U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
| | TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________ .
Commission File No. 0-24490
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AQUAGENIX, INC.
---------------
(Exact name of small business issuer as specified in its charter)
Delaware 65-0419263
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6500 Northwest 15th Avenue, Fort Lauderdale, Florida 33309
----------------------------------------------------------
(Address of principal executive offices)
(305) 975-7771
--------------
(Issuer's telephone number)
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 | |
The number of shares outstanding of the issuer's Common Stock, $.01 Par Value,
as of October 31, 1997 was 4,530,204.
Transitional Small Business Disclosure Format: Yes | | No |X|
Page 1 of 17 Pages
<PAGE>
AQUAGENIX, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1: Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 (unaudited) 3
Consolidated Statements of Operations for the three
months and nine months ended September 30, 1997 and
September 30, 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and September 30,
1996 (unaudited) 5
Notes to Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis or Plan of
Operation 9-14
PART II. OTHER INFORMATION 15-16
-----------------
SIGNATURES 17
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 890,935 $ 890,731
Marketable securities 0 158,492
Accounts receivable, net of allowance for doubtful
accounts of $142,297 and $88,541, respectively 1,606,459 1,064,151
Inventories 677,208 339,114
Prepaid expenses and other 534,413 490,740
------------ ------------
Total current assets 3,709,015 2,943,228
Accounts receivable, non-current 1,269,431 1,269,909
Property and equipment, net 2,754,124 2,450,154
Intangible assets, net 4,828,679 4,946,027
Deferred financing costs, net 157,833 154,276
Other assets 243,974 267,233
------------ ------------
Total assets $ 12,963,056 $ 12,030,827
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Short term borrowings - acquisitions $ 0 $ 200,000
Borrowings under credit agreement 550,000 404,415
Current maturities of long-term debt 325,225 166,168
Accounts payable 901,739 709,870
Net liabilities of discontinued operations 133,332 350,076
Other current liabilities 310,975 322,582
------------ ------------
Total current liabilities 2,221,271 2,153,111
Long-term debt, net of current maturities 5,807,865 5,326,769
------------ ------------
Total liabilities 8,029,136 7,479,880
------------ ------------
Stockholders' equity:
Preferred stock, par value $.01, 1,000,000 shares
authorized, no shares issued and outstanding 0 0
Common stock, par value $.01, 10,000,000 shares
authorized, 4,528,704 and 4,163,391 shares issued
and outstanding, respectively 45,287 41,634
Additional paid-in capital 14,547,949 12,671,620
Accumulated deficit (9,491,065) (7,938,330)
Unearned compensation (168,251) (230,058)
Unrealized gain on securities 0 6,081
------------ ------------
Total stockholders' equity 4,933,920 4,550,947
------------ ------------
Total liabilities and stockholders' equity $ 12,963,056 $ 12,030,827
============ ============
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues - Continuing operations $ 3,689,128 $ 3,485,783 $ 10,186,456 $ 8,728,513
------------ ------------ ------------ ------------
Costs and expenses:
Costs of services 2,538,867 2,106,120 6,297,464 4,855,112
Selling, general and administrative 1,417,852 851,689 4,179,574 2,354,882
Depreciation and amortization 235,873 170,401 696,912 476,707
------------ ------------ ------------ ------------
Total costs and expenses 4,192,592 3,128,210 11,173,950 7,686,701
------------ ------------ ------------ ------------
Operating (loss) income (503,464) 357,573 (987,494) 1,041,812
Interest income 9,976 10,554 28,958 53,847
Interest expense (196,314) (182,753) (594,199) (513,656)
------------ ------------ ------------ ------------
(Loss) income from continuing operations before income taxes (689,802) 185,374 (1,552,735) 582,003
Provision for income taxes 0 0 0 0
------------ ------------ ------------ ------------
(Loss) income from continuing operations (689,802) 185,374 (1,552,735) 582,003
Discontinued operations:
Change in allowance for estimated phase-out losses
from environmental remediation segment 0 0 0 464,689
------------ ------------ ------------ ------------
Net (loss) income $ (689,802) $ 185,374 $ (1,552,735) $ 1,046,692
============ ============ ============ ============
(Loss) income per weighted average common share:
Continuing operations $ (0.15) $ 0.05 $ (0.36) $ 0.16
Discontinued operations 0.00 0.00 0.00 0.13
------------ ------------ ------------ ------------
Net (loss) income $ (0.15) $ 0.05 $ (0.36) $ 0.29
============ ============ ============ ============
Weighted average common shares outstanding 4,478,871 4,009,678 4,339,720 3,578,617
============ ============ ============ ============
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,552,735) $ 1,046,692
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 696,912 476,707
Loss (gain) on sale of property and equipment 22,406 (1,703)
(Gain) on sale of securities (9,785) 0
Provision for doubtful accounts 90,341 80,595
Consulting fees 36,250 88,930
Discontinued operations (216,744) 1,059,087
Net change in operating assets and liabilities (810,417) (1,709,277)
----------- -----------
Net cash (used in) provided by operating activities (1,743,772) 1,041,031
----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable securities 162,196 624,187
Proceeds from sale of property and equipment 106,577 280,896
Proceeds from sale of assets of discontinued operations 0 2,892,768
Cash paid for acquisitions, net of cash acquired (83,253) (51,221)
Purchase of property and equipment (754,158) (791,151)
----------- -----------
Net cash (used in) provided by investing activities (568,638) 2,955,479
----------- -----------
Cash flows from financing activities:
Proceeds under credit agreements 841,141 0
Proceeds from other borrowings 756,090 279,992
Payment of credit agreements (695,556) (147,902)
Payment of notes payable and long-term debt (408,638) (666,821)
Payment of debt obligations of discontinued operations 0 (4,502,794)
Payment of financing costs (46,365) 0
Distribution to stockholder 0 (49,684)
Issuance of common stock 1,865,942 1,750,000
----------- -----------
Net cash provided by (used in) financing activities 2,312,614 (3,337,209)
----------- -----------
Cash and cash equivalents:
Increase 204 659,301
Beginning balance 890,731 720,888
----------- -----------
Ending balance $ 890,935 $ 1,380,189
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 484,696 $ 406,203
=========== ===========
Income taxes paid (refunded) $ 0 $ (605,951)
=========== ===========
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the
audited annual consolidated financial statements. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996 of Aquagenix, Inc. (the "Company"), as
filed with the Securities and Exchange Commission. The December 31, 1996
financial statements were derived from audited consolidated financial
statements, but do not include all disclosures required by generally
accepted accounting principles. The accompanying financial statements have
been restated for the comparative period to include the accounts of Green
Pastures, Inc. which was acquired on December 31, 1996 and accounted for
as a pooling of interests.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
position and results of operations. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the full year.
2. Earnings Per Share
------------------
Earnings (loss) per common shares were computed by dividing net income
(loss) by the weighted average number of shares outstanding. Common share
equivalents resulting from options and warrants have not been included for
the loss per share computation for three months and nine months ended
September 30, 1997 since their effect would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board (the "FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"), which establishes new standards for computing and
presenting earnings per share ("EPS"). The statement replaces the current
presentation of primary EPS and will require dual presentation of basic
and diluted EPS on the face of the statement of operations. SFAS 128
requires restatement of all prior period EPS data presented and is
effective in the fourth quarter of 1997 for the Company. The Company does
not expect adoption of SFAS 128 to have a significant impact on the
Company's financial statements.
In September 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards of reporting and display of comprehensive income and
its components. In September 1997, the FASB also issued Statement of
Financial Accounting Standard No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for reporting operating and geographic segments and the type and
level of financial information to be discussed about these segments. Both
SFAS 130 and SFAS 131 are effective for fiscal years beginning after
December 15, 1997.
- 6 -
<PAGE>
3. Loan Agreements
---------------
In April 1997, the Company entered into loan agreements with Capital Bank
which provided for borrowings under a revolving line of credit of up to an
aggregate of $750,000 and a three-year term loan of $250,000 which is
collaterized by a long-term receivable. Advances under the line of credit
are based on certain borrowing formula relating to eligible accounts
receivable. Interest accrues at the rates of 1- 1/4% above prime for the
line of credit and 9.5% for the three-year term loan. Substantially all of
the Company's assets are pledged to Capital Bank as collateral. This new
line of credit replaced the line with SunTrust and the amount outstanding
under the SunTrust's revolving line of credit was fully repaid in April
1997.
In June 1997, the Company entered into a four-year loan agreement, for a
principal amount of $500,000, with a commercial equipment financing
company to refinance certain capital expenditures relating to application
equipment and vehicles.
In October 1997, the Company entered into additional loan agreements with
Capital Bank which provide for an increase in the borrowings under the
revolving line of credit to $1,000,000, a three-year term loan of $200,000
for purchases of computer equipment with interest accruing at 9.75% and
$270,000 guidance equipment line with two drawdowns and a four-year
amortization term at an interest rate of 9.75%.
4. Issuance of Common Stock
------------------------
In September 1997, the Company issued 39,500 shares of common stock
resulting from the exercise of stock options granted to a financial
consultant in 1994 pursuant to a consulting agreement dated November 29,
1994 between the consultant and the Company. The Company received total
cash proceeds of $241,938.
On May 2, 1997, the Company issued 100,000 shares of common stock to
another financial consultant resulting from the exercise of stock options
granted to them in 1996 as consideration for financial consulting services
rendered. The Company received an aggregate purchase price of $500,000.
On May 19, 1997, the Company issued 47,500 shares of common stock to one
of the directors of Aquagenix, Inc. (the "Company"), namely Mr. Fred S.
Katz, upon the exercise of options granted to him under the Company's
Directors Stock Option Plan. The aggregate purchase price was $200,200,
all of which has been received in cash by the Company.
On the same day, the Company completed an equity private placement of
83,333 shares (the "Shares") at $6.00 per share pursuant to the terms of a
Subscription Agreement, dated as of May 19, 1997. The aggregate purchase
price was $500,000, all of which has been received in cash by the Company.
In February 1997, the Company also completed an equity private placement
of 50,000 shares with an aggregate purchase price of $250,000.
- 7 -
<PAGE>
Since December 31, 1996, the Company has issued a total of 365,313 shares
of common stock resulting mainly from the exercise of stock options by its
employees, directors, financial consultants and two private equity
placements, thereby increasing its share capital by $1,879,982.
5. Subsequent Event
----------------
On October 27, 1997, the Company completed a private equity placement for
an aggregate purchase price $700,000. The number of shares of common stock
(the "Shares") to be issued will be based on 85% of the average closing
bid price of the Company's common stock for ten consecutive trading days
prior to the date the investor gives notice to receive all or any portion
of the Shares. The notice by the investor will take place between January
27, 1998 and December 31, 1998. The Company also issued warrants to the
investor to purchase 60,000 shares of common stock at $8.00 per share and
these warrants will expire on October 27, 1999.
- 8 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Aquagenix, Inc. (the "Company"), through its wholly-owned subsidiaries, provides
aquatic and industrial vegetation management services to both governmental and
commercial customers in Florida, Georgia, North and South Carolina, Arizona,
Alabama and Tennessee. The Company's continued emphasis on quality service,
internal growth and the selective acquisition of privately held waterway and
vegetation management companies in the Sunbelt region of the United States has
resulted in the Company becoming the largest provider of aquatic and industrial
vegetation management services in the United States with annual revenues of
approximately $11,500,000 for 1996. The Company's services consist primarily of
the control of aquatic weeds, algae and exotic plants, brush and noxious tree
control, wetland planting and restoration, installation of floating fountains
and aeration systems and the stocking of fish for game, plant and insect
control.
In April 1997, the Company established a new branch office in Birmingham,
Alabama as the Company has started to provide industrial vegetation management
services in that region. The expansion of its network of branches into Alabama
should help further develop alliances with the utility companies in that area
and increase the Company's ability to capitalize on the beginning of large-scale
outsourcing of non-core utility services by utility companies throughout the
country.
In September 1997, the Company opened an additional office in San Francisco,
California managed by a new branch manager with over 20 years of experience in
surface water management and ecosystem restoration. The addition of this member
to the Company's management team represents the Company's first strategic move
in the California market to take advantage of the significant business
opportunities relating to surface water management and environmentally-sensitive
land management issues currently faced by the entire western United States.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 Compared to Three Months Ended September
- --------------------------------------------------------------------------------
30, 1996
- --------
REVENUES. The Company's revenues increased by $203,345, or 5.8%, from $3,485,783
during the three months ended September 30, 1996 to $3,689,128 during the three
months ended September 30, 1997. The increase in revenues was primarily
attributable to an increase in aquatic vegetation management contracts as a
result of the acquisition of Aquatic Dynamics, Inc. (the "ADI Acquisition") in
December 1996. This increase in revenues was partly offset by a decrease in
revenues from industrial vegetation contracts for Georgia for the third quarter
of 1997 as compared to the corresponding quarter of 1996.
- 9 -
<PAGE>
COST OF SERVICES. Cost of services increased by $432,747, or 20.5%, from
$2,106,120 during the three months ended September 30, 1996 to $2,538,867 during
the three months ended September 30, 1997. The increase in cost of services was
mainly attributable to increased chemical, labor, subcontracting and vehicle
leasing costs as a result of the Company's expanding operations, of which
$327,301 related to the cost of services for the Arizona operations. As a
percentage of revenues, cost of services have increased from 60.4% in the third
quarter of 1996 to 68.8% in the third quarter of 1997. The reduced gross margin
was mainly attributable to the lower margins obtained for aquatic vegetation
contracts in Arizona and industrial vegetation contracts in Alabama. In
addition, the reduction of revenues from industrial vegetation contracts in the
third quarter of 1997 as compared to the corresponding quarter of 1996 for the
Georgia operations resulted in a higher percentage of fixed labor overheads to
revenues.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense
increased by $566,163, or 66.5%, from $851,689 during the three months ended
September 30, 1996 to $1,417,852 during the three months ended September 30,
1997. The increase in selling, general and administrative expenses was due
mainly to the expansion of the Company's sales and marketing arm directed at
penetrating the utility, governmental and wetland development markets,
assimilation of the operations of the three businesses acquired in 1996,
increased payroll and recruitment costs, business promotion expenses and
increased corporate expenses associated with the sourcing of potential financing
arrangements and acquisitions which included travel expenses, legal and
professional fees. The operating expenses of the four new offices in Georgia,
Arizona, Alabama and California accounted for approximately $275,000 of the
increase in selling, general and administrative expenses. Payroll costs have
increased substantially mainly due to the expansion of the sales and marketing
team and the additions to the corporate management team of the Company which
included the recruitment of a President for the Company's largest subsidiary, a
chief compliance officer for training of technical staff and monitoring of
compliance with environmental regulations and a management information systems
manager.
As a percentage of revenues, such expenses have increased from 24.4% for the
three months ended September 30, 1996 to 38.4% for the corresponding period in
1997. The increase was mainly attributable to the increased level of
infrastructure spending as evidenced by the establishment of a specialized
marketing team headed by a newly appointed President and the Company-wide
upgrade of the management information systems. The specialized marketing team of
the Company have been targeting their efforts at governmental agencies and
utility and power companies which have the most substantial demand potential for
the Company's services as a result of active deregulation and increased
competition which results in the outsourcing of their in-house services. Due to
the greater levels of competition and cost awareness, these utility companies
and municipalities must seek the most efficient and cost-effective methods of
delivering their core services. This investment in the marketing infrastructure
of the Company, however, is not expected to yield immediate positive results as
the average selling cycle ranges from 12-18 months for governmental contracts
and 6-12 months for utility contracts.
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<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
from $170,401 in the third quarter of 1996 to $235,873 in the third quarter of
1997. Such expense as a percentage of revenues increased from 4.9% for the
quarter ended September 30, 1996 to 6.4% for the corresponding quarter in 1997.
This increase reflected the additional depreciation of application equipment
purchased during the three months ended September 30, 1997. In addition,
amortization expenses have also increased due to the additional intangibles
acquired from the ADI and ARC acquisitions.
INTEREST EXPENSE. Interest expense increased by $13,561 from $182,753 during the
three months ended September 30, 1996 to $196,314 during the three months ended
September 30, 1997 primarily as a result of increased bank borrowings.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
1996
- ----
REVENUES. The Company's revenues increased by $1,457,943, or 16.7%, from
$8,728,513 during the nine months ended September 30, 1996 to $10,186,456 during
the nine months ended September 30, 1997. The increase in revenues was primarily
attributable to an increase in both aquatic and industrial vegetation management
contracts as a result of the acquisitions of Aquatic Dynamics, Inc. (the "ADI
Acquisition") in December 1996 and Aquatic and Right of Way Control, Inc. (the
"ARC Acquisition") in June 1996, the establishment of a branch office in Alabama
and the intensive marketing efforts targeted at electric and power utilities and
governmental agencies. This increase in revenues was partly offset by a
reduction in revenues from wetland and non-recurring aquatic contracts resulting
from one-time contracts secured in 1996. For the nine months ended September 30,
1997 and 1996, industrial vegetation management services accounted for
approximately 22.0% and 18.4%, respectively, of the Company's total revenues.
COST OF SERVICES. Cost of services increased by $1,442,352, or 29.7%, from
$4,855,112 during the nine months ended September 30, 1996 to $6,297,464 during
the nine months ended September 30, 1997. The increase in cost of services was
mainly attributable to increased chemical, labor, fuel, subcontracting and
vehicle leasing costs as a result of the Company's expanding operations, of
which $848,085 related to the cost of services for the Arizona operations. As a
percentage of revenues, cost of services have increased from 55.6% for the nine
months ended September 30, 1996 to 61.8% for the nine months ended September 30
,1997. The reduced gross margin was mainly attributable to lower margins
obtained for aquatic vegetation contracts in Arizona and industrial vegetation
contracts in Alabama and higher chemical and subcontracting costs as a result of
a higher mix of industrial vegetation management contracts for the nine months
ended September 30 ,1997 as compared to the corresponding period of 1996. Gross
margins from industrial vegetation management contracts are generally lower than
the aquatic vegetation management contracts as they involve a higher usage of
chemicals and in some cases, subcontractors have to be used when aerial chemical
application using helicopters is required.
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<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense
increased by $1,824,692, or 77.5%, from $2,354,882 during the nine months ended
September 30, 1996 to $4,179,574 during the nine months ended September 30,
1997. The increase in selling, general and administrative expenses was due
mainly to the expanded sales force and business development costs, the
assimilation of the operations of the three businesses acquired in 1996,
increased payroll and recruitment costs, higher travel and increased corporate
expenses associated with the sourcing of potential financing arrangements and
private placements which included travel expenses, legal and professional fees.
The operating expenses of the four new offices in Georgia, Arizona, Alabama and
California accounted for approximately $802,000 of the total increase in
selling, general and administrative expenses. Payroll costs have increased
substantially mainly due to the expansion of the sales and marketing team and
the additions to the corporate management team of the Company which included the
recruitment of a President for the Company's largest subsidiary, a chief
compliance officer for training of technical staff and monitoring of compliance
with environmental regulations and a management information systems manager.
