LOAN AGREEMENT
H.E.R.C. Products Incorporated, a Delaware corporation, with its principal
office at 0000 X. Xxxx Xxxxxx Xxxxx, #00, Xxxxxxx, Xxxxxxx 00000 (hereinafter
referred to as ("Borrower"), and InterEquity Capital Partners, L.P., a Delaware
limited partnership, having an office at 000 Xxxxx Xxxxxx, Xxx Xxxx, X.X. 00000
(hereinafter referred to as "Lender"), hereby enter into this Loan Agreement
("Agreement") dated as of September 15, 1997.
SECTION 1. CERTAIN DEFINITIONS
1.1 The following terms used in this Agreement will have the meanings
given below:
"Affidavit of Confession of Judgment" Defined in Section 7.1(c).
"Claims and Expenses" Any and all claims, lawsuits of any
kind, judgments, losses, damages,
liabilities, penalties, costs and
reasonable expenses arising out of
transactions contemplated under this
Agreement or under the Collateral
Documents, including all "Legal Costs
and Expenses" (defined below) incurred
in connection therewith.
Collateral Documents The Notes, the Security Agreement, the
Guaranty, the Affidavit of Confession
of Judgment, the Patent and Trademark
Assignment, the Subsidiaries' Security
Agreement and the applicable UCC
Statements.
EBITDA Earnings before interest, taxes,
depreciation and amortization.
"Event of Default" or default Defined in Section 13.1.
The "First Note" Defined in Section 2.2.
The "First Loan" Defined in Section 2.1.
First Loan Amortization Commencement March 1, 1998.
Date
The "First Loan Maturity Date" August 30, 2002.
Loan covenants
10.1 Prompt payment of interest - yes.
10.2.1 Net worth of $2.6 - yes but will be
under at year end
m. EBIDITA of ($1.4 million) for you - No
Son - 2.2
Dep & Amortization (.3)
-----
$1.9
n. Revenues of $6 million - $1 million short
Fixed Charge Coverage Net after tax income plus depreciation
and amortization divided by all
payments of principal on any
indebtedness and all cash expenditures
for capital expenses including
capitalized leases.
The "Guaranty" The Guaranty by the Subsidiaries of
the Notes.
Interest Coverage EBITDA divided by interest charges on
all indebtedness including the
outstanding Notes.
"Legal Costs and Expenses" Any and all reasonable attorneys' fees
and disbursements, court costs and
other litigation expenses.
The "Loans" The First Loan and the Second Loans
collectively.
The "Notes" The First Note and the Second Note
collectively.
The Patent and Trademark Assignment Defined in Section 7.1(b).
"Prepayment Fee" Defined in Section 2.3(c)(ii).
The "Second" Loan" Defined in Section 3.1.
Second Loan Amortization Commencement Defined in Section 3.2A(i)
Date
"Second Loan Funding Date" Defined in Section 3.2A
"The Second Loan Maturity Date" Defined in Section 3.2A(ii)
The "Second Note" Defined in Section 3.2.
Subsidiaries H.E.R.C. Consumer Products, Inc. and
CCT Corporation which corporations are
wholly owned by Borrower.
Subsidiaries' Security Agreement Security Agreement by the Subsidiaries
collateralizing the Guaranty.
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SECTION 2. THE FIRST LOAN
2.1 Simultaneously with the execution of this Agreement, Lender is
making the loan (the "First Loan") to Borrower in the principal amount of Two
Hundred Fifty Thousand US Dollars (US $250,000.00);
2.2 The First Loan is evidenced by a promissory note ("the First Note")
of the Borrower in favor of Lender, which is being executed by Borrower and
delivered to Lender contemporaneously herewith. A copy of the First Note is
attached to this Agreement as Exhibit 1.
2.3 The First Note is payable in accordance with its provisions which
include, inter alia;
(a) interest at the rate of 14% per annum on the unpaid balance of the
First Note payable in arrears on October 1, 1997 and on the first day
of each of the next five successive months thereafter;
(b) commencing April 1, 1998, and continuing successively on the first
day of each of the next 52 months thereafter, payments of $6,266.17,
with a 54th and final payment of $6,266.14 plus any other unpaid
principal and interest being due and payable on the First Loan Maturity
Date, each such payment reflecting interest at the annual rate of 14%
(computed from the First Loan Amortization Commencement Date) and
amortization of principal (based on a 54-month self-liquidating
schedule);
(c) the right of Borrower, exercisable at any time prior to the First
Loan Maturity Date to prepay all or part (in multiples of $100,000 or
covering the unpaid balance of the Note) of the unpaid principal amount
and accrued interest thereon of the First Note upon Borrower giving,
and Lender receiving:
(i) not less than 30 days' prior written notice of Borrower's
intention to prepay; and
(ii) if the prepayment pursuant to such notice is received
after the expiration of two years from the date of the First Note, an
additional amount (the "Prepayment Fee") equal to a percentage of the
then unpaid principal amount (as of the date immediately prior to such
prepayment) of the First Note, such percentage to equal 5% for a
prepayment received by Lender during the 12-month period beginning upon
the expiration of two years from the date of the First Note and
declining to 4% for a prepayment received by the Lender during the next
twelve month period and to 3% for a prepayment received by Lender after
the expiration of four years from the date of the First Note.
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(d) The principal of the First Note and accrued interest thereon shall
become immediately due and payable upon the occurrence of an Event of
Default.
SECTION 3. THE SECOND LOAN
3.1 Lender shall make an additional loan (the "Second Loan") to
borrower if drawn down by Borrower in its discretion by December 31, 1997 upon
the satisfaction of the conditions set forth in Section 3.3.
3.2 A. The Second Loan shall be evidenced by a promissory note (the
"Second Note") dated the day it is drawn down (the "Second Loan Funding Date")
and shall be payable in accordance with its provision which shall include, inter
alia:
(i) a payment of interest at the rate of 14% per annum on the
unpaid balance of the Second Note payable in arrears on the
first day of the month immediately following the Second Loan
Funding Date, and on the first day of each of the next five
(5) successive months thereafter (the scheduled date on which
the last payment of interest is due as hereinabove provided
being referred to herein as the "Second Loan Amortization
Commencement Date");
(ii) commencing on the first day of the month following the
month in which the Second Loan Amortization Commencement Date
occurs, and continuing successively on the first day of each
of the next 52 months thereafter, payments of $6,266.17 with a
54th and final payment of $6,266.14 plus any other unpaid
principal and interest payable on the expiration of 54 months
after the Second Loan Amortization Commencement Date, each
such payment representing interest at the rate of 14% per
annum computed from the Second Loan Amortization Commencement
Date and amortization of principal (based on a 54-month self
liquidating schedule);
(iii) the right of Borrower to prepay the Second Note on the
same terms as permitted under the First Note, including the
payment of a Prepayment Fee in the same amount as would be
payable under the First Note if a prepayment of that Note were
made at the same time as the prepayment is sought to be made
of the Second Note.
B. Except as indicated above, the Second Note, which shall be
substantially in the form attached hereto as Exhibit 2, shall contain the same
provisions as contained in the First Note.
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3.3 The obligation of Lender to make the Second Loan shall be
conditioned on the satisfaction of the following conditions as of the Second
Note Funding Date.
(a) Borrower shall be in compliance with all of its covenants
under this Agreement and under the Collateral Loan Documents,
and no Event of Default hereunder or thereunder shall have
occurred and be then continuing, or such noncompliance or
Event of Default shall have been waived, in writing, by the
Lender hereunder,
b) Borrower shall have recorded, on a cumulative basis,
revenues and EBITDA for the period (the "Period") from June 1,
1997 to the last day of the month immediately preceding the
month in which the Second Loan Funding Date occurs in amounts
at least equal to the amounts reflected for such items for the
Period on Borrower's Consolidated Budget annexed hereto as
Exhibit 3;
(c) All of the warranties and representations of Borrower set
forth herein shall be true and correct as of the Second Loan
Funding Date to the same effect as if made as of such date;
(d) Subsequent to June 1, 1997, the Borrower shall have
obtained binding commitments from its customers (with respect
to services not theretofore contracted for) which by their
terms will provide Borrower with $800,000 in revenue.
(e) Borrower's President shall have delivered to Lender a
certificate certifying to the fulfillment of the conditions
set forth in (a), (b), (c) and (d) above and in (g) and (i)
below;
(f) Lender shall have received an opinion of Borrower's
attorneys, addressed to the Lender substantially similar in
content to the opinion of Borrower's attorneys given in
connection with the First Loan (a copy of which is attached as
Exhibit 10 to this Agreement) and otherwise satisfactory in
form, scope and substance to the Lender and its attorneys;
(g) There shall be full compliance with the rules,
regulations, procedures and requirements of the U.S. Small
Business Administration as they relate to the Small Business
Investment Company program and this transaction;
(h) Lender shall have received all documents required by this
Agreement;
(i) There shall not have been a material adverse change in the
condition (financial or otherwise) from that contemplated in
this Agreement (whether under Section 9, Section 10.2, Section
11 or otherwise), or in the business or in the prospects of
Borrower or either of the Subsidiaries, it being understood
that losses consistent with the operating projections
reflected on Borrower's Consolidated
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Budget attached as Exhibit 3 shall not for this reason alone
be regarded as a materially adverse change;
(j) Borrower shall have delivered to Lender a certificate
signed by its President setting forth in detail the specific
purposes for which the proceeds of the Second Loan will be
applied, it being the understanding that the proceeds will not
be used for equipment purchases and upgrades of existing
equipment and fulfilling new contracts, unless at least 25% of
the internal cash balance of Borrower as at the Second Loan
Funding Date (not including the proceeds of the Second Loan
and the proceeds from the receivable financing referred to in
Section 11(a)) has been allocated for use for such purposes.
(k) Lender at its request shall have received a letter from
Xxxx Xxxxxxx, an associate of Lender, or such other employee
of Lender as Lender shall direct, which letter shall not be
unreasonably withheld, that based solely on a review of
Borrower's consolidated financial statements delivered to
Lender and discussions with the Chief Financial Officer of
Borrower and Borrower's independent outside accountants,
nothing has come to his attention that would indicate that as
of a date within five days prior to the Second Loan Funding
Date Borrower is or is likely to be in default of its
financial representations and covenants contained in Sections
9 and 10.2 upon the consummation of the Second Loan.
(l) Lender shall have received from Borrower an Affidavit of
Confession of Judgment relating to certain defaults of
Borrower of the Second Loan, in substantially the same form as
Exhibit 7 referred to in Section 7.1(c) herein.
