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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Security Exchange Act of 1934
Date of Report (Date of earliest event reported) May 15, 1996
____________________
SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-14992 38-2294876
(State of other jurisdiction of (Commission File (IRS Employer
incorporated organization) Number) identification No.)
Bayview Corporate Center
3501 Jamboree Road, Suite 550
Newport Beach, CA 92660
(address of principal executive offices)
Registrant's telephone number, including area code: (714) 737-7900
____________________
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Item 5. Other Events
On May 15, 1996, the Company and its Senior Lenders executed the Third
Amendment, Waiver and Consent (the "Third Amendment") effective as of May 15,
1996 to the existing Loan and Security Agreement dated October 18, 1995 between
Smith Environmental Technologies Corporation; BCM Engineers Inc., an Alabama
corporation; BCM Engineers Inc., a Pennsylvania corporation; and Riedel
Environmental Services Inc. (collectively the "Company"); and Chemical Bank as
agent for the Lenders (the "Senior Lenders") (referred to as the "Loan
Agreement").
The Third Amendment waived and consented to certain conditions and actions
related to (1) the BCM Engineers Inc. ("BCM") Employee Stock Ownership Plan
and (2) financial covenant violations under the Loan Agreement. The waiver
was in effect from March 31, 1996 through June 29, 1996. The effectiveness of
the waivers, consents and amendments provided in this Third Amendment were
contingent upon certain conditions precedent which have not been met. The
Company and its Senior Lenders have executed a Forbearance Agreement for the
period of June 7, 1996 through June 28, 1996 in connection with an overdraft
condition which resulted from the establishment, by the Senior Lenders of a
reserve against the Company's borrowing base. The reserve, which reduced the
Company's available borrowing base causing an overdraft condition, resulted
from the cancellation of a contract and the Senior Lenders' concerns regarding
the collectibility of the related account receivables. The issues relating to
the contract and the associated accounts receivable have subsequently been
resolved and amounts due the Company have been collected. The Company and the
Senior Lenders are currently preparing an amendment to the forbearance
agreement and negotiating an additional amendment to the Loan Agreement.
The Company also executed an Amended and Restated Note Purchase Agreement (the
"Amended Agreement") effective as of May 15, 1996 with the holders of notes
payable to 399 Venture Partners Inc., an affiliate of Citicorp Venture Capital,
Ltd. and to various individual distributees of promissory notes formerly held
by 399 Venture Partners, Inc. (the "Holders"), in the aggregate principal
amount of $2.0 million in Convertible Subordinated Notes and $10.0 million in
Senior