As a percentage of revenues, such expenses have increased from 27.0% for the
nine months ended September 30, 1996 to 41.0% for the corresponding period in
1997. This was mainly attributable to the increased level of infrastructure
spending as evidenced by the establishment of a specialized marketing team
headed by a newly appointed President and the Company-wide upgrade of the
management information systems. The specialized marketing team of the Company
have been targeting their efforts at governmental agencies and utility and power
companies which have the most substantial demand potential for the Company's
services as a result of active deregulation and increased competition which
results in the outsourcing of their in-house services. Due to the greater levels
of competition and cost awareness, these utility companies and municipalities
must seek the most efficient and cost-effective methods of delivering their core
services. This investment in the marketing infrastructure of the Company,
however, is not expected to yield immediate positive results as the average
selling cycle ranges from 12-18 months for governmental contracts and 6-12
months for utility contracts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
from $476,707 for the nine months ended September 30, 1996 to $696,912 for the
corresponding period in 1997. Such expense as a percentage of revenues increased
from 5.5% for the nine months ended September 30, 1996 to 6.8% for the nine
months ended September 30, 1997. This increase reflected the additional
depreciation of application equipment and computer equipment purchased during
the nine months ended September 30, 1997. In addition, there was an increase in
amortization relating to intangibles acquired from the ADI and ARC acquisitions.
INTEREST INCOME. Interest income decreased by $24,889 from $53,847 for the nine
months ended September 30, 1996 to $28,958 for the corresponding period of 1997.
The decrease in interest income was consistent with the lower average cash
balances in 1997 as compared to 1996.
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<PAGE>
INTEREST EXPENSE. Interest expense increased by $80,543 from $513,656 during the
nine months ended September 30, 1996 to $594,199 during the nine months ended
September 30, 1997 primarily as a result of increased bank borrowings.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. Working capital (excluding net liabilities of discontinued
operations), which consists principally of cash and accounts receivable , was
$1,140,193 at December 31, 1996, compared to $1,621,076 at September 30, 1997.
The increase in working capital was mainly attributable to an increase in
accounts receivable.
Of the Company's accounts receivable outstanding at December 31, 1996 and
September 30, 1997, approximately $336,000 (31.6%) and $623,000 (38.8%) were due
from five customers, respectively. The increase was primarily due to more
industrial vegetation contracts undertaken during the third quarter of 1997
which are typically larger in value. At September 30, 1997, the Company's
allowance for doubtful debts was $142,297 which the Company believes is
currently adequate to cover anticipated losses. The average collection period
for accounts receivable was approximately 35 days as of September 30, 1997 as
compared to 32 days at December 31, 1996.
Inventories have increased from $339,114 as of December 31, 1996 to $677,208 as
of September 30, 1997 primarily as a result of increase in the number of branch
offices and bulk purchases of chemicals to take advantage of quantity discounts.
At September 30, 1997, the Company has loan agreements with Capital Bank which
provide for borrowings under a revolving line of credit of up to an aggregate of
$750,000 and a three-year term loan of $250,000 which is collaterized by a
long-term receivable. Advances under the line of credit are based on a certain
borrowing formula relating to eligible accounts receivable. Interest accrues at
the rates of 1-1/4% above prime for the line of credit and 9.5% for the
three-year term loan. Substantially all of the Company's assets are pledged to
Capital Bank as collateral. As of September 30, 1997, $232,751 was outstanding
under the three-year term loan and $550,000 was outstanding under the line of
credit. Availability under the line of credit at September 30, 1997 amounted to
$200,000.
On October 3, 1997, the Company entered into additional loan agreements with
Capital Bank which provide for an increase in the borrowings under the revolving
line of credit to $1,000,000, a three-year term loan of $200,000 for purchases
of computer equipment with interest accruing at 9.75% and a $270,000 equipment
financing line with two drawdowns and a four-year amortization term at an
interest rate of 9.75%.
CAPITAL COMMITMENTS. As of September 30, 1997, the Company has capital
commitments to purchase 25 specialized application equipment known as
"Spra-Buggies" over the next 13 months at a purchase price of approximately
$27,000 for each spra-buggy. The Company anticipates that these capital
expenditures will be funded by a combination of bank borrowings and loans from
equipment financing companies.
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<PAGE>
CASH FLOWS FROM OPERATING ACTIVITIES. For the nine months ended September 30,
1997, the Company's cash flows used in operations was $1,743,772 as compared to
cash generated from operations of $1,041,031 for the nine months ended September
30, 1996. Of the net cash used in operating activities for the nine months ended
September 30, 1997, $1,527,028 were used in continuing operations as compared to
$482,745 for the nine months ended September 30, 1996. The increase in cash
flows used in continuing operations was primarily attributable to the net loss
incurred for the nine months ended September 30, 1997. If necessary, the Company
will seek additional financing through private placements or otherwise to fund
its operating activities.
CASH FLOWS FROM INVESTING ACTIVITIES. For the nine months ended September 30,
1997, purchases of application and computer equipment amounted to $754,158. This
was partly offset by some proceeds from the sale of marketable securities and
equipment, resulting in net cash used in investing activities of $568,638. Net
cash provided by investing activities for the nine months ended September 30,
1996 of $2,955,479 was derived mainly from the sale of marketable securities and
certain assets of discontinued operations.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash provided by financing activities
for the nine months ended September 30, 1997 of $2,312,614 was derived primarily
from the issuance of common stock resulting from equity private placements and
the exercise of stock options by employees, directors and financial consultants.
Proceeds from such issuances amounted to $1,865,942 for the nine months ended
September 30, 1997. The Company also had additional borrowings of $756,090
during nine months ended September 30, 1997 which included the three-year term
loan of $250,000 from Capital Bank and an equipment loan of $500,000 from a
commercial equipment financing company. The Company repaid a total of $408,638
of its debts which included the instalment note of $200,000 relating to the ADI
Acquisition.
DISCONTINUED OPERATIONS. Net liabilities of discontinued operations decreased
from $350,076 as of December 31, 1996 to $133,332 as of September 30, 1997. This
decrease was mainly due to the settlement of certain accounts payable and the
utilization of the provision for phase-out losses relating to legal fees
incurred for the collection of accounts receivable of the discontinued
operations and amounts paid to an ex-employee under a settlement agreement
entered into in 1996.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of stockholders was held on August 1, 1997 and
the matters voted on at the meeting consisted of the following:
(a) The election of five nominees, namely, Andrew P. Chesler, Abraham
S. Fischler, Fred S. Katz, Allen H. Stern and Jeffrey T. Katz to
the Company's Board of Directors to hold office until the
Company's 1998 Annual Meeting of Stockholders or until their
successors are duly elected and qualified. The number of shares
voted for and against each nominee, as well as the number of
abstentions with respect to each nominee are set forth below:
Nominee Votes For Votes Against Votes Abstain
------- --------- ------------- -------------
Andrew P. Chesler 3,755,973 27,000 0
Abraham S. Fischler 3,755,973 27,000 0
Fred S. Katz 3,755,973 27,000 0
Allen H. Stern 3,755,973 27,000 0
Jeffrey T. Katz 3,755,973 27,000 0
(b) To ratify the appointment of Coopers & Lybrand, L.L.P.,
independent certified public accountants, as the Company's
auditors. 3,730,423 shares were voted in favor of their
appointment, 27,050 shares were voted against and 25,500 shares
abstained from voting on the matter.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
- 15 -
<PAGE>
Exhibit Description
------- -----------
10.93 Loan Agreement, dated April 10, 1997, between the Company and
Capital Bank
10.94 Promissory Note in the principal amount of $750,000, dated April
10, 1997, between the Company and Capital Bank
10.95 Promissory Note in the principal amount of $250,000, dated April
10, 1997, between the Company and Capital Bank
10.96 Security Agreement, dated April 10, 1997, between the Company
and Capital Bank
10.97 Continuing Guaranty, dated April 10, 1997, between the Company
and Capital Bank
10.98 Subordination Agreement, dated April 18, 1997, between the
Company and The Equitable Life Assurance Society of the United
States in favor of Capital Bank re: Exhibits 10.94 and 10.95
10.99 Consolidated Promissory Note in the principal amount of
$1,000,000, dated October 3, 1997, between the Company and
Capital Bank
10.100 Term Promissory Note in the principal amount of $200,000, dated
October 3, 1997, between the Company and Capital Bank
10.101 Guidance Equipment Line Promissory Note in the principal amount
of $270,000, dated October 3, 1997, between the Company and
Capital Bank
10.102 Reaffirmation of Guaranty Agreement, dated October 3, 1997,
between the Company and Capital Bank
10.103 First Amendment to Subordination Agreement, dated October 6,
1997, between the Company and The Equitable Life Assurance
Society of the United States in favor of Capital Bank re:
Exhibits 10.99, 10.100 and 10.101
10.104 Subscription Agreement, dated as of October 27, 1997, between
the Company and Alexander Enterprise Holdings Corp.
27.1 Financial Data Schedule
(b) Reports on Form 8-K: None
- 16 -
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AQUAGENIX, INC.
Date: November 13, 1997 By: /s/ Andrew P. Chesler
----------------------
Andrew P. Chesler,
Chairman of the Board,
Chief Executive Officer,
President and Treasurer
(Principal Executive Officer)
Date: November 13, 1997 By: /s/ Helen Chia
--------------
Helen Chia,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 17 -
LOAN AGREEMENT
THIS AGREEMENT, made and entered into this _10_ day of April, 1997, by and
among AQUAGENIX LAND-WATER TECHNOLOGIES, INC., a Florida corporation (the
"Borrower") and CAPITAL BANK, a Florida banking corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender provide Borrower with a
revolving credit facility loan in the amount of SEVEN HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($750,000.00) (the "Loan");
WHEREAS, Lender has agreed to make the Loan to Borrower as hereinafter
provided in reliance upon the representations and warranties and covenants of
Borrower, herein contained, and subject to the following terms and conditions:
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, Borrower and Lender
hereby covenant and agree as follows:
1. RECITATIONS. The above recitations are true and correct and are
incorporated herein by reference.
2. THE LOAN.
(a) Lender agrees to make available to Borrower, a Loan in the
amount of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00).
(b) The Loan shall be represented by a promissory note (the
"Note") in the full amount of the Loan bearing interest at one and one-quarter
percent over the Prime Rate, as defined in the Note.
3. REVOLVING CREDIT LOAN.
(a) Provided no Event of Default exists hereunder, Lender agrees
to extend to Borrower a non-binding, discretionary line of credit up to but not
to exceed the amount shown in the Note. Lender, in its sole discretion, may make
advances pursuant to the Note from time to time and it is therefore contemplated
that the outstanding balance may fluctuate accordingly. Nothing herein shall be
construed as a warranty or representation by Lender that it will at any time
make advances to Borrower. Any request for an advance under the Note shall be
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<PAGE>
subject to review and approval by Lender within the limits set forth in the
Note. Borrower may borrow, repay and reborrow in accordance with the terms and
conditions in this Agreement and the Note.
(b) Any advances under the Note shall be as follows:
(i) Borrowings under the Loan shall be limited to the
"Borrowing Base". Subject to the terms and conditions thereof, and provided
Borrower is not in default under the Note, this Agreement and the other loan
documents executed in connection with the Loan ("Loan Documents") or any other
agreement between Lender and Borrower, Borrower may borrow, repay and reborrow
advances under the Loan up to the maximum amount of the Note.
(ii) Any advances made under the Note shall be limited to the
amount available under the Borrowing Base. As set forth herein, "Borrowing Base"
shall include: (i) eighty percent (80%) of all eligible accounts receivable
outstanding ninety (90) days or less from invoice. Only outstanding accounts
receivable in which the Lender has obtained a first perfected security interest
shall be included in the Borrowing Base calculation.
The foregoing calculations shall be calculated in accordance with a
Borrowing Base certificate in the form attached hereto and made a part hereof as
EXHIBIT A ("Borrowing Base Certificate") which shall be submitted to Lender on a
monthly basis, unless more frequently requested by Lender, and shall contain
such information related to the Borrowing Base as deemed necessary by Lender. In
the event the outstanding principal balance on the Loan exceeds the Borrowing
Base, Borrower shall immediately pay the Lender an amount equal to such excess.
Failure to make such payment shall constitute a default under the Loan.
4. SECURITY.
(a) In order to secure the payment of principal and interest under
the Note and any other indebtedness or obligations of the Borrower to the
Lender, now existing from time to time, Borrower shall deliver to the Lender,
simultaneously herewith, in form and substance satisfactory to the Lender:
(i) a security agreement under which Borrower conveys a
security interest in all inventory, accounts, contract rights, general
intangibles, furniture, fixtures, leasehold improvements and equipment, wherever
situated, now owned by the Borrower or hereafter acquired, together with the
proceeds of the above described collateral as security for present and future
advances as security for Borrower's obligations under the Note (the "Security
Agreement");
(ii) UCC-1 financing statements, security agreements,
assignments, and any and all other documents, certificates and statements which
counsel for the Lender may reasonably require in order to perfect the security
interest described herein;
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<PAGE>
(b) Borrower will cause to be signed and executed by its duly
authorized officers alone or with Lender any additional financing statement or
other document and will procure any document and pay all costs which the Lender
deems reasonably necessary to protect the security interests of the Lender.
5. CONDITIONS PRECEDENT OF LOAN. Lender shall not be obligated to make
or disburse any Loan funds unless and until the following conditions have been
satisfied:
(a) Borrower has authorized the execution and delivery to Lender
of the Note, the Security Agreement, the UCC-1 Financing Statements and other
documents as required by Lender and its counsel to evidence and secure the Loan
including delivery of a corporate resolution and incumbency certificate of
Borrower, duly adopted by the Board of Directors of Borrower and accompanied by
a secretary's certificate stating that said resolutions are true and correct,
have not been altered or repealed and are in full force and effect, and
certifying the names of officers authorized to sign each of the Loan Documents
together with the true signatures of each such officer.
(b) Lender shall have been furnished with certified copies,
satisfactory in form and substance to Lender, of all such corporate documents
and proceedings of Borrower authorizing or relating to the transactions hereby
contemplated as may be reasonably required by the Lender or its counsel,
including, but not limited to good standing certificates, certified copies of
the articles of incorporation and all amendments thereto, and a copy of the
by-laws, certified as being true and correct by the secretary of Borrower.
(c) Lender shall have received:
(i) Borrower's financial statements in form and content
reasonably acceptable to Lender:
(ii) the policies of hazard, casualty, liability, business
interruption and other insurance required by the Lender, including insurance on
corporate assets, accompanied by evidence of the cash payment of the premiums
therefor in advance and endorsements naming Capital Bank, as mortgagee/loss
payee;
(iii) evidence satisfactory to Lender that the collateral has
been fully paid for, free of all liens and encumbrances;
(iv) the duly executed Note;
(v) opinion of Borrower's counsel in form and content
acceptable to Lender and Lender's counsel (which shall include an opinion as to
the authorization and power of the Borrower to enter into the Loan Documents);
3
<PAGE>
(vi) on the first day of each month, monthly agings of
Borrower's accounts receivable; and
(vii) on the first day of each month, monthly Borrowing Base
Certificates.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents, covenants and
warrants that:
(a) Borrower is a corporation, duly organized or incorporated and
validly existing under the laws of the State governing its organization or
incorporation, and has the requisite corporate power and authority to make and
consummate the transactions contemplated hereby;
(b) The making and performance by Borrower and the performance of
the transactions contemplated by this Agreement or any other loan document have
been duly authorized by all necessary corporate action, and will not violate any
provision of law or of the certificates of incorporation or by-laws of Borrower,
or result in a breach of or constitute a default under or result in the creation
of any security interest, lien, charge or encumbrance upon any property or
assets of the Borrower pursuant to any agreement, indenture or other instrument
to which they may be a party;
(c) There are no actions, suits or legal, equitable, arbitration
or administrative proceedings pending or, to the knowledge of Borrower
threatened against Borrower or affecting Borrower, which, if adversely
determined, would have a material adverse effect upon the financial condition of
the business of Borrower, or which would involve the validity or enforceability
of any document or security interest granted by Borrower to Lender;
(d) The financial statements heretofore furnished to Lender, are
complete and correct and fairly represent the financial conditions of Borrower
as of the respective dates thereof. The financial statements heretofore
delivered to the Lender have been prepared in accordance with generally accepted
accounting principles consistently applied. No material adverse charge has
occurred in the financial conditions reflected therein since the respective
dates thereof and no additional borrowings have been made by Borrower since the
date thereof. There are no obligations or liabilities of the Borrower not
disclosed in such statements except tax liabilities for periods subsequent to
the date of said respective financial statements;
(e) Borrower is not a party to any judgment, order, decree or any
agreement or instrument nor are subject to corporate restrictions materially
adversely affecting their business, properties or assets, operations or
condition (financial or otherwise) and are not in default in the performance,
observance of fulfillment of any of the material obligations, covenants or
conditions contained in any agreement or instrument to which Borrower is a
party;
(f) There are no actions, suits, or proceedings pending before any
court of law or equity or any administrative board, or threatened against or
4
<PAGE>
affecting Borrower or the property or any assets, or involving the validity or
enforceability of any security agreement or UCC-l filings in favor of Lender, at
law or in equity, or before or by any governmental authority or local authority
and Borrower is not in default under any other indebtedness or with respect to
any order, writ, injunction, decree, or demand of any court or any governmental
authority or local authority;
(g) The consummation of the transactions hereby contemplated and
performance of this Agreement, the Note, or any other loan document will not
result in any breach of, or constitute a default under, any mortgage, deed of
trust, lease, bank loan, or credit agreement, corporation charter, by-laws, or
other instrument to which Borrower is a party or by which Borrower may be bound
or affected;
(h) Borrower has good and marketable title to all of their assets,
own said assets free and clear of any claims or encumbrances and have signed no
mortgage or security agreement under the Uniform Commercial Code which creates a
lien against any of Borrower's assets, nor has Borrower permitted to be filed
any financing statement under any such code with respect to any of Borrower's
assets;
(i) No license, consent or approval or any governmental authority
is required in connection with the transactions contemplated hereby. Borrower
and s hold all certificates and authorizations of governmental authorities
required by law to enable it to engage in the business transacted by them;
(j) No part of the proceeds of the Loan will be used to purchase
or carry margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying any such margin stock, or for any illegal
purpose;
(k) There is no default on the part of the Borrower under this
Agreement, the Note, or any other loan document, and no event has occurred and
is continuing which with notice or the passage of time or both would constitute
a default under any thereof;
(l) Borrower is in full compliance with all of the provisions and
requirements of Lender's commitment letter dated March 27, 1997, as revised (the
"Commitment"), and all of the statements, reports, and other matters presented
or delivered to the Lender pursuant to such commitment are true and correct as
of the date hereof;
(m) The proceeds of each borrowing will be used for the general
corporate purposes of Borrower or for specific uses as previously disclosed in
writing to Lender;
(n) Lender has a first priority interest in the corporate assets
of Borrower;
5
<PAGE>
(o) All tax returns required to be filed by Borrower in any
jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, income or
franchises have been paid prior to the time that such taxes could give rise to a
lien thereon. There is no proposed tax assessment against Borrower and there is
no basis for such assessment; and
(p) All representations and warranties made by Borrower herein or
made in any certificate delivered pursuant hereto shall survive the making of
the Loan hereunder and the execution and delivery to the Lender of the Note and
any other loan document executed in connection with the Loan, and any
investigation at any time made by or on behalf of Lender shall not diminish
Lender's rights to rely thereon.
7. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that from the
date hereof and until payment in full of the principal of and interest on the
Note, Borrower will:
(a) furnish to Lender: (i) within ninety (90) days after the end
of each fiscal year of Borrower (with reasonable extensions, not to exceed
fifteen (15) additional days, if requested by Borrower) reviewed financial
statements of Borrower as of the close of such fiscal year certified by
independent certified public accountants and income statements. At such time,
the Borrower will also cause its certified, public accountants to state by
letter addressed to the Lender whether their examination has disclosed any
condition or event which constitutes an event of default herein specified (or
with which the lapse of time or notice of lapse of time would become such an
event of default), and if such a condition or event has been disclosed, will
specify the nature and existence thereof; (ii) within thirty (30) days after the
end of each quarter, company prepared financial statements of Borrower certified
by the chief financial officer or chief executive officer of Borrower, and a
certificate signed by Borrower's President and chief financial officer stating
that he is fully informed concerning Borrower's financial affairs and the
quarterly financial statements fairly reflect the conditions and operations of
the Borrower for the date and period described therein; (iii) within thirty (30)
days after the end of each month, an aging of accounts or contracts receivable,
an aging of accounts or contracts payable and a schedule of inventory of the
Borrower, in form and substance acceptable to Lender; (iv) on the first day of
each month, the Borrowing Base Certificate; and (v) annually, copies of most
recent income tax returns filed timely for Borrower, prepared, in accordance
with generally accepted accounting principals and in form and substance
acceptable to Lender, and to include any other information that Lender may
require from time to time.
(b) notify Lender immediately upon receipt of any notice of any
audit or investigation commenced to be by any federal, state or local governing
authority;
(c) pay and discharge any taxes, assessments and governmental
charges or levies that may be imposed upon Borrower or upon its income or
profits or upon any of is property prior to the date on which penalties attached
thereto and all lawful claims which, if unpaid, might become a lien or charge
upon its property;
6
<PAGE>
(d) maintain insurance with responsible companies in such amounts
and against such risks as is usually carried by owners of similar business and
properties in the same general area in which Borrower operates and as the Lender
may reasonably require, including, but without limitation, fire and extended
coverage insurance, public liability insurance, business risk insurance, theft
insurance and such other insurance as may be reasonably necessary to protect the
Lender. Lender shall be furnished with certificates of insurance showing Lender
as loss payee/mortgagee;
(e) maintain its fixed assets in a good and in a workable
condition at all times, and not suffer or permit any waste, deterioration or
depreciation of such assets, other than necessarily and normally incurred in
their ordinary and intended use;
(f) permit any officer or independent representative of Lender
designated by Lender to visit and inspect any of Borrower's properties,
corporate books and financial records at such times and intervals as Lender may
reasonably request and discuss Borrower's financial statements and financial
conditions with Borrower's accountants, suppliers or other dealers; and
(g) to the extent Borrower owns any real property, has undertaken
an appropriate inquiry into the previous ownership and uses of the property
consistent with good commercial or customary practice in an effort to minimize
liability with respect to any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"toxic substances," "contaminants," or other pollution under any applicable
federal or state or local laws, ordinances, rules or regulations now or
hereafter in effect ("Hazardous Materials"). Borrower confirms that the property
is presently free from contamination by Hazardous Materials and the property and
the activities to be conducted thereon do not pose any significant hazard to
human health or the environment or violate any applicable federal, state or
local laws, ordinances, rules or regulations pertaining to Hazardous Materials
or industrial hygiene or environmental conditions ("Environmental Laws") and
shall not cause or permit the property to be used for the generation, handling,
storage, transportation, disposal or release of any Hazardous Materials except
as permitted by Lender, and Borrower shall not cause or permit the property or
any activities conducted thereon to be in violation of any applicable
Environmental Laws. Borrower shall comply with all applicable Environment Laws
and shall promptly notify Lender of the receipt by Borrower of any notice of a
violation of any applicable Environmental Laws. Borrower agrees to indemnify
Lender and hold Lender and its directors, officers, employees, successors and
assigns harmless from and against any and all claims, losses, damages (including
all foreseeable and unforeseeable consequential damages), liabilities, fines,
penalties, charges, interest, administrative or judicial proceedings and orders,
judgments, remedial action requirements, enforcement actions of any kind, and
all costs and expenses incurred in connection therewith (including without
limitation attorneys' fees and expenses), directly or indirectly resulting in
whole or in part from the violation of any Environmental Laws applicable to the
property or any activity conducted thereon, or from any past, present or future
use, generation, handling, storage, transportation, disposal or release of
Hazardous Materials at or in connection with the property, or any
7
<PAGE>
decontamination, detoxification, closure, cleanup or other remedial measures
required with respect to the property under any Environmental Laws. This
indemnity shall survive the full payment and performance of the obligations and
the satisfaction of the Loan Agreement.
8. NEGATIVE COVENANTS. Borrower covenants and agrees that until all
obligations owed by Borrower to Lender shall have been paid in full, Borrower
will not, without the prior written consent of Lender, do, perform or suffer any
of the following:
(a) Except with respect to equipment financing, create, incur,
assume or suffer to exist any security interest, lien, charge or encumbrance on
any of its properties or assets, whether now owned or hereafter acquired,
except:
(i) The security interest in favor of Lender; or
(ii) Liens for taxes not delinquent;
(b) Amend or modify or permit default on the part of Borrower in
any agreement in any manner materially adverse to Borrower;
(c) Make any change in the control of Borrower;
(d) Except with respect to equipment financing, create, incur,
assume or in any manner become or remain liable in respect of any indebtedness
for monies borrowed except (i) indebtedness to the Lender and/or (ii) except for
any other indebtedness which shall have been approved by Lender in writing;
(e) Assume, guarantee, endorse, contingently agree to purchase or
provide funds for the payment of, or otherwise become liable in respect of, any
obligations of any person, firm or corporation except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;
(f) Consolidate with, or merge into, any other corporation or
permit any other corporation to merge into Borrower or acquire all or a
substantial part of the assets or capital stock of any other person, firm or
corporation, unless such acquisition or merger is part of Borrower's gross
strategy plan as set forth in Form 10-KSB filed by Aquagenix, Inc. for the year
ended December 31, 1996;
(g) Make or permit to be made any change in the nature of the
business conducted by Borrower; and/or
8
<PAGE>
(h) Declare, directly or indirectly any dividend or distributions
or make any loan or impair capital in any way whatsoever.
9. EVENTS OF DEFAULT. If any of the following events of default shall
occur and shall not have been remedied within any period specifically provided
for herein, Lender may by written notice to Borrower:
(a) Declare the principal of and accrued interest on any notes,
obligations or other evidences of indebtedness due and payable; and/or
(b) Exercise any remedy available to it hereunder or pursuant to
any other agreement or instrument or collateral hereto pursuant to applicable
law, including the right of set-off as to other accounts of Borrower;
(c) Without limiting the demand feature of the Note, Events of
Default shall be:
(i) Default in the due and punctual payment of the Loan;
(ii) Any representation or warranty or covenant made by
Borrower to Lender, verbally or in writing, or contained in this Agreement or
any other loan document executed in connection with the Loan which shall prove
to have been false, incorrect, or misleading, or shall be breached, in any
respect;
(iii) Default in the performance of this Agreement which shall
remain unremedied for ten (10) days;
(iv) Any license, consent or approval required for the
confirmation of any transaction contemplated by this Agreement shall have been
revoked, withdrawn, materially modified or withheld or shall otherwise fail to
remain in full force and effect;
(v) Default in accordance with the terms and conditions of
any other agreement or instrument between Lender and Borrower including, but not
limited to, the Loan Documents, any other security agreement, mortgage, note and
any and all other collateral documents executed in connection with any other
loan between Borrower and Lender;
(vi) Default in any other documents in connection with the
Loan including, but not limited to, the Note and that certain Continuing
Guaranty executed by Aquagenix, Inc.;
(vii) If Borrower shall:
9
<PAGE>
(aa) apply for or consent to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets;
(bb) be unable, or admit in writing its inability, to
pay its debts as they mature;
(cc) make a general assignment for the benefit of
creditors;
(dd) be adjudicated a bankrupt or insolvent;
(ee) file a voluntary petition in bankruptcy or an
agreement with creditors or to take advantage of any insolvency law or an answer
admitting the material allegations of the petition filed against Borrower in any
bankruptcy, reorganization or insolvency proceeding, or corporate action shall
be taken by Borrower for the purpose of effectuating any of the foregoing; or
(ff) become subject to an order, judgment or decree
without the application, approval or consent of Borrower approving a petition
seeking reorganization of Borrower or appointing receiver, trustee or liquidator
of Borrower or of all or a substantial part of its assets, and such order,
judgment or decree shall continue in effect for a period of sixty (60)
consecutive days; or
(viii)If Borrower or any other person executing any
instrument, promissory note or notes secured hereby, shall fail to pay when due
any indebtedness for borrowed money owing by Borrower or such other person, or
any interest or premium thereon, whether such indebtedness shall become due by
scheduled maturity, required payment, acceleration, demand or otherwise; or
Borrower or other person shall fail to abide by any term, covenant, or agreement
under any agreement or instrument evidencing, securing or relating to any
indebtedness for borrowed money owing by Borrower or such other person, if the
effect of such failure is to accelerate, or permit the holder or holders to
accelerate, the maturity of such indebtedness, whether or not such failure be
waived by the holder or holders of such indebtedness.
No consent or waiver expressed or implied by Lender to or of any
default by Borrower hereunder shall be construed as a consent or waiver to or of
any further default of the same or any other term, covenant, condition or
provision hereof, or of or under any of the obligations secured hereby; and no
consent or waiver shall be deemed or construed to exist by reason of any
curative action initiated by Lender or any other course of conduct or in any
other manner whatsoever except by a writing duly executed by the Lender and then
only to the single occasion to which such writing is addressed. In order to
accelerate the maturity of the indebtedness secured hereby because of the
failure of Lender to pay any tax, assessment, premium charge, liability,
obligation or encumbrance upon the property as herein provided, it shall not be
necessary nor requisite that Lender first pay the same.
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<PAGE>
10. NOTICES. All notices, request and demands shall be in writing and
shall be given to or made upon respective parties hereto by first class mail,
telefax or personally delivered as follows:
LENDER: Capital Bank
1221 Brickell Avenue
Miami, Florida 33131
BORROWER: AQUAGENIX LAND-WATER TECHNOLOGIES, INC.
6500 NW 15th Avenue
Fort Lauderdale, Florida 33309
or in such other manner, as to any party hereto, as such party shall designate
by written notice to the other parties hereto. Said notices shall be deemed
effective as from the date of their mailing.
11. EXPENSES. The Borrower will pay all costs and expenses in connection
with the preparation, execution and enforcement of this Agreement and the
instruments herein provided for, all fees for recording and filing and all taxes
(including penalties and interest, if any, assessed thereon), in connection with
any of the foregoing, and reasonable fees of counsel for the Lender.
12. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise by Lender of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right.
13. APPLICABLE LAW. This Agreement and the documents provided for herein
shall be deemed to be governed by, and construed in accordance with, the laws of
the State of Florida, and venue shall lie in Dade County, Florida.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original hereof.
15. WAIVER OF JURY TRIAL. Borrower hereby knowingly, voluntarily and
intentionally waive the right either may have to trial by jury in respect to any
litigation based hereon, or arising out of, under or in connection with the Note
or this Loan Agreement and/or any other loan document executed or 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.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals, on the day and year first above written.
WITNESSES: LENDER:
CAPITAL BANK, a Florida banking association
/s/ Christine Lenoir By: /s/ Thomas D. Thuroson
- -------------------------- -----------------------------------------
/s/ Jami Looney Print Name: Thomas D. Thuroson
- -------------------------- ---------------------------------
Its: Business Banking Officer
----------------------------------------
BORROWER:
AQUAGENIX LAND-WATER TECHNOLOGIES,
INC., a Florida corporation
/s/ Christine Lenoir By: /s/ Andrew Chesler
- -------------------------- -----------------------------------------
/s/ Jami Looney Print Name: Andrew Chesler
- -------------------------- ---------------------------------
Its: President
----------------------------------------
12
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EXHIBIT A
BORROWING BASE CERTIFICATE
Status as of___________
In accordance with the terms of the Loan Agreement between CAPITAL BANK and
AQUAGENIX LAND- WATER TECHNOLOGIES, INC. dated April ___, 1997, we hereby
represent and warrant as follows:
1. Total Accounts Receivable $____________
ACCOUNTS RECEIVABLE AGING
Current $______
01 - 30 Days _________
31 - 60 Days _________
61 - 90 Days _________
Over 90 Days __________
Less: Accounts Greater than
90 Days and other Ineligibles $_________
2. Eligible Accounts Receivable $____________
3. Advance Rate X 80 %
-----
4. Availability Against Receivables $_____________________
5. Total Availability $____________
6. Total Principal Balance on Revolver $____________
CERTIFICATION
To the best of the knowledge and belief of the signer hereof, the undersigned
does certify that the foregoing statement of ACCOUNTS RECEIVABLE is true and
correct as of this date,_____________, and that the company is in compliance
with all terms and conditions of the Loan Agreement dated effective April __,
1997.
BORROWER: AQUAGENIX LAND-WATER
TECHNOLOGIES, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
13
PROMISSORY NOTE
---------------
$750,000.00 Phoenix Arizona
--------------------,-----------
City State
April 10, 1997
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
the Bank at 1221 Brickell Avenue, Miami, Florida 33131 or at such other place as
the holder hereof may from time to time designate in writing, the principal sum
of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00), together with
interest thereon on the principal amount from time to time outstanding at an
annual rate prior to maturity or default of one and one-quarter percent (1-
1/4%) over the "Prime Rate" (Prime Rate shall mean, at any time, the rate of
interest quoted in the Wall Street Journal, Money Rates Section as the "Prime
Rate" (currently defined as the base rate on corporate loans posted by at least
75% of the nation's thirty (30) largest banks), with the Prime Rate in effect on
the first day of a month being applicable to the entire month. In the event that
the Wall Street Journal quotes more than one rate, or a range of rates as the
Prime Rate, then the Prime Rate shall mean the average of the quoted rates. In
the event that the Wall Street Journal ceases to publish a Prime Rate, then the
Prime Rate shall be the average of the three largest U.S. money center
commercial banks, as determined by Bank). Interest shall be computed on the
actual number of days elapsed and an assumed year of 360 days. Borrower and all
endorsers, sureties, guarantors and any other persons liable or to become liable
with respect to the loan evidenced by this Note (the "Loan") are each included
in the term "Obligors" as used in this Note. Said principal and interest shall
be payable in lawful money of the United States, on the dates and in the amounts
specified below, to wit:
(a) Interest shall be paid in monthly installments coming on the first
(1st) day of the month following the date hereof, and on the first (1st)
day of each month thereafter.
(b) The then outstanding principal balance plus any accrued and unpaid
interest shall be due and payable ON DEMAND ("Maturity Date").
Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
This Note may be prepaid in whole or in part at any time without penalty.
1
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Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
If default be made in the payment of any sums payable pursuant to the
terms of this Note, or if default or other event causing the acceleration of
this Note occur under the Loan Agreement of even date herewith (the "Loan
Agreement") or under the Security Agreement of even date herewith securing this
Note (the "Security Agreement"), the Continuing Guaranty by Aquagenix, Inc.
("Guarantor") of even date herewith ("Guaranty"), the Promissory Note in the
amount of $250,000 of even date herewith executed by Guarantor (the "Term
Note"), or any other instrument or document executed in connection with the Loan
(this Note, the Loan Agreement, the Security Agreement, the Guaranty, the Term
Note and all such instruments and documents, including, without limitation, any
guaranties, agreements, UCC-1 financing statements, security agreements,
assignments and other documents securing this Note, are referred to in this Note
as the "Loan Documents") (an "Event of Default"), then or at any time thereafter
at the option of Bank, the whole of the principal sum then remaining unpaid
hereunder, together with all interest accrued thereon and all other sums owing
under the Loan Documents, shall immediately become due and payable without
notice and Bank shall be entitled to pursue any and all rights and remedies
provided by applicable law and/or under the terms of this Note or any other Loan
Document, all of which shall be cumulative and may be exercised successively or
concurrently. The foregoing references shall not be deemed to limit the demand
feature of this Note. Upon the occurrence and during the continuation of any
Event of Default, Bank, at its option, may at any time declare any or all other
liabilities of any Obligor to Bank immediately due and payable (notwithstanding
any contrary provisions thereof) without demand or notice of any kind. In
addition, Bank shall have the right to set off any and all sums owed to any
Obligor by Bank in any capacity (whether or not then due) against the Loan
and/or against any other liabilities of any Obligor to Bank.
From and after an Event of Default, and regardless of whether the Bank
also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) twenty-five percent (25%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
In no event shall any agreed or actual exaction charged, reserved or taken
as an advance or forbearance by Bank as consideration for the Loan exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. If the
floating rate of interest based on the Prime Rate should increase above such
maximum interest rate permitted by applicable law (if any), then notwithstanding
2
<PAGE>
any contrary provision in this Note or any other Loan Document and without
necessity of further agreement or notice by Bank or any Obligor, the unpaid
principal balance of the Loan shall thereupon bear interest at such maximum
lawful rate. If the floating interest should thereafter decrease below such
maximum lawful rate, the Loan shall nevertheless continue to bear interest at
such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. The interest rate charged is authorized by Florida
Statutes, Chapter 665.
The Obligors hereby severally: (a) waive demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold any Obligor liable with respect to the
Loan; (b) waive any right to immunity from any such action or proceeding and
waive any immunity or exemption of any property, wherever located, from
garnishment, levy, execution, seizure or attachment prior to or in execution of
judgment, or sale under execution or other process for the collection of debts;
(c) waive any right to interpose any set-off or non-compulsory counterclaim or
to plead laches or any statute of limitations as a defense in any such action or
proceeding and waive (to the extent lawfully waivable) all provisions and
requirements of law for the benefit of any Obligor now or hereafter in force;
(d) submit to the jurisdiction of the state and federal courts in the State of
Florida for purposes of any such action or proceeding; (e) agree that the venue
of any such action or proceeding may be laid in Dade County, Florida (in
addition to any county in which any collateral for the Loan is located), and
waive any claim that the same is an inconvenient forum; (f) stipulate that
service of process in any such action or proceeding shall be properly made if
mailed by any form of registered or certified mail (airmail if international),
postage prepaid, to the address then registered in Bank's records for the
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor that is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
Bank and the owners(s) of any collateral then securing the Loan may agree to
3
<PAGE>
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including reasonable attorney's fees,
whether or not involving litigation and/or appellate, administrative or
Bankruptcy proceedings. The Obligors jointly and severally agree to pay any
documentary stamp taxes, intangibles taxes or other taxes (except for federal or
Florida franchise or income taxes based on Bank's net income) which may now or
hereafter apply to this Note or the Loan or any security therefor, and the
Obligors jointly and severally agree to indemnify and hold Bank harmless from
and against any liability, costs, reasonable attorney's fees, penalties,
interest or expenses relating to any such taxes, as and when the same may be
incurred. The Obligors jointly and severally agree to pay on demand, and to
indemnify and hold Bank harmless from and against, any and all present or future
taxes (other than income tax of Bank), levies, imposts, deductions, charges and
withholdings imposed in connection with the Loan by the laws or governmental
authorities of any jurisdiction other than the State of Florida or the United
States of America, and all payments to Bank under this Note shall be made free
and clear thereof and without deduction therefor.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida, except that federal law shall govern to
the extent that it may permit Bank to charge, from time to time, interest on the
Loan at a rate higher than may be permissible under applicable Florida law.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
If this Note is signed by more than one person, then the term "Borrower"
as used in this Note shall refer to all such persons jointly and severally, and
all promises, agreements, covenants waivers, consents, representations,
warranties and other provisions in this Note are made by and shall be binding
upon each and every undersigned person, jointly and severally. The term "Bank"
shall be deemed to include any subsequent holder(s) of this Note. Whenever used
4
<PAGE>
in this Note, the term "person" means any individual, firm, corporation, trust
or other organization or association or other enterprise or any governmental or
political subdivision, agency, department or instrumentality thereof. Whenever
used in this Note, words in the singular include the plural, words in the plural
include the singular, and pronouns of any gender include the other genders, all
as may be appropriate. The "Prime Rate" is a base reference rate of interest
adopted by Capital Bank as a general benchmark from which Capital Bank
determines the floating interest rates chargeable on various loans to borrowers
with varying degrees of creditworthiness, and Borrower acknowledges and agrees
that Bank has made no representations whatsoever that the "Prime Rate" is the
interest rate actually offered by Capital Bank to borrowers of any particular
creditworthiness.
