<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
____________ TO ____________
COMMISSION FILE NUMBER 0-13667
PDG ENVIRONMENTAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2677298
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
300 OXFORD DRIVE, MONROEVILLE, PENNSYLVANIA 15146
(Address of principal executive offices) (Zip Code)
412-856-2200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of September 3, 1996, there were 5,908,868 shares of the registrant's common
stock outstanding.
<PAGE> 2
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Consolidated Financial Statements and Notes to Consolidated
Financial Statements
(a) Condensed Consolidated Balance Sheets as of July 31, 1996
(unaudited) and January 31, 1996 3
(b) Consolidated Statements of Operations for the Three Months Ended
July 31, 1996 and 1995 (unaudited) 4
(c) Consolidated Statements of Operations for the Six Months Ended
July 31, 1996 and 1995 (unaudited) 5
(d) Consolidated Statements of Cash Flows for the Six Months Ended
July 31, 1996 and 1995 (unaudited) 6
(e) Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 3. Defaults Upon Senior Securities 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1996 1996*
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 119,000 $ 273,000
Accounts receivable - net 3,277,000 3,221,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 804,000 670,000
Inventory 185,000 181,000
Net assets of discontinued operations - 1,492,000
Other current assets 551,000 734,000
----------- -----------
TOTAL CURRENT ASSETS 4,936,000 6,571,000
PROPERTY, PLANT AND EQUIPMENT 3,905,000 3,886,000
Less: accumulated depreciation 3,179,000 (3,067,000)
----------- -----------
726,000 819,000
OTHER ASSETS 47,000 55,000
----------- -----------
TOTAL ASSETS $ 5,709,000 $ 7,445,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,885,000 $ 1,680,000
Accrued liabilities 1,142,000 998,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 600,000 607,000
Current portion of long-term debt 174,000 176,000
----------- -----------
TOTAL CURRENT LIABILITIES 3,801,000 3,461,000
LONG-TERM DEBT 1,473,000 2,766,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Cumulative convertible 2% preferred stock 444,000 444,000
Common stock 118,000 118,000
Additional paid-in capital 4,254,000 4,230,000
Deficit (4,381,000) (3,574,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 435,000 1,218,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,709,000 $ 7,445,000
=========== ===========
</TABLE>
*Derived from audited financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JULY 31,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
CONTRACT REVENUES $3,715,000 $5,108,000
CONTRACT COSTS 3,202,000 4,251,000
---------- ----------
Gross margin 513,000 857,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 556,000 718,000
---------- ----------
(Loss) income from operations (43,000) 139,000
OTHER INCOME (EXPENSE):
Interest expense (84,000) (127,000)
Interest income - 5,000
Other income 39,000 1,000
---------- ----------
(45,000) (121,000)
---------- ----------
(Loss) income before income taxes and
discontinued operations (88,000) 18,000
INCOME TAX BENEFIT -- (76,000)
---------- ----------
(LOSS) INCOME BEFORE DISCONTINUED OPERATIONS (88,000) 94,000
DISCONTINUED OPERATIONS:
Loss from operations (252,000) (393,000)
Gain on disposal 212,000 --
---------- ----------
(40,000) (393,000)
NET (LOSS) INCOME $ (128,000) $ (299,000)
========== ==========
PREFERRED STOCK DIVIDEND REQUIREMENTS $ 9,000 $ 12,000
========== ==========
PER SHARE OF COMMON STOCK - PRIMARY:
Income (loss) before discontinued operations $ (0.01) $ 0.01
Discontinued operations (0.01) (0.07)
---------- ----------
Net (loss) income per share $ (0.02) $ (0.06)
========== ==========
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING 5,909,000 5,439,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
CONTRACT REVENUES $7,525,000 $7,986,000
CONTRACT COSTS 6,691,000 6,843,000
---------- ----------
Gross margin 834,000 1,143,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,231,000 1,492,000
---------- ----------
(Loss) income from operations (397,000) (349,000)
OTHER INCOME (EXPENSE):
Gain on sale of PDG Remediation, Inc. common stock -- 1,354,000
Interest expense (168,000) (263,000)
Interest income 5,000 14,000
Other income 46,000 4,000
---------- ----------
(117,000) 1,109,000
---------- ----------
Income (loss) before income taxes and
discontinued operations (514,000) 760,000
INCOME TAX PROVISION (BENEFIT) -- --
---------- ----------
LOSS BEFORE DISCONTINUED OPERATIONS (514,000) 760,000
DISCONTINUED OPERATIONS:
Loss from operations (505,000) (445,000)
Gain on disposal 212,000 --
---------- ----------
(293,000) (445,000)
NET INCOME (LOSS) $ (807,000) $ 315,000
========== ==========
PREFERRED STOCK DIVIDEND REQUIREMENT $ 18,000 $ --
========== ==========
PER SHARE OF COMMON STOCK - PRIMARY:
Income (loss) before discontinued operations $ (0.09) $ 0.11
Discontinued operations (0.05) (0.06)
---------- ----------
Net income (loss) per common share $ (0.14) $ 0.05
========== ==========
AVERAGE COMMON SHARES AND DILUTIVE COMMON
EQUIVALENTS OUTSTANDING 5,909,000 6,968,000
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (807,000) $ 315,000
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO CASH:
Gain on sale of PDG Remediation, Inc. common stock (212,000) (1,354,000)
Depreciation and amortization 181,000 230,000
Other 16,000 104,000
CHANGES IN ASSETS AND LIABILITIES
OTHER THAN CASH:
Accounts receivable (56,000) (667,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (134,000) (168,000)
Inventory (4,000) (35,000)
Net assets of discontinued operations 498,000 445,000
Other current assets 319,000 188,000
Accounts payable 38,000 (389,000)
Billings in excess of costs and estimated earnings
on uncompleted contracts (7,000) 10,000
Accrued liabilities 144,000 (64,000)
Other -- (5,000)
----------- -----------
TOTAL ADJUSTMENTS IN ASSETS AND LIABILITIES 798,000 (685,000)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (24,000) (1,390,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (44,000) (276,000)
Proceeds from the sale of property, plant and equipment 3,000 1,000
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (41,000) (275,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on sale of PDG Remediation, Inc. common stock 1,206,000 1,435,000
Proceeds from debt -- 20,000
Principal payments on debt (1,295,000) (189,000)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (89,000) 1,266,000
----------- -----------
Net Increase (Decrease) in Cash and Short-Term Investments (154,000) (399,000)
Cash and Short-Term Investments, Beginning of Period 273,000 673,000
----------- -----------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 119,000 $ 274,000
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
Additional information:
The proceeds on the sale of PDG Remediation, Inc. common stock of $1,205,000
for the six months ended July 31, 1996 was not received in the form of cash,
but rather was a direct offset to the debt owed CVD Financial, Inc.
6
<PAGE> 7
PDG ENVIRONMENTAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include PDG Environmental, Inc.'s
wholly-owned subsidiaries. The accounts of PDG Remediation, Inc. ("PDGR"), in
which PDG Environmental, Inc. maintained until July 31, 1996 a 59.5% ownership
interest subsequent to the initial public offering of PDGR's common stock and
warrants on February 9, 1995 are reflected as a discontinued operation (see
Note 3).
The accompanying financial statements of PDG Environmental, Inc. and
subsidiaries (the "Corporation") are unaudited. However, in the opinion of
management, they include all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows. All adjustments made
during the three and six months ended July 31, 1996 were of a normal, recurring
nature. The amounts presented for the three and six months ended July 31, 1996
are not necessarily indicative of results of operations for a full year.
Additional information is contained in the Annual Report on Form 10-K of the
Corporation for the year ended January 31, 1996, as amended by Form 10-K/A No.
1 dated May 31, 1996 and Quarterly Report on Form 10-Q of the Corporation for
the quarter ended April 30, 1996 dated June 14, 1996, and should be read in
conjunction with this quarterly report.
The prior year financial statements have been reclassified to reflect the PDGR
business as a discontinued operation.
NOTE 2 - FEDERAL INCOME TAXES
No income taxes have been provided for the three and six months ended July 31,
1996 due to a loss for financial reporting purposes.
Income taxes paid by the Corporation for the six months ended July 31, 1996 and
1995 totaled approximately $4,000 and $16,000, respectively.
NOTE 3 - PDG REMEDIATION, INC.
INITIAL PUBLIC OFFERING
On February 9, 1995, PDGR sold in an initial public offering 1,000,000 shares
of common stock and 1,000,000 redeemable warrants at a price of $5.00 per share
of common stock and $0.10 per redeemable warrant. The Corporation sold 400,000
shares of its PDGR common stock as part of the initial public offering and
received net proceeds of approximately $1.4 million, which resulted in a gain
of approximately $1.4 million during the six months ended July 31, 1995. The
Corporation recorded the sale effective as of February 1, 1995. PDGR sold
600,000 newly issued common shares plus 1,000,000 redeemable warrants and
received net proceeds of approximately $2.3 million. The Corporation owned
approximately 59.5% of PDGR common stock until July 31, 1996.
DISCONTINUED OPERATIONS
On May 1, 1996, the Corporation made the decision to divest its remaining 59.5%
ownership interest in PDGR. The loss from operations in the Statements of
Consolidated Operations represents the Corporation's 59.5% portion of PDGR's
loss. During the three and six month periods ending July 31, 1996 and 1995,
respectively, PDGR had revenues of $1,186,000 and $2,479,000 (fiscal 1997) and
$976,000 and $3,560,000 (fiscal 1996), respectively. See Note 4 for a
discussion of the sale of PDGR.