3.4 Interest Limitation. Notwithstanding any provision in this
Agreement or the First or Second Note to the contrary, in no event shall the
interest rate applicable to the Loans exceed that permitted by the laws or
governmental regulations applicable to the Lender that limit rates of interest
that may be charged or collected by the Lender. If any payment hereunder or
under the First or Second Note shall be found to constitute a payment of
interest in excess of that permitted under the laws or governmental regulations
applicable to the Lender that limit rates of interest that may be charged or
collected by the Lender, then the amount of such excess payment shall be
refunded to the Borrower.
6
SECTION 4. PROCESSING FEE
4.1 The Processing Fee payable by Borrower to Lender is $15,000, and
has been paid as follows:
o $12,500 has heretofore been paid to Lender.
o The final $2,500 is being paid by Borrower to Lender
simultaneously herewith.
SECTION 5. WARRANTS
5.1 Simultaneously with the Closing hereunder Borrower has delivered to
Lender two Warrants, Warrant A and Wan-ant B, each to purchase 62,500 shares of
Borrower's Common Stock, which Warrants are alike in all respects except that
the exercise price for Warrant A is $1.18 while the exercise price of the Second
Warrant is $1.475. The exercise price of both Warrants, and the number of shares
covered thereby. are subject to adjustment as set forth in the Wan-ants copies
of which are attached hereto as Exhibits 4 and 5.
5.2 At the closing of the Second Loan Borrower will deliver to Lender
two additional Warrants each providing for the purchase of 62,500 shares of
Borrower's Common Stock. One of these Warrants shall provide for the same
exercise price as contained in Warrant A, and the other shall have the same
exercise price as contained in Warrant B. Except for their dates of issuance the
Wan-ants to be issued at the Second Loan Funding Date shall in all respects be
the same as Warrants A and B, respectively, including their dates of expiration.
5.3 If, upon the expiration of two years from the date hereof, the
outstanding Loans have not been prepaid in full by Borrower, Borrower shall
deliver to Lender additional Warrants identical to the Warrants that were
heretofore issued to Lender thereby doubling the number of Warrants that will
have been issued to Lender hereunder.
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SECTION 6. USE OF PROCEEDS
A. The proceeds of the Loans will be used by the Borrower to purchase
pipe cleaning equipment to secure and fulfill new industrial contracts and to
insure its ability to work at multiple locations simultaneously and to upgrade
existing equipment and provide working capital for fulfilling new contracts and
for costs and expenses of Borrower relating to the transactions hereunder.
B. Borrower shall not use the proceeds of either of the Loans for any
purpose contrary to the purposes contemplated by the Small Business Investment
Act of 1958, as amended, including any subsequent amendments, or for any purpose
that may be in conflict with any regulations issued by the U. S. Small Business
Administration as they relate to the Small Business Investment Company program.
Such prohibited uses include:
(i) personal use by shareholders, officers and employees of
Borrower or the Subsidiaries;
(ii) use for any relending or reinvesting purposes, if the
primary business activity of such person involves, directly or
indirectly, providing funds to others, the purchase of debt
obligations, factoring, or long term leasing of equipment with
no provision for maintenance or repair;
(iii) use for purchasing any stock in or providing capital to
any small business investment company;
(iv) use for making any real estate purchases if a Borrower or
a Subsidiary as the case may be, is classified under Major
Group 65 of the Standard Industrial Classification Manual
unless such transaction would otherwise be exempt by virtue of
Section 901(c) of the Small Business Administration
Regulations pertaining to Small Business
Investment Companies,
(v) use for purposes contrary to the public interest,
including but not limited to activities which are in violation
of law, or inconsistent with free competitive enterprise; or
(vi) use for foreign investment and use outside the United
States except as may be permitted under Section 901 (e) of the
Small Business Administration Regulations pertaining to Small
Business Investment Companies.
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SECTION 7. COLLATERAL
7.1 The Loans are secured by the following documents, which are being
executed and delivered simultaneously with this Agreement:
(a) a security agreement from Borrower in substantially the form
attached hereto as Exhibit 6 granting Lender the security interests set
forth therein (the "Security Agreement");
(b) a collateral assignment of all of Borrower's patents and trademarks
in form appropriate for recording and satisfactory to Lender's Counsel
(the "Patent and Trademarks Assignment");
(c) an Affidavit of Confession of Judgment against, and executed by,
Borrower in favor of Lender (in the form attached hereto as Exhibit 7);
(d) UCC-I Financing Statements granting Lender a security interest in
property of Borrower and the Subsidiaries in form and content
satisfactory to Lender;
(e) a guaranty of the Notes by the Subsidiaries in substantially the
form annexed hereto as Exhibit 8 (the "Guaranty"); and
(f) a Security Agreement from the Subsidiaries, in substantially the
form annexed hereto as Exhibit 9 collateralizing their guaranty (the
"Subsidiaries' Security Agreement").
7.2 It is acknowledged and agreed by Lender that Borrower will seek to
secure a receivable facility in an aggregate amount of up to $1.5 million from a
third party ("Third Party"), pursuant to which Borrower shall sell certain or
all of its receivables to Third Party. It is further agreed that Borrower shall
be entitled to sell such receivables to Third Party and Lender's security
interest in Borrower's unsold receivables and inventory, to the extent covered
by the security interest to be given to Third Party ("Third party Security
Interest"), shall be subordinate to such Third Party Security Interest. Further,
Lender hereby agrees to enter into such intercreditor agreement as may be
reasonably requested by Third Party consistent with the provisions herein.
SECTION 8. CLOSING DOCUMENTS
8.1 Simultaneously with the execution and delivery of this Agreement,
the First Loan is being funded and Borrower is delivering to Lender the
following "Collateral Documents", duly executed and (where required) witnessed
or notarized:
(a) the First Note;
(b) the documents set forth in Section 7.1;
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(c) Secretary's Certificate of Borrower as to resolutions of its Board
of Directors authorizing (i) the borrowing hereunder and (ii) the
execution and delivery of this Agreement and the transactions
contemplated hereby and thereby;
(d) Opinion Letter of Attorneys for Borrower (in form and content
attached hereto as Exhibit 10).
8.2 Simultaneously with the funding of the Second Loan, Borrower shall
deliver or cause to be delivered to Lender, duly executed and (where required)
witnessed or notarized, closing documents substantially similar to the First
Loan Closing Documents.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
9.1 To induce Lender to make the Loan hereunder, the Borrower
represents, warrants and agrees that;
(a) Borrower and each Subsidiary validly exists and is in good standing
under the laws of their respective states of incorporation and is
qualified to do business in each state where the ownership of property
or the nature of the business conducted requires such qualification.
(b) Borrower has the requisite corporate authority and power to enter
into this Agreement, to borrow money as contemplated hereby, to issue
the Notes and Warrants described herein, and to execute and deliver
each of those documents required and described in this Agreement.
c) Borrower's Form 10-KSB for the year ended on December 31, 1996 and
its Forms 1O-QSB for the quarters ending on March 31, 1997 and June 30,
1997 are true and correct in all material respects and the financial
statements contained therein present fairly the financial position of
Borrower and its Subsidiaries on a consolidated basis as of the dates
of their respective balance sheets included therein and the results of
their operations for the applicable periods then ended.
(d) All representations made by Borrower to Lender in this Agreement or
in any Collateral Document are true and correct in all material
respects as of this date.
(e) Neither Borrower nor any Subsidiary is a party to, or threatened
by, any suits, actions, claims, or investigations by any governmental
body or legal, administrative or arbitration proceeding which may
result, either singly or in the aggregate, in any material adverse
change in the business, property or assets of the Borrower or any
Subsidiary.
(f) There are no outstanding orders, judgments, writs, injunctions or
decrees of any court, governmental agency, or arbitration tribunal
which may result, either singly or in the
10
aggregate, in any material adverse change in the business, property or
assets of Borrower or any Subsidiary.
(g) Neither Borrower nor any Subsidiary is a party to, or bound by, any
contract or instrument which would be in breach as a result of any of
the Loans covered by this Agreement.
(h) Except to the extent indicated below, neither Borrower nor any
Subsidiary is in breach of, in default under, or in violation of, any
applicable law, decree, order, rule or regulation, or any indenture,
contract, agreement, deed, lease, loan agreement, commitment, bond,
note, deed of trust, restrictive covenant, license, instrument or
obligation to which it is a party or by which it is bound, or to which
any of its assets is subject, in each case which breach, default or
violation would have a material adverse effect on Borrower and the
Subsidiaries taken as a whole, and the execution, delivery and
performance of this Agreement and the Collateral Documents will not
constitute any such breach, default or violation, or require consent or
approval of any court, governmental agency, or body, except as may be
expressly provided herein or shall have been obtained. Borrower and its
Subsidiaries are currently delinquent in the payment of obligations in
an amount less than $500,000 in the aggregate. For purposes of this
subparagraph an obligation shall be deemed past due and delinquent if
it has not been paid when due in accordance with the understanding of
the parties to such transaction or, if there is no such understanding,
has not been paid within thirty (30) days after the date such
obligation was incurred. It is expected that the $500,000 maximum
delinquent amount will be reduced by $100,000 per month until
extinguished. Consequently, when this representation and warranty is
repeated as a condition to the making of the Second Loan, the $500,000
amount shall be deemed reduced to the amount determined by taking into
account the reductions as set forth in the preceding sentence.
(i) There has not been a material adverse change in the condition
(financial or otherwise) of the Company or the Subsidiaries from that
shown in the Company's financial statements included in its Form 10-QSB
for the quarter ending on June 30, 1997, it being understood that
losses consistent with the operating projections reflected in
Borrower's Consolidated Budget attached as Exhibit 3 shall not for this
reason alone be regarded as a materially adverse change.
(j) Borrower is a small business concern, as defined under the Small
Business investment Act and Regulations, in accordance with SBA Form
480 thereunder and accordingly is entitled to receive the proceeds of
this Loan.
(k) There are no liens, security interests or encumbrances of any kind
on any of the assets of Borrower or any Subsidiary which are intended
to secure the Notes or the Guaranty other than immaterial liens, and
Lender shall upon the filing of UCC statements as appropriate and the
recording of the Patent and Trademark Assignment have a first perfected
security interest in all such assets, except for a prior security
interest granted or to be granted by Borrower of the type permitted
under Section 11 (a) and the security interest given to bonding
institutions to secure Borrower's performance under outstanding
municipal contracts.
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(l) Mr. S. Xxxxxx Xxxx'x employment agreement with the Borrower has
been amended effective on the date hereof to eliminate any incentive
bonus based on the revenues of CCT Corporation.
(m) Prior to the date hereof, S. Xxxxxx Xxxx and Xxxxxx Xxxx and his
wife, have made equity investments in Borrower and/or the Subsidiaries
in an aggregate amount of not less than $1,300,000.
n) There has not since December 31, 1996 been any material change in
the ownership or control of Borrower or in the corporate structure or
business of Borrower or any of the Subsidiaries except as reflected in
Borrower's Forms 10-QSB referred to in Section 9.1(c) and its Proxy
Statement dated July 8, 1997 (the "Proxy Statement").
9.2 The representations, warranties and agreements in Section 9.1 apply
to each Loan and shall be deemed to have been made as of the Second Loan Funding
Date by the Borrower to induce Lender to fund the Second Loan.
SECTION 10. CERTAIN AFFIRMATIVE COVENANTS
10.1 The covenants and agreements in this Section 10 apply to each
Loan.
10.2 While either Note is outstanding, the Borrower will do and comply
with the following:
(a) Borrower will promptly make all payments of the principal and
interest on each Note when due;
(b) Borrower will comply with the terms and conditions in this
Agreement and in those contained in each Collateral Document;
(c) Borrower will keep accurate and complete books and records and
maintain them at its principal office set forth in the first sentence
of the Agreement.
(d) Borrower will furnish to Lender:
(i) within ninety (90) days after the end of each fiscal year
consolidated and consolidating balance sheets of Borrower and
consolidated and consolidating income statements of Borrower
showing the financial condition as of the close of such fiscal
year and the results of its operations for such fiscal year
and consolidated and consolidating statements of shareholders'
equity of Borrower and consolidated and consolidating
statements of cash flows of Borrower. All of the foregoing
Consolidated Financial Statements to be audited by an
independent certified public
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accountant ("CPA") selected by Borrower and reasonably
acceptable to Lender; it being agreed that Borrower's current
CPAs are acceptable to Lender;
(ii) within forty-five (45) days after the end of each fiscal
quarter, unaudited consolidated and consolidating balance
sheets, income statements, statements of shareholders' equity
and statements of cash flows of Borrower as of the end of such
quarterly period, prepared and certified by the Chief
Financial Officer of Borrower as presenting fairly the
financial condition and results of operations of Borrower and
having been prepared in accordance with generally accepted
accounting principles subject to year-end adjustments;
(iii) copies of each report of Borrower filed pursuant to the
Securities Exchange Act of 1934, simultaneous with its filing
with the Securities and Exchange Commission.
(e) For purposes of verifying Borrower's compliance with the provisions
of this Agreement, Borrower shall permit any authorized representative
of Lender and its attorneys and accountants to inspect, examine and
make copies and abstracts of the books of account and records of
Borrower and the Subsidiaries at reasonable times and upon five (5)
business day's notice during normal business hours, and to inspect the
collateral given as security for the Loans and the Guaranty;
(f) Borrower shall notify Lender of (i) litigation involving amounts of
$25,000. or more to which Borrower or a Subsidiary is a party by
mailing to Lender by certified mail within five (5) business days of
receipt thereof, a copy of the complaint, motion for judgment, or other
such pleadings served on or by Borrower or a Subsidiary and (ii) any
litigation to which Borrower or a Subsidiary is not a party but which
could substantially and adversely affect the operation of Borrower's or
a Subsidiary's business or the collateral pledged for this Loan by
mailing to Lender by certified mail, a copy of all pleadings obtained
by Borrower or a Subsidiary regarding such litigation, or if no
pleadings are obtained, a letter setting out the facts known about the
litigation within five (5) business days of receipt thereof. Mailings
under this paragraph shall be addressed to:
Xxxxxxx Xxxxxxxxx, Managing Director
InterEquity Capital Partners, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(g) Borrower shall continue, and shall cause the Subsidiaries to
continue, their respective businesses in substantially the same general
character and manner as conducted as of the date of this Agreement and
to maintain, preserve and keep, in all material respects all their
respective properties, buildings, equipment and fixtures necessary for
the operation of their respective businesses in reasonable repair and
condition and promptly pay and discharge or cause to be paid and
discharged as and when due any and all income taxes, federal or
otherwise, lawfully assessed and imposed upon them, and any and all
lawful taxes, rates, levies and assessments whatsoever upon their
respective properties and every part thereof,
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provided however that nothing contained herein shall be construed as
prohibiting Borrower or a Subsidiary from contesting in good faith the
validity of any such income taxes, federal or otherwise, or such other
taxes, rates, levies or assessments;
(i) Borrower shall defend and cause the Subsidiaries to defend at all
times any claim by a third party relating to the possession of, or
interest in, their respective assets;
(j) Borrower shall make and cause the Subsidiaries to make all payments
to creditors as shall be necessary to preserve Lender's security
interests in the collateral given to secure the Loans and the Guaranty;
(k) Borrower shall execute and deliver and cause the Subsidiaries to
execute and deliver to Lender either before or after disbursement of
either Loan, all documents necessary to perfect Lender's security
interests or mortgages in the collateral given (A) to secure the Loans
including (but not limited to) extensions of the Affidavit of
Confession of Judgment referred to in Section 7 and (B) to
collateralize the Guaranty;
(l) The consolidated net worth of Borrower shall at all times up to and
including December 30, 1998 exceed $2,600,000, and at all times on or
after December 30, 1998 shall exceed $2,800,000.
(m) The (i) consolidated EBITDA of Borrower for the year ending
December 31, 1997 shall not result in a loss greater than $1,400,000
and (ii) the consolidated EBITDA of Borrower for each year beginning on
or after January 1, 1998 shall exceed $700,000.
(n) The Consolidated Revenues of Borrower for 1997 shall exceed
$6,000,000 and for each year thereafter shall exceed $8,500,000.
(o) The Interest Coverage for each year beginning on or after January
1, 1998 shall be not less than 1.5 to 1.
(p) The Fixed Charge Coverage for each year beginning on or after
January 1, 1998 shall be not less than 1.1 to 1.
(q) The President or Chief Financial Officer of Borrower shall submit a
semi-annual certification to Lender that to the best of such officer's
knowledge and belief, Borrower is in compliance with all of the terms,
provisions, conditions and covenants set forth in this Loan Agreement.
(r) Borrower shall, at all times, keep reserved for issuance that
number of shares of capital stock as may be required to be issued in
connection with the exercise of the Warrants issued and to be issued
hereunder.
(s) Employment and Non-Compete Agreements with S. Xxxxxx Xxxx and Xxxx
Xxxxxxx and with such other key operating and technical personnel as
requested by Lender, copies of
14
which have been delivered to Lender shall remain in full force and
effect without any modification or amendment thereof.
(t) Borrower shall maintain insurance on the business assets of
Borrower and key man life insurance on the lives of S. Xxxxxx Xxxx and
Xxxx Xxxxxxx in the amounts of at least $500,000 for each such person
from licensed carriers, all in accordance with its current practice,
with the policies thereon made payable to Lender as its interest may
appear.
(u) Borrower and each Subsidiary shall comply with all federal, state
and local laws, ordinances, regulations and requirements applicable to
them and to their respective businesses, including (without limitation)
federal and state securities laws and zoning laws and ordinances except
where the failure to so comply would not have a material adverse effect
on Borrower and the Subsidiaries taken as a whole.
SECTION 11. CERTAIN NEGATIVE COVENANTS
Until such date as the Loans are repaid in full, and except with the
prior written consent of Lender (whose consent may be refused without
explanation and without any legal recourse by Borrower), Borrower will not:
(a) except for a loan up to $1,500,000 from a financial institution to
be secured by Borrower's accounts receivable and inventory on terms
acceptable to Lender and equipment leases and purchase money security
interests and credit card obligations in the ordinary course of
business, borrow any money or permit a Subsidiary to borrow any money
except for intra corporate borrowings between the Borrower and a
Subsidiary or between Subsidiaries.
(b) engage or permit a Subsidiary to engage in any line of business
materially different from those which Borrower and the Subsidiaries are
now engaged in;
(c) become, or permit a Subsidiary to become, a party to any merger or
consolidation with any corporation, company or entity of any kind
whatsoever, or sell substantially all of its assets, or otherwise
liquidate or dispose of its business, provided that nothing herein
shall prevent a merger or sale of assets between or among Borrower and
the Subsidiaries;
(d) become, or permit a Subsidiary to become, a guarantor of
obligations of any other person, firm, corporation or entity, except in
connection with depositing checks and other instruments for the payment
of money acquired in the normal course of their respective businesses;
(e) except as otherwise contemplated herein, transfer, sell, lease or
in any other manner convey or permit a Subsidiary to so do, to any
person other than in the ordinary course of its business any equitable,
beneficial or legal interest in any of the collateral securing a Loan
or the Guaranty;
15
(f) except as otherwise contemplated herein, create or permit to exist
any mortgage interest, pledge, security interest, title retention
device, or other encumbrance in the collateral securing the Notes and
the Guaranty junior to Lender's lien or security interest thereon,
except for liens of taxes and assessments not delinquent or contested
in good faith, nonmaterial liens for xxxxxxx'x compensation and
unemployment obligations or those machinery and equipment purchases and
leases which may arise in the ordinary and necessary course of
business;
(g) knowingly permit any judgment obtained against Borrower or a
Subsidiary in an amount exceeding $10,000 to remain unpaid for a period
of thirty (30) days following the entry thereof, without obtaining a
stay of execution or bonding or causing such judgment to be bonded;
(h) pay any dividends or make any other distributions with respect to
its capital stock;
(i) pay any bonus to or increase the salary of any employee if the
effect of such payment would cause a breach of any other representation
or covenant made by Borrower in this Agreement, including, without
limitation, the covenants set forth in Section 10 of this Agreement;
(j) increase the salary of and/or pay a bonus to any executive officer
of Borrower which in the aggregate exceed 5% of his compensation for
any year;
(k) make any payment to any executive officer of Borrower for salary,
bonus or otherwise (whether or not such salary has been earned or such
other payment is due) if the effect of such payment would cause a
breach of any other representation or covenant made by Borrower in this
Agreement, including, without limitation, the covenants set forth in
Section 10 of this Agreement; provided that any payment so deferred may
thereafter be made to the extent that such payment would not cause a
breach of any other representation or covenant made by Borrowers in
this Agreement, including, without limitation, the covenants set forth
in this Section or in Section 9 or 10 of this Agreement.
SECTION 12. REPRESENTATION ON BORROWER'S BOARD OF DIRECTORS
12.1 Upon request of Lender, Borrower shall cause a person designated
by Lender, to be elected to serve as a member of Borrower's Board of Directors
for so long as either of the Notes remain unpaid.
12.2 If Lender does not elect to designate a nominee for election to
the Borrower's Board of Directors it shall have the right to send an observer to
all meetings of the Board in which case it
16
shall be entitled to receive notice of all Board meetings in the same course and
manner as the directors comprising the Board.
