----------------------------
3
Subsidiaries of Hi-Rise Recycling Systems, Inc.
IDC Systems, Inc.
Dade County Recycling, Inc.
Recycltech Enterprises Ltd.
Wilkinson Company, Inc.
NuReTech of Florida, Inc.
Hesco Sales, Inc.
Atlantic Maintenance of Miami, Inc.
Subsidiaries of Hesco Sales, Inc.
Hesco Export, Inc.
Hesco Leasing, Inc.
U.S. Containers, Inc.
United Truck and Body, Inc.
U.S. Cylinders, Inc.
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 of our report dated February 20,
1998, except as to the information in the second paragraph of Note 15, for which
the date is March 10, 1998, on our audits of the consolidated financial
statements of Hi-Rise Recycling Systems, Inc. as of December 31, 1997 and 1996,
and for the years then ended, which report is included in this Annual Report on
Form 10-KSB.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 31, 1998
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,134,131
<SECURITIES> 0
<RECEIVABLES> 3,191,488
<ALLOWANCES> 120,108
<INVENTORY> 2,002,163
<CURRENT-ASSETS> 9,842,715
<PP&E> 1,624,688
<DEPRECIATION> 451,996
<TOTAL-ASSETS> 19,184,850
<CURRENT-LIABILITIES> 5,354,221
<BONDS> 0
0
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<COMMON> 64,685
<OTHER-SE> 10,570,922
<TOTAL-LIABILITY-AND-EQUITY> 19,184,850
<SALES> 10,483,576
<TOTAL-REVENUES> 10,483,576
<CGS> 5,378,144
<TOTAL-COSTS> 10,527,486
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 383,643
<INCOME-PRETAX> 131,165
<INCOME-TAX> 11,000
<INCOME-CONTINUING> 120,165
<DISCONTINUED> 0
<EXTRAORDINARY> 100,000
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