7
<PAGE> 8
NOTE 4 - LINES OF CREDIT
On July 31, 1996, the Corporation entered into a Loan Modification Agreement
("Modification Agreement") with CVD Financial Corporation ("CVD"). The
Modification Agreement provided that CVD purchase all 1,470,320 shares of PDGR
common stock held by the Corporation for $0.82 per share and that the aggregate
purchase price of $1,205,662 was utilized to reduce the outstanding balance on
the line of credit. This resulted in a $212,000 gain on the sale. After
application of the proceeds, the debt under the line of credit was reduced to
$1,214,332 at July 31, 1996, and the maximum allowable borrowings under the
line of credit are capped at $1,500,000. The maturity date of the line of
credit and term loan agreements was extended until August 1, 1997.
The closing of the sale is subject to a number of conditions, including (a) the
reincorporation of PDGR as a Delaware corporation on or before November 1,
1996; (b) the reincorporation of PDGR resulting in no material liabilities to
PDGR; and (c) not more than five percent (5%) of the shareholders of PDGR
exercising dissenter's rights in connection with the reincorporation. CVD has
the right to waive all of the aforementioned conditions to closing.
PDGR's Board of Directors has also been restructured effective September 4,
1996, with the resignations of John Regan and David D'Appolonia and the
appointment of four representatives of CVD.
The Modification Agreement also provides that the Corporation has the right,
until November 1, 1996, to arrange for the account of CVD a cash sale of all
shares of PDGR's common stock held by CVD or its affiliates at minimum price of
$0.82 per share, provided that certain conditions are met, including the
satisfaction of any indebtedness or guarantees which CVD has provided to PDGR
in the interim. The Corporation has granted an exclusive option to a third
party for $1.20 per share. If the option is exercised, the gain to the
Corporation will be $559,000 and debt with CVD will be reduced by a similar
amount.
The Corporation and PDGR are guarantors on the Sirrom Environmental Funding LLC
Agreement which provides $4 million of funding relative to unbilled amounts on
certain contracts. As of July 31, 1996, PDGR was advanced approximately $2.3
million under the Sirrom Agreement.
The Corporation paid interest costs totaling approximately $29,000 and $320,000
during the six months ended July 31, 1996 and 1995, respectively.
NOTE 5 - COMPENSATION PLANS
The Corporation maintains a qualified incentive stock option plan (the "Plan")
which provides for the grant of incentive options to purchase shares of the
common stock of the Corporation to certain officers and employees of the
Corporation and its subsidiaries. Options to purchase 1,165,000 shares of the
Corporation's common stock at an exercise price of $0.36 per share were granted
under the Plan on June 17, 1996. Vesting of 50% of the options is contingent
upon the individual offices, and in the case of executive officers, the
corporation, meeting pre- established financial goals for the remainder of
fiscal 1997 and for all of fiscal year 1998. If financial goals are exceeded
by 25%, the remaining 50% of options vest. If financial goals are not
achieved, the options do not vest and are returned to the Plan for future
grants
NOTE 6 - PREFERRED STOCK
Cumulative dividends in arrears on the Corporation's 2% Series A Preferred
Stock were approximately $109,000 at July 31, 1996. At July 31, 1996, there
were 186,052 shares of Series A Preferred Stock outstanding. The Series A
Preferred Stock is convertible into four shares of the Corporation's common
stock at the option of the preferred stockholder.
The conversion rate on the Series A Preferred Stock is also subject to
adjustment as a result of certain changes in the Corporation's capital
structure or distributions to common stockholders (except for cash dividends
permissible under law).
8
<PAGE> 9
NOTE 7 - NET LOSS PER SHARE
The primary loss per common share for the three months ended July 31, 1996 and
1995 and the six months ended July 31, 1996 is computed by adjusting the net
loss for the preferred dividend requirement of $9,000, $12,000 and $18,000,
respectively, and dividing this amount by the weighted average number of shares
of common stock outstanding for the respective period. The effects of assuming
the conversion of preferred stock or the exercise of stock options, stock
warrants and common stock rights would be antidilutive for the three months
ended July 31, 1996 and 1995 and the six months ended July 31, 1996.
Primary earnings per share for the six months ended July 31, 1995 are
calculated by dividing the net income by the average common shares outstanding
and dilutive common stock equivalents. Stock options and warrants have not
been reflected as exercised for purposes of computing the primary loss per
share for the three months ended July 31, 1996 and 1995 and the six months
ended July 31, 1996 since the exercise of such options and warrants would be
antidilutive.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
As discussed in further detail in Item 3. Legal Proceedings contained in the
Corporation's Annual Report on Form 10-K for the year ended January 31, 1996,
as amended by Form 10-K/A dated May 31, 1996, the Corporation and PDGR has been
named as a defendant in a purported class action lawsuit involving the purchase
by all persons and entities of PDGR's common stock from February 9, 1995,
through May 23, 1995. The action alleges that the defendants violated certain
federal securities laws.
The Corporation and PDGR believe that the allegations are without merit or that
there are meritorious defenses to the allegations, and intends to defend the
action vigorously. If, however, the plaintiff is successful in its claims, a
judgment rendered against the Corporation and the other defendants would likely
have a material adverse effect on the business and operations of the
Corporation.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1996 AND 1995
On February 9, 1995, the Corporation sold approximately 40.5% of its common
stock interest in its wholly-owned environmental services subsidiary, PDGR, in
an initial public offering of PDGR's common stock. The Corporation recorded
the sale effective as of February 1, 1995. On May 1, 1996, the Corporation
made a decision to divest its remaining 59.5% ownership interest in PDGR.
Therefore, the Corporation accounted for its remaining 59.5% ownership interest
as a discontinued operation until July 31, 1996, at which time the
Corporation's remaining ownership in PDGR was sold to CVD Financial.
The Corporation's contract revenues decreased by approximately 27% to $3.7
million during the three months ended July 31, 1996 compared to $5.1 million in
the three months ended July 31, 1995. The Corporation, which now solely
consists of asbestos abatement, did not experience the summer increase in
contract activity until July 1996, which resulted in lower revenues as compared
to the prior 3 month period.
The Corporation's gross margin decreased to $0.5 million in the second quarter
of fiscal 1997 compared to $0.9 million in the second quarter of fiscal 1996.
The decrease in gross margin was primarily attributable to the aforementioned
decrease in contract revenue although gross margin as a percentage of revenue
did decrease by 3% to 14% for the current three month period due to the fixed
portion of contract cost being spread over a smaller revenue base and slightly
lower field margins.
Selling, general and administrative expenses decreased to $0.56 million in the
three months ended July 31, 1996 compared to $0.72 million in the three months
ended July 31, 1995. The decrease is primarily attributable to cost- saving
measures implemented during the current fiscal year.
As a result of the factors described above, the Corporation reported a loss
from operations of $0.04 million in the current three month period compared to
income from operations of $0.14 million for the same three months of the prior
fiscal year.
The Corporation's reported interest expense decreased to $0.08 million for the
three months ended July 31, 1996 from $0.13 million for the three months ended
July 31, 1995. The Corporation's interest expense decreased due to lower
interest rates on outstanding indebtedness with CVD.
Interest income decreased to zero for the three months ended July 31, 1996
versus $5,000 for the three months ended July 31, 1995 due to lower invested
cash balances while $39,000 of other income was recognized primarily from the
sale of fixed assets.
During the three months ended July 31, 1995, the Corporation recorded an income
tax benefit of approximately $76,000 to reverse its first quarter income tax
provision. During the three months ended July 31, 1996, the Corporation did
not provide an income tax provision due to the loss for financial reporting
purposes.
The Corporation recognized its 59.5% interest in PDGR resulting in a $252,000
and $393,000 loss from discontinued operations for the three months ended July
31, 1996 and 1995, respectively. The decreased loss from PDGR was due to a
$200,000 increase in revenues and decreases in certain operating expenses. The
sale of the PDGR shares to CVD on July 31, 1996 resulted in a $212,000 gain.
SIX MONTHS ENDED JULY 31, 1996 AND 1995
The Corporation's contract revenues decreased to $7.5 million for the six
months ended July 31, 1996 compared to $8.0 million for the six months ended
July 31, 1995. The decrease in revenues in the current six month period was
due to a delay until July 1996 in the increase in contract activity during the
summer months.
10
<PAGE> 11
The gross margin reported by the Corporation in the six months ended July 31,
1996 decreased to $0.8 million compared to $1.1 million for the six months
ended July 31, 1995. The decrease in gross margin primarily related to a
decrease in gross margin as a percentage of revenue due to the fixed portion of
contract costs being spread over a smaller revenue base and lower field margins
during the first quarter when two significant projects (completed in that
quarter) were not profitable.
Selling, general and administrative expenses reported by the Corporation for
the six months ended July 31, 1996 decreased to $1.2 million versus $1.5
million in the same six month period of the prior fiscal year. The decrease is
primarily attributable to cost-saving measures implemented during the current
fiscal year.
The Corporation reported a loss from operations of $0.40 million in the six
months ended July 31, 1996 as a result of the factors discussed above compared
to a loss from operations of $0.35 million in the same six month period last
year.
During the six months ended July 31, 1995, the Corporation reported a net gain
of approximately $1.4 million from the initial public offering of common stock
and warrants by PDGR since the basis of the Corporation's investment was lower
than the proceeds realized from the initial public offering. As a result of
the sale, the Corporation's ownership percentage in PDGR was reduced from 100%
to 59.5%.