12.3 Upon the occurrence, and continuation, for six months, of a
default by Borrower of any of its covenants under this Agreement, Borrower shall
at Lender's request cause a second person designated by Lender to be elected to
its Board of Directors, such person to serve as a director until all defaults
under this Agreement are cured.
SECTION 13. EVENTS OF DEFAULT
13.1 The occurrence of each of the following is an "Event of Default"
or "default" under this Agreement and under each Collateral Document:
(a) the failure to make any payment (whether for interest,
amortization, unpaid principal or otherwise) under this Agreement or a
Note within ten (10) days after being due;
(b) the failure of Borrower to perform, observe or comply with any of
the covenants, agreements, obligations, requirements or provisions in
this Agreement or in a collateral Document, and such failure continues
for ten (10) days after written notice thereof is given;
(c) any representation or warranty in this Agreement or in a Collateral
Document is not true or correct as of the date or dates such
representation is deemed made;
(d) the failure by a Subsidiary to comply with the Guaranty;
(e) Borrower or a Subsidiary shall commit an act of bankruptcy within
the meaning of the Federal Bankruptcy code or a bankruptcy,
receivership, insolvency, reorganization, dissolution, liquidation or
other similar proceeding shall be instituted by or against Borrower or
a Subsidiary and in the case of a non-voluntary proceeding such party
consents thereto or fails to cause such proceeding to be dismissed or
discharged within sixty (60) days;
(f) Except as described in Section 9.1(h), Borrower or a Subsidiary
shall be in default after expiration of all cure periods on any debt or
obligation greater than $25,000.00 whether or not secured by any of the
collateral given to secure a Loan; and
(g) a judgment or tax lien is filed against Borrower or a Subsidiary
and it is not paid or discharged by bond or otherwise stayed within
thirty (30) days;
(h) the death or permanent disability of S. Xxxxxx Xxxx or Xxxx
Xxxxxxx;
17
(i) there has occurred since December 31, 1996 a material change in the
ownership or control of Borrower or in the corporate structure of
Borrower or any of the Subsidiaries except as reflected in either of
Borrower's Forms 1O-QSB referred in Section 9.1(c) or in the Proxy
Statement.
13.2 Borrower hereby waives presentment, demand, notice of dishonor,
protest or further notice of any kind. As a result, if any installment or other
sum is not paid when due, Lender does not have to notify Borrower before
enforcing its rights to collect all amounts due.
SECTION 14. IRREGULAR PAYMENT
14.1 Lender may accept late payments and partial payments even though
marked "payment in full" or words of similar import, without losing any of its
rights under this Agreement or under the Notes.
SECTION 15. DELAY IN ENFORCEMENT
15.1 Lender may delay in enforcing its rights under this Agreement or a
Collateral Document without losing or prejudicing such rights.
SECTION 16. NO BROKER
16.1 Borrower represents and warrants to Lender that it has not dealt
with any broker or finder, whether or not licensed, in connection with this
Agreement or the loan transactions under this Agreement.
16.2 Borrower agrees to defend, indemnify and hold harmless Lender from
any and all Claims and Expenses based on, or arising from, its representation
and warranty in Section 16.1.
SECTION 17. LOAN EXPENSES
17.1 Borrower agrees to pay, promptly after demand is made, all
reasonable out-of-pocket expenses incurred by Lender in connection with the
making, perfection or enforcement of the loan transactions which are the subject
of this Agreement, including (but not limited to) Lender's legal
18
fees and disbursements and other miscellaneous expenses. Borrower has delivered
its check for $7,500 to Lender's counsel Morse, Zelnick, Rose & Lander, LLP on
account of legal fees and disbursements to be incurred by it in connection with
this transaction and will deliver a check for the balance of its fees and
disbursements incurred in connection therewith at the Closing against
presentation of a xxxx for such service and disbursements.
SECTION 18. NOTICES
18.1 Unless otherwise expressly provided elsewhere in this Agreement,
any notice, request, consent, election, demand or other communication ("notice")
to be given or made by the parties under this Agreement must be in writing and
either:
(a) delivered by hand, telecopier or overnight delivery by Federal
Express or other recognized carrier; or
(b) sent by certified or registered mail, return receipt requested,
postage prepaid.
18.2 Each notice to be given:
(a) to Lender, will be addressed to:
Xxxxxxx Xxxxxxxxx, Managing Director
InterEquity Capital Partners, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) to Borrower, will be addressed to it at its address set forth in
the preamble on page 1 of this Agreement.
18.3 A copy of each notice must be sent simultaneously and in like
manner to the following persons:
(a) (in case of a notice to Lender) to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Att'n: Xxxxxx X. Xxxxxxxxx, Esq.
19
(b) (in the case of a notice to Borrower) to:
Xxxxxxxx, Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Att'n: Xxxxx Xxxx Xxxxxx
18.4 Borrower and Lender may, by notice to the others, change the
address to which future notices are to be sent or add or change a person to whom
a notice or a copy of a notice is to be sent.
18.5 Unless otherwise provided elsewhere in this Agreement, each notice
shall be considered to be given on:
(a) the date delivered by hand or telecopier (unless it is not a
business day or is not received before 5:30 P.M., in which case the
notice shall be considered given on the next business day after being
sent);
(b) the next business day after being sent by overnight courier;
(c) the third full business day following the date of mailing postage
prepaid in the United States Mail.
However, a notice of a change of address of person pursuant to Section 18.4
shall not be deemed given until received.
18.6 A notice that is mailed must be deposited into an official mail
depository maintained by the United States Postal Service or (if mailed outside
the United States) by an equivalent postal authority.
18.7 Failure to accept a notice is deemed receipt of it and does not
invalidate the notice or excuse the performance of an obligation.
SECTION 19. ENTIRE AGREEMENT
19.1 All prior and contemporaneous statements, representations,
promises, understandings, agreements, projections and opinions, whether written
or oral made to each other
20
with regard to this transaction, are merged in this Agreement and have no effect
unless they are expressly contained in this Agreement. This Agreement
constitutes our entire agreement.
SECTION 20. CHANGES AND WAIVERS
20.1 A provision of this Agreement will be considered to have been
changed or waived only if the change or waiver is expressly made in writing
signed by the party to be charged.
20.2 The failure to insist on strict performance of any provision will
not mean that the provision has been waived or that the right to insist
thereafter on strict performance of that or any other provision has been waived.
SECTION 21. PARTIES TO COOPERATE
21.1 Each party will reasonably cooperate with the other to close these
loan transactions.
21.2 In furtherance of such cooperation, each party will obtain,
execute and deliver such documents as are in its possession or control and are
reasonably necessary in order to close or effectuate or confirm any provisions
of this Agreement.
SECTION 22. GOVERNING LAW; VENUE FOR LAWSUITS
22.1 The laws of the State of New York will govern this Agreement and
the interpretation and enforcement of its provisions, without regard to legal
principles of conflict of laws.
22.2 The parties each hereby agree that any action, suit or proceeding
under this Agreement shall be brought in the State of New York, and each party
hereby submits to the jurisdiction of the courts of the State of New York (both
State and Federal). Borrower hereby irrevocably appoints Messrs. Xxxxxxxx,
Xxxxxx & Xxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as its authorized
agent upon whom process may be served in any such action, suit or proceeding.
Borrower agrees that service of process on such agent with a copy of such
process delivered to Borrower in the manner permitted under Section 18 shall
constitute effective service
21
upon it Borrower agrees to take any and all actions, including the execution and
filing of all documents and instruments, as may be necessary or appropriate to
effect and continue the appointment of such agent in full force and effect, or
if necessary by reason of any fact or condition relating to such agent, to
replace such agent to the satisfaction of Lender and Borrower agrees that
service of process upon such agent or any replacement therefore with a copy to
it shall be deemed in every respect effective service of process in any such
suit, action or proceeding in any such court.
SECTION 23. WAIVER OF JURY TRIAL
23.1 Each Party waives the right to a trial by jury in any litigation
arising under this agreement or under any ancillary document.
23.2 Any claim for which a jury trial cannot legally be waived shall
not be asserted as a counterclaim or joined with any lawsuit in which a jury
trial is waived, unless the failure to assert it would prevent the claim from
being made later.
SECTION 24. INVALID PROVISIONS SEVERED
24.1 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity of the other provisions, which shall be
enforced to the fullest extent permitted by law.
SECTION 25. CAPTIONS; EXHIBITS; AND GRAMMAR
25.1 The paragraph captions are for convenience only. They are not part
of the text of this Agreement and are not to be used to interpret its
provisions.
25.2 All Exhibits to this Agreement are incorporated in, and are part
of, this Agreement as fully as though set forth herein.
25.3 All references in this Agreement to a Section, paragraph or
Exhibit mean a Section or paragraph of this Agreement or an Exhibit attached to
this Agreement.
22
25.4 The use of the singular includes the plural and the use of any
gender includes any other gender whenever required by the sense of this
Agreement
SECTION 26. REIMBURSEMENT FOR ENFORCEMENT
26.1 In the event Borrower fails to perform any of its obligations
under this Agreement or under any Collateral Document, then Borrower shall pay
any and all Claims and Expenses incurred by the Lender in enforcing or
establishing its rights hereunder or thereunder.
SECTION 27. NO NEGATIVE CONSTRUCTION AGAINST DRAFTING PARTY
27.1 The parties acknowledge that they are sophisticated and are
represented by experienced, knowledgeable attorneys. The parties agree that the
normal rules of construction to resolve ambiguities against the party whose
counsel drafted this Agreement shall not be followed in the interpretation of
this Agreement. Consequently, no negative inference or interpretation shall be
made by a court in enforcing the provisions of this Agreement against the party
whose attorney drafted this Agreement.
SECTION 28. NO OTHER PARTIES
The representations, warranties and agreements of Borrower contained
herein are intended solely for the benefit of Lender, and shall confer no rights
hereunder, whether legal or equitable, in any other third person, and no other
person shall be entitled to rely thereon.
SECTION 29. COUNTERPARTS
29.1 This Agreement may be signed in counterparts, each of which will
be deemed an original document. All counterparts will constitute one document
which may be sufficiently evidenced by one such Counterpart. Each counterpart
will be binding on the signatory to such counterpart notwithstanding that it is
not signed by both signatories to this Agreement.
23
SECTION 30. INDEMNIFICATION
30.1 Borrower indemnifies Lender, its officers, directors, principals
and affiliates from and against any Claims and Expenses incurred or suffered by
them or any of them arising out of the transactions contemplated hereunder,
except that this indemnification shall not apply to any liability incurred by
the Lender to the Borrower or to any Person as a result of the gross negligence
or willful misconduct of the Lender, its officers, directors, employees, agents
and participating lenders.