Time shall be of the essence with respect to the terms of this Note. This
Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer of cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to this Note is not received on the due date, Bank
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under, this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. If Borrower or any other Obligor is a
partnership, then all general partners thereof shall be liable jointly and
severally for all obligations under this Note and for all other covenants,
agreements, undertakings and obligations of Borrower in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. All of the terms of this Note shall inure to the benefit of
Bank and its successors and assigns and shall be binding upon each and every one
of the Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY
5
<PAGE>
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. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
WITNESS the due execution hereof as of the date first above written.
AQUAGENIX LAND-WATER TECHNOLOGIES, INC.
By: /s/ Andrew Chesler
---------------------------------------
Andrew Chesler, President
STATE OF Arizona )
) SS:
COUNTY OF Maricopa )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by Andrew Chesler, the President
of AQUAGENIX LAND-WATER TECHNOLOGIES, INC. a Florida corporation, freely and
voluntarily under authority duly vested in him/her by said corporation and that
the seal affixed thereto is the true corporate seal of said corporation. He/She
is personally known to me or who has produced __Driver's Licence____ as
identification.
WITNESS my hand and official seal in the County and State last aforesaid
this _10th_ day of April, 1997.
/s/ Maria Rosana Chavez
-----------------------------------------------
Notary Public
Maria Rosana Chavez
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires:
August 17, 1997
- ----------------------
6
PROMISSORY NOTE
$250,000.00 Phoenix Arizona
--------------------,-----------
City State
April 10, 1997
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
the Bank at 1221 Brickell Avenue, Miami, Florida 33131, or at such other place
as the holder hereof may from time to time designate in writing, the principal
sum of TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($250,000), together with
interest thereon on the principal amount from time to time outstanding at an
annual rate prior to maturity or default of nine and 50/100ths percent (9.50%).
Interest shall be computed on the actual number of days elapsed and an assumed
year of 360 days. Borrower and all endorsers, sureties, guarantors and any other
persons liable or to become liable with respect to the loan evidenced by this
Note (the "Loan") are each included in the term "Obligors" as used in this Note.
Said principal and interest shall be payable in lawful money of the United
States, on the dates and in the amounts specified below, to wit:
(a) On May 10, 1997, and on the tenth (10th) day of each successive
calendar month thereafter, through and including March 10, 2000, an installment
of principal and interest equal to __Five Thousand Two Hundred Sixty Seven__ AND
__73__/100 DOLLARS ($___5,267.73___) will be due and payable; and
(b) On April 10, 2000, the entire outstanding principal balance hereof,
together with accrued but unpaid interest thereon, will be due and payable
("Maturity Date").
Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
This Note may be prepaid in whole or at any time without penalty.
Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
If default be made in the payment of any sums payable pursuant to the
terms of this Note, or if default or other event causing the acceleration of
this Note, that certain Promissory Note in the amount of $750,000 of even date
herewith executed by Aquagenix Land-Water Technologies, Inc. ("Line of Credit
Note") or any other instrument or document executed in connection with the Loan
(this Note, the Line of Credit Note, and all such instruments and documents,
including, without limitation, any guaranties, agreements, mortgages, security
agreements, assignments and other documents securing this Note, are referred to
in this Note as the "Loan Documents") (an "Event of Default"), then or at any
time thereafter at the option of Bank, the whole of the principal sum then
remaining unpaid hereunder, together with all interest accrued thereon and all
other sums owing under the Loan Documents, shall immediately become due and
payable without notice and Bank shall be entitled to pursue any and all rights
and remedies provided by applicable law and/or under the terms of this Note or
any other Loan Document, all of which shall be cumulative and may be exercised
successively or concurrently. Upon the occurrence and during the continuation of
any Event of Default, Bank, at its option, may at any time declare any or all
other liabilities of any Obligor to Bank immediately due and payable
1
<PAGE>
(notwithstanding any contrary provisions thereof) without demand or notice of
any kind. In addition, Bank shall have the right to set off any and all sums
owed to any Obligor by Bank in any capacity (whether or not then due) against
the Loan and/or against any other liabilities of any Obligor to Bank.
From and after an Event of Default, and regardless of whether the Bank
also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) twenty-five percent (25%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
In no event shall any agreed or actual exaction charged, reserved or taken
as an advance or forbearance by Bank as consideration for the Loan exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. In the event
that the interest provisions of this Note or any exactions provided for in this
Note or any other Loan Document shall result at any time or for any reason in an
effective rate of interest that transcends the maximum interest rate permitted
by applicable law (if any), then without further agreement or notice the
obligation to be fulfilled shall be automatically reduced to such limit and all
sums received by Bank in excess of those lawfully collectible as interest shall
be applied against the principal of the Loan immediately upon Bank's receipt
thereof, with the same force and effect as though the payor had specifically
designated such extra sums to be so applied to principal and Bank had agreed to
accept such extra payment(s) as a premium-free prepayment or prepayments. During
any time that the Loan bears interest at the maximum lawful rate (whether by
application of this paragraph, the default provisions of this Note or
otherwise), interest shall be computed on the basis of the actual number of days
elapsed and the actual number of days in the respective calendar year.
The Obligors hereby severally: (a) waive demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold any Obligor liable with respect to the
Loan; (b) waive any right to immunity from any such action or proceeding and
waive any immunity or exemption of any property, wherever located, from
garnishment, levy, execution, seizure or attachment prior to or in execution of
judgment, or sale under execution or other process for the collection of debts;
(c) waive any right to interpose any set-off or non-compulsory counterclaim or
to plead laches or any statute of limitations as a defense in any such action or
proceeding and waive (to the extent lawfully waivable) all provisions and
requirements of law for the benefit of any Obligor now or hereafter in force;
(d) submit to the jurisdiction of the state and federal courts in the State of
Florida for purposes of any such action or proceeding; (e) agree that the venue
of any such action or proceeding may be laid in Dade County, Florida (in
addition to any county in which any collateral for the Loan is located), and
waive any claim that the same is an inconvenient forum; (f) stipulate that
service of process in any such action or proceeding shall be properly made if
mailed by any form of registered or certified mail (airmail if international),
postage prepaid, to the address then registered in Bank's records for the
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor who is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
Bank and the owners(s) of any collateral then securing the Loan may agree to
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
2
<PAGE>
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan. The interest
rate charged is authorized by Florida Statutes, Chapter 665.
The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including attorney's fees, whether or
not involving litigation and/or appellate, administrative or bankruptcy
proceedings. The Obligors jointly and severally agree to pay any documentary
stamp taxes, intangibles taxes or other taxes (except for federal or Florida
franchise or income taxes based on Bank's net income) which may now or hereafter
apply to this Note or the Loan or any security therefor, and the Obligors
jointly and severally agree to indemnify and hold Bank harmless from and against
any liability, costs, attorney's fees, penalties, interest or expenses relating
to any such taxes, as and when the same may be incurred. The Obligors jointly
and severally agree to pay on demand, and to indemnify and hold Bank harmless
from and against, any and all present or future taxes, levies, imposts,
deductions, charges and withholdings imposed in connection with the Loan by the
laws or governmental authorities of any jurisdiction other than the State of
Florida or the United States of America, and all payments to Bank under this
Note shall be made free and clear thereof and without deduction therefor.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida, except that federal law shall govern to
the extent that it may permit Bank to charge, from time to time, interest on the
Loan at a rate higher than may be permissible under applicable Florida law.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
If this Note is signed by more than one person, then the term "Borrower"
as used in this Note shall refer to all such persons jointly and severally, and
all promises, agreements, covenants waivers, consents, representations,
warranties and other provisions in this Note are made by and shall be binding
upon each and every undersigned person, jointly and severally. The term "Bank"
shall be deemed to include any subsequent holder(s) of this Note. Whenever used
in this Note, the term "person" means any individual, firm, corporation, trust
or other organization or association or other enterprise or any governmental or
political subdivision, agency, department or instrumentality thereof. Whenever
used in this Note, words in the singular include the plural, words in the plural
include the singular, and pronouns of any gender include the other genders, all
as may be appropriate.
Time shall be of the essence with respect to the terms of this Note. This
Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer of cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to this Note is not received on the due date, Bank
3
<PAGE>
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under, this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. If Borrower or any other Obligor is a
partnership, then all general partners thereof shall be liable jointly and
severally for all obligations under this Note and for all other covenants,
agreements, undertakings and obligations of Borrower in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. All of the terms of this Note shall inure to the benefit of
Bank and its successors and assigns and shall be binding upon each and every one
of the Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE 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. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
WITNESS the due execution hereof as of the date first above written.
AQUAGENIX, INC.
By: /s/ Andrew Chesler
---------------------------------------
Print Name: Andrew Chesler
-------------------------------
Title: President
------------------------------------
STATE OF Arizona )
) SS:
COUNTY OF Maricopa )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by Andrew Chesler, the President
of AQUAGENIX LAND-WATER TECHNOLOGIES, INC. a Florida corporation, freely and
voluntarily under authority duly vested in him/her by said corporation and that
the seal affixed thereto is the true corporate seal of said corporation. He/She
is personally known to me or who has produced __Driver's Licence____ as
identification.
WITNESS my hand and official seal in the County and State last aforesaid
this _10th_ day of April, 1997.
/s/ Maria Rosana Chavez
-----------------------------------------------
Notary Public
Maria Rosana Chavez
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires:
August 17, 1997
- ----------------------
4
SECURITY AGREEMENT
(GENERAL)
AQUAGENIX LAND-WATER TECHNOLOGIES, INC. (hereinafter called "Debtor" or
"Borrower") and AQUAGENIX, INC. (hereinafter called "Guarantor") of 6500
Northwest 15th Avenue, Fort Lauderdale, Florida 33309, for value received,
hereby grant to CAPITAL BANK, a Florida banking corporation, hereinafter called
"Secured Party", a security interest in the following property:
All "Inventory," "Equipment," "goods which are or are to become fixtures"
(which shall exclude fixtures owned by any landlord of the Debtor or
Guarantor), "Accounts," "Chattel Paper," "Instruments," "Documents,"
"General Intangibles," and "Items" in which Debtor and Guarantor now have
any rights or hereafter acquire any rights, however arising, including all
bank accounts in which Debtor or Guarantor have deposited proceeds of any
"Collateral" (as hereinafter defined), all copyrights, patents, trade
secrets, processes, procedures, codes, information, and trademarks and
trade names, and licenses of and for the foregoing; all occupational
licenses and permits (to the extent assignable), files, correspondence,
advertising programs, customer lists, all monies becoming due Debtor or
Guarantor from any sale of Collateral on account of rebates, warranty
service or bonuses; and all books and records of Debtor and Guarantor,
including computer records and programs (excluding any licensed software),
and all rents, royalties, revenues, profits, interest, increases, products
and proceeds arising in connection with the foregoing in which Debtor or
Guarantor now and hereafter has any rights, presently owned and hereafter
acquired, created and arising. The Collateral is described by types as
defined in the Uniform Commercial Code as adopted in Florida as of the
date of this Security Agreement ("UCC"). Words capitalized or in quotation
marks herein shall have the meanings ascribed to them in the UCC,
together with all accessories, parts, equipment, and accessions now attached to
or used in connection therewith or which may hereafter at any time be placed in
or added to the above-described property, and also any and all replacements of
any such property (all of which is hereinafter called "Collateral"), to secure
the payment of that certain indebtedness evidenced by: (i) a promissory note
executed by Borrower in favor of Secured Party in the original principal amount
of Seven Hundred Fifty Thousand Dollars ($750,000.00) and any renewal,
modification or extension thereof; and (ii) any and all other liabilities or
obligations of the Borrower and Guarantor to the Secured Party, direct or
indirect, absolute or contingent, now existing or hereafter arising, now due or
hereafter to become due (all hereinafter called the "Obligations").
Borrower and Guarantor hereby warrant and agree that:
1
<PAGE>
1. The Collateral is acquired or used primarily for business use, and the
Secured Party may disburse such proceeds or any part thereof directly to the
seller of the Collateral.
2. The Collateral will be kept at the address shown at the beginning of this
Agreement; Borrower and Guarantor will promptly notify Secured Party of any
change in the location of the Collateral within said state; and Borrower and
Guarantor will not remove the Collateral from said state without the written
consent of Secured Party.
3. THIS SPACE IS INTENTIONALLY LEFT BLANK.
4. THIS SPACE IS INTENTIONALLY LEFT BLANK.
5. If the Collateral is acquired or used primarily for business use and is
of a type normally used in more than one state, whether or not so used, and
Borrower and Guarantor have a place of business in more than one state, the
chief place of business of Borrower and Guarantor is: the address shown in the
beginning, and Borrower and Guarantor will immediately notify Secured Party in
writing of any change in Borrower's or Guarantor's chief place of business; and
if certificates of title are issued or outstanding with respect to any of the
Collateral, Borrower and Guarantor will cause the interest of Secured Party to
be properly noted thereon.
6. Except for the security interest granted hereby, Borrower is the owner of
the Collateral free from any adverse lien, security interest, or encumbrance;
and Borrower will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest thereon. Except for the
security interest granted hereby, Guarantor is the owner of the Collateral free
from any adverse lien, security interest, or encumbrance; and Guarantor will
defend the Collateral against all claims and demands of all persons at any time
claiming the same or any interest thereon.
7. No Financing Statement covering any Collateral or any proceeds thereof is
on file in any public office; Borrower and Guarantor authorize the Secured Party
to file, in jurisdictions where this authorization will be given effect, a
Financing Statement signed only by the Secured Party describing the Collateral
in the same manner as it is described herein; and from time to time at the
request of Secured Party, execute one or more Financing Statements and such
other documents (and pay the cost of filing or recording the same in all public
offices deemed necessary or desirable by the Secured Party) and do such other
acts and things, all as the Secured Party may request to establish and maintain
a valid security interest in the Collateral (free of all other liens and claims
whatsoever) to secure the payment of the Obligations, including, without
limitation, deposit with Secured Party of any certificate of title issuable with
respect to any of the Collateral and notation thereon of the security interest
hereunder.
8. Borrower and Guarantor will not, except in the ordinary course of
business, sell, transfer, lease, or otherwise dispose of any of the Collateral
2
<PAGE>
or any interest therein, or offer so to do, without the prior written consent of
Secured Party, which may be withheld in its sole and absolute discretion.
9. Borrower and Guarantor will at all times keep the Collateral insured
against loss, damage, theft, and such other risks as Secured Party may require
in such amounts and companies and under such policies and in such form, and for
such periods, as shall be satisfactory to Secured Party, and each such policy
shall provide that loss thereunder and proceeds payable thereunder shall be
payable to Secured Party as its interest may appear (and Secured Party may apply
any proceeds of such insurance which may be received by Secured Party toward
payment of the Obligations, whether or not due, in such order of application as
Secured Party may determine) and each such policy shall provide for 10 days'
written minimum cancellation notice to Secured Party; and each such policy
shall, if Secured Party so requests, be deposited with Secured Party; and
Secured Party may act as attorney for Borrower and Guarantor in obtaining,
settling, and cancelling such insurance and endorsing any drafts.
10. Borrower and Guarantor shall at all times keep the Collateral free from
any adverse lien, security interest, or encumbrance and in good order and repair
and will not waste or destroy the Collateral or any part thereof; and Borrower
and Guarantor will not use the Collateral in violation of any statute or
ordinance, and Secured Party may examine and inspect the Collateral at any time,
wherever located.
11. Borrower and Guarantor will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
agreement or upon any note or notes evidencing the Obligations, or any of them.
12. At its option, Secured Party may discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral,
may pay for insurance on the Collateral, and may pay for the maintenance and
preservation of the Collateral. Borrower and Guarantor agree to reimburse
Secured Party on demand for any payment made, or any expense incurred, by
Secured Party, pursuant to the foregoing authorization. Until default, Borrower
and Guarantor may have possession of their respective Collateral and use it in
any lawful manner not inconsistent with this agreement and not inconsistent with
any policy of insurance thereon.
13. Borrower and Guarantor shall be in default under this agreement upon the
happening of any of the following event(s) or condition(s): (a) failure or
omission to pay when due any Obligation (or any installment thereof or interest
thereon), or default in the payment or performance of any obligation, covenant,
agreement, or liability contained or referred to herein or contained in any
agreement between either Borrower, Guarantor or any other guarantor and Secured
Party; (b) any warranty, representation or statement made or furnished to
Secured Party by or on behalf of any Borrower and Guarantor proves to have been
false in any material respect when made or furnished; (c) loss, theft,
3
<PAGE>
substantial damage, destruction, sale (other than in the ordinary course of the
Borrower's and Guarantor's business), or encumbrance to or of any of the
Collateral, or the making of any levy, seizure, or attachment thereof or
thereon; (d) any Obligor (which term, as used herein, shall mean each Borrower,
Guarantor, and each other party primarily or secondarily or contingently liable
on any of the Obligations) becomes insolvent or unable to pay debts as they
mature or makes an assignment for the benefit of creditors, or any proceeding is
instituted by or against any Obligor alleging that such Obligor is insolvent or
unable to pay debts as they mature; (e) entry of any judgment against any
Obligor which materially affects the financial condition of the Obligors, which
determination shall be made in the sole discretion of the Secured Party acting
reasonably; (f) dissolution, merger or consolidation, or transfer of a
substantial part of the property of any Obligor which is a corporation or a
partnership; and (g) appointment of a receiver for the Collateral or any thereof
or for any property in which any Borrower or Guarantor has an interest.
14. Upon the occurrence of any such default, following any applicable cure
period, or at any time thereafter, or whenever the Secured Party feels insecure
for any reason whatsoever, or UPON DEMAND, Secured Party may, at its option,
declare all Obligations secured hereby, or any of them (notwithstanding any
provisions thereof), immediately due and payable without demand or notice of any
kind and the same thereupon shall immediately become and be due and payable
without demand or notice (but with such adjustments, if any, with respect to
interest or other charges as may be provided for in the promissory note or other
writing evidencing such liability), and Secured Party shall have and may
exercise from time to time any and all rights and remedies of a Secured Party
under the Uniform Commercial Code and any and all rights and remedies available
to it under any other applicable law; and upon request or demand of Secured
Party, Borrower and Guarantor shall, at their respective expense, assemble the
Collateral and make it available to the Secured Party at a convenient place
acceptable to Secured Party; and Borrower and Guarantor shall promptly pay,
jointly and severally, all costs of Secured Party of collection of any and all
the Obligations, and enforcement of rights hereunder, including reasonable
attorneys' fees and legal expenses and expenses of any repairs to any of the
Collateral and expenses of any repairs to any realty or other property to which
any of the Collateral may be affixed or be a part. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Secured Party will give Borrower and Guarantor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. The requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to any Borrower and Guarantor at the address of
Borrower and Guarantor shown at the beginning of this agreement or at any other
address shown on the records of Secured Party, at least five days before the
time of the sale or disposition. Expenses of retaking, holding, preparing for
sale, selling, or the like, shall include Secured Party's reasonable attorneys'
fees and legal expenses. Upon disposition of any Collateral after the occurrence
of any default hereunder or if Secured Party feels insecure for any reason,
Borrower and Guarantor shall be and remain liable for any deficiency; and
4
<PAGE>
Secured Party shall account to Borrower and Guarantor for any surplus, but
Secured Party shall have the right to apply all or any part of such surplus (or
to hold the same as a reserve against) all or any of the Obligations, whether or
not they, or any of them, be then due, and in such order of application as
Secured Party may from time to time elect.