Interest expense decreased to $0.17 million in the current six month period
compared to $0.26 million in the six months ended July 31, 1995 due to a
decrease in the interest rate on the CVD indebtedness.
Interest income totaled $5,000 for the current six month period versus $14,000
in the same six month period of the prior fiscal year due to lower invested
cash balances. Other income in the current six month period was primarily
generated from the sale of fixed assets.
No income tax provision has been recorded for the six months ended July 31,
1996 due to a loss for financial reporting purposes.
The Corporation recognized its 59.5% interest in PDGR resulting in a $505,000
and $445,000 loss from discontinued operations for the six months ended July
31, 1996 and 1995, respectively. The increased loss from PDGR was due to an
approximate $1,000,000 revenue decrease in the current year which was partially
offset by decreases in certain operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity decreased during the six months ended July 31, 1996
as cash and short-term investments decreased by $0.15 million to $0.12 million
compared to a decrease in cash and short-term investments of $0.4 million in
the six months ended July 31, 1995.
The decrease in cash flows during the current six month period is principally
attributable to the repayment of debt.
Cash outflows associated with financing activities during the current six
months included $1.2 million of proceeds from the sale of PDGR stock to CVD
which was utilized to reduce borrowing under the revolving line of credit.
Additionally, $0.09 million of principal payments were made on the CVD term
debt.
Cash outflows from operating activities of $0.03 million in the six months
ended July 31, 1996 included a $0.06 million increase in accounts receivable, a
$0.13 million increase in costs and estimated earnings in excess of billings on
uncompleted contracts related to the timing of certain contract activity, $0.8
million as a result of net loss generated during the period and an adjustment
of $0.2 million due to the gain on the sale of PDGR common stock. The
aforementioned cash outflows from operating activities were offset, in part, by
a $0.04 million increase in accounts payable, a $0.32 million decrease in other
current assets, a $0.14 million increase in accrued liabilities due to the
timing of payments and $0.18 million of depreciation and amortization.
11
<PAGE> 12
The Corporation's cash outflows from investing activities of $0.04 million in
the six months ended July 31, 1996 was attributable to $0.04 million for the
purchase of property, plant and equipment.
During the six months ended July 31, 1995, the $0.4 million decrease in the
Corporation's liquidity resulted from cash used by operating activities of $1.4
million and cash used by investing activities of $0.03 million. These cash
outflows were funded in part by cash provided by financing activities of $1.3
million.
The Corporation's cash outflows of $1.4 million to fund operating activities
principally included a $0.7 million increase in accounts receivable and a $0.2
million increase in costs and estimated earnings in excess of billings on
uncompleted contracts, a $0.4 million decrease in accounts payable due to
payments and an adjustment of $1.4 million due to the gain on the sale of PDGR
common stock. These cash outflows in operating activities were offset in part
by net income generated during the period of $0.3 million and $0.2 million of
depreciation and amortization and a $0.2 million decrease in other current
assets.
During the six months ended July 31, 1995, cash outflows associated with
investing activities of $0.3 million were due to the purchase of property,
plant and equipment.
The Corporation's cash inflows related to financing activities included $1.4
million from the sale of the PDGR common stock. These cash inflows were offset
by principal payments on debt of $0.2 million to CVD.
At July 31, 1996, the Corporation's backlog associated with its asbestos
abatement business totaled $11 million ($4.5 million on fixed fee contracts and
$6.5 on time and materials or unit price contracts). This is a significant
increase from the asbestos abatement backlog of $6.2 million at April 30, 1996
and reflects a number of large contracts awarded during the second quarter.
The Corporation maintained a line of credit with CVD Financial totaling $2.5
million. The line of credit provided the Corporation with the ability to
borrow up to 85% of eligible accounts receivable as defined and bears interest
at a bank prime rate of interest plus 3%. At July 30, 1996, the Corporation
had borrowings under this line of credit totaling $2.42 million.
On July 31, 1996, the Corporation entered into a Loan Modification Agreement
("Modification Agreement") with CVD Financial Corporation ("CVD"). The
Modification Agreement provided that CVD purchase all 1,470,320 shares of PDGR
common stock held by the Corporation for $0.82 per share and that the aggregate
purchase price of $1,205,662 was utilized to reduce the outstanding balance on
the line of credit. This resulted in a $212,000 gain on the sale. After
application of the proceeds, the debt under the line of credit was reduced to
$1,214,332 at July 31, 1996, and the maximum allowable borrowings under the
line of credit are capped at $1,500,000. The maturity date of the line of
credit and term loan agreements was extended until August 1, 1997.
The closing of the sale is subject to a number of conditions, including (a) the
reincorporation of PDGR as a Delaware corporation on or before November 1,
1996; (b) the reincorporation of PDGR resulting in no material liabilities to
PDGR; and (c) not more than five percent (5%) of the shareholders of PDGR
exercising dissenter's rights in connection with the reincorporation. CVD has
the right to waive all of the aforementioned conditions to closing.
PDGR's Board of Directors has also been restructured effective September 4,
1996, with the resignations of John Regan and David D'Appolonia and the
appointment of four representatives of CVD.
The Modification Agreement also provides that the Corporation has the right,
until November 1, 1996, to arrange for the account of CVD a cash sale of all
shares of PDGR's common stock held by CVD or its affiliates at minimum price of
$0.82 per share, provided that certain conditions are met, including the
satisfaction of any indebtedness or guarantees which CVD has provided to PDGR
in the interim. The Corporation has granted an exclusive option to a third
party for $1.20 per share. If the option is exercised, the gain to the
Corporation will be $559,000 and debt with CVD will be reduced by a similar
amount.
12
<PAGE> 13
The Corporation and PDGR are guarantors on the Sirrom Environmental Funding LLC
Agreement which provides $4 million of funding relative to unbilled amounts on
certain contracts. As of July 31, 1996, PDGR was advanced approximately $2.3
million under the Sirrom Agreement.
The Corporation will continue to monitor closely its short-term and long-term
liquidity requirements on an ongoing basis and is prepared to implement any
measures required to conserve cash to meet its needs and to satisfy its
obligations.
PROSPECTIVE INFORMATION
The Corporation's current business consists solely of asbestos abatement
contracting after the sale of its 59.5% ownership interest in PDGR to CVD on
July 31, 1996.
The Corporation is exploring further options to increase liquidity and
stockholders' equity including the aforementioned resale of the PDGR shares
held by CVD, a private placement of the Corporation's equity securities and/or
the consummation of a new credit facility.
As discussed in further detail in Item 1. Legal Proceedings contained in Part
II located elsewhere herein, the Corporation has been named as a defendant in a
purported class action involving the purchase by all persons and entities of
PDGR common stock from February 9, 1995 through May 23, 1995. The action
alleges that defendants violated certain federal securities laws. The
Corporation believes that the allegations are without merit or that there are
meritorious defenses to the allegations, and intends to defend the action
vigorously. If, however, the plaintiff is successful in its claims, a judgment
rendered against the Corporation and the other defendants would likely have a
material adverse effect on the business and operations of the Corporation.
13
<PAGE> 14
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the action, captioned Klein v. PDG Remediation, Inc., et al.
described in the Corporation's Form 10-K for the year ended January 31, 1996,
the parties have begun initial discovery with respect to the action.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The registrant is currently in arrears with respect to the payment of dividends
on its Series A Preferred Stock. At July 31, 1996, the cumulative dividends in
arrears on the Series A Preferred Stock were approximately $109,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT INDEX
EXHIBIT NO. AND DESCRIPTION
<TABLE>
<CAPTION>
PAGES OF SEQUENTIAL
NUMBERING SYSTEM
<S> <C> <C>
4(a) Loan Modification Agreement dated July 31, 1996 between CVD Financial Corporation
and PDG Environmental, Inc., PDG, Inc., Project Development Group, Inc. and
Enviro-Tech Abatement Services Co. and John Regan
10(a) Professional Consulting Agreement dated June 14, 1996 between Len Turano and PDG
Environmental, Inc.
(b) The registrant did not file any current reports on Form 8-K during the three months
ended July 31, 1996.
27 Financial Data Schedule
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PDG ENVIRONMENTAL, INC.
By /s/ JOHN C. REGAN
-------------------------------------
John C. Regan
Chairman and Chief Executive Officer
Date: September 16, 1996
15
<PAGE> 1
EXHIBIT 4(a)
LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT ("Agreement" or the "August 1, 1996
Loan Modification Agreement") is made effective the 31st day of July, 1996,
between CVD Financial Corporation, a Delaware corporation ("Lender"); PDG
Environmental, Inc., a Delaware corporation ("PDGE"); PDG, Inc., a Pennsylvania
corporation ("PDG"); Project Development Group, Inc., a Pennsylvania
corporation ("PDGI"); Enviro-Tech Abatement Services Co., a North Carolina
corporation ("Enviro-Tech"); and John Regan.