SECTION 31. LENDER'S RIGHT TO TRANSFER AND ASSIGN
31.1 Lender has the right, in its sole and absolute discretion, without
consent or affecting the obligations of Borrower, to transfer and assign
participation interests in one or both Notes given to it pursuant to this
Agreement together with its rights hereunder under one or more of the other
Collateral Documents, provided that if there is more than one participant
(including Lender) then all participants shall designate one party who shall for
all purposes of the transactions contemplated under this Agreement act for and
on behalf of all participants.
SECTION 32. SUCCESSORS AND ASSIGNS
32.1 This Agreement shall bind Borrower and its successors.
32.2 This Agreement shall be binding upon and shall inure to the
benefit of Lender, its successors and assigns. Any reference in this Agreement
to Lender shall include its successors and assigns.
24
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
and affixed their seals as of the date first above stated.
(SEAL) H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Xxxx X. Xxxxxxx
-------------------------
INTEREQUITY CAPITAL PARTNERS, L.P.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------
25
Exhibit 3 to Loan Agreement
H.E.R.C. Products Incorporated and Subsidiaries
0000 X. Xxxx Xxxxxx Xxxxx #00
Xxxxxxx, XX 00000
1997 FORECAST
HERC PRODUCTS INCORPORATED
CONSOLIDATED BUDGET 1997
A C T U A L P R O J E C T E D
Revenue Jan Feb Mar Apr May Jun Jul
Sales - PK 50,570 18,270 33,750 19,000 170,175 113,066 111,260
Sales - PW 13,234 12,301 8,688 9,639 9,878 9,996 11,937
Sales - WK 14,657 6,645 5.065 5,100 8,000 4,580 6,395
Sales - CH 10,685 5,250 0 5,008 5,145 5,187 5,355
Sales - HCP 164,318 293,309 168,803 111,600 118,779 151,115 147,765
Sales - CCT 81,758 106.156 100,610 176,953 277,877 266,721 93,520
Total Revenue 335,222 441,931 316,916 327,300 587,854 550,665 376,232
Cost of Goods Sold
COGS - PK 23,202 21,982 14,695 44,988 149,254 233,675 68,047
COGS - PW 3,319 4,902 2,458 4,145 2,976 2,587 3,165
COGS - WK 9,525 1,961 1,902 1,440 2,132 1,190 2,008
COGS - CH 1,684 819 0 1,166 872 706 999
COGS - HCP 139,786 202,406 42,142 68,733 75,433 103,578 102,656
COGS - CCT 40,132 41,086 55,691 89,649 155,592 149,858 47,616
Total Cost of Goods Sold 217,648 273,156 26,888 210,121 386,259 491,513 224,491
Gross Profit 117,574 168,775 100,028 117,179 201,595 59,152 151,741
------- ------- ------- ------- ------- ------ -------
35% 38% 32% 36% 34% 11% 40%
Selling Expenses
Selling Expenses - PK 25,754 18,328 27,747 21,612 33,979 29,848 26,678
Selling Expenses - PW 7,280 6,867 6,051 7,906 5,604 6,220 5,624
Selling Expenses - WK 5,026 5,160 4,476 4,780 4,751 4,531 5,343
Selling Expenses - CH 0 0 0 0 0 0 0
Selling Expenses - HCP 44,339 58,449 49,890 47,379 30,874 31,434 39,683
Selling Expenses - CCT 42,419 49,409 70,917 47,810 54,897 38,394 36,807
Total Selling Expenses 124,818 138,203 159,081 129,487 130,105 110,427 114,135
General & Administrative Expenses
G&A Expenses - PK 36,661 32,618 39,654 72,500 29,283 75,149 65,664
G&A Expenses - PW 155 284 198 112 128 143 139
G&A Expenses - WK 517 125 325 549 347 130 245
G&A Expenses - CH 0 0 0 0 0 0 0
G&A Expenses - HCP 856 7,546 28,920 6,812 3,108 2,690 2,006
G&A Expenses - CCT 19,172 14,823 9,054 14,823 16,201 14,714 14,616
G&A Expenses - Corporate 148,090 149,748 339,946 109,495 118,849 159,896 153,767
Total G & A Expenses 205,451 205,144 418,907 204,291 165,916 252,722 236,437
Total SG&A Expenses 330,269 343,347 577,178 333,778 296,021 363,149 350,572
Other Income Expenses
Interest Income 4,843 10,038 2,953 (472) 4,275 2,059 200
Interest Expense (1,302) (446) (2,549) (1,295) (3,694) 1,935 (2,525)
Total Other Income/Expense 3,541 9,592 404 (1,767) 581 3,994 (2,325)
Net Income (Loss) (209,154) (164,980) (476,746) (218,366) (93,845) (300,003) (201,156)
-------- -------- -------- -------- ------- -------- --------
-62.39% -37.33% -150.43% -66.72% -15.96% -54.48% -53.47%
A C T U A L P R O J E C T E D
Revenue Aug Sep Oct Nov Dec Total
Sales - PK 129,500 130,000 345,300 115,000 125,000 1,860,591
Sales - PW 10,000 15,000 15,300 15,000 15,000 145,673
Sales - WK 10,000 25,000 25,300 20,000 20,000 141,442
Sales - CH 5,200 10,000 10,300 10,000 10,000 81,830
Sales - HCP 157,174 172,064 186,355 201,845 216,735 2,090,463
Sales - CCT 225,000 300,000 150,000 52,626 51,154 1,892,377
Total Revenue 536,874 652,064 731.955 924,473 437,889 6,219,376
Cost of Goods Sold
COGS - PK 80,073 89,740 157,071 306,073 83,921 1,272,721
COGS - PW 3,200 4,800 4,800 4,800 4,800 45,952
COGS - WK 3,400 8,500 8,500 6.800 6,800 54,077
COGS - CH 1,768 3,400 3,400 3,400 3,400 21,614
COGS - HCP 97,088 105,642 114,972 124,302 133,632 1,410,370
COGS - CCT 128,255 155,023 75,661 33,543 20,055 992,161
Total Cost of Goods Sold 313,783 367,105 364,405 478,918 252,608 3,796,895
Gross Profit 223,901 284,959 367,550 445,555 185,281 2,422,481
------- ------- ------- ------- ------- ---------
42% 44% 50% 48% 42% 39%
Selling Expenses
Selling Expenses - PK 20,855 21,275 24,600 24,600 19,050 294,324
Selling Expenses - PW 6,343 8,343 6,343 7,843 6,343 80,757
Selling Expenses - WK 13,264 10,728 10,728 10,328 10,328 89,443
Selling Expenses - CH 0 0 0 0 0 0
Selling Expenses - HCP 42,889 39,088 40,922 40,922 41,267 505,937
Selling Expenses - CCT 54,938 57,934 27,614 27,614 24,832 547,739
Total Selling Expenses 138,288 137,313 123,216 111,307 101,819 1,518,200
General & Administrative Expenses
G&A Expenses - PK 29,253 39,253 39,253 39,253 39,253 537,793
G&A Expenses - PW 190 190 190 190 190 2,109
G&A Expenses - WK 525 525 525 525 525 4,863
G&A Expenses - XX 0 0 0 0 0 0
X&X Expenses - HCP 583 3,083 583 1,183 583 57,955
G&A Expenses - CCT 17,385 13,218 13,218 13,218 13,218 173,660
G&A Expenses - Corporate 107,527 102,420 94,420 94,920 94,420 1,671,497
Total G & A Expenses 155,463 158,689 148,189 149,289 148,189 2,447,876
Total SG&A Expenses 293,751 296,002 271,405 260,596 250,008 3,966,077
Other Income Expenses
Interest Income 200 200 200 200 200 24,896
Interest Expense (3,757) (8,006) (11,715) (13,735) (13,731) (80,820)
Total Other Income/Expense (3,557) (7,806) (11,515) (13,535) (13,531) (35,924)
Net Income (Loss) (74,217) (18,848) 84,630 171,424 (78,258) (1,579,520)
------- ------- ------ ------- ------- ----------
-13.82% -2.89% 11.58^ 18.54% -17.87% -25.40%
HERC PRODUCTS INCORPORATED
CORPORATE BUDGET 1997
General & Administrative A C T U A L P R O J E C T E D
Jan Feb Mar Apr May Jun Jul
Auto 796 1,380 952 2,424 1,276 1,410 1,000
Amortization 9,808 9,808 9,808 9,808 9,808 10,980 10,024
Bank Charges 20 570 1 157 173 12,941 13,700
Depreciation Expense 5,100 5,100 5,100 5,100 5,100 (7,201) 3,050
Dues & Subscriptions 4,000 261 107 962 0 200 0
Education Expenses 0 65 299 0 0 0 0
Meals and Entertainment 1,533 674 2,084 2,621 941 3,021 1,500
Equipment Rental Office 4,193 2,766 2,858 572 2,858 2,858 2,858
401K 10% Match 153 0 655 261 131 394 150
Insurance - Health 6,153 4,927 7,676 4,154 5,051 7,061 6,143
Insurance - Liab./D&O 17,270 6,956 14,330 9,644 12,602 11,940 12,500
Legal & Professional 12,847 26,548 43,218 12,766 24,146 19,194 19,607
Maint. & Repairs Office 927 213 849 678 298 676 54
Moving Expenses 0 0 0 0 0 0 0
Patent Expenses 0 0 3 4 0 (39) 0
Payroll Office 11,715 11,251 10,212 9,422 11,263 13,393 12,794
Payroll Officers 37,730 47,542 196,292 13,958 22,708 41,958 34,958
Payroll Support 3,317 3,167 3,217 3,267 3,167 3,345 3,580
Payroll Expenses 8,392 5,606 6,771 6,425 4,568 5,406 4,580
Permits/Licenses/Fees 0 0 0 60 0 4,396 76
Postage 1,725 884 987 1,491 563 1,576 1,050
Printing 439 417 2,576 324 821 173 6,000
Rent 9,841 9,722 9,819 9,755 2,316 9,074 9,074
R & D Expense 0 0 0 1,035 61 5 0
Supplies Office 3,051 1,688 2,151 1,843 896 3,130 2,000
Telephone 2,956 3,524 3,733 3,757 4,097 3,135 2,835
Taxes - Other 0 0 4,151 2 82 1,546 34
Testing Expenses 42 0 3,787 (50) 0 0 0
Travel 5,465 5,481 7,309 7,657 3,229 8,524 5,000
Utilities 615 0 801 1,398 692 800 1,200
Total G&A Expenses 148,090 149,748 339,946 109,495 116,849 159,896 153,767
Other Income/Expense
Other Income (Expense) 4,843 10,038 2,953 (472) 4,275 2,059 200
Interest Expense (798) 0 (905) (139) (1,390) (1,235) (1,100)
Total Other Income/Expense 4,045 10,038 2,046 (611) 2,885 824 (900)
General & Administrative A C T U A L P R O J E C T E D
Aug Sep Oct Nov Dec Total
Auto 1,000 1,000 1,000 1,000 1,000 12,240
Amortization 10,024 10,024 10,024 10,024 10,024 120,164
Bank Charges 0 0 0 0 0 27,562
Depreciation Expense 3,050 3,050 3,050 3,050 3,050 36,599