15. No waiver by Secured Party of any default shall operate as a waiver of
any other default or of the same default on a future occasion. No delay or
omission on the part of Secured Party in exercising any right or remedy shall
operate as a waiver thereof and no single or partial exercise by Secured Party
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy. Time is of the essence of this
agreement. The provisions of this agreement are cumulative and in addition to
the provisions of any note secured by this agreement, and Secured Party shall
have all the benefits, rights and remedies of and under any note secured hereby.
If more than one party shall execute this agreement, the term "Borrower" and
"Guarantor" shall mean all parties signing this agreement and each of them, and
all such parties shall be jointly and severally obligated and liable hereunder.
The singular pronoun, when used herein, shall include the plural. If this
agreement is not dated when executed by the Borrower and Guarantor, the Secured
Party is authorized, without notice to the Borrower and Guarantor, to date this
agreement. This agreement shall become effective as of the date of this
agreement. All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns, and all Obligations of Borrower and Guarantor shall
bind the heirs, executors, administrators, successors and assigns of each
Borrower and Guarantor, as applicable.
16. This agreement has been delivered in the State of Florida and shall be
construed in accordance with the laws of Florida. Wherever possible, each
provision of this agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
agreement.
BORROWER AND GUARANTOR HEREBY KNOWINGLY, IRREVOCABLY AND INTENTIONALLY
WAIVE, FOR THEMSELVES, THEIR SUCCESSORS AND REPRESENTATIVES, ALL RIGHT TO TRIAL
BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS SUBORDINATION AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENT OR ACTION OF THE PARTIES; AND AGREE THAT ANY SUIT BROUGHT
HEREUNDER SHALL BE BROUGHT ONLY IN THE STATE COURTS OF FLORIDA.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this agreement this
_10TH__ day of April, 1997
BORROWER:
AQUAGENIX LAND-WATER
TECHNOLOGIES, INC., a Florida corporation
/s/ Christine Lenoir By: /s/ Andrew Chesler
- -------------------------- -----------------------------------------
/s/ Jami Looney Print Name: Andrew Chesler
- -------------------------- Its: President
(CORPORATE SEAL)
GUARANTOR:
AQUAGENIX INC., a Delaware corporation
/s/ Christine Lenoir By: /s/ Andrew Chesler
- -------------------------- -----------------------------------------
/s/ Jami Looney Print Name: Andrew Chesler
- -------------------------- Its: President
(CORPORATE SEAL)
6
CAPITAL BANK -- CONTINUING GUARANTY
FOR VALUABLE CONSIDERATION, the undersigned, AQUAGENIX, INC. (hereinafter
called "Guarantor"), for itself, their heirs, personal representatives,
successors and assigns, hereby, jointly and severally, unconditionally guarantee
to CAPITAL BANK, a Florida banking corporation (hereinafter called "Lender"),
and its successors, participants, endorsees or assigns, the due performance and
full and prompt payment when due, whether at maturity or by acceleration, or
otherwise, of any and all obligations and indebtedness of AQUAGENIX LAND-WATER
TECHNOLOGIES, INC. (hereinafter called "Borrower") to Lender.
The word "indebtedness" is used herein in its most comprehensive sense and
includes any and all advances, debts, obligations and liabilities, including
interest of Borrower heretofore, now or hereafter made, incurred or created or
held or to be held, by Lender for its own account or as agent for another, or
otherwise, whether created directly or acquired by assignment, or otherwise,
whether voluntary or involuntary, and however arising, whether due or not,
absolute or contingent, liquidated or non-liquidated, and whether Borrower may
be liable individually or jointly with others, or whether recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations, or
whether such indebtedness may be or hereafter become otherwise unenforceable.
This is a Continuing Guaranty relating to said indebtedness, including that
arising under subsequent or successive transactions between Borrower and Lender,
which shall either continue or increase the indebtedness and is not limited as
to amount.
The obligations hereunder are joint and several, and independent of the
obligations of Borrower, and a separate action or actions may be brought and
prosecuted against Guarantor, whether action is brought against Borrower or
whether Borrower may be joined in any such action or actions. This is a guaranty
of payment and not of collection.
Guarantor acknowledges that the loan referred to herein is a valid and
binding obligation of the Borrower. Guarantor authorizes Lender, without notice
of demand, and without affecting their liability hereunder, from time to time,
and on any number of occasions, to (a) renew, amend, compromise, extend,
accelerate, reinstate or otherwise change the time for payment of, or otherwise
change the terms of the indebtedness or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold security of the
payment of this guaranty or the indebtedness guaranteed, exchange, enforce,
waive and release any such security; (c) apply such security and direct the
order or manner of sale thereof as Lender in its discretion may determine; and
(d) release or substitute any one or more of the endorsers or guarantors.
Guarantor acknowledges and agrees that no act or omission of any kind by Lender,
including, but not limited to, the failure to take or perfect a security
interest in any security for the indebtedness guaranteed, shall affect or impair
this guaranty and the Lender shall have no duties in respect thereof to
Guarantor. Lender, may, without notice, assign this guaranty in whole or in
part.
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<PAGE>
Guarantor waives any right to require Lender to (a) proceed against
Borrower; (b) proceed against or exhaust any security held from Borrower; or (c)
pursue any other remedy in Lender's power whatsoever. Guarantor waives any
defense arising by reason of any disability or other defense of Borrower or by
reason of the cessation from any cause whatsoever of the liability of Borrower.
Until all indebtedness of Borrower to Lender shall have been paid in full,
Guarantor shall have no right of subrogation, and waive any right to enforce any
remedy which Lender now has or may hereafter have against Borrower, and waive
any benefit of, and any right to participate in, any security now or hereafter
held by Lender. Guarantor waives all presentments, demands for performance,
notices of nonperformance, protests, notices of dishonors and notices of
acceptance of this guaranty and of the existence, creation or incurring of new
or additional indebtedness. Guarantor covenants to cause the Borrower to
maintain and preserve the enforceability of any instruments now or hereafter
executed in favor of the Lender, and to take no action of any kind which might
be the basis for a claim that the Guarantor have any defense hereunder other
than payment in full of all indebtedness of the Borrower to Lender. Guarantor
hereby indemnifies Lender against loss, cost or expense by reason of the
assertion by the Guarantor of any defense hereunder based upon any such action
or inaction of the Borrower. Guarantor waives any right or claim of right to
cause a marshaling of the Borrower's assets or to require the Lender to proceed
against the Guarantor in any particular order. No delay on the part of the
Lender in the exercise of any right, power or privilege under the documentation
with the Borrower or under this guaranty shall operate as a waiver of any such
privilege, power or right.
In addition to all liens upon, and rights of setoffs against, the monies,
securities, or other property of Guarantor, or any of them, given to Lender by
law, Lender shall have a lien upon, and a right of setoff against, all monies,
securities and other property of Guarantor, or any of them, now or hereafter in
the possession of or on deposit with Lender, whether held in a general or
special account of deposit, or for safekeeping, or otherwise; and every such
lien and right of setoff may be exercised without demand upon or notice to
Guarantor. No lien or right of setoff shall be deemed to have been waived by any
act or conduct on the part of the Lender, or by any neglect to exercise such
right of setoff or to enforce such lien, or by any delay in so doing; and every
right of setoff and lien shall continue in full force and effect until such
right of setoff or lien is specifically waived or released by an instrument in
writing executed by Lender.
Any indebtedness of Borrower now or hereafter held by Guarantor is hereby
subordinated to the indebtedness of Borrower to Lender; and such indebtedness of
Borrower to Guarantor if Lender so requests shall be collected, enforced and
received by Guarantor as trustees for Lender and be paid over to Lender on
account of the indebtedness of Borrower to Lender, but without reducing or
affecting in any manner the liability of Guarantor under the other provisions of
this guaranty.
Guarantor agrees to pay a reasonable attorneys' fee and all other costs
and expenses which may be incurred or expended by Lender in the enforcement of
the Borrower's obligation and of this guaranty, whether suit be brought or not,
and in the event suit is brought, then for all services in trial and appellate
courts. Guarantor does hereby waive the right to trial by jury of any claims or
actions arising hereunder or resulting from the indebtedness referred to herein.
2
<PAGE>
Upon the default of the Borrower with respect to any of its obligations or
liabilities to Lender, or in case Borrower or any Guarantor shall become
insolvent or make an assignment for the benefit of creditors, or if a petition
in bankruptcy or for corporate reorganization or for an arrangement be filed by
or against Borrower or any Guarantor, or in the event of the appointment of a
receiver for Borrower or for any Guarantor or their properties, or in the even
that a judgment is obtained or warrant of attachment issued against Borrower or
any Guarantor, or in the event Lender deems itself insecure, or should Lender
request additional security and Guarantor or Borrower should fail to provide
same, all or any part of the indebtedness of the Borrower and of the obligations
and liabilities of the Guarantor to Lender, whether direct or contingent, and of
every kind and description, shall, without notice or demand, at the option of
the Lender, become immediately due and payable and shall be paid forthwith by
the Guarantor.
Where the Borrower is a corporation or a partnership, it is not necessary
for the Lender to inquire into the powers of the Borrower, or the officers,
directors, partners or agents acting or purporting to act in the Borrower's
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
Notwithstanding any provision herein or in any instrument now or hereafter
evidencing said indebtedness, the total liability for payments in the nature of
interest shall not exceed the limits imposed from time to time by the usury laws
of the State of Florida. This guaranty and the rights and obligations of the
Lender and the Guarantor shall be governed and construed in accordance with the
laws of the State of Florida.
The terms "Borrower," "Borrowers," "Guarantor" or "Guarantors" shall
denote the single or the plural, and natural or artificial persons whenever and
wherever the context so requires or admits.
The Guarantor acknowledges that the Lender has been induced by this
Guaranty to make financial accommodations, now and in the future, to the
Borrower, and would not make such financial accommodations without this
Guaranty, and this Guaranty agreement shall, without further reference or
assignment, pass to, and may be relied upon and enforced by, any successor or
participant or assignee of the Lender.
As to each of the undersigned, this Guaranty shall continue until written
notice of revocation signed by such undersigned, or until written notice of the
death of such undersigned shall in each case have been actually received by the
Lender, notwithstanding revocation by, or the death of, or complete or partial
release for any cause of, any one or more of the remainder of the undersigned,
or of the Borrower or of anyone liable in any manner for the indebtedness hereby
guaranteed or for the indebtedness (including those hereunder) incurred directly
or indirectly in respect thereof or hereof, and notwithstanding the dissolution,
termination or increase, decrease or change in personnel of any one or more of
the undersigned which may be partnerships. No revocation or termination hereof
shall affect in any manner rights arising under this Guaranty with respect to
(a) liabilities which shall have been created, contracted, assumed or incurred
prior to receipt by the Lender of written notice of such revocation or
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<PAGE>
termination, or (b) liabilities which shall have been created, contracted,
assumed or incurred after receipt of such written notice pursuant to any
contract entered into by the Lender prior to receipt of such notice; and the
sole effect of revocation or termination hereof shall be to exclude from this
Guaranty liabilities thereafter arising which are unconnected with liabilities
theretofore arising or transactions theretofore entered into.
All notices required or permitted to be given to the Lender herein shall
be sent by registered or certified mail, return receipt requested, directed to
the President of the Lender.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law; however, if
any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals this _10th_ day of April, 1997.
Signed, sealed and delivered
in the presence of: AQUAGENIX, INC.
/s/ Christine Lenoir By: /s/ Andrew Chesler
- -------------------------- -----------------------------------------
/s/ Jami Looney Print Name: Andrew Chesler, President
- --------------------------
4
SUBORDINATION AGREEMENT
In consideration of financial accommodations now or hereafter extended by
Capital Bank (the "Lender") to Aquagenix, Inc., a Delaware corporation, and/or
Aquagenix Land-Water Technologies, Inc., a Florida corporation (collectively,
the "Company"), and in order to induce the Lender to, at any time or from time
to time, make loans extensions of credit or other accommodations to or for the
account of the Company, or to purchase or extend credit upon any instrument or
writing in respect of which the Company may be liable in any capacity, or to
grant such renewals or extensions of any thereof as the Lender may deem
advisable, The Equitable Life Assurance Society of the United States (the
"Creditor"), hereby agrees that:
1. SUBORDINATION. The following subordination provisions shall govern
its 12.50% Amended and Restated Senior Secured Notes, due October 31, 2003 (the
"Notes") as the Notes relate to "Senior Debt" hereinafter defined:
(a) GENERAL. All principal of and interest on the Notes
("Subordinated Debt") shall be subordinate and junior in right of payment and
lien position to all Senior Debt to the extent provided in this Section 1.
(b) AMENDMENT OF SENIOR DEBT, ETC. The Senior Debt shall continue
to be Senior Debt and entitled to the benefits of these subordination provisions
irrespective of any amendment, modification or waiver of any term of the Senior
Debt, any extension or renewal of the Senior Debt, or the granting or release of
any collateral or security securing the repayment of the Senior Debt.
(c) DEFAULT IN RESPECT OF SENIOR DEBT.
(i) PAYMENT DEFAULT. In the event the Company shall default
in the payment of any principal of, or interest on, any Senior Debt when the
same becomes due and payable, whether at maturity, at a date fixed for
prepayment, by declaration of acceleration or otherwise, then, unless and until
such default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property or securities or by set-off or
otherwise) shall be made or agreed to be made on account of on any Subordinated
Debt.
(ii) NONPAYMENT DEFAULT. Upon the occurrence of any Specified
Senior Nonpayment Default, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment (in
cash, property or securities or by set-off or otherwise) shall be made or agreed
to be made on account of any Subordinated Debt during any period of ninety (90)
days after the time a notice of such default shall have been given to the
<PAGE>
Company by the holders of Senior Debt at the time outstanding; provided that
only two such blockage periods of ninety (90) day each may be commenced within
any three hundred sixty-five (365) day period.
As used herein, the term "Specified Senior Nonpayment Default" means a
default or event of default with respect to the Senior Debt which:
(i) permits the holder or holders of such Senior Debt to
cause such Senior Debt to become immediately due and payable; and
(ii) is based upon the breach of a covenant, agreement or
provision which
(A) requires the Company to maintain specified
financial amounts or ratios or to meet other financial tests,
(B) restricts the ability of the Company to:
(1) make distributions or investments,
(2) incur, create or maintain any Debt (ore other
obligations) or Liens,
(3) merge, consolidate or acquire or be acquired
by any person or entity,
(4) sell, lease, transfer or dispose of any
property, and
(iii) requires the Company to be in compliance with all laws,
the violation of which could have a material adverse effect upon the Company and
its subsidiaries.
(d) INSOLVENCY, ETC. In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding which
relates to the Company or its property,
(ii) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of
creditors, or
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(iv) any other marshalling of the assets of the Company,
all Senior Debt (including any interest thereon accruing at the contract rate
after the commencement of any such proceedings, but only to the extent allowed
as a claim in such proceeding) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made to
any holder of any Subordinated Debt on account of any Subordinated Debt. Any
payment or distribution, whether in cash, securities or other property (other
than securities of the Company or any other corporation provided for by a plan
or reorganization or readjustment the payment of which is subordinated, at least
to the extent of the Subordinated Debt as provided in this Section 1, to the
payment of all Senior Debt a the time outstanding and to any Securities issued
to the holders of Senior Debt in respect of the Senior Debt under any such plan
or reorganization or readjustment), that would otherwise (but for this Section
1) be payable or deliverable in respect of Subordinated Debt, shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders of Senior Debt until all Senior Debt
(including any interest thereon accruing at the contract rate of the Senior Debt
after the commencement of any such proceedings, but only to the extent allowed
as a claim in such proceedings) shall have been paid in full, after giving
effect to any concurrent payment or distribution to or for the benefit of the
holders of Senior Debt, provided that in the event that payment or delivery of
such cash, securities or other property to any holder of Subordinated Debt is
authorized by an order or decree giving effect, and expressly stating in such
order or decree that effect is given, to the subordination of Subordinated Debt
to the Senior Debt in, or substantially in, accordance with the provisions of
this Section 1 and made by a court of competent jurisdiction in a reorganization
case or proceeding under any applicable law, then
(A) no payment or delivery of such cash, securities or other
property payable or deliverable with respect to the Subordinated Debt need
be made to the holders of the Senior Debt, and
(B) no such delivery need be made of securities that are
subordinate and junior to the payment of the Senior Debt then outstanding
and that are issued pursuant to reorganization, dissolution or liquidation
proceedings by the Company or by the Company as reorganized.
(e) OBLIGATIONS NOT IMPAIRED. No present or future holder of any
Senior Debt shall be prejudiced in the right to enforce subordination of
Subordinated Debt by any act or failure to act on the part of the Company.
Nothing contained in this Section 1 shall impair, as between the Company and any
holder of Subordinated Debt, the obligation of the Company to pay to such holder
the principal thereof and interest on the Subordinated Debt, as and when the
same shall become due and payable in accordance with the terms thereof, or
prevent any holder of any Subordinated Debt from exercising all rights, powers
and remedies otherwise permitted by applicable law or under any agreement under
3
<PAGE>
which such Subordinated Debt was incurred, all subject to the rights of the
holders of the Senior Debt to receive cash, securities or other property
otherwise payable or deliverable to the holders of Subordinated Debt as provided
in this Section 1.
(f) PAYMENT OF SENIOR DEBT; SUBROGATION. Upon the payment in full
of all Senior Debt, the holders of Subordinated Debt shall be subrogated to all
rights of any holder of Senior Debt to receive any further payments or
distributions applicable to the Senior Debt until the Subordinated Debt shall
have been paid in full, and such payments or distributions received by the
holders of Subordinated Debt by reason of such subrogation, of cash, securities
or other property that otherwise would be paid or distributed to the holders of
Senior Debt, shall, as between the Company and its creditors other than the
holders of Senior Debt, on the one hand, and the holders of Subordinated Debt,
on the other hand, be deemed to be a payment by the Company on account of Senior
Debt, and not on account of Subordinated Debt.
(g) RELIANCE OF HOLDERS OF SENIOR DEBT. Each holder of
Subordinated Debt by its acceptance thereof shall be deemed to acknowledge and
agree that the foregoing subordination provisions are, and are intended to be,
an inducement to and a consideration of each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the creation of
Subordinated Debt, to acquire and hold, or to continue to hold, such Senior
Debt, and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and holding, or in continuing to
hold, such Senior Debt.
(h) DEFINITION OF SENIOR DEBT. As used in this Agreement, Senior
Debt shall mean and include the aggregate amount of principal, interest
(including post-petition interest accruing after the commencement of any
bankruptcy, insolvency, liquidation or similar proceeding, to the extent allowed
as a claim in such proceeding), fees and other amounts payable by the Company to
the Lender on, or in respect of, indebtedness listed on Schedule 1 hereto;
provided, however, that if the aggregate amount of such indebtedness (exclusive
of accrued and unpaid interest) shall exceed Five Million Dollars ($5,000,000),
such excess shall not constitute Senior Debt for purposes of this Agreement.