PDGE, PDGI, PDG and Enviro-Tech are referred to herein collectively as
the "PDGE Debtor Parties." Certain affiliates of the PDGE Debtor Parties,
consisting of PDG Environmental Services, Inc., a Delaware corporation
("PDGES"), in its own capacity and as successor in interest to PDG
Environmental Remediation, a Pennsylvania limited partnership ("PDGER"); Geo
Recovery Services, Ltd., a Florida limited partnership ("Geo"); PDG
Remediation, Inc., a Pennsylvania corporation ("Remediation"); Geo Holding
Company, a Delaware corporation ("GHC"); PDG Delaware, Inc., a Delaware
corporation ("PDG Delaware") are referred to herein collectively as the "PDGES
Debtor Parties." The PDGE Debtor Parties and PDGES Debtor Parties are sometimes
referred to herein collectively as the "Debtor Parties" and John Regan is
referred to as the "Guarantor."
WITNESSETH
----------
A. PDGI is a party to that certain Mortgage and related Promissory Note
in the principal amount of $320,000, each dated December 1, 1987, representing a
loan made by Equibank to PDGI (the "Integra Term Loan"). Certain of the Debtor
Parties, including PDG, PDGE, PDGES, PDGI, and Enviro-Tech, together with
certain of their predecessors in interest, are parties to a Credit Agreement,
dated November 5, 1991, with Equibank, representing a revolving credit facility
of $3,000,000 (the "Integra Revolving Loan"), which has been amended from time
to time, including the amendments being reflected in that certain Amended and
Restated Credit Agreement, dated March 24, 1994. The foregoing agreements (the
"Integra Loan Agreements"), and all notes, other instruments and documents
evidencing the Integra Term Loan and the Integra Revolving Loan (the "Integra
Loans") or security thereof, including all documents described as "Loan
Documents" in the Amended and Restated Credit Agreement, dated March 24, 1994,
are referred to herein as the "Integra Loan Documents." Lender acquired the
interest of Integra Bank/Pittsburgh (Equibank's successor) in the Integra Loans
and Integra Loan Documents on June 30, 1994.
B. PDGES and Lender are also parties to a certain Loan Agreement,
dated October 28, 1993, as amended and superseded by an Amended and Restated
Loan Agreement, dated September 6, 1994, pursuant to which Lender made
available a revolving line of credit to PDGES in the maximum amount of
$4,000,000 (the "PDGES Loan Agreement"). The PDGES Loan Agreement, and all
notes, other instruments and documents evidencing such loan (the "PDGES Loan")
or the security therefor, including all documents described as "Loan Documents"
in the PDGES Loan Agreement, are referred to herein as the "PDGES Loan
Documents."
C. Lender and certain of the Debtor Parties, including PDGE, PDG,
PDGES, PDGI, Enviro-Tech, PDGER and Geo, are also parties to a certain Loan
Agreement, dated
<PAGE> 2
March 23, 1994 (the "PDGE Loan Agreement"), under which Lender extended a term
loan in the amount of $812,000 (the "PDGE Term Loan") and a revolving loan in
the amount of $1,000,000 (the "PDGE Revolving Loan") to such Debtor Parties. The
PDGE Term Loan and PDGE Revolving Loan are sometimes referred to herein as the
"PDGE Loans." Effective August 12, 1994, Lender extended to the Debtor Parties
who are the borrowers in connection with the PDGE Loans an additional $300,000
revolving credit under the PDGE Revolving Loan subject to a requirement that
such credit be cleared each fifteen (15) days, such additional credit to be
secured by the liens and security interests granted in connection with the PDGE
Loan Agreement (the "Additional PDGE Advance"). The PDGE Loan Agreement, and all
notes, other instruments and documents evidencing the PDGE Loans or the security
therefor, including all documents described as "Loan Documents" in the PDGE Loan
Agreement are referred to herein as the "PDGE Loan Documents."
D. The Debtor Parties, as well as PDGE and Remediation as the
guarantors of the PDGES Loan and John and Eleanor Regan, as guarantors of the
PDGE Loans, entered into a Loan Modification Agreement dated September 30, 1994
(the "September 30, 1994 Loan Modification Agreement"), under which the Lender
agreed to permit up to $300,000 of credit otherwise available to PDGES (the
"New Advance") under the PDGES Loan Agreement to be transferred to the PDGE
Loan Agreement and made available under the terms of the PDGE Revolving Loan,
to increase the maximum amount of the PDGE Revolving Loan to $1,600,000 to
accommodate such credit and the Additional PDGE Advance, and to amend and
modify the Integra Loan Documents, PDGE Loan Documents and PDGES Loan
Documents.
E. The September 30, 1994 Loan Modification Agreement contemplated,
among other things, that the $300,000 Additional PDGE Advance would be repaid
by not later than December 1, 1994. At the request of certain of the Debtor
Parties, a second Loan Modification Agreement dated December 9, 1994 (the
"December 9, 1994 Loan Modification Agreement") was entered into to provide
that such date be extended to not later than February 1, 1995.
F. Effective February 7, 1995, at the request of the Debtor Parties, a
third Loan Modification Agreement (the "February 7, 1995 Loan Modification
Agreement") was entered into by the Debtor Parties and Lender, under which the
PDGES Debtor Parties and certain of their assets in which Lender had been
granted security interests were released from any obligations under the PDGE
Loans and Integra Loans in order to permit the public offer and sale of
securities of Remediation and the refinancing of the PDGES Loan by Barnett Bank
of Central Florida, the unpaid balance of the Integra Term Loan was included in
the balance of the Integra Revolving Loan, and the maturity date for the
Integra Revolving Loan and the PDGE Revolving Loan, inclusive of the Additional
PDGE Advance, were extended to April 1, 1995.
G. On or about February 28, 1995, as contemplated by the February 7,
1995 Loan Modification Agreement, the PDGES Loan was repaid in full.
2
<PAGE> 3
H. On or about October 31, 1995, at the request of the Debtor Parties,
an Amended and Restated Loan Agreement (the "October 31, 1995 Amended and
Restated PDGE Loan Agreement") was entered into between Lender and the PDGE
Debtor Parties, under which the maturity date of the PDGE Revolving Loan and
Integra Revolving Loan were extended to December 31, 1996, the maturity date of
the PDGE Term Loan was reset at December 31, 1996, the interest rates
thereunder were reduced and the credits consolidated as provided therein, and
in the Amended and Restated Revolving Note, dated October 31, 1995 (the
"Amended and Restated Revolving Note"), and Amended and Restated Term Note,
dated October 31, 1995, (the "Amended and Restated Term Note"). In addition,
as part of the transactions contemplated by the October 31, 1995 Loan
Modification Agreement, PDGE pledged 1,470,320 shares of common stock of
Remediation to Lender pursuant to the terms of a Stock Pledge Agreement dated
October 31, 1995 (the "Remediation Stock Pledge Agreement").
I. On or about July 5, 1996, at the request of each of the PDGE Debtor
Parties and Guarantor, a Loan Modification Agreement, dated effective as of May
21, 1996 (the "May 21, 1996 Loan Modification Agreement") was executed by the
Lender and the PDGE Debtor Parties, which, among other things (i) extended the
maturity date of the PDGE Revolving Loan (inclusive of the balances of the
Integra Revolving Loan and Integra Term Loan included therein as a result of the
October 31, 1995 Amended and Restated PDGE Loan Agreement) and the PDGE Term
Loan to May 1, 1997; (ii) and allowed PDGE to be readvanced certain monies under
the PDGE Revolving Loan under certain circumstances once such loan has had its
outstanding principal balance reduced by at least $1,400,000; and (iii) modified
the Remediation Stock Pledge Agreement to Stock Pledge Agreement, dated as of
May 21, 1996.
J. Each of the PDGE Debtor Parties and Guarantor have requested that
the Lender agree to extend the final maturity date of the PDGE Term Loan and
PDGE Revolving Loan to August 1, 1997 and to otherwise modify the terms of the
loans extended by Lender, and has determined that Lender's agreement to extend
and modify such loans is of material benefit to the PDGE Debtor Parties and
Guarantor.
K. Lender is willing to extend the maturity date of the PDGE Revolving
Loan and the PDGE Term Loan, and to otherwise modify such loans, subject to the
terms and conditions hereof.
L. Each of the PDGE Debtor Parties and Guarantor acknowledge that
current defaults exist under the Loan Documents, including the failure to pay
interest owing, and that the execution of this Loan Modification Agreement does
not constitute a cure of those defaults, except as expressly provided herein,
nor does execution of this Loan Agreement constitute a waiver by Lender of any
rights it has under the Loan Documents, including, without limitation, the
right to declare an Event of Default.
M. All other capitalized terms used herein and not otherwise defined
shall have the meanings set forth therefor in the Loan Documents (as defined
below).
3
<PAGE> 4
NOW, THEREFORE, the parties hereto agree as follows:
1. Loan Documents; Loans. As used herein the term "Loan Documents"
shall mean the Integra Loan Documents, PDGE Loan Documents, the September 30,
1994 Loan Modification Agreement, the December 9, 1994 Loan Modification
Agreement, the February 7, 1995 Loan Modification Agreement, the October 31,
1995 Amended and Restated PDGE Loan Agreement, the May 21, 1996 Loan
Modification Agreement and all notes, other instruments and documents
evidencing the Integra Loans or PDGE Loans or the security therefore, and
including, without limitation, all notes, instruments and documents listed on
Schedule "B" to the October 31, 1995 Amended and Restated PDGE Loan Agreement.
The term "Loans" shall mean the PDGE Revolving Loan (including the balance of
the Integra Revolving Loan and the Integra Term Loan included therein) and the
PDGE Term Loan.
2. Extension and Modification of Loans.
(a) PDGE Revolving Loan. The PDGE Revolving Loan and Amended and
Restated Revolving Note are hereby amended by extending the maturity dates
thereof from May 1, 1997 to August 1, 1997.