Dues & Subscriptions 100 100 100 100 100 8,030
Education Expenses 0 0 0 0 0 364
Meals and Entertainment 1,700 1,000 1,000 1,500 1,000 16,574
Equipment Rental Office 2,858 2,858 2,858 2,858 2,858 33,253
401K 10% Match 300 300 300 300 300 3,244
Insurance - Health 5,000 5,000 5,000 5,000 5,000 66,365
Insurance - Liab./D&O 13,750 13,750 13,750 13,750 13,750 153,992
Legal & Professional 13,219 12,200 4,700 4,700 4,700 197,845
Maint. & Repairs Office 500 500 500 500 500 8,195
Moving Expenses 0 0 0 0 0 0
Patent Expenses 0 0 0 0 0 (32)
Payroll Office 12,750 11,001 11,001 11,001 11,001 138,804
Payroll Officers 15,334 15,334 15,334 15,334 15,334 471,816
Payroll Support 3,506 3,506 3,506 3,506 3,506 40,590
Payroll Expenses 3,862 3,223 3,223 3,223 3,223 59,701
Permits/Licenses/Fees 0 0 0 0 0 4,532
Postage 900 900 900 900 900 12,776
Printing 200 200 200 200 200 11,750
Rent 9,074 9,074 9,074 9,074 9,074 104,971
R & D Expense 0 0 0 0 0 1,101
Supplies Office 1,500 1,500 1,500 1,500 1,500 22,259
Telephone 2,700 2,700 2,700 2,700 2,700 37,537
Taxes - Other 0 0 0 0 0 5,815
Testing Expenses 0 0 0 0 0 3,779
Travel 5,000 4,000 4,000 4,000 4,000 63,665
Utilities 1,200 1,200 700 700 700 10,006
Total G&A Expenses 107,527 102,420 94,420 94,420 94,420 1,671,497
Other Income/Expense
Other Income (Expense) 200 200 200 200 200 24,896
Interest Expense (2,315) (6,587) (10,280) (12,305) (12,305) (49,339)
Total Other Income/Expense (2,115) (6,367) (10,080) (12,105) (12,105) (24,443)
HERC PRODUCTS INCORPORATED
PIPE KLEAN BUDGET 1997
A C T U A L P R O J E C T E D
Jan Feb Mar Apr May Jun Jul
Net Sales 50,570 18,270 33,750 19,000 170,175 113,066 111,260
Cost of Goods Sold
Inventory 3,176 1,305 2,868 16,486 26,556 10,248 3,245
Meals - Operations 567 500 0 2,150 8,229 4,513 9,978
Contract labor 0 167 287 72 10,717 8,498 7,408
Freight 3,033 3,108 470 1,219 3,664 8,784 2,345
Insurance - Health 708 628 1,374 0 660 659 4,800
Lab Fees 0 182 0 936 0 0 0
Maint. & Repairs 0 716 551 0 5,918 (4,463) 769
Payroll - Operations 9,690 6,902 7,770 12,682 38,664 71,042 29,115
Payroll Expenses 817 528 589 787 2,846 3,073 2,832
Subcontractors 0 0 0 0 3,360 30,889 (5,130)
Supplies 675 4,175 333 1,667 14,341 11,998 1,28
MRU Repairs 368 150 188 1,925 1,083 0 1,230
Travel - Operations 3,698 1,663 275 2,257 10,602 14,309 23,900
Other 470 1,852 60 2,448 10,365 49,387 (29,000)
Rentals 0 106 0 2,359 12,249 24,738 15,300
Total COGS 23,202 21,982 14,695 44,988 149,254 233,675 68,047
Gross Profit 27,368 (3,712) 19,055 (25,988) 20,921 (120,609) 43,213
------ ------ ------ ------- ------ -------- ------
54% -20% 56% -137% 12% -107% 39%
Selling Expenses
Advertising 4,199 1,506 3,034 2,295 5,674 (50) 733
Auto 2,011 912 778 589 1,026 3,227 1,000
Commissions 0 0 2,846 0 5,261 4,038 3,338
Consultants 0 0 0 0 0 1,500 0
Dues & Subscriptions 771 0 0 86 170 225 0
Postage 482 42 18 467 293 416 300
Insurance - Health 2,123 1,200 1,321 2,043 2,259 1,460 1,777
Payroll - Sales 7,333 9,086 8,635 8,317 11,650 11,650 12,917
Payroll Expenses 561 636 464 659 969 892 988
Meals & Entertainment 493 184 890 232 244 985 400
Travel 5,189 4,242 3,914 3,743 4,705 2,187 3,000
Supplies 117 620 946 2,892 1,647 2,503 2,000
Trade Shows 2,475 (100) 4,900 289 81 815 225
Total Selling Expenses 25,754 18,326 27,747 21,612 33,979 29,848 26,678
A C T U A L P R O J E C T E D
Aug Sep Oct Nov Dec Total
Net Sales 129,500 130,000 345,000 615,000 125,000 1,860,591
Cost of Goods Sold
Inventory 8,650 10,500 21,500 48,500 8,750 161,784
Meals - Operations 2,590 2,600 6,900 12,300 2,500 52,824
Contract labor 4,745 4,400 12,950 21,050 4,500 74,794
Freight 778 890 1,980 4,140 775 31,186
Insurance - Health 5,600 5,600 6,350 6,350 6,350 39,079
Lab Fees 130 130 345 615 125 2,463
Maint. & Repairs 1,943 1,950 5,175 9,225 18,75 23,659
Payroll - Operations 23,448 23,448 25,948 25,948 25,948 300,535
Payroll Expenses 1,993 1,993 2,206 2,206 2,206 22,075
Subcontractors 13,802 22,679 29,268 101,589 15,268 211,724
Supplies 3,885 3,900 10,350 18,450 3,750 74,782
MRU Repairs 0 0 0 0 0 4,944
Travel - Operations 3,455 3,650 9,050 17,150 3,375 93,384
Other 5,170 4,100 14,700 20,100 4,750 84,402
Rentals 3,885 3,900 10,350 18,450 3,750 95,087
Total COGS 80,073 89,740 157,071 306,073 83,921 1,272,721
Gross Profit 49,427 40,260 187,929 308,927 41,079 587,870
------ ------ ------- ------- ------ -------
38% 31% 54% 50% 33% 32%
Selling Expenses
Advertising 0 0 0 0 0 17,391
Auto 800 800 800 800 800 13,543
Commissions 2,580 1,500 7,800 7,800 2,250 37,413
Consultants 200 200 200 200 200 2,500
Dues & Subscriptions 0 0 0 0 0 1,252
Postage 300 300 300 300 300 3,518
Insurance - Health 1,500 1,500 1,500 1,500 1,500 19,683
Payroll - Sales 9,583 9,583 9,583 9,583 9,583 117,503
Payroll Expenses 767 767 767 767 767 9,003
Meals & Entertainment 400 400 400 400 400 5,428
Travel 3,000 3,000 3,000 3,000 3,000 41,980
Supplies 1,725 1,725 250 250 250 14,925
Trade Shows 0 1,500 0 0 0 10,185
Total Selling Expenses 20,855 21,275 24,600 24,600 19,050 294,324
1997 PIPE KLEAN BUDGET CONTINUED
General Administrative A C T U A L P R O J E C T E D
Jan Feb Mar Apr May Jun Jul.
Auto 2,878 635 1,602 482 160 760 500
Depreciation 2,030 2,740 2,740 2,800 2,800 30,483 7,333
Dues & Subscriptions 4,712 0 1,497 99 0 (25) 0
Education 0 0 149 0 0 0 0
Entertainment 396 383 628 441 435 584 500
Equip. Rental Office 0 0 102 908 149 354 300
401k expense 55 0 233 75 47 110 110
insurance - Health 899 802 1,223 913 190 850 1,110
Legal Fees 2,930 178 2,331 357 103 7,881 1,986
Maint. & Repairs Office 0 1,250 100 371 287 0 150
Moving Expenses 0 0 0 0 0 2,499 0
Payroll Admin 12,833 12,833 12,833 12,833 12,708 13,000 13,000
Payroll Expenses 982 9820 982 1,346 972 994 995
Licenses & Permits 95 603 0 50 319 50 0
Postage 249 112 361 520 (121) 521 335
Printing 145 2,634 229 0 560 183 0
Office Rent 469 641 2,781 2,619 2,619 2,571 2,619
Research & Development 0 472 0 45,000 178 260 139
Office Supplies 594 2,315 2,154 (950) 941 1,468 2,422
Telephone 3,252 0 3,292 2,564 3,144 4,813 3,000
Taxes Other 0 75 0 675 11 (225) 100
Testing Expenses 1,146 5,890 2,516 486 1,245 1,045 175
Travel 2,996 0 3,395 765 1,932 6,489 3,500
Uncollectible Accounts 0 73 0 0 0 0 27,000
Utilities 0 506 146 604 484 400 400
Total G&A Expense 36,661 32,618 39,654 72,500 29,283 75,149 65,664
Total SG&A Expenses 62,415 50,946 67,401 94,112 63,262 104,997 92,342
Other Income (Expense)
Interest Expense (47) 0 (52) 0 (45) (951) (1,328)
Net Income (35,904) (54,658) (48,398) (120,100) (42,386) (226,557) (50,457)
------- ------- ------- -------- ------- -------- -------
-69.40% -299.17% -143.40% -632.11% -24.91% -200.38% -45.35%
General Administrative A C T U A L P R O J E C T E D
Aug Sep Oct Nov Dec Total
Auto 500 500 500 500 500 9,517
Depreciation 7,333 17,333 17,333 17,333 17,333 127,591
Dues & Subscriptions 100 100 100 100 100 6,783
Education 0 0 0 0 0 149
Entertainment 500 500 500 500 500 5,867
Equip. Rental Office 300 300 300 300 300 3,313
401k expense 110 110 110 110 110 1,180
insurance - Health 1,100 1,100 1,100 1,100 1,100 11,477
Legal Fees 1,000 1,000 1,000 1,000 1,000 20,766
Maint. & Repairs Office 50 50 50 50 50 2,40
Moving Expenses 0 0 0 0 0 2,499
Payroll Admin 8,834 8,834 8,834 8,834 8,834 134,210
Payroll Expenses 707 707 707 707 707 10,787
Licenses & Permits 100 100 100 100 100 1,014
Postage 350 350 350 350 350 4,218
Printing 250 250 250 250 250 2,479
Office Rent 2,619 2,619 2,619 2,619 2,619 29,407
Research & Development 0 0 0 0 0 46,218
Office Supplies 300 300 300 000 000 0,601
Telephone 2,500 2,500 2,500 2,500 2,500 34,880
Taxes Other 100 100 100 100 100 1,061
Testing Expenses 100 100 100 100 100 7,188
Travel 2,000 2,000 2,000 2,000 2,000 34,967
Uncollectible Accounts 0 0 0 0 0 27,000
Utilities 400 400 400 400 4,213
Total G&A Expense 29,253 39,253 39,253 39,253 39,253 537,793
Total SG&A Expenses 50,107 60,527 63,852 63,852 58,302 832,117
Other Income (Expense)
Interest Expense (1,328) (1,328) (1,328) (1,328) (1,328) (9,063)
Net Income (2,008) (21,595) 122,748 243,747 (18,552) (253,310)
------ ------- ------- ------- ------- --------
-1.55% -16,61% 35.58% 39.63% -14.84$ -13.61%
HERC PRODUCTS INCORPORATED
CCT CORPORATION BUDGET 1997
A C T U A L P R O J E C T E D
Jan. Feb Mar Apr May Jun Jul
Sales 81,758 106,158 100,610 176,953 277,877 266,721 93,520
Cost of Good Sold 40,132 41,086 55,691 89,649 155,592 149,858 47,616
Gross Profit 41,626 65,070 44,919 87,304 122,285 116,863 45,904
------ ------ ------ ------ ------- ------- ------
51% 61% 45% 49% 44% 44% 49%
Selling, General & Admin.