2. ACKNOWLEDGMENTS REGARDING SUBORDINATED DEBT. The Creditor and the
Company represent that the Company now owes the Creditor the sum of $5,000,000
without counterclaim, defense or offset, which indebtedness is evidenced by the
Notes (as defined in Section 1 hereof). The Notes shall not be modified in any
manner inconsistent with the subordination provisions set forth in this
Agreement.
3. ACKNOWLEDGMENTS REGARDING SENIOR DEBT. The Creditor and the Company
acknowledge that Schedule 1 hereto correctly sets forth the Senior Debt
outstanding as of the date hereof and the Company acknowledges that it owes such
amounts to the Lender without any counterclaim, defense or offset.
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<PAGE>
4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Creditor, its legal representatives, successors and assigns, and shall inure to
the benefit of Lender, its successor and assigns.
5. WAIVER OF ACCEPTANCE. Notice of acceptance by the Lender of this
Agreement is hereby waived by Creditor, and this Agreement and all of the terms
and provisions hereof shall be immediately binding upon Creditor from the date
of execution hereof.
6. GOVERNING LAW. This Agreement shall be construed according to the
laws of the State of Florida.
[Remainder of Page Intentionally Blank. Next page is signature page.]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed this _18_ day of ___April__, 19_97_.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ William Gobbo, Jr.
-----------------------------------
Investment Officer
AQUAGENIX, INC.
By: /s/ Andrew Chesler
-----------------------------------
AQUAGENIX LAND-WATER TECHNOLOGIES,
INC.
By: /s/ Andrew Chesler
-----------------------------------
6
<PAGE>
SCHEDULE 1 TO SUBORDINATION AGREEMENT
1. Loan Agreement dated as of the date hereof between the Company and
the Lender, as such agreement may be amended or supplemented from time to time,
and promissory note issued thereunder as follows:
Promissory Note of Aquagenix Land-Water Technologies, Inc. dated as
of the date hereof in the principal amount of $750,000, guaranteed by Aquagenix,
Inc.
2. Promissory Note of Aquagenix, Inc. dated as of the date hereof in
the principal amount of $250,000
Schedule 1-1
CONSOLIDATED PROMISSORY NOTE
$1,000,000.00 Commonwealth of the Bahamas
New Providence
--------------------,-----------
City State
3rd October, 1997
--------------------
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
the Bank at 1221 Brickell Avenue, Miami, Florida 33131 or at such other place as
the holder hereof may from time to time designate in writing, the principal sum
of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), together with interest
thereon on the principal amount from time to time outstanding at an annual rate
prior to maturity or default of one and one-quarter percent (1-1/4%) over the
"Prime Rate" (Prime Rate shall mean, at any time, the rate of interest quoted in
the Wall Street Journal, Money Rates Section as the "Prime Rate" (currently
defined as the base rate on corporate loans posted by at least 75% of the
nation's thirty (30) largest banks), with the Prime Rate in effect on the first
day of a month being applicable to the entire month. In the event that the Wall
Street Journal quotes more than one rate, or a range of rates as the Prime Rate,
then the Prime Rate shall mean the average of the quoted rates. In the event
that the Wall Street Journal ceases to publish a Prime Rate, then the Prime Rate
shall be the average of the three largest U.S. money center commercial banks, as
determined by Bank). Interest shall be computed on the actual number of days
elapsed and an assumed year of 360 days. Borrower and all endorsers, sureties,
guarantors and any other persons liable or to become liable with respect to the
loan evidenced by this Note (the "Loan") are each included in the term
"Obligors" as used in this Note. Said principal and interest shall be payable in
lawful money of the United States, on the dates and in the amounts specified
below, to wit:
(a) Interest on the outstanding principal balance shall be paid in
monthly installments commencing on the first (1st) day of the month
following the date hereof, and on the first (1st) day of each month
thereafter.
(b) The then-outstanding principal balance plus any accrued and unpaid
interest shall be due and payable ON DEMAND ("Maturity Date").
Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
This Note may be prepaid in whole or in part at any time without penalty.
Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
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<PAGE>
If default be made in the payment of any sums payable pursuant to the
terms of this Note, or if default or other event causing the acceleration of
this Note occur under the Loan Agreement between Borrower and Bank dated April
10, 1997, as amended by the First Amendment to Loan Agreement dated even date
herewith (the "Loan Agreement") or under the Security Agreement securing this
Note between Borrower, Aquagenix, Inc. and Bank dated April 10, 1997, as amended
by the First Amendment to Security Agreement dated even date herewith (the
"Security Agreement"), the Continuing Guaranty by Aquagenix, Inc. ("Guarantor")
dated April 10, 1997, as reaffirmed by Reaffirmation of Guaranty dated even date
herewith ("Guaranty"), the Promissory Note in the amount of $250,000 dated April
10, 1997, executed by Guarantor (the "Term Note"), the Consolidated Promissory
Note in the amount of $1,000,000 between Borrower and Bank dated even date
herewith (the "Consolidated Note"), the Term Promissory Note in the amount of
$200,000 between Borrower and Bank dated even date herewith (the "$200,000 Term
Note"), the Guidance Equipment Line Promissory Note in the amount of $270,000
between Borrower and Bank dated even date herewith ("Equipment Note") or any
other instrument or document executed in connection with the Loan (this Note,
the Loan Agreement, the Security Agreement, the Guaranty, the Term Note, the
Consolidated Note, the $200,000 Term Note, the Equipment Note and all such
instruments and documents, including, without limitation, any guaranties,
agreements, UCC-1 financing statements, security agreements, assignments and
other documents securing this Note, are referred to in this Note as the "Loan
Documents") (an "Event of Default"), then or at any time thereafter at the
option of Bank, the whole of the principal sum then remaining unpaid hereunder,
together with all interest accrued thereon and all other sums owing under the
Loan Documents, shall immediately become due and payable without notice and Bank
shall be entitled to pursue any and all rights and remedies provided by
applicable law and/or under the terms of this Note or any other Loan Document,
all of which shall be cumulative and may be exercised successively or
concurrently. The foregoing references shall not be deemed to limit the demand
feature of this Note. Upon the occurrence and during the continuation of any
Event of Default, Bank, at its option, may at any time declare any or all other
liabilities of any Obligor to Bank immediately due and payable (notwithstanding
any contrary provisions thereof) without demand or notice of any kind. In
addition, Bank shall have the right to set off any and all sums owed to any
Obligor by Bank in any capacity (whether or not then due) against the Loan
and/or against any other liabilities of any Obligor to Bank.
From and after an Event of Default, and regardless of whether the Bank
also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) eighteen percent (18%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
In no event shall any agreed or actual exaction charged, reserved or taken
as an advance or forbearance by Bank as consideration for the Loan exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess.
2
<PAGE>
If the floating rate of interest based on the Prime Rate should increase above
such maximum interest rate permitted by applicable law (if any), then
notwithstanding any contrary provision in this Note or any other Loan Document
and without necessity of further agreement or notice by Bank or any Obligor, the
unpaid principal balance of the Loan shall thereupon bear interest at such
maximum lawful rate. If the floating interest should thereafter decrease below
such maximum lawful rate, the Loan shall nevertheless continue to bear interest
at such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. The interest rate charged is authorized by Florida
Statutes, Chapter 665.
The Obligors hereby severally: (a) waive demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold any Obligor liable with respect to the
Loan; (b) waive any right to immunity from any such action or proceeding and
waive any immunity or exemption of any property, wherever located, from
garnishment, levy, execution, seizure or attachment prior to or in execution of
judgment, or sale under execution or other process for the collection of debts;
(c) waive any right to interpose any set-off or non-compulsory counterclaim or
to plead laches or any statute of limitations as a defense in any such action or
proceeding and waive (to the extent lawfully waivable) all provisions and
requirements of law for the benefit of any Obligor now or hereafter in force;
(d) submit to the jurisdiction of the state and federal courts in the State of
Florida for purposes of any such action or proceeding; (e) agree that the venue
of any such action or proceeding may be laid in Dade County, Florida (in
addition to any county in which any collateral for the Loan is located), and
waive any claim that the same is an inconvenient forum; (f) stipulate that
service of process in any such action or proceeding shall be properly made if
mailed by any form of registered or certified mail (airmail if international),
postage prepaid, to the address then registered in Bank's records for the
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor that is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
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<PAGE>
Bank and the owners(s) of any collateral then securing the Loan may agree to
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including reasonable attorney's fees,
whether or not involving litigation and/or appellate, administrative or
Bankruptcy proceedings. The Obligors jointly and severally agree to pay any
documentary stamp taxes, intangibles taxes or other taxes (except for federal or
Florida franchise or income taxes based on Bank's net income) which may now or
hereafter apply to this Note or the Loan or any security therefor, and the
Obligors jointly and severally agree to indemnify and hold Bank harmless from
and against any liability, costs, reasonable attorney's fees, penalties,
interest or expenses relating to any such taxes, as and when the same may be
incurred. The Obligors jointly and severally agree to pay on demand, and to
indemnify and hold Bank harmless from and against, any and all present or future
taxes (other than income tax of Bank), levies, imposts, deductions, charges and
withholdings imposed in connection with the Loan by the laws or governmental
authorities of any jurisdiction other than the State of Florida or the United
States of America, and all payments to Bank under this Note shall be made free
and clear thereof and without deduction therefor.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida, except that federal law shall govern to
the extent that it may permit Bank to charge, from time to time, interest on the
Loan at a rate higher than may be permissible under applicable Florida law.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
If this Note is signed by more than one person, then the term "Borrower"
as used in this Note shall refer to all such persons jointly and severally, and
all promises, agreements, covenants waivers, consents, representations,
warranties and other provisions in this Note are made by and shall be binding
upon each and every undersigned person, jointly and severally. The term "Bank"
shall be deemed to include any subsequent holder(s) of this Note. Whenever used
4
<PAGE>
in this Note, the term "person" means any individual, firm, corporation, trust
or other organization or association or other enterprise or any governmental or
political subdivision, agency, department or instrumentality thereof. Whenever
used in this Note, words in the singular include the plural, words in the plural
include the singular, and pronouns of any gender include the other genders, all
as may be appropriate. The "Prime Rate" is a base reference rate of interest
adopted by Capital Bank as a general benchmark from which Capital Bank
determines the floating interest rates chargeable on various loans to borrowers
with varying degrees of creditworthiness, and Borrower acknowledges and agrees
that Bank has made no representations whatsoever that the "Prime Rate" is the
interest rate actually offered by Capital Bank to borrowers of any particular
creditworthiness.
Time shall be of the essence with respect to the terms of this Note. This
Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer of cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to this Note is not received on the due date, Bank
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under, this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. If Borrower or any other Obligor is a
partnership, then all general partners thereof shall be liable jointly and
severally for all obligations under this Note and for all other covenants,
agreements, undertakings and obligations of Borrower in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. All of the terms of this Note shall inure to the benefit of
Bank and its successors and assigns and shall be binding upon each and every one
of the Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
This Consolidated Promissory Note consolidates that certain Promissory
Note executed by Borrower in favor of Bank dated April 10, 1997, in the original
principal sum of Seven Hundred Fifty Thousand Dollars ($750,000), and that
certain Future Advance Promissory Note dated of even date herewith, in the
original principal sum of Two Hundred Fifty Thousand Dollars ($250,000).
5
<PAGE>
BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE 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. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
WITNESS the due execution hereof as of the date first above written.
AQUAGENIX LAND-WATER TECHNOLOGIES, INC.
By: /s/ Helen Chia (SEAL)
-----------------------------------------
Name: Helen Chia
---------------------------------------------
Title: Chief Financial Officer
--------------------------------------------
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by ______Helen Chia_________,
the __Chief Financial Officer___ of AQUAGENIX LAND-WATER TECHNOLOGIES, INC. a
Florida corporation, freely and voluntarily under authority duly vested in
him/her by said corporation and that the seal affixed thereto is the true
corporate seal of said corporation. She has produced ____Passport # 16340912___
as identification.
WITNESS my hand and official seal in the County and State last aforesaid
this __3rd__ day of October, 1997.
/s/ Kendolyn V. Cartwright
-----------------------------------------------
Notary Public
Kendolyn V. Cartwright
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires: 31/12/97
6
<PAGE>
AFFIDAVIT FOR EXECUTION OF NOTE
WITHOUT THE STATE OF FLORIDA
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
BEFORE ME, the undersigned Notary Public, duly authorized in the County
and State aforesaid to administer oaths and take acknowledgments, personally
appeared the undersigned, to me well known and to me known to be the persons
described as witnesses to the foregoing Note and who witnessed the execution and
delivery of the foregoing Note, and who, first being duly sworn by me did each
depose, say and acknowledge before me that they were present at the time that
the said Note was executed, that they saw the same executed and delivered by
__Helen Chia_______, and that the other subscribing witness was likewise present
and witnessed the execution and delivery of the foregoing Note, to a
representative of Capital Bank, at the City of ___Nassau_____, State of
__Commonwealth of the Bahamas__, on the date written below.
/s/ June Jarrett-Penn
--------------------------------------------
Subscribing Witness
Print Name: June Jarrett-Penn
---------------------------------
Address: Nassau, Bahamas
------------------------------------
/s/ Raquel Young
--------------------------------------------
Subscribing Witness
Print Name: Raquel Young
---------------------------------
Address: Nassau, Bahamas
------------------------------------
--------------------------------------------
SWORN TO AND SUBSCRIBED before me and acknowledged to me this _3rd_ day of
___October___, 1997.
/s/ Kendolyn V. Cartwright (SEAL)
--------------------------------------------
Notary Public, of
Printed Name: Kendolyn V. Cartwright
-------------------------------
Address: P.O. Box 919
------------------------------------
Nassau, Bahamas
--------------------------------------------
My Commission Expires: 31/12/97
My Commission No. is: 76
7
TERM PROMISSORY NOTE
$200,000.00 Commonwealth of the Bahamas
New Providence
--------------------,-----------
City State
3rd October, 1997
--------------------
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
the Bank at 1221 Brickell Avenue, Miami, Florida 33131 or at such other place as
the holder hereof may from time to time designate in writing, the principal sum
of TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00), together with interest
thereon at a fixed rate of nine and three-quarters percent (9.75%) per annum.
Interest shall be computed on the actual number of days elapsed and an assumed
year of 360 days. Borrower and all endorsers, sureties, guarantors and any other
persons liable or to become liable with respect to the loan evidenced by this
Note (the "Loan") are each included in the term "Obligors" as used in this Note.
Said principal and interest shall be payable in lawful money of the United
States, on the dates and in the amounts specified below, to wit:
(a) Interest on the outstanding principal balance shall be paid in
monthly installments commencing on the first (1st) day of the month
following the date hereof, and on the first (1st) day of each month
thereafter.
(b) Principal shall be paid in monthly installments of $5,555.55
commencing on the first (1st) day of the month following the date hereof,
and on the first (1st) day of each month thereafter. The then-outstanding
principal balance plus any accrued and unpaid interest shall be due and
payable three (3) years following the date hereof ("Maturity Date").
Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
This Note may be prepaid in whole or in part at any time without penalty.
Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
If default be made in the payment of any sums payable pursuant to the
terms of this Note, or if default or other event causing the acceleration of
this Note occur under the Loan Agreement between Borrower and Bank dated April
10, 1997, as amended by the First Amendment to Loan Agreement dated even date
herewith (the "Loan Agreement") or under the Security Agreement securing this
Note between Borrower and Bank dated April 10, 1997, as amended by the First
1
<PAGE>
Amendment to Security Agreement dated even date herewith (the "Security
Agreement"), the Continuing Guaranty by Aquagenix, Inc. ("Guarantor") dated
April 10, 1997, as reaffirmed by Reaffirmation of Guaranty dated even date
herewith ("Guaranty"), the Promissory Note in the amount of $250,000 dated April
10, 1997, executed by Guarantor (the "Term Note"), the Term Promissory Note in
the amount of $1,000,000 executed between Borrower and Bank dated even date
herewith (the "Consolidated Note"), the Guidance Equipment Line Promissory Note
in the amount of $270,000 executed by Borrower in favor of Bank dated even date
herewith ("Equipment Note") or any other instrument or document executed in
connection with the Loan (this Note, the Loan Agreement, the Security Agreement,
the Guaranty, the Term Note, the Consolidated Note, the $200,000 Term Note, and
all such instruments and documents, including, without limitation, any
guaranties, agreements, UCC-1 financing statements, security agreements,
assignments and other documents securing this Note, are referred to in this Note
as the "Loan Documents") (an "Event of Default"), then or at any time thereafter
at the option of Bank, the whole of the principal sum then remaining unpaid
hereunder, together with all interest accrued thereon and all other sums owing
under the Loan Documents, shall immediately become due and payable without
notice and Bank shall be entitled to pursue any and all rights and remedies
provided by applicable law and/or under the terms of this Note or any other Loan
Document, all of which shall be cumulative and may be exercised successively or
concurrently. Upon the occurrence and during the continuation of any Event of
Default, Bank, at its option, may at any time declare any or all other
liabilities of any Obligor to Bank immediately due and payable (notwithstanding
any contrary provisions thereof) without demand or notice of any kind. In
addition, Bank shall have the right to set off any and all sums owed to any
Obligor by Bank in any capacity (whether or not then due) against the Loan
and/or against any other liabilities of any Obligor to Bank.
From and after an Event of Default, and regardless of whether the Bank
also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) eighteen percent (18%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
In no event shall any agreed or actual exaction charged, reserved or taken
as an advance or forbearance by Bank as consideration for the Loan exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. If the
floating rate of interest based on the Prime Rate should increase above such
maximum interest rate permitted by applicable law (if any), then notwithstanding
any contrary provision in this Note or any other Loan Document and without
necessity of further agreement or notice by Bank or any Obligor, the unpaid
principal balance of the Loan shall thereupon bear interest at such maximum
lawful rate. If the floating interest should thereafter decrease below such
maximum lawful rate, the Loan shall nevertheless continue to bear interest at
such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
2
<PAGE>
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. The interest rate charged is authorized by Florida
Statutes, Chapter 665.
The Obligors hereby severally: (a) waive demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold any Obligor liable with respect to the
Loan; (b) waive any right to immunity from any such action or proceeding and
waive any immunity or exemption of any property, wherever located, from
garnishment, levy, execution, seizure or attachment prior to or in execution of
judgment, or sale under execution or other process for the collection of debts;
(c) waive any right to interpose any set-off or non-compulsory counterclaim or
to plead laches or any statute of limitations as a defense in any such action or
proceeding and waive (to the extent lawfully waivable) all provisions and
requirements of law for the benefit of any Obligor now or hereafter in force;
(d) submit to the jurisdiction of the state and federal courts in the State of
Florida for purposes of any such action or proceeding; (e) agree that the venue
of any such action or proceeding may be laid in Dade County, Florida (in
addition to any county in which any collateral for the Loan is located), and
waive any claim that the same is an inconvenient forum; (f) stipulate that
service of process in any such action or proceeding shall be properly made if
mailed by any form of registered or certified mail (airmail if international),
postage prepaid, to the address then registered in Bank's records for the
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor that is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
Bank and the owners(s) of any collateral then securing the Loan may agree to
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
3
<PAGE>
The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including reasonable attorney's fees,
whether or not involving litigation and/or appellate, administrative or
Bankruptcy proceedings. The Obligors jointly and severally agree to pay any
documentary stamp taxes, intangibles taxes or other taxes (except for federal or
Florida franchise or income taxes based on Bank's net income) which may now or
hereafter apply to this Note or the Loan or any security therefor, and the
Obligors jointly and severally agree to indemnify and hold Bank harmless from
and against any liability, costs, reasonable attorney's fees, penalties,
interest or expenses relating to any such taxes, as and when the same may be
incurred. The Obligors jointly and severally agree to pay on demand, and to
indemnify and hold Bank harmless from and against, any and all present or future
taxes (other than income tax of Bank), levies, imposts, deductions, charges and
withholdings imposed in connection with the Loan by the laws or governmental
authorities of any jurisdiction other than the State of Florida or the United
States of America, and all payments to Bank under this Note shall be made free
and clear thereof and without deduction therefor.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida, except that federal law shall govern to
the extent that it may permit Bank to charge, from time to time, interest on the
Loan at a rate higher than may be permissible under applicable Florida law.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
If this Note is signed by more than one person, then the term "Borrower"
as used in this Note shall refer to all such persons jointly and severally, and
all promises, agreements, covenants waivers, consents, representations,
warranties and other provisions in this Note are made by and shall be binding
upon each and every undersigned person, jointly and severally. The term "Bank"
shall be deemed to include any subsequent holder(s) of this Note. Whenever used
in this Note, the term "person" means any individual, firm, corporation, trust
or other organization or association or other enterprise or any governmental or
political subdivision, agency, department or instrumentality thereof. Whenever
used in this Note, words in the singular include the plural, words in the plural
include the singular, and pronouns of any gender include the other genders, all
as may be appropriate. The "Prime Rate" is a base reference rate of interest
adopted by Capital Bank as a general benchmark from which Capital Bank
determines the floating interest rates chargeable on various loans to borrowers
with varying degrees of creditworthiness, and Borrower acknowledges and agrees
that Bank has made no representations whatsoever that the "Prime Rate" is the
interest rate actually offered by Capital Bank to borrowers of any particular
creditworthiness.