(b) PDGE Term Loan. The PDGE Term Loan and Amended and Restated
Term Note are hereby amended by extending the maturity dates thereof from May
1, 1997 to August 1, 1997.
(c) Collateral; Waiver by PDGE Debtor Parties and Guarantor. The
payment of the Loans, as modified herein, will be secured by the collateral
presently securing such loans, including without limitation, as applicable, the
guaranties of the Guarantor, and all accounts receivable and work in process,
equipment, the commercial real estate located in Murrysville, Pennsylvania, and
the other property and collateral of the PDGE Debtor Parties described in the
Loan Documents. The PDGE Debtor Parties and Guarantor hereby waive any and all
rights any of them may have to require the Lender to marshall any security or
collateral or otherwise to compel the Lender to seek recourse or satisfaction
of the indebtedness owed to the Lender from any PDGE Debtor Party, Guarantor or
other source before seeking recourse or satisfaction from another PDGE Debtor
Party, Guarantor or other source.
(d) Principal Payment; Remediation Shares.
(i) Subject to and conditioned upon (A) the effective
reincorporation of Remediation as a Delaware corporation, which reincorporation
shall include the filing of a certificate of incorporation in Delaware and the
adoption of bylaws of Remediation containing (as and where appropriate)
provisions expressly electing not to be governed by Section 203 of the Delaware
General Corporation law and such other provisions as are acceptable to Lender
in its sole discretion, effective on or before November 1, 1996; (B) the
closing of the purchase of the Remediation Shares by Lender contemplated in
this Section 2(d) on or before November 1, 1996; (C) the reincorporation of
Remediation as a Delaware corporation resulting in no material liabilities to
Remediation, to be determined in the sole
4
<PAGE> 5
discretion of Lender; and (D) such reincorporation resulting in not more than
five percent (5%) of the shareholders of Remediation exercising dissenters'
rights in connection with the reincorporation of Remediation as a Delaware
corporation, on the Closing Date (as hereinafter defined) PDGE shall sell,
transfer and convey to Lender, and to any assignee or assignees designated by
Lender, absolute ownership of all the 1,470,320 issued and outstanding shares
of common stock of Remediation ("Remediation Shares") which are presently the
subject of the Remediation Stock Pledge Agreement for an aggregate purchase
price of $1,205,662 ($0.82 per share). Subject to the satisfaction of all
conditions to the obligation of Lender set forth herein, the closing of the
sale, transfer and conveyance of Remediation Shares by PDGE to Lender shall
occur on the closing date (the "Closing Date"), which date shall be a date
determined by Lender, and which date shall be no sooner than the effective date
of the reincorporation of Remediation as a Delaware corporation and no later
than November 1, 1996. The foregoing conditions are for the benefit of Lender
only, and may be waived, in whole or in part by Lender, in its sole discretion.
(ii) The purchase price for the Remediation Shares to be
purchased by Lender shall be paid in the form of a direct $1,205,662
credit against the outstanding principal balance of the PDGE Revolving
Loan to be made effective as of July 31, 1996. Upon the sale, transfer
and conveyance of the Remediation Shares as contemplated by this Section
2(d), PDGE shall no longer have any right to sell or cause the release
of the Remediation Shares pursuant to the terms of the Remediation Stock
Pledge Agreement, as amended.
(iii) From and after the sale, transfer and conveyance of the
Remediation Shares as contemplated by this Section 2(d) and until
November 1, 1996, PDGE will have the right to arrange for the account
of Lender and any Identified Purchasers (as defined below) a sale to be
consummated on or before November 1, 1996, of all, but not less than
all, of the Remediation Shares and any other shares of common or
preferred stock or other securities of Remediation which may be
purchased or otherwise acquired by Lender or third parties identified to
PDGE by Lender ("Identified Purchasers") after the date hereof and prior
to such sale (the "New Remediation Shares"); provided, that (i) no Event
of Default under any of the Loan Documents shall have occurred and be
continuing; (ii) the proceeds of such sale, net of all brokerage
commissions, cost of registration or qualification and related costs of
sale ("Net Sales Proceeds") are not less than $0.82 per share for the
Remediation Shares and, with respect to the New Remediation Shares, not
less than the cost to Lender and Identified Purchasers of such New
Remediation Shares; (iii) such sale shall be made for cash only with the
proceeds of such sale to be delivered directly to such accounts of
Lender and Identified Purchasers as Lender may direct; (iv) Lender and
any Identified Purchasers shall release such shares only to the buyer
thereof against delivery of the Net Sales Proceeds; (v) Lender and the
Identified Purchasers shall receive such indemnities and assurances as
Lender may require respecting compliance of such sale with all
applicable federal and state securities laws, including without
limitation evidence of the effectiveness of any registration statement,
application, permit, notice or other filing required in
5
<PAGE> 6
connection therewith and an opinion of counsel acceptable to Lender,
confirming the compliance of such sale with all federal and state
securities laws; (vi) written notice of such sale shall be given to
Lender and the Identified Purchasers at least five days prior to the
closing date thereof, and such sale shall close and the Net Sales
Proceeds thereof shall be received by Lender and the Identified
Purchasers by no later than November 1, 1996; and (vii) Remediation
shall first satisfy in full any indebtedness and obligations of
Remediation to Lender or its affiliates now or hereafter existing and
shall further release and indemnify Lender from and against any Guaranty
Equivalent. Lender shall be deemed to be subject to a Guaranty
Equivalent in respect of any obligation (the "Assured Obligation") of
another person (the "Deemed Obligor") if the Lender directly or
indirectly guarantees, becomes surety for, endorses, assumes,
indemnifies or agrees to indemnify the Deemed Obligor against, or
otherwise agrees, becomes or remains liable (contingently or otherwise)
for, such Assured Obligation, in whole or in part. Without limitation, a
Guaranty Equivalent shall be deemed to exist if Lender agrees, has
agreed, becomes or remains liable (contingently or otherwise), directly
or indirectly in respect of any other transaction the effect of which is
to assure the payment or performance (or payment of damages or other
remedy in the event of nonpayment or nonperformance) in whole of in part
of any Assured Obligation. Any sale of the Remediation Shares and New
Remediation Shares shall be for the account of Lender and the Identified
Purchaser only, and PDGE shall not be entitled to receive such shares or
any proceeds of the sale thereof. Such securities and funds shall not be
held in or for account of PDGE by any broker or other party.
(iv) Any Net Sales Proceeds actually received by Lender in
respect of the sale of the Remediation Shares only, to the extent such
Net Sales Proceeds exceed $0.82 per share (the "Excess Remediation
Shares Net Sales Proceeds"), shall be credited upon receipt by the
Lender against the principal balance of the PDGE Revolving Loan or, if
such loan has been repaid in full, the principal balance of the PDGE
Term Loan. No portion of the Net Sales Proceeds from any sale of New
Remediation Shares shall be credited against the Loans.
(v) Neither Lender, nor any of its affiliates, nor any other
persons constituting Released Lender Parties (as defined in paragraph 7
below) shall owe any duty of care or any other duty to PDGE, the PDGE
Debtor Parties, Guarantor or their affiliates or have any liability of
any kind whatsoever to PDGE, the PDGE Debtor Parties, Guarantor or their
affiliates for any action or omission to act in respect of the
management, control or operation of Remediation at any time.
(e) Conversion. Lender shall retain all conversion rights of the Lender
set forth in paragraphs 2.1.8 and 2.7.3 of the October 31, 1995 Amended and
Restated Loan Agreement. Subject to the satisfaction of all conditions set forth
in Paragraph 4 hereof and herein, Lender agrees to convert up to $800,000 in
unpaid principal balance of the PDGE Revolving Loan, or to the extent the PDGE
Revolving Loan has been repaid in full, a portion of the principal balance of
the PDGE Term Loan, into shares of PDGE common stock at a
6
<PAGE> 7
conversion price of $0.50 per share; provided, that no such conversion shall
occur until each of the following conditions are satisfied, unless waived by
Lender: (i) no Event of Default under any of the Loan Documents shall have
occurred and be continuing; (ii) PDGE shall notify Lender in writing at least
five days prior to the effective date of the conversion of the principal amount
of the Loans that it wishes to convert and of the effective date of such
conversion, which effective date shall be the date on which Lender shall
receive the proceeds from the resale of such shares, which dates shall not be
later than August 1, 1997; (iii) concurrent with such notice, PDGE shall
provide Lender with a binding written commitment from a broker or dealer
reasonably acceptable to Lender agreeing to sell the shares to be acquired upon
such conversion for the account of Lender by not later than August 1, 1997 at a
price resulting in the receipt of Net Sales Proceeds by Lender by August 1,
1997 of not less than $0.50 per share; and (iv) Lender shall receive such
indemnities and assurances as it may require respecting compliance of such sale
with all applicable federal and state securities laws, including without
limitation evidence of the effectiveness of any registration statement,
application, permit, notice or other filing required in connection therewith
and an opinion of counsel acceptable to Lender confirming the compliance of
such sale with all federal and state securities laws. All shares received by
and resold for Lender upon such conversion shall be registered and qualified
under all applicable federal and state securities laws upon conversion,
including without limitation the Securities Act of 1933, to exempt from such
registration and qualification requirements. The registration and qualification
of such shares under applicable federal and state law shall not constitute the
Demand Registration contemplated by paragraph 2.1.8(c) of the October 31, 1995
Amended and Restated Loan Agreement and Lender shall continue to have Demand
Registration Rights thereunder. In the event all of the foregoing conditions
are satisfied, Lender shall provide a letter confirming the terms of this
Agreement for delivery by PDGE to the National Association of Securities
Dealers. The effective date of any conversion shall occur upon the date Lender
receives the proceeds from the sale by Lender of the shares being acquired
under the provisions of this subparagraph.