Accounting Fees 169 111 (9) 56 146 124 0
Advertising 200 0 0 0 0 0 0
Amortization 207 207 206 206 207 207 207
Bank Fes 0 0 21 0 0 0 0
Business Promotion 628 0 112 11 287 (11) 200
Commissions 1,000 0 3,164 2,190 2,480 1,784 251
Conferences & Meetings 388 260 1,111 116 575 103 410
Consulting Fees 2,575 2,500 19,000 2 9,334 (10,533) 0
Depeciation Expenses 474 474 474 474 474 474 474
Dues & Publications 370 760 1,525 268 334 145 0
Education & Training 0 0 108 0 0 0 120
Employee Benefits 3,083 3,394 1,637 2,269 104 2,430 1,672
Entertainment 912 1,067 531 1,054 988 646 613
Equip. Rental 0 0 0 0 0 0 95
Gas & Oil 144 111 476 385 554 72 748
Insurance Hazard 90 0 89 90 90 90 90
Insurance Worker's Comp. 102 0 0 0 0 0 0
License Fees 759 46 1,264 182 0 0 0
Misc. Expense 196 75 110 515 411 25 0
Office Supplies 1,475 678 783 830 781 831 337
Outside Services 0 0 14 (35) 8,868 1,149 0
Payroll Taxes 3,994 3,103 2,476 2,976 2,481 2,595 2,834
Plant Supplies 0 0 0 0 0 0 0
Postage 546 1,029 217 515 1,011 619 110
Printing 21 2,610 561 3,319 (2,580) 842 467
Professional Services 1,167 1,145 38 (10) 0 0 0
Rent 0 1,695 3,390 1,695 1,695 1,695 1,695
Repairs & Maint. 98 815 98 98 295 98 98
R & D 0 1,000 1,000 264 339 0 0
Salaries Admin. 11,959 6,203 1,137 7,10 8,084 6,797 6,699
Salaries Officers 7,213 8,620 ,917 7.717 8,117 7,917 7,917
Salaries Sales 13,092 16,842 22,256 17,598 16,842 18,902 18,902
Mill Taxes 0 0 0 0 0 52 52
Telephone 2,336 2,969 1,278 4,001 2,787 1,505 1,505
Travel 5,108 4,205 5,521 3,958 5,144 3,475 3,475
Utilities 105 96 92 93 12 122 122
Vehicle Repair 0 0 0 0 0 0 0
Vehicle Rents 1,306 1,516 1,174 1,441 1,504 1,455 1,455
Vehicle Reimbursement 1,619 1,996 1,791 2,600 3,186 1,625 1,625
Warehousing Costs 255 705 409 640 (1,582) 60 60
Total S, G&A Expenses 61,591 64,232 79,971 62,633 71,098 53,108 51,423
Operating Income (19,965) 838 (35,052) 24,671 51,187 63,755 (5,519)
Other Income/Expense
Other Income (Expense) (457) (446) (1,592) (1,156) (2,259) 4,121 (97)
Total Other Expense (457) (446) (1,592) (1,156) (2,259) 4,121 (97)
Net Income (20,422) 392 (36.644) 23,515 48,928 67,876 (5,616)
------- --- ------- ------ ------ ------ ------
-24.998% 0.37% -36.42% 13.29% 17.61% 25.45% -8.01%
A C T U A L P R O J E C T E D
Aug Sep Oct Nov Dec Total
Sales 225,000 300,000 150,000 62,628 51,514 1,892,377
Cost of Good Sold 128,255 155,023 75,661 33,543 20,051 992,161
Gross Profit 96,745 144,977 74,339 29,085 31,099 900,216
------ ------- ------ ------ ------ -------
43% 48% 50% 46% 61% 48%
Selling, General & Admin.
Accounting Fees 120 120 120 120 120 1,197
Advertising 0 0 0 0 0 200
Amortization 207 207 207 207 207 2,482
Bank Fes 60 60 50 50 50 291
Business Promotion 350 400 100 250 0 2,327
Commissions 4,624 8,996 1,588 970 193 27,240
Conferences & Meetings 1,500 250 250 0 0 4,963
Consulting Fees 3,032 3,061 3,010 3,010 3,001 37,992
Depeciation Expenses 474 474 474 474 474 5,688
Dues & Publications 125 210 100 100 50 3,987
Education & Training 225 725 175 75 275 1,703
Employee Benefits 3,043 3,043 3,043 2,535 2,535 28,788
Entertainment 760 415 415 340 302 8,043
Equip. Rental 145 145 120 20 20 545
Gas & Oil 805 840 337 332 342 5,146
Insurance Hazard 0 0 0 0 0 539
Insurance Worker's Comp. 0 0 0 0 0 102
License Fees 125 125 125 125 125 2,876
Misc. Expense 432 812 138 138 20 2,873
Office Supplies 960 755 755 720 720 9,625
Outside Services 0 0 0 0 0 7,996
Payroll Taxes 3,309 3,893 2,975 1,371 1,303 33,310
Plant Supplies 0 0 0 0 0 0
Postage 487 480 355 380 400 6,149
Printing 572 307 290 1,627 127 8,163
Professional Services 0 0 0 0 0 2,349
Rent 2,035 2,035 2,035 2,035 2,035 22,040
Repairs & Maint. 96 96 96 96 96 2,080
R & D 0 0 9 0 0 2,603
Salaries Admin. 11,968 7,801 7,801 7,801 7,801 91,157
Salaries Officers 5,417 5,417 5,417 5,417 5,417 82,503
Salaries Sales 18,902 18,902 18,217 7,171 7,171 189,556
Mill Taxes 1,130 2,267 351 0 0 11,448
Telephone 2,780 2,480 2,555 970 970 27,131
Travel 4,584 3,640 2,880 1,622 2,020 45,206
Utilities 150 150 150 150 150 1,503
Vehicle Repair 700 0 0 0 0 700
Vehicle Rents 1,958 1,806 1,376 1,776 1,176 17,693
Vehicle Reimbursement 1,760 1,750 1,180 650 650 20,431
Warehousing Costs 300 300 300 300 300 2,774
Total S, G&A Expenses 72,323 71,152 54,986 40,832 38,050 721,399
Operating Income 24,422 73,825 19,353 (11,747) (6,951) 178,817
Other Income/Expense
Other Income (Expense) (114) (111) (107) (102) (98) (2,418)
Total Other Expense (114) (111) (107) (102) (98) (2,418)
Net Income 24,308 73,714 19,246 (11,849) (7,049) 176,399
------ ------ ------ ------- ------ -------
10.80% 24.57% 12.83% -18.92% -13.78% 9.32%
HERC PRODUCTS INCORPORATED
CONSUMER PRODUCTS BUDGET 1997
A C T U A L P R O J E C T E D
Jan Feb Mar Apr May Jun Jul
Sales 202,880 318,392 173,434 114,365 123,515 148,548 144,314
Discounts (3,605) (4,844) (3,658) (3,721) (4,147) (4,677) (3,719)
Allowances (29,736) (18,466) 0 (1,568) 0 0 0
Returns (5,221) (1,971) (4,114) (907) (1,927) (10,601) (3,001)
Product Claims 0 198 3,141 3,431 1,338 17,847 10,171
Net Sales 164,318 293,309 168,803 111,600 118,779 151,115 147,765
Cost of Goods Sold 107,304 156,5583 95,817 52,167 58,601 74,461 75,404
Freight In 0 2,530 2,614 1,980 2,651 2,639 1,228
Freight Out 32,036 42,380 39,193 14,400 12,014 24,845 25,735
Warehouse Supplies 446 913 4,518 186 2,167 1,633 289
Total GOGS 139,786 202,406 142,142 68,733 75,433 103,578 102,656
Gross Profit 24,532 90,903 26,661 42,867 43,346 47,537 45,109
------ ------ ------ ------ ------ ------ ------
15% 31% 16% 38% 36% 31% 31%
Selling Expenses
Advertising 18,074 18,962 17,728 17,999 16,593 18,739 16,612
Auto 609 1,250 709 952 (434) 1,189 500
Commissions - Reps 7,341 13,790 8,446 5,580 (5,936) 8,289 7,388
Commissions - Sales 2,936 4,466 2,917 1,399 1,542 (12,846) 0
Customer Refunds 36 0 0 0 47 25 (25)
Insurance - Health 1,082 1,031 989 1,064 1,064 1,082 1,082
Payroll Sales 11,894 11,542 13,207 13,506 12,792 10,029 10,893
Payroll Expenses 910 883 1,042 1,033 979 1,413 833
Meals & Entertainment 55 902 486 569 (227) 310 350
Travel 675 3,548 2,902 3,485 1,529 2,145 1,500
Trade Shows 727 2,075 1,464 1,792 2,925 1,059 550
Total Selling Expenses 44,339 58,449 49,890 47,379 30,874 31,434 39,683
General & Administrative
Dues & Subscriptions 0 0 250 0 0 128 0
401k % Match 0 0 119 16 32 48 50
Licenses & Fees 0 0 350 62 91 319 77
Legal & Professional 0 323 148 479 2,623 497 604
Moving Expenses 0 0 22,000 44 (2,092) 0 0
Postage 218 625 398 151 68 41 25
Printing 16 32 271 40 40 1,165 58
Office Supplies 133 2,46 118 172 496 88 170
Product Development (42) 3,316 3,672 4,765 1,000 0 000
Telephone 531 782 1,594 1,083 656 404 318
Total G & A Expense 856 7,546 28,920 8,812 3,108 2,690 2,006
Total SG&A Expenses 45,195 85,995 78,810 54,191 33,982 34,124 41,689
Net Profit (20,663) 24,908 (52,149) (11,324) 9,365 13,413 3,420
------- ------ ------- ------- ----- ------ -----
-12.58% 8.49% -30.89% -10.15% 7.88% 8.88% 2.31%
A C T U A L P R O J E C T E D
Aug Sep Oct Nov Dec Total