Time shall be of the essence with respect to the terms of this Note. This
Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
4
<PAGE>
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer of cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to this Note is not received on the due date, Bank
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under, this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. If Borrower or any other Obligor is a
partnership, then all general partners thereof shall be liable jointly and
severally for all obligations under this Note and for all other covenants,
agreements, undertakings and obligations of Borrower in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. All of the terms of this Note shall inure to the benefit of
Bank and its successors and assigns and shall be binding upon each and every one
of the Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE 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. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
WITNESS the due execution hereof as of the date first above written.
AQUAGENIX LAND-WATER TECHNOLOGIES, INC.
By: /s/ Helen Chia (SEAL)
-----------------------------------------
Name: Helen Chia
---------------------------------------------
Title: Chief Financial Officer
--------------------------------------------
5
<PAGE>
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by ______Helen Chia_________,
the __Chief Financial Officer___ of AQUAGENIX LAND-WATER TECHNOLOGIES, INC. a
Florida corporation, freely and voluntarily under authority duly vested in
him/her by said corporation and that the seal affixed thereto is the true
corporate seal of said corporation. She has produced ____Passport # 16340912___
as identification.
WITNESS my hand and official seal in the County and State last aforesaid
this __3rd__ day of October, 1997.
/s/ Kendolyn V. Cartwright
-----------------------------------------------
Notary Public
Kendolyn V. Cartwright
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires: 31/12/97
6
<PAGE>
AFFIDAVIT FOR EXECUTION OF NOTE
WITHOUT THE STATE OF FLORIDA
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
BEFORE ME, the undersigned Notary Public, duly authorized in the County
and State aforesaid to administer oaths and take acknowledgments, personally
appeared the undersigned, to me well known and to me known to be the persons
described as witnesses to the foregoing Note and who witnessed the execution and
delivery of the foregoing Note, and who, first being duly sworn by me did each
depose, say and acknowledge before me that they were present at the time that
the said Note was executed, that they saw the same executed and delivered by
__Helen Chia_______, and that the other subscribing witness was likewise present
and witnessed the execution and delivery of the foregoing Note, to a
representative of Capital Bank, at the City of ___Nassau_____, State of
__Commonwealth of the Bahamas__, on the date written below.
/s/ June Jarrett-Penn
--------------------------------------------
Subscribing Witness
Print Name: June Jarrett-Penn
---------------------------------
Address: Nassau, Bahamas
------------------------------------
/s/ Raquel Young
--------------------------------------------
Subscribing Witness
Print Name: Raquel Young
---------------------------------
Address: Nassau, Bahamas
------------------------------------
--------------------------------------------
SWORN TO AND SUBSCRIBED before me and acknowledged to me this _3rd_ day of
___October___, 1997.
/s/ Kendolyn V. Cartwright (SEAL)
--------------------------------------------
Notary Public, of
Printed Name: Kendolyn V. Cartwright
-------------------------------
Address: P.O. Box 919
------------------------------------
Nassau, Bahamas
--------------------------------------------
My Commission Expires: 31/12/97
My Commission No. is: 76
7
GUIDANCE EQUIPMENT LINE PROMISSORY NOTE
$270,000.00 Commonwealth of the Bahamas
New Providence
--------------------,-----------
City State
3rd October, 1997
--------------------
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of CAPITAL BANK, a Florida banking corporation ("Bank"), at the office of
the Bank at 1221 Brickell Avenue, Miami, Florida 33131 or at such other place as
the holder hereof may from time to time designate in writing, the principal sum
of TWO HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS ($270,000.00), together with
interest on the outstanding principal balance at a fixed rate of nine and
three-quarters percent (9.75%) per annum. Interest shall be computed on the
actual number of days elapsed and an assumed year of 360 days. Borrower and all
endorsers, sureties, guarantors and any other persons liable or to become liable
with respect to the loan evidenced by this Note (the "Loan") are each included
in the term "Obligors" as used in this Note.
Provided no default exists under this Note or any of the other "Loan
Documents" (as hereinafter defined), for the period ending one (1) year
following the date of this Note the Borrower shall have the right to borrow (but
not reborrow) up to the face amount of this Note in up to two (2) installments
(each installment is hereinafter referred to as a "Tranche"). Each Tranche shall
be due and payable in money of the United States as follows:
(a) Interest on the outstanding principal balance of each Tranche shall
be paid in monthly installments commencing on the first (1st) day of the
month following the funding of such Tranche and on the first (1st) day of
each month thereafter.
(b) Principal, in an amount necessary to fully amortize such Tranche
over forty-eight (48) months, shall be paid in monthly installments
commencing on the first (1st) day of the month following the initial
funding of such Tranche and on the first (1st) day of each month
thereafter. The outstanding principal balance together with accrued and
unpaid interest shall be due and payable four (4) years following the
initial funding of such Tranche. The failure of the Borrower to draw down
the amount of this Note within one (1) year following the date hereof
shall render null and void the ability of the Borrower to draw any
additional sums hereunder.
Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
This Note may be prepaid in whole or in part at any time without penalty.
Borrower shall pay all amounts owing under this Note in full when due
without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
1
<PAGE>
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
If default be made in the payment of any sums payable pursuant to the
terms of this Note, or if default or other event causing the acceleration of
this Note occur under the Loan Agreement between Borrower and Bank dated April
10, 1997, as amended by the First Amendment to Loan Agreement dated even date
herewith (the "Loan Agreement") or under the Security Agreement securing this
Note between Borrower and Bank dated April 10, 1997, as amended by the First
Amendment to Security Agreement dated even date herewith (the "Security
Agreement"), the Continuing Guaranty by Aquagenix, Inc. ("Guarantor") dated
April 10, 1997, as reaffirmed by Reaffirmation of Guaranty dated even date
herewith ("Guaranty"), the Promissory Note in the amount of $250,000 dated April
10, 1997, executed by Guarantor (the "Term Note"), the Term Promissory Note in
the amount of $200,000 executed by Borrower in favor of the Bank dated even date
herewith ("200,000 Term Note"), or any other instrument or document executed in
connection with the Loan (this Note, the Loan Agreement, the Security Agreement,
the Guaranty, the Term Note, the $200,000 Term Note, and all such instruments
and documents, including, without limitation, any guaranties, agreements, UCC-1
financing statements, security agreements, assignments and other documents
securing this Note, are referred to in this Note as the "Loan Documents") (an
"Event of Default"), then or at any time thereafter at the option of Bank, the
whole of the principal sum then remaining unpaid hereunder, together with all
interest accrued thereon and all other sums owing under the Loan Documents,
shall immediately become due and payable without notice and Bank shall be
entitled to pursue any and all rights and remedies provided by applicable law
and/or under the terms of this Note or any other Loan Document, all of which
shall be cumulative and may be exercised successively or concurrently. Upon the
occurrence and during the continuation of any Event of Default, Bank, at its
option, may at any time declare any or all other liabilities of any Obligor to
Bank immediately due and payable (notwithstanding any contrary provisions
thereof) without demand or notice of any kind. In addition, Bank shall have the
right to set off any and all sums owed to any Obligor by Bank in any capacity
(whether or not then due) against the Loan and/or against any other liabilities
of any Obligor to Bank.
From and after an Event of Default, and regardless of whether the Bank
also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) eighteen percent (18%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
In no event shall any agreed or actual exaction charged, reserved or taken
as an advance or forbearance by Bank as consideration for the Loan exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. If the
floating rate of interest based on the Prime Rate should increase above such
maximum interest rate permitted by applicable law (if any), then notwithstanding
any contrary provision in this Note or any other Loan Document and without
necessity of further agreement or notice by Bank or any Obligor, the unpaid
principal balance of the Loan shall thereupon bear interest at such maximum
2
<PAGE>
lawful rate. If the floating interest should thereafter decrease below such
maximum lawful rate, the Loan shall nevertheless continue to bear interest at
such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. The interest rate charged is authorized by Florida
Statutes, Chapter 665.
The Obligors hereby severally: (a) waive demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold any Obligor liable with respect to the
Loan; (b) waive any right to immunity from any such action or proceeding and
waive any immunity or exemption of any property, wherever located, from
garnishment, levy, execution, seizure or attachment prior to or in execution of
judgment, or sale under execution or other process for the collection of debts;
(c) waive any right to interpose any set-off or non-compulsory counterclaim or
to plead laches or any statute of limitations as a defense in any such action or
proceeding and waive (to the extent lawfully waivable) all provisions and
requirements of law for the benefit of any Obligor now or hereafter in force;
(d) submit to the jurisdiction of the state and federal courts in the State of
Florida for purposes of any such action or proceeding; (e) agree that the venue
of any such action or proceeding may be laid in Dade County, Florida (in
addition to any county in which any collateral for the Loan is located), and
waive any claim that the same is an inconvenient forum; (f) stipulate that
service of process in any such action or proceeding shall be properly made if
mailed by any form of registered or certified mail (airmail if international),
postage prepaid, to the address then registered in Bank's records for the
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor that is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
Bank and the owners(s) of any collateral then securing the Loan may agree to
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
3
<PAGE>
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including reasonable attorney's fees,
whether or not involving litigation and/or appellate, administrative or
Bankruptcy proceedings. The Obligors jointly and severally agree to pay any
documentary stamp taxes, intangibles taxes or other taxes (except for federal or
Florida franchise or income taxes based on Bank's net income) which may now or
hereafter apply to this Note or the Loan or any security therefor, and the
Obligors jointly and severally agree to indemnify and hold Bank harmless from
and against any liability, costs, reasonable attorney's fees, penalties,
interest or expenses relating to any such taxes, as and when the same may be
incurred. The Obligors jointly and severally agree to pay on demand, and to
indemnify and hold Bank harmless from and against, any and all present or future
taxes (other than income tax of Bank), levies, imposts, deductions, charges and
withholdings imposed in connection with the Loan by the laws or governmental
authorities of any jurisdiction other than the State of Florida or the United
States of America, and all payments to Bank under this Note shall be made free
and clear thereof and without deduction therefor.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida, except that federal law shall govern to
the extent that it may permit Bank to charge, from time to time, interest on the
Loan at a rate higher than may be permissible under applicable Florida law.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
If this Note is signed by more than one person, then the term "Borrower"
as used in this Note shall refer to all such persons jointly and severally, and
all promises, agreements, covenants waivers, consents, representations,
warranties and other provisions in this Note are made by and shall be binding
upon each and every undersigned person, jointly and severally. The term "Bank"
shall be deemed to include any subsequent holder(s) of this Note. Whenever used
in this Note, the term "person" means any individual, firm, corporation, trust
or other organization or association or other enterprise or any governmental or
political subdivision, agency, department or instrumentality thereof. Whenever
used in this Note, words in the singular include the plural, words in the plural
include the singular, and pronouns of any gender include the other genders, all
as may be appropriate. The "Prime Rate" is a base reference rate of interest
adopted by Capital Bank as a general benchmark from which Capital Bank
determines the floating interest rates chargeable on various loans to borrowers
4
<PAGE>
with varying degrees of creditworthiness, and Borrower acknowledges and agrees
that Bank has made no representations whatsoever that the "Prime Rate" is the
interest rate actually offered by Capital Bank to borrowers of any particular
creditworthiness.
Time shall be of the essence with respect to the terms of this Note. This
Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. Borrower shall receive immediate credit on payments only if made in
the form of either a federal wire transfer of cleared funds or a check drawn on
an account maintained with Bank containing sufficient available funds.
Otherwise, Borrower shall receive credit on payments after clearance, which
shall be no sooner than the first Business Day after receipt of payment by Bank.
For purposes of determining interest accruing under this Note, principal shall
be deemed outstanding on the date payment is credited by Bank. If any payment
required to be made pursuant to this Note is not received on the due date, Bank
shall have the right, at its election, to charge any of Borrower's accounts at
Bank with the amount of such payment. Except as otherwise required by the
provisions of this Note or any other Loan Document, any notice required to be
given to any Obligor shall be deemed sufficient if made personally or if mailed,
postage prepaid, to such Obligor's address as it appears in this Note (or, if
none appears, to any address for such Obligor then registered in Bank's
records). Bank may grant participations in all or any portion of, and may assign
all or any part of Bank's rights under, this Note. Bank may disclose to any such
participant or assignee any and all information held by or known to Bank at any
time with respect to any Obligor. If Borrower or any other Obligor is a
partnership, then all general partners thereof shall be liable jointly and
severally for all obligations under this Note and for all other covenants,
agreements, undertakings and obligations of Borrower in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. All of the terms of this Note shall inure to the benefit of
Bank and its successors and assigns and shall be binding upon each and every one
of the Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE 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. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
5
<PAGE>
WITNESS the due execution hereof as of the date first above written.
AQUAGENIX LAND-WATER TECHNOLOGIES, INC.
By: /s/ Helen Chia (SEAL)
-----------------------------------------
Name: Helen Chia
---------------------------------------------
Title: Chief Financial Officer
--------------------------------------------
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by ______Helen Chia_________,
the __Chief Financial Officer___ of AQUAGENIX LAND-WATER TECHNOLOGIES, INC. a
Florida corporation, freely and voluntarily under authority duly vested in
him/her by said corporation and that the seal affixed thereto is the true
corporate seal of said corporation. She has produced ____Passport # 16340912___
as identification.
WITNESS my hand and official seal in the County and State last aforesaid
this __3rd__ day of October, 1997.
/s/ Kendolyn V. Cartwright
-----------------------------------------------
Notary Public
Kendolyn V. Cartwright
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires: 31/12/97
6
<PAGE>
AFFIDAVIT FOR EXECUTION OF NOTE
WITHOUT THE STATE OF FLORIDA
COMMONWEALTH OF THE BAHAMAS )
) SS:
NEW PROVIDENCE )
BEFORE ME, the undersigned Notary Public, duly authorized in the County
and State aforesaid to administer oaths and take acknowledgments, personally
appeared the undersigned, to me well known and to me known to be the persons
described as witnesses to the foregoing Note and who witnessed the execution and
delivery of the foregoing Note, and who, first being duly sworn by me did each
depose, say and acknowledge before me that they were present at the time that
the said Note was executed, that they saw the same executed and delivered by
__Helen Chia_______, and that the other subscribing witness was likewise present
and witnessed the execution and delivery of the foregoing Note, to a
representative of Capital Bank, at the City of ___Nassau_____, State of
__Commonwealth of the Bahamas__, on the date written below.
/s/ June Jarrett-Penn
--------------------------------------------
Subscribing Witness
Print Name: June Jarrett-Penn
---------------------------------
Address: Nassau, Bahamas
------------------------------------
/s/ Raquel Young
--------------------------------------------
Subscribing Witness
Print Name: Raquel Young
---------------------------------
Address: Nassau, Bahamas
------------------------------------
--------------------------------------------
SWORN TO AND SUBSCRIBED before me and acknowledged to me this _3rd_ day of
___October___, 1997.
/s/ Kendolyn V. Cartwright (SEAL)
--------------------------------------------
Notary Public, of
Printed Name: Kendolyn V. Cartwright
-------------------------------
Address: P.O. Box 919
------------------------------------
Nassau, Bahamas
--------------------------------------------
My Commission Expires: 31/12/97
My Commission No. is: 76
7
REAFFIRMATION OF GUARANTY AGREEMENT
THIS REAFFIRMATION OF GUARANTY AGREEMENT ("Reaffirmation") dated this
_3RD__ day of __OCTOBER______________, 1997, is made by AQUAGENIX, INC., a
Delaware corporation ("Guarantor").
W I T N E S S E T H:
WHEREAS, AQUAGENIX LAND-WATER TECHNOLOGIES, INC., a Florida corporation
("Borrower"), executed and delivered that certain Promissory Note in favor of
CAPITAL BANK ("Lender"), dated April 10, 1997, in the original principal amount
of Seven Hundred Fifty Thousand Dollars ($750,000) ("Line of Credit Note") and
that certain Promissory Note in favor of Lender dated April 10, 1997, in the
original principal amount of Two Hundred Fifty Thousand Dollars ($250,000)
("Term Note") (collectively, the Line of Credit Note and the Term Note are
hereinafter the "Note"), which Note is secured by that certain Security
Agreement dated April 10, 1997, as modified by the First Amendment to Security
Agreement dated even date herewith (collectively, "Security Agreement") and that
certain UCC-1 Financing Statement filed with the Secretary of State of Florida
and bearing File No. U97000002408 ("UCC-1"); and
WHEREAS, Guarantor executed and delivered to Lender that certain
Continuing Guaranty ("Guaranty"), dated as of April 10, 1997, securing, among
other things, the payment and performance of Borrower under the Note, the
Security Agreement, the UCC-1 and all other loan documents executed in
connection therewith and more particularly described in the Guaranty
(collectively, the "Loan Documents"); and
WHEREAS, even date herewith Lender has extended to Borrower the following
additional credit facilities: (i) term loan as evidenced by the Term Promissory
Note dated even date herewith in the original principal amount of Two Hundred
Thousand Dollars ($200,000); and (ii) guidance equipment line as evidenced by
the Guidance Equipment Line Promissory Note dated even date herewith in the
original principal amount of Two Hundred Seventy Thousand Dollars ($270,000)
(collectively, the "Additional Credit Facilities"); and
WHEREAS, the Lender has, on this date, agreed to modify the terms of the
Note and Security Agreement, and in connection therewith Borrower has executed
that certain Future Advance Note in the original principal amount of Two Hundred
Fifty Thousand Dollars ($250,000) ("Future Advance Note") and that certain
Consolidated Promissory Note dated even date herewith in the original principal
amount of One Million Dollars ($1,000,000) which consolidates the Future Advance
Note and the Line of Credit Note (collectively, the "Consolidated Note"); and
WHEREAS, as a condition to Lender agreeing to modify the Note and extend
the Additional Credit Facilities, the Lender is requiring Guarantor to reaffirm
its obligations under the Guaranty and to acknowledge that the Guaranty secures
the obligations of Borrower under the Note, the Security Agreement, the
Consolidated Note, the Additional Credit Facilities and all loan documents
executed in connection therewith (collectively, the "Modification Documents").