(f) Maximum Loan Balances. Paragraph 2(d) (Maximum Advances)
of the May 21, 1996 Loan Modification Agreement, is hereby deleted and replaced
in full by the following:
"From and after the Closing Date of the sale of the Remediation
Shares to Lender pursuant to paragraph 2(d) of the August 1,
1996, Loan Modification Agreement, the maximum unpaid principal
balance of the PDGE Revolving Loan at any time outstanding, as
represented by the Amended and Restated Revolving Note, shall
not exceed the lesser of (i) $1,500,000, less the amount of any
reduction in the principal amount thereof resulting from (A) the
conversion of any portion of the principal of the PDGE Revolving
Loan into shares of PDGE common stock under the terms of
7
<PAGE> 8
the August 1, 1996 Loan Modification Agreement, the October 31,
1995 Amended and Restated Loan Agreement or otherwise, (B) the
payment to Lender of any sums resulting from the exercise of any
stock purchase warrants held by Lender, and (C) the application
of any Excess Remediation Shares Net Sales Proceeds; or (ii) the
Borrowing Base (as defined below). Readvances of any portion of
the amounts repaid under the Amended and Restated Revolving Note
shall only be permitted at such time as the outstanding
principal balance of the PDGE Revolving Loan is reduced to not
more than $1,214,331.71, and all interest and other payments due
thereunder have been brought current, and following the purchase
by Lender (or its assignees) of the Remediation Shares, at which
time advances may be obtained, repaid and funds readvanced
according to the procedures set forth in the October 31, 1995
Amended and Restated PDGE Loan Agreement. The Borrowing Base
shall consist of 85% of the value of all Eligible Accounts of
the PDGE Debtor Parties. Eligible accounts shall not include the
accounts of any PDGES Debtor Parties or of any accounts
previously transferred by the PDGE Debtor Parties to the PDGES
Debtor Parties as contemplated by the February 7, 1995 Loan
Modification Agreement."
3. Security. All sums previously advanced or to be advanced under
the Loans shall continue to be secured by all of the Loan Documents, including
the Integra Loan Documents and PDGE Loan Documents, as applicable, after giving
effect to the terms hereof, and all security interests granted therein and
herein, and all such Loan Documents shall be deemed amended to the extent
necessary to reflect the terms of this Agreement. The Guarantor expressly
acknowledges and agrees that Guarantor's Guaranty Agreements and Suretyship
Agreements shall remain in full force and effect in respect of the Loans as
modified.
4. Conditions Precedent. The obligation of the Lender to perform the
terms of this Agreement, including without limitation the extension of the
PDGE Revolving Loan and PDGE Term Loan and the readvance of any funds under the
PDGE Revolving Loan, is expressly conditioned on the performance of the
following actions.
(a) The execution and delivery of this Agreement, by the PDGE
Debtor Parties and Guarantor, as required by the terms hereof prior to or
concurrent with the execution of this Agreement.
8
<PAGE> 9
(b) The reincorporation of Remediation as a Delaware corporation,
which reincorporation shall include the filing of a certificate of
incorporation in Delaware and the adoption of bylaws of Remediation containing
(as and where appropriate) provisions expressly electing not to be governed by
Section 203 of the Delaware General Corporation law and such other provisions
as are acceptable to Lender in its sole discretion, effective on or before
November 1, 1996, and the receipt by not later than August 26, 1996, of
evidence satisfactory to Lender of the approval by the Board of Directors of
Remediation of the reincorporation of Remediation as a Delaware corporation.
(c) The closing of the transaction contemplated by Section 2(d) of this
Agreement on or before November 1, 1996.
(d) The reincorporation of Remediation as a Delaware corporation
resulting in no material liabilities to Remediation, as determined in the sole
discretion of Lender.
(e) The reincorporation of Remediation as a Delaware corporation
resulting in not more than five percent (5%) of the shareholders of Remediation
exercising dissenters' rights.
(f) At the closing of the sale, transfer and conveyance of the
Remediation Shares on the Closing Date as contemplated in Section 2(d) hereof,
the transfer to Lender of a certificate representing the Remediation Shares, as
required by the terms hereof, showing Lender as the owner thereof, together with
an Irrevocable Proxy executed by PDGE in the form attached hereto Schedule "A"
hereto.
(g) Prior to or concurrent with the execution of this Agreement and
again, as of the Closing Date, the execution and delivery of Borrowing Base
Certificates and Compliance Certificates by the PDGE Debtor Parties and the
execution and delivery of a Remediation Certificate by Remediation as described
in paragraph 1.40 of the October 31, 1995 Amended and Restated PDGE Loan
Agreement, each satisfactory to Lender.
(h) Prior to or concurrent with the Closing Date, the payment by the
PDGE Debtor Parties of all interest accrued on the Loan through the Closing
Date, and all principal payments due on or before such date, together with all
unpaid Lender charges and expenses. Remediation Shares.
(i) Prior to or concurrent with the execution of this Agreement, the
(i) delivery to Lender of a certificate in the name of Lender representing the
Remediation Shares, to be held pursuant to the Remediation Stock Pledge
Agreement; and (ii) the Reconstitution of the membership of the Board of
Directors of Remediation on terms acceptable to Lender in its sole discretion.
9
<PAGE> 10
(j) The representations and warranties of the PDGE Debtor Parties and
Guarantor contained in this Agreement shall be true, correct and complete in
all material respects.
Any of the foregoing conditions shall be for the benefit of Lender
only, and may be waived, in whole or in part by Lender, in its sole discretion.
5. Representations and Warranties. Each of the PDGE Debtor Parties
and Guarantor hereby represents and warrants to the Lender, jointly and
severally, as follows:
(a) The Loan Documents constitute all the documents executed by
any of the PDGE Debtor Parties or Guarantor in connection with the Loans; the
PDGE Debtor Parties and Guarantor have performed all of their respective
obligations under the foregoing Loan Documents; all Loan Documents as modified
by this Agreement remain in full force and effect and unmodified except as
expressly stated in this Agreement; no circumstances exist which, with the
passage of time or giving of notice, or otherwise, will constitute an Event of
Default by any Borrower under Article 6 of the October 31, 1995 Amended and
Restated PDGE Loan Agreement by any other Loan Document (each an "Event of
Default") or otherwise entitle Lender to accelerate the maturity of the
obligations of any PDGE Debtor Party or enforce the Lender's other rights
thereunder; no PDGE Debtor Party or Guarantor claims any defense, right or
offset or counterclaim against enforcement of any Loan Document; each PDGE
Debtor Party and each Guarantor has received full and adequate consideration
for the undertaking of the obligations set forth herein.
(b) This Agreement constitutes a legal and binding obligation of
each of the PDGE Debtor Parties and Guarantor enforceable in accordance with
its terms.
(c) The execution and delivery of this Agreement, the consummation
of any of the transactions hereby contemplated and compliance with the terms
hereof will not contravene or conflict with any law, statute or regulation to
which any PDGE Debtor Party or Guarantor is subject or any judgment, license,
order or permit applicable to any PDGE Debtor Party or Guarantor or any
indenture, mortgage, deed of trust or other instrument to which a PDGE Debtor
Party or Guarantor is subject; no consent, approval, authorization, or order of
any court, governmental authority or third party is required in connection with
the execution, delivery or performance of this Agreement by the PDGE Debtor
Parties or Guarantor.
(d) No litigation, investigation or governmental proceeding is
pending or threatened against any PDGE Debtor Party or Guarantor, and no
judgments have been rendered against any PDGE Debtor Party or Guarantor, except
as previously disclosed in writing to Lender.
(e) Any individuals executing this Agreement on behalf of the PDGE
Debtor Parties, and Guarantor, have full power, authority and capacity to
execute, deliver or perform this Agreement and all documents executed and
delivered in connection therewith.
10
<PAGE> 11
(f) No representation or warranty made by any PDGE Debtor
Party or Guarantor in any of the Loan Documents contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading. There is no fact known to any PDGE Debtor
Party or Guarantor which has or might reasonably be anticipated to have a
material adverse effect on the business, assets, financial condition or
operations of any PDGE Debtor Party or Guarantor which has not been disclosed
to the Lender.
(g) Each PDGE Debtor Party and Guarantor represents and
warrants that they (a) have been advised by legal counsel of their choice in
the transactions contemplated by the Agreement; (b) are fully aware and clearly
understands all of the terms and provisions contained in this Agreement; (c)
have voluntarily, with full acknowledge and without coercion or duress of any
kind, entered into this Agreement; (e) on their own initiative have made
proposals to the Lender, the terms of which are reflected by this Agreement;
and (f) have received actual and adequate consideration to enter into this
Agreement.
(h) PDGE agrees to cause the Remediation Shares to be voted in
favor of the Reincorporation of Remediation as approved by the Board of
Directors of Remediation and Lender, and shall execute such proxies, consents
or other documents or may be required in connection therewith.