Sales 155,000 170,000 185,000 200,000 215,000 2,150,446
Discounts (1,771) (1,943) (2,114) (2,286) (2,475) (38,943)
Allowances 3,500 3,500 3,500 3,500 3,500 (32,270)
Returns (192) (192) (192) (192) (192) (28,702)
Product Claims 638 699 761 823 885 39,931
Net Sales 157,174 172,064 186,955 201,845 216,735 2,090,463
Cost of Goods Sold 82,048 89,998 97,948 105,898 113,848 1,110,078
Freight In 0 0 0 0 0 13,642
Freight Out 14,725 15,300 16,650 18,000 19,350 274,628
Warehouse Supplies 314 344 374 404 433 12,022
Total GOGS 97,088 105,642 114,972 124,302 133,632 1,410,370
Gross Profit 60,087 66,422 71,983 77,543 83,104 680,093
------ ------ ------ ------ ------ -------
38% 39% 39% 38% 38% 33%
Selling Expenses
Advertising 16,667 16,667 16,667 16,667 16,667 208,042
Auto 500 500 500 500 500 7,275
Commissions - Reps 7,025 7,770 8,514 9,259 10,003 87,470
Commissions - Sales 0 0 0 0 0 414
Customer Refunds 50 50 50 50 50 333
Insurance - Health 1,082 1,082 1,082 1,082 1,082 12,804
Payroll Sales 10,893 10,893 10,893 10,893 10,893 138,328
Payroll Expenses 871 871 871 871 871 11,450
Meals & Entertainment 200 200 200 200 200 3,445
Travel 4,000 1,000 1,000 1,000 1,000 23,784
Trade Shows 1,600 0 0 400 0 12,592
Total Selling Expenses 42,889 39,033 39,778 40,922 41,267 505,937
General & Administrative
Dues & Subscriptions 0 0 0 0 0 378
401k % Match 50 50 50 50 50 515
Licenses & Fees 0 0 0 0 0 899
Legal & Professional 0 0 0 0 0 4,674
Moving Expenses 0 0 0 0 0 19,952
Postage 208 208 208 208 208 2,566
Printing 0 0 0 600 0 2,222
Office Supplies 125 125 125 125 125 4,270
Product Development 0 2,500 0 0 0 16,111
Telephone 200 200 200 200 200 6,368
Total G & A Expense 583 3,083 583 1,183 583 57,955
Total SG&A Expenses 43,472 42,117 40,361 42,106 41,850 563,892
Net Profit 16,614 24,305 31,621 35,437 41,253 116,201
------ ------ ------ ------ ------ -------
10.57% 14.13% 6.91% 17.58% 19.03% 5.56%
HERC PRODUCTS INCORPORATED
WELL KLEAN BUDGET 1997
A C T U A L P R O J E C T E D
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Total
Sales 4,657 6,645 5,065 5,100 6,000 4,580 6,395 10,000 25,000 25,000 20,000 20,000 148,442
Cost of Goods Sold 9,525 1,961 1902 1,440 2,132 1,109 2,008 3,400 8,500 8,500 6,800 6,8005 54,077
Gross Profit 5,132 4,684 3,163 3,60 3,868 3,471 4,387 6,660 16,500 16,500 13,200 13,200 94,365
----- ----- ----- ---- ----- ----- ----- ----- ------ ------ ------ ------ ------
35% 70% 62% 72% 64% 76% 69% 55% 66% 66% 66% 66^ 64$
Selling Expenses
Advertising 904 0 0 163 0 150 0 733 733 733 733 733 4,882
Auto 0 376 167 317 186 11 410 400 400 400 400 400 3,467
Consultant Fees 0 0 0 0 0 0 0 0 0 0 0 0 0
Payroll - Sales 3,000 3,000 3,000 3,000 3,000 3,000 3,000 7,000 4,000 4,000 4,000 4,000 44,000
Payroll Expenses 230 242 246 248 271 251 237 560 320 320 320 320 3,565
Commissions 0 161 211 236 541 287 191 800 2,000 2,000 1,600 1,600 9,627
Trade Shows 0 101 0 0 0 0 212 250 250 250 250 250 1,563
Travel 260 659 216 175 130 283 670 2,000 2,000 2,000 2,000 2,000 12,393
Postage 68 0 41 28 0 11 50 200 200 200 200 200 1,198
Insurance - Health 564 481 498 498 498 498 498 996 500 500 500 500 6,531
Meals & Entertainment 0 140 97 115 45 40 75 250 250 250 250 250 1,762
Supplies 0 0 0 80 0 0 75 75 75 75 75 455
Total Selling Expenses 5,026 5,160 4,476 4,780 4,751 4,531 5,343 13,264 10,728 10,728 10,328 10,328 89,443
General &
Administrative
401K 10% Match 0 0 0 0 0 0 0 0 0 0 0 0 0
Dues & Subscriptions 464 0 0 0 0 0 0 0 0 0 0 0 464
Employee Benefits 0 0 0 0 0 0 0 0 0 0 0 0 0
Equipment Rental 0 0 0 0 0 0 0 0 0 0 0 0 0
Legal & Prof. 0 0 235 102 0 0 0 0 0 0 0 0 337
License & Permits 0 0 0 0 0 0 0 0 0 0 0 0 0
Postage 0 41 0 0 0 26 87 0 0 0 0 0 154
Printing 0 0 0 0 0 0 0 25 25 25 25 25 125
R & D Expense 0 0 0 277 200 0 0 0 0 0 0 0 477
Taxes Other 0 0 0 0 0 0 0 0 0 0 0 0 0
Telephones 53 84 90 170 147 104 158 500 500 500 500 500 3,306
Total G & A Expenses 517 125 325 549 347 130 245 525 525 525 525 525 4,863
Total SG&A Expenses 5,543 5,285 4,801 5,329 5,098 4,661 5,588 13,789 11,253 11,253 10,853 10,853 94,306
Net Profit (411) (601) (1,638) (1,669) (1,230) (1,190) (1,201) (7,189) 5,247 5,247 2,347 2,347 59
----- ----- ----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
-3% -9% -32% -33% -21% -26% -19% -72% 21% 21% 12% 12% 0%
HERC PRODUCTS INCORPORATED
PROCESS WATER BUDGET 1997
A C T U A L P R O J E C T E D
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Total
Sales 13,234 12,301 8,688 9,639 9,878 9,996 11,937 10,000 15,000 15,000 15,000 15,000 145,673
Cost of Goods Sold 3,319 4,902 2,458 4,145 2,976 2,587 3,165 3,200 4,800 4,800 4,800 4,800 45,952
Gross Profit 9,915 7,399 6,230 5,494 6,902 7,409 8,772 6,800 10,200 10,200 10,200 10,200 99,721
----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
75% 60% 72% 57% 70% 74% 73% 68% 68% 68% 68% 68% 68%
Selling Expenses
Advertising 0 0 0 193 (193) 0 0 0 2,000 0 0 0 2,000
Auto 520 611 0 130 0 271 150 250 250 250 250 250 2,932
consulting Fees 0 0 0 0 0 0 0 0 0 0 0 0 0
Dues & Subscriptions 375 0 0 0 0 0 0 0 0 0 0 0 375
Freight & Postage 3 31 8 29 0 24 31 50 50 50 50 50 376
Insurance - Health 495 495 512 512 512 511 512 512 512 512 512 512 6,109
Meals & Entertainment 215 424 149 468 0 205 125 125 125 125 125 125 2,211
Payroll Expenses 306 306 306 306 306 306 306 306 30 306 306 306 3,672
Payroll Sales 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Supplies 84 242 0 41 0 85 0 100 100 100 100 100 952
Trade Shows 0 0 0 60 979 0 0 0 0 0 1,500 0 2,539
Travel 1,282 748 1,076 2,167 0 818 500 1,000 1,000 1,000 1,000 1,000 11,591
Total Selling Expenses 7,280 6,857 6,051 7,906 5,604 6,220 5,624 6,343 8,343 6,343 7,843 6,343 80,757
General &
Administrative
401K Expense 10 0 50 20 10 60 40 40 40 40 40 40 390
Dues & Subscriptions 0 0 0 0 0 0 0 0 0 0 0 0 0
Employee Benefits 0 0 0 0 0 0 0 0 0 0 0 0 0
Printing 0 0 0 0 12 0 0 0 0 0 0 0 12
Supplies 11 0 0 0 0 0 7 0 0 0 0 0 18
Taxes Other 0 0 0 0 0 0 0 0 0 0 0 0 0
Telephone 134 284 148 92 106 83 92 150 150 150 150 150 1,689
Total G&A Expenses 155 284 198 112 128 143 139 190 190 190 190 190 2,109
Total SG&A Expenses 7,435 7,141 6,249 8,018 5,732 6,363 5,763 6,533 8,533 6,533 8,033 6,533 82,866
Net Profit 2,480 258 (19) (2,524) 1,170 1,046 3,009 267 1,667 3,667 2,167 3,667 16,855
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19% 2% 0% -26% 12% 10% 255 3% 11% 24% 14% 24% 12%
HERC PRODUCTS INCORPORATED
CHLORID BUDGET 1997
A C T U A L P R O J E C T E D
Jan Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Total
Sales 10,685 5,250 0 5,008 5,145 5,187 5,355 5,200 10,000 10,000 10,000 10,000 81,830
Cost of Goods Sold 1,684 819 0 1,166 872 706 999 1,768 3,400 3,400 3,400 3,400 21,614
Gross Profit 9,001 4,431 0 3,842 4,273 4,481 4,356 3,432 6,600 6,600 6,600 6,600 60,216
Net Profit 9,001 4,431 0 3,842 4,273 4,481 4,356 3,432 6,600 6,600 6,600 6,600 60,216
----- ----- ---- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------
84.24% 84.40% 0.00% 76.72% 83.05% 86.39% 81.34% 66.00% 66.00% 66.00% 66.00% 66.00% 73.59%