1
<PAGE>
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Guarantor hereby agrees as follows:
1. The foregoing recitals are true and correct and incorporated herein
by this reference.
2. Guarantor hereby reaffirms its obligation to unconditionally and
irrevocably guarantee to Lender the full and punctual payment (without set-off,
defense or any deduction), performance and observance by the Borrower of all the
terms, covenants and conditions contained in the Note, the Consolidated Note,
the Additional Credit Facilities and the Loan Documents, as more fully set forth
in the Guaranty.
3. Guarantor hereby acknowledges and agrees that the "indebtedness" as
defined in the Guaranty shall include, without limitation, all of Borrower's
obligations to Lender under the Note, the Consolidated Note, and the Additional
Credit Facilities, including without limitation, all principal, interest, fees
and expenses, including attorney's fees, evidenced by the Note, the Consolidated
Note, the Additional Credit Facilities and the other Modification Documents or
otherwise, or arising in connection with the foregoing, whether existing now or
arising hereafter, as such indebtedness may be modified, increased, extended or
renewed from time to time. Guarantor further agrees and acknowledges that
Guarantor's Unconditional Guaranty of Borrower's timely performance of all of
its obligations under all of the Loan Documents, shall include, without
limitation, Borrower's obligations under the Modification Documents.
4. Guarantor fully reaffirms all of the terms and provisions of the
Guaranty as modified hereby and confirms to Lender that, as of the date hereof,
the Guaranty, as modified hereby, is a valid obligation of the Guarantor,
enforceable in accordance with its terms, without defense or off-set whatsoever.
Guarantor further acknowledges that, except as specifically provided by this
Reaffirmation, no part of the Guaranty is in any way altered, amended or
changed.
5. Guarantor acknowledges receipt of copies of the Consolidated Note,
the Additional Credit Facilities, the First Amendment to Security Agreement and
the Modification Documents, and joins in and consents to same as if fully set
forth herein.
6. Guarantor waives any right of indemnity or subrogation against the
Borrower.
7. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS GUARANTY 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 THE PARTIES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE LENDER'S ENTERING INTO THE MODIFICATION EVIDENCED BY
THE MODIFICATION DOCUMENTS.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Reaffirmation to be
signed and sealed as of the date and year set forth above.
Signed, Sealed and Delivered GUARANTOR:
in the Presence of:
WITNESSES: AQUAGENIX, INC.
/s/ Brenda Stewart By: /s/ Andrew Chesler (SEAL)
- -------------------------------- ----------------------------------
Andrew Chesler, President
Brenda Stewart
- --------------------------------
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments, the
foregoing instrument was acknowledged before me by ___Andrew Chesler_____, the
__President_ of AQUAGENIX, INC., a Delaware corporation, freely and voluntarily
under authority duly vested in him/her by said corporation and that the seal
affixed thereto is the true corporate seal of said corporation. He/She is
personally known to me or who has produced ______________________ as
identification.
WITNESS my hand and official seal in the County and State last aforesaid
this _3rd_ day of __October_, 1997.
/s/ Susanna Goins Metzger
-----------------------------------------------
Notary Public
Susanna Goins Metzger
-----------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires:
1/4/99
3
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT ("Amendment") is entered
into between CAPITAL BANK ("Lender"), AQUAGENIX, INC., a Delaware corporation,
and/or AQUAGENIX LAND-WATER TECHNOLOGIES, INC., a Florida corporation
(collectively, the "Company"), and THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES ("Creditor")
RECITALS:
A. Lender, Company and Creditor are parties to that certain
Subordination Agreement dated April 18, 1997 ("Subordination Agreement").
B. Company has requested that Lender advance the following additional
credit facilities to the Company: (i) $1,000,000 Consolidated Promissory Note
(which consolidates the existing $750,000 line of credit promissory note and a
new $250,000 future advance promissory note); (ii) $200,000 Term Note; and (iii)
$270,000 Guidance Equipment Line Promissory Note (collectively, the "Additional
Facilities").
C. The Lender would be unwilling to extend to the Company the
Additional Facilities without the execution by the Creditor of this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. The foregoing recitations are true and correct and are incorporated
herein by reference.
2. The "Senior Debt" (as defined in the Subordination Agreement) is
amended to include the Additional Facilities.
3. Except as modified hereby, the terms and provisions of the
Subordination Agreement shall remain in full force and effect.
LENDER:
CAPITAL BANK
By: /s/ Tom Thuroson
-----------------------------------------
Name: Tom Thuroson
---------------------------------------
Title: Business Banking Officer
--------------------------------------
Date: October 3, 1997
---------------------------------------
1
<PAGE>
COMPANY:
AQUAGENIX, INC., a Delaware corporation
/s/ Brenda Stewart By: /s/ Helen Chia
- --------------------------- -----------------------------------------
Name: Helen Chia
---------------------------------------
Brenda Stewart Title: Chief Financial Officer
- --------------------------- --------------------------------------
Date: Oct 3, 1997
---------------------------------------
AQUAGENIX LAND-WATER TECHNOLOGIES,
INC., a Florida corporation
/s/ Brenda Stewart By: /s/ Helen Chia
- --------------------------- -----------------------------------------
Name: Helen Chia
---------------------------------------
Brenda Stewart Title: Chief Financial Officer
- --------------------------- --------------------------------------
Date: Oct 3, 1997
---------------------------------------
CREDITOR:
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/ William Gobbo, Jr.
- --------------------------- -----------------------------------------
Name: William Gobbo, Jr.
- --------------------------- ---------------------------------------
Title: Investment Officer
--------------------------------------
Date: October 6, 1997
---------------------------------------
2
<PAGE>
SCHEDULE 1 TO
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
1. Loan Agreement dated as of April 10, 1997, between the Company and
the Lender, as such agreement may be amended or supplemented from time to time,
and promissory note issued thereunder as follows:
Promissory Note of Aquagenix Land-Water Technologies,
Inc. ("Borrower") dated as of April 10, 1997, in the
principal amount of $750,000, guaranteed by Aquagenix,
Inc., as increased by $250,000 Future Advance Promissory
Note, which Notes were consolidated into that certain
$1,000,000 Consolidated Promissory Note dated October
3, 1997.
2. Promissory Note of Aquagenix, Inc. dated as of April 10, 1997, in
the principal amount of $250,000.
3. Guidance Equipment Line Promissory Note of Borrower dated October 3,
1997, in the original principal amount of $270,000.
4. Term Promissory Note of Borrower dated October 3, 1997, in the
original principal amount of $200,000.
3
SUBSCRIPTION AGREEMENT
----------------------
Aquagenix, Inc.
6500 N.W. 15th Avenue
Fort Lauderdale, Florida 33309
Gentlemen:
Pursuant to the discussion between Aquagenix, Inc., a Delaware corporation
(the "Company") and Alexander Enterprise Holdings Corp., a British Virgin
Islands corporation (the "Undersigned"), the Undersigned is writing to advise
you of the following terms and conditions under which the Undersigned hereby
offers to subscribe (the "Offer") for the purchase of shares ("Shares") of the
Company's Common Stock, par value $.01 per share, in an amount to be determined
pursuant to Section 2(a) hereof, and Sixty Thousand (60,000) warrants
("Warrants") at an aggregate purchase price of $700,000.
1. SUBSCRIPTION. Subject to the terms and conditions hereinafter set
forth in this Subscription Agreement, the Undersigned hereby offers to purchase
the Shares and Warrants for an aggregate purchase price of $700,000.
If the Offer is accepted, the Shares and Warrants shall be paid for
by the delivery of $700,000 by wire transfer payable to Aquagenix, Inc.,
BankAtlantic, 1750 East Sunrise Boulevard, Fort Lauderdale, Florida, 33304; ABA
#267083763, Account #0055937302, and the certificates evidencing the Shares and
Warrants shall be delivered
to the Undersigned immediately thereafter.
2. DESCRIPTION OF SHARES AND WARRANTS.
(a) SHARES. "Shares" that the Undersigned shall receive pursuant to this
Subscription Agreement shall mean that number of shares of the Company's Common
Stock equal to $700,000 divided by the Fair Market Value (as defined herein) of
the Company's shares of Common Stock on the date of the Notice (as defined
herein). Notice to receive all or any portion of the amount of Shares shall be
determined at the option of the Undersigned any time commencing ninety (90) days
from the date hereof and ending on December 31, 1998. The Undersigned shall
deliver written notice ("Notice") to the Company via telecopy on the day of
exercising its right to receive the Shares and delivering the original Notice to
the Company by express courier within three (3) business days of exercise, which
Notice shall indicate the amount of Shares to be received pursuant to that
Notice and the calculation of the purchase price. Each such conversion shall
reduce the principle amount of the Undersigned's initial investment by the
amount stated in the Notice. The term "Fair Market Value' of the Company's
shares of Common Stock shall mean 85% of the average closing bid price of the
Company's Common Stock, as reported by the principal exchange on which the
1
<PAGE>
Common Stock is traded, the Nasdaq National Market System or the National
Quotation Bureau, Incorporated, as the case may be, for ten consecutive trading
days immediately prior to the date of the Notice. Notwithstanding anything
contained herein to the contrary, the maximum amount of Shares that the
Undersigned can receive pursuant to this Subscription Agreement shall not exceed
19.99% of the Company's currently issued and outstanding shares of Common Stock.
(b) WARRANTS. Each Warrant entitles the Undersigned to purchase one
share of Common Stock at $8.00 per share (the "Warrant Exercise Price")
commencing on the date hereof and continuing for a period of two years from the
date hereof. The Warrants shall be in substantially the same form as attached
hereto as Exhibit A.
3. REPRESENTATIONS AND WARRANTIES.
(i) In order to induce the Company to accept this Subscription
Agreement, the Undersigned hereby represents and warrants to, and covenants
with, the Company as follows:
(a) The Undersigned has received and reviewed the Company's Annual
Reports on Form 10-KSB for the years ended December 31, 1994, 1995 and
1996 and the Form 10-QSB for the quarter ended June 30, 1997 (collectively
the "Disclosure Documents");
(b) The Undersigned has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company,
the Shares and Warrants, and all such questions, if any, have been
answered to the full satisfaction of the Undersigned;
(c) The Undersigned has such knowledge and expertise in financial
and business matters that the Undersigned is capable of evaluating the
merits and risks involved in an investment in the Company;
(d) Except as set forth herein and in the Disclosure Documents, no
representations or warranties have been made to the Undersigned by or on
behalf of the Company or any agent, employee or affiliate of the Company
and in entering into this transaction the Undersigned is not relying upon
any information, other than that contained in the Disclosure Documents and
the results of independent investigation by the Undersigned;
(e) The Undersigned understands that (A) the Shares and Warrants
have not been registered under the Act or the securities laws of any
state, based upon an exemption from such registration requirements for
non-public offerings pursuant to an exemption under the Act; (B) the
Shares and Warrants are and will be "restricted securities", as said term
2
<PAGE>
is defined in Rule 144 of the Rules and Regulations promulgated under the
Act; (C) the Shares and Warrants may not be sold or otherwise transferred
unless they have been first registered under the Act and all applicable
state securities laws, or unless exemptions from such registration
provisions are available with respect to said resale or transfer; (D)
other than as set forth in the Disclosure Documents and this Subscription
Agreement, the Company is under no obligation to register the Shares or
Warrants under the Act or any state securities laws, or to take any action
to make any exemption from any such registration provisions available; (E)
the certificates for the Shares and Warrants will bear a legend to the
effect that the transfer of the securities represented thereby is subject
to the provisions hereof; and (F) stop transfer instructions will be
placed with the transfer agent for the Shares and Warrants;
(f) The Undersigned is acquiring the Shares and Warrants solely
for the account of the Undersigned, for investment purposes only, and not
with a view towards the resale or distribution thereof;
(g) The Undersigned will not sell or otherwise transfer any of the
Shares or Warrants, or any interest therein, unless and until (i) said
Shares and Warrants shall have first been registered under the Act and all
applicable state securities laws; or (ii) the Undersigned shall have first
delivered to the Company a written opinion of counsel (which counsel and
opinion (in form and substance) shall be reasonably satisfactory to the
Company), to the effect that the proposed sale or transfer is exempt from
the registration provisions of the Act and all applicable state securities
laws;
(h) The Undersigned is a corporation duly organized under the laws
of the British Virgin Islands, has full power and authority to execute and
deliver this Subscription Agreement and to perform the obligations of the
Undersigned hereunder; and this Subscription Agreement is a legally
binding obligation of the Undersigned in accordance with its terms;
(i) The Undersigned is an "accredited investor," as such term is
defined in Regulation D of the Rules and Regulations promulgated under the
Act and the Undersigned understands that the Company has determined that
the exemption from the registration provisions of the Securities Act of
1933, as amended (the "Act"), which is based upon non-public offerings are
applicable to the offer and sale of the Shares and Warrants, based, in
part, upon the representations, warranties and agreements made by the
Undersigned herein and in the this Subscription Agreement; and
(j) Funding of this Subscription Agreement shall be made by wire
transfer of funds on or before 2:30 P.M. on __________, October ____,
1997.
3
<PAGE>
(ii) In order to induce the undersigned to enter into this Subscription
Agreement, the Company hereby represents and warrants to, and covenants with the
Company, as follows:
(a) The Company is a corporation duly organized under the laws of
Delaware; has full power and authority to execute and deliver this
Subscription Agreement and perform its obligations hereunder, and
this Agreement is a legally binding obligation of the Company in
accordance with its terms;
(b) The Shares and Warrants when issued and paid for in accordance with
the terms of this Subscription Agreement will be validly issued and
fully paid and non-assessable; the holders thereof will not be
subject to any personal liability as such holders; all corporate
action required to be taken for the authorization, issuance and sale
of the Shares and Warrants has been duly and validly taken;
(c) The execution and delivery of the Subscription Agreement does not
(i) conflict with or will conflict with, result in a material breach
of, or constitute a default under (x) the articles or bylaws of the
Company; (y) any material contract, indenture mortgage, deed of
trust or other material agreement or instrument to which the Company
is a party or by which any of the properties or assets of the
Company may be bound; and
(d) The Company has filed with the Securities and Exchange Commission
("SEC") the Disclosure Documents which reports do not contain any
material misstatements of facts or omit to state any material facts.
Since the date of filing of the last such report there has been no
material adverse change in the business or financial condition of
the Company. Except as disclosed in the Disclosure Documents, there
are no pending or threatened litigations or other proceedings which
could have a material adverse effect on the business or financial
condition of the Company.
4. UNDERTAKING TO REGISTER SHARES. The Company shall file a
registration statement for the Shares within thirty days from the date hereof
and will use its best efforts to cause such registration statement to become
effective as soon as reasonably possible.
5. Neither the Undersigned, nor the Undersigned's representatives,
administrators, successors or assigns will offer, sell, transfer, assign,
pledge, hypothecate, encumber or otherwise attempt to directly or indirectly
dispose of any of the Shares, Warrants or shares of Common Stock receivable upon
exercise of the Warrants either pursuant to Rule 144 of the Securities Act of
1933, a registration statement or otherwise, or dispose of any beneficial
interest therein for a period of ninety (90) days following the date of this
Subscription Agreement without the prior written consent of the Company.
4
<PAGE>
6. The Undersigned understands that this Subscription Agreement is not
binding upon either party unless and until accepted by both parties, which
acceptance is at the sole discretion of each party and is to be evidenced by
each party's execution of this Subscription Agreement where indicated.
7. Each party agrees to indemnify the other and hold it harmless from
and against any and all losses, damages, liabilities, costs and expenses which
it may sustain or incur in connection with the breach by the other party of any
representation, warranty or covenant made by the other party herein.
8. Neither this Subscription Agreement nor any of the rights of the
Undersigned hereunder may be transferred or assigned by the Undersigned.
9. This Subscription Agreement (i) may only be modified by a written
instrument executed by the Undersigned and the Company; and (ii) sets forth the
entire agreement of the Undersigned and the Company with respect to the subject
matter hereof; (iii) shall be governed by the laws of the State of Florida
applicable to contracts made and to be wholly performed therein; and (iv) shall
inure to the benefit of, and be binding upon the Company and the Undersigned and
its respective successors and assigns.
10. All notices or other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or mailed by
certified or registered mail, return receipt requested, postage prepaid, as
follows: if to the Undersigned, Falcon Cliff Palace Road, Douglas, Isle of Man,
IM99 1EP, and if to the Company, to Aquagenix, Inc., 6500 N.W. 15th Avenue, Fort
Lauderdale, Florida 33309 or to such other address as the Company or the
Undersigned shall have designated to the other by like notice.
11. JURISDICTIONAL NOTICE
FOR FLORIDA RESIDENTS: EACH FLORIDA RESIDENT WHO SUBSCRIBES FOR THE PURCHASE OF
SECURITIES HEREIN HAS THE RIGHT, PURSUANT TO SECTION 517.061(11)(A)(5) OF THE
FLORIDA SECURITIES ACT, TO WITHDRAW HIS SUBSCRIPTION FOR THE PURCHASE AND
RECEIVE A FULL REFUND OF ALL MOINES PAID WITHIN THREE (3) BUSINESS DAYS AFTER
THE EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN
MADE, WHICHEVER IS LATER. WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO
ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER
OR TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS CONFIDENTIAL TERM
SHEET INDICATING HIS INTENTION TO WITHDRAW.
5
<PAGE>
FOR RESIDENTS OF ALL STATES: THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN
STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SHARES ARE SUBJECT IN
VARIOUS STATES TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THE SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OF ADEQUACY OF THE CONFIDENTIAL TERM SHEET. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
12. NO WAIVER. Notwithstanding any of the representations, warranties,
acknowledgements or agreements made herein by the Undersigned, the Undersigned
does not thereby or in any manner waive any rights granted to the Undersigned
under federal or state securities laws.
13. REVOCATION. The Undersigned agrees that he shall not cancel,
terminate or revoke this Subscription Agreement or any agreement of the
Undersigned made hereunder other than as set forth under Section 9 above, and
that this Subscription Agreement shall survive the death or disability of the
Undersigned.
14. MISCELLANEOUS.
(a) This Subscription Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
(b) The provisions of this Subscription Agreement shall survive
the execution thereof.
6
<PAGE>
IN WITNESS WHEREOF, the Undersigned has executed this Subscription
Agreement on the date indicated below.
ALEXANDER ENTERPRISE HOLDINGS
CORP., a British Virgin Islands corporation
By: /s/ Jared Bluestein
-------------------------------
Jared Bluestein
Dated: 27 October 1997
----------------------------
Accepted as of the _27__ day of October, 1997.
AQUAGENIX, INC.
By: /s/ Helen Chia
----------------------------------------
Helen Chia, Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCEHDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 890,935
<SECURITIES> 0
<RECEIVABLES> 1,748,756
<ALLOWANCES> 142,297
<INVENTORY> 677,208
<CURRENT-ASSETS> 3,709,015
<PP&E> 4,238,498
<DEPRECIATION> 1,484,374
<TOTAL-ASSETS> 12,963,056
<CURRENT-LIABILITIES> 2,221,271
<BONDS> 0
0
0
<COMMON> 45,287
<OTHER-SE> 4,888,633
<TOTAL-LIABILITY-AND-EQUITY> 12,963,056
<SALES> 0
<TOTAL-REVENUES> 10,186,456
<CGS> 0
<TOTAL-COSTS> 6,297,464
<OTHER-EXPENSES> 4,786,145
<LOSS-PROVISION> 90,341
<INTEREST-EXPENSE> 565,241
<INCOME-PRETAX> (1,552,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,552,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,552,735)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