6. Entire Agreement No Further Modification. Except as expressly set
forth herein, the Integra Loan Documents, PDGE Loan Documents, the September
30, 1994 Loan Modification Agreement, the December 9, 1994 Loan Modification
Agreement, the February 7, 1995 Loan Modification Agreement, the October 31,
1995 Amended and Restated PDGE Loan Agreement and the May 21, 1996 Loan
Modification Agreement shall not be modified and shall remain in full force and
effect. This Agreement and the other Loan Documents (i) embody the final,
complete and entire agreement between the parties; (ii) supersede all prior and
contemporaneous negotiations, offers, proposals, agreements, commitments,
promises, acts, conduct, course of dealing, representations, assurances and
understandings, whether written or oral, and (iii) may not be varied or
contradicted by evidence of any such prior or contemporaneous matter or by
evidence of any subsequent oral agreement between the parties. Each of the PDGE
Debtor Parties and Guarantor specifically acknowledge that all of the terms and
all of the obligations of Lender with respect to any credit of any kind
extended to the PDGE Debtor Parties is fully contained in this Agreement and
the other Loan Documents and that no other understanding, written or oral, has
been entered into in connection herewith. No provision hereof or thereof can be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the party against whom the enforcement of the change, waiver,
discharge or termination is sought. It is understood that the Lender is under
no obligation to extend the term of any credit extended under this Agreement or
any other Loan Document and any such further modifications or extensions will
be made in the Lender's sole and absolute discretion. Any such modifications or
extensions will be evidenced by the acceptance by Lender of a written agreement
having terms acceptable to the Lender.
11
<PAGE> 12
7. Release of Lender. As additional consideration for the undertaking to
execute and deliver this Agreement, the PDGE Debtor Parties and Guarantor hereby
each release and forever discharge the Lender, the Lender's agents, servants,
employees, officers, directors, attorneys, and shareholders, as well as the
respective successors and assigns of any and all thereof (collectively, the
"Released Lender Parties") from all damage, loss, claims, demands, liabilities,
obligations, actions and causes of action whatsoever which the Debtor Parties or
Guarantor, or any of them, might now have or claim to have against the Lender,
whether presently known or unknown, and of every nature and extent whatsoever,
on account of or in any way concerning, arising out of or founded on the Integra
Loans, PDGE Loans, PDGES Loan or any of the Loan Documents or PDGES Loan
Documents, including without implied limitation, all such loss or damage of any
kind heretofore sustained that might arise as a consequence from the dealings
between the parties.
To the extent applicable, the PDGE Debtor Parties and Guarantor waive
the provisions of Section 1542 of the California Civil Code which provides as
follows:
"A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR"
---- ---- ----------
PDGE PDGI John Regan
--- -----------
PDG Enviro-Tech
8. Miscellaneous. It is further agreed as follows:
(a) Time is the essence of each provision of this Agreement.
(b) Any notice, demand or communication required or permitted to be
given by any provision of this Agreement will be in writing and will be deemed
to have been given when delivered personally or by facsimile, receipt confirmed,
to the party designated to receive such notice, or on the date following the day
sent by overnight courier, or on the third (3rd) business day after the same is
sent by certified mail, postage and charges prepaid, directed to the following
addresses or to such other or additional addresses as any party might designate
by written notice to the other party:
12
<PAGE> 13
To the PDGE Debtor Parties
and Guarantor: c/o PDG Environmental, Inc.
300 Oxford Drive
Monroeville, Pennsylvania 15146
Attention: John Regan
To the Lender: CVD Financial Corporation
400 Burrard Street, Suite 1250
Vancouver, British Columbia
Canada, V6C3A6
Attention: Roy Zanatta
(c) This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the parties.
(d) If any legal action or proceeding is brought by any party
in order to enforce a provision of this Agreement or any Loan Document, the
unsuccessful party in such action or proceeding, whether or not such action or
proceeding is prosecuted to final judgment, shall pay all of the attorneys'
fees and costs incurred by the prevailing party. If any PDGE Debtor Party or
Guarantor shall become the subject of any bankruptcy or insolvency proceeding,
the PDGE Debtor Parties and Guarantor shall pay to the lender on demand all
attorneys' fees, costs and expenses which the Lender may incur (i) to obtain
relief from any bankruptcy or insolvency proceeding which delays or other wise
impairs the Lender's exercise of any right or remedy under this Agreement, or
any of the Loan Documents, or (ii) to obtain adequate protection or assurance
for any of the Lender's rights or collateral.
(e) If any provision of this Agreement is determined by a
court having jurisdiction to be illegal, invalid or unenforceable under any
present or future law, the remainder of this Agreement will not be affected
thereby. It is the intention of the parties that if any provision is so held to
be illegal, invalid or unenforceable, there will be added in lieu thereof a
provision as similar in terms to such provision as is possible that is legal,
valid and enforceable.
(f) The headings used in this Agreement are for ease in
reference and are not intended to affect the interpretation of this Agreement
in any way.
(g) No waiver of any action or default by any party will be
implied from the failure or delay by the other party to take any action in
respect of such action or default. No express waiver of any condition precedent
or default will affect any other default or extend any period of time for
performance other than as specified in such express waiver. One or more waivers
of any default in the performance of any provision of this Agreement will not be
deemed a waiver of any subsequent default in the performance of the same
provision or any other provision. The consent to or approval of any act or
request by any party will not be deemed to waive or render unnecessary the
consent to or approval of any subsequent similar act
13
<PAGE> 14
or request. A party's exercise of any right or remedy under this Agreement will
not preclude any other or further exercise thereof or the exercise of any other
right or remedy. No course of dealing between the parties will be deemed to
amend the terms of the Agreement or to preclude any party from exercising the
rights and remedies herein contained notwithstanding such course of dealing.
The rights and remedies provided in this Agreement are cumulative and no right
or remedy will be exclusive of any other, or of any other right or remedy at
law or in equity which any party might otherwise have by virtue of a default
under this Agreement and the exercise of any right or remedy by any party will
not impair such party's standing to exercise any other right or remedy.
(h) The lending transaction contemplated by this Agreement and
the Loan Documents has been negotiated, consummated and is to be performed in
the State of California. This Agreement and the other Loan Documents described
herein shall be governed by, and construed and enforced in accordance with the
substantive law of the State of California. Any action or proceeding arising in
connection with this Agreement and the Loan Documents shall be brought in a
federal or state court within Los Angeles County, California, and the Debtor
Parties and Guarantor hereby consent to the jurisdiction of any federal or state
court within the State of California and located in State of California and
located in Los Angeles County, California. The Debtor Parties and Guarantor
irrevocably and unconditionally submit to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waive (a)
any objection that they might now or hereafter have to the venue in any such
court; and (b) any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum. Notwithstanding the foregoing, the
Lender may, in its sole and absolute discretion, initiate proceedings in the
courts of any other jurisdiction in which any Debtor Party or Guarantor may be
found or in which its assets may be located.
(i) THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS
AGREEMENT, ANY OF THE LOAN DOCUMENTS DESCRIBED HEREIN OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND THE PARTIES HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRAIL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
14
<PAGE> 15
(j) The PDGE Debtor Parties shall pay all fees and costs of
any kind incurred by Lender in preparation of this Agreement and all related
documents.
LENDER: CVD FINANCIAL CORPORATION,
a Delaware corporation
By:
-------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
PDGE DEBTOR PARTIES: PDG ENVIRONMENTAL, INC.,
a Delaware corporation
By:
-------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
PDG, INC.,
a Pennsylvania corporation
By:
-------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
PROJECT DEVELOPMENT GROUP, INC.,
a Pennsylvania corporation
By:
-------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
15
<PAGE> 16
ENVIRO-TECH ABATEMENT SERVICES CO.,
a North Carolina corporation
By:
-------------------------------------
Its:
-------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
GUARANTOR:
------------------------------------------
JOHN REGAN
16
<PAGE> 17
IRREVOCABLE PROXY
The undersigned, as owner of shares of common stock of PDG REMEDIATION,
INC., a Delaware corporation, the number and description of which shares are
set forth below, hereby revokes all previous proxies and appoints CVD FINANCIAL
CORPORATION, and its assigns, as proxy holder to attend and vote at any and all
meetings of the shareholders of the corporation, and any adjournments thereof,
held on or after the date of the giving of this proxy, and to execute any and
all written consents of shareholders of the corporation executed on or after
the date of the giving of this proxy, with the same effect as if the
undersigned had personally attended the meeting or had personally voted the
shares or had personally signed the written consent.
The undersigned authorizes and directs the proxy holder to file this
proxy appointment with the secretary of the corporation and authorizes the
proxy holder to substitute another person as proxy holder and to file the
substitution instrument with the secretary of the corporation.
This proxy has been given in connection with the sale of the shares
covered hereby by PDG Environmental, Inc., to CVD Financial Corporation and
is irrevocable.
Dated: , 1996
--------------
Number and Description of Shares: 1,470,320 shares of common stock
PDG ENVIRONMENTAL, INC.,
a Delaware corporation
By:
----------------------
John Regan, Chairman
Schedule "A"
17
<PAGE> 1
EXHIBIT 10(a)
PROFESSIONAL CONSULTING AGREEMENT
THIS PROFESSIONAL CONSULTING AGREEMENT is made this 14th day of June,
1996, by and between LEN TURANO at 5650 Greenwood Blvd., Suite 201, Englewood,
Colorado and PDG ENVIRONMENTAL, INC., ("Client"), a Delaware corporation, with
its principal offices located at 300 Oxford Drive, Monroeville, Pennsylvania.
WHEREAS, Consultants operate and sell marketing services designated to
heighten public awareness of the business conducted and performance results
achieved by specified companies which consist primarily of researching,
organizing and disseminating such information; and
WHEREAS, PDG Environmental, Inc. (PDGE), is a public company that is at
this time trading its common stock through the NASDAQ stock market; and
WHEREAS, Client desires to retain the services of the Consultants in a
public relations and promotional capacity to inform the general public, the
brokerage community and other individuals pursuant to the terms hereof; and
WHEREAS, Client wishes to formalize in a written agreement the terms
and conditions under which Consultants will provide such services to Client.
NOW, THEREFORE, for the mutual promises and other consideration
described herein, the parties hereto agree as follows:
1. ENGAGEMENT: The Client hereby contains the Consultants and the
Consultants hereby accept the engagement to act as a public
relations and promotional consultant to the Client. It is the
intention of the parties to this agreement that the Consultants
will gather all publicly-available information on the Client and
will confer with officers and directors of the Client in an effort
to consolidate the information obtained into summary form for
dissemination to interested parties. The Consultants will then
disseminate such information about the Client to individuals and
registered representatives of broker/dealers whom the Consultants,
in its sole discretion, believe can effectively disseminate such
information to the general public. Consultants shall at all times
act as an independent contractor in the transaction of their
business and shall conduct their activities in accordance with the
rules and regulations of the Securities and Exchange Commission,
and the long standing practices of the industry.
<PAGE> 2
2. SERVICES: Consultants shall provide through April 15, 1997,
investor relations services to the Client as requested by the
Client in consideration of the compensation provided under this
Agreement.
(a) Consultants shall exercise their best efforts to identify and
establish appropriate information channels capable of
maximizing dissemination of Client information to the
licensed broker/dealers.
(b) Consultants shall exercise their best efforts to assemble and
organize Client Information in a format and medium which best
facilitates such dissemination.
(c) This Agreement shall commence on June 15, 1996 and end on
April 15, 1997.
(d) Len Turano will perform all the services outlined on a
monthly basis for the duration of this agreement.
3. INFORMATION: Client shall furnish Consultants with current public
information about Client, including any and all statements and
reports filed by Client with the United States Securities and
Exchange Commission, its most recent Annual Report to Shareholders,
and any other information reasonably requested by Consultants to
assist Consultants in providing business opportunity services to
Client ("Client Information"). It is understood and agreed by all
parties hereto that the Consultants cannot undertake to
independently verify facts previously supplied to it or to be
supplied in the future by the Company, including but not limited
to, factual matters included in material prepared by the Company or
oral representations by representatives of the Company. All
information disseminated by Consultants will be provided solely and
exclusively by the Client and the Client warranties and guarantees
the accuracy and completeness of all documents, information and
material furnished or to be furnished to the Consultants. The
Company agrees to defend, indemnify and hold the Consultants
harmless against any claims made against the Consultants arising
out of representations made by it in reliance upon information
furnished to it by the Company and to pay any attorney's fees
incurred by the Consultants with respect thereto. Except as set
forth herein, the Company represents that there exists no
impediment to completion of the transaction. The company agrees to
notify Consultants before issuing any shares of common stock. The
Company agrees to notify Consultants before filing to sell any 144
stock to the extent Company is aware of such transactions.
<PAGE> 3
4. COMPENSATION: In consideration for the services to be provided to
the Client by the consultants under this Agreement, the Client
hereby agrees to the payment schedule to the Consultant as
follows:
(a) The Client hereby agrees to pay the Consultants a fee of Four
Thousand Dollars ($4,000) due and payable upon the execution
of this agreement and on the fifteenth (15) of every month
for the length of the contract.
(b) The Client agrees to establish an accountable monthly budget
in the amount of Three Thousand Dollars ($3,000) for the
first six months of this contract at which time the budget
and its amount can and will be reviewed. Prior approval will
be made by client for all expenses under this budget.
(c) PDGE will issue to Len Turano options/warrants to purchase
free trading stock at $0.375 per share according to the
following schedule:
1.) One Hundred Fifty Thousand (150,000) options/warrants
when stock price reaches Fifty Cents ($.50).
2.) One Hundred Fifty Thousand (150,000) options/warrants
when stock price reaches One Dollar ($1.00).
3.) One Hundred Fifty Thousand (150,000) options/warrants
when stock price reaches Two Dollars ($2.00).
Stock price must be maintained for at least 10 days.
These prices must be achieved during terms of Agreement or Extension.
ADDITIONAL: Two Hundred Thousand (200,000) options/warrants
to purchase Two Hundred Thousand (200,000) shares of free
trading stock at Thirty-Seven and One-Half Cents ($.37-1/2)
if One (1) Million Dollars in financing is arranged by effort
of Consultants by October 31, 1996. Any financing
arrangements must first be approved by client and its Board
of Directors.
5. TERM: This Agreement shall become effective as of the date written
above and shall remain in effect through April 15, 1997. It is also
mutually agreed upon that a minimum of six (6) months is guaranteed
to the Consultants. The Client and Consultants may mutually agree
in writing to extend the Agreement for an additional period.
However, this Agreement may be terminated with cause by either
party.
6. REIMBURSEMENT: Any services or hard costs not outlined will be
reimbursed to Consultants only upon prior approval of management of
PDGE. Consultants shall be responsible for the payment of all
expenses and taxes or other liabilities which Consultants incur due
to the receipt of any compensation as a result of this Agreement.
<PAGE> 4
7. REPRESENTATIONS AND WARRANTIES: Consultants represent and warrant
that services to be provided and the system to be produced or
developed by Consultants under this Agreement will be performed,
produced or developed by competent, trained professionals in a
workman-like manner. Consultants shall comply with all applicable
statutes, rules and regulations governing all aspects of the
services to be performed under this Agreement provided that, as
described in paragraph 3 of this Agreement, Client shall be fully
responsible to assure all Client Information is accurate and
complete. Client understands and acknowledges that Consultants
cannot guarantee that the services provided hereunder will achieve
any particular objective or fulfill any specified goals.
OTHER THAN THE FOREGOING EXPRESS WARRANTIES, CONSULTANTS MAKE NO
WARRANTIES WITH RESPECT TO THE QUALITY OF THE GOODS AND SERVICES TO
BE PROVIDED HEREUNDER OR ANY RESULTS TO BE ACHIEVED, AND HEREBY
EXPRESSLY DISCLAIM THE EXISTENCE OF ANY SUCH REPRESENTATIONS AND
WARRANTIES INCLUDING WITHOUT LIMITATIONS AND IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CONSULTANTS
SHALL HAVE NO LIABILITY TO ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES SUFFERED BY CLIENT AS A RESULT OF ANY FAILURE
ON THE PART OF CONSULTANTS IN THE PERFORMANCE OF THEIR DUTIES
HEREUNDER.
8. ON GOING BUSINESS: PDGE shall be free to exercise its own judgment
as to time, place and manner of the actual marketing and public
relations. PDGE acknowledges that Consultants are engaged in other
business activities and that it will continue in such activities
during the term of this Agreement. Consultants shall not be
restricted from engaging in other business activities during the
term of this Agreement.
9. PROPRIETARY INFORMATION: The Consultants acknowledge and agree
that specified segments of information received from the Client
under this Agreement are exclusive proprietary information and the
same shall not be divulged, published, or distributed in any manner
or form to any third party without any express right or written
consent of their Client.
10. MISCELLANEOUS: This Agreement shall be interpreted and construed
in accordance with the laws of the State of Colorado. The parties
agree that the jurisdiction and venue of any dispute arising
hereunder shall be Denver, Colorado.
<PAGE> 5
11. ENTIRE UNDERSTANDING: This Agreement contains the entire
understanding of the parties with respect to the subject matter
hereof. The terms of this Agreement may be altered only by written
agreement between the parties. The failure of either party to
object to or take affirmative action with respect to any conduct
of the other is in violation of the terms of this Agreement and
shall not be construed as a waiver of the violation or breach of
any future similar violation or breach.
12. NOTICES: Any notice to be given by Consultant as required by
this Agreement shall be sent to the Company and its principal
executive officers. Any notice from the Company to Consultant
shall be sent to the Consultant at its address as it appears on
this Agreement or on the Company's books and records. Either party
may change the address to which notices are to be sent by
informing the other party in writing of the new address.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed by its duly authorized officer, or as to an individual
party, has executed this Agreement in his own hand, as of the date first
written above.
PDG ENVIRONMENTAL, INC.
/s/ DULCIA MAIRE June 19, 1996
BY:___________________________________ DATE:_____________________
DULCIA MAIRE, CORPORATE SECRETARY
/S/ LEN TURANO June 14, 1996
BY:___________________________________ DATE:_____________________
LEN TURANO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 119,000
<SECURITIES> 0
<RECEIVABLES> 3,277,000
<ALLOWANCES> 0
<INVENTORY> 185,000
<CURRENT-ASSETS> 4,936,000
<PP&E> 3,905,000
<DEPRECIATION> 3,179,000
<TOTAL-ASSETS> 5,709,000
<CURRENT-LIABILITIES> 3,801,000
<BONDS> 1,473,000
0
444,000
<COMMON> 118,000
<OTHER-SE> (127,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,709,000
<SALES> 7,525,000
<TOTAL-REVENUES> 7,525,000
<CGS> 6,691,000
<TOTAL-COSTS> 6,691,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168,000
<INCOME-PRETAX> (514,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (514,000)
<DISCONTINUED> (293,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,000)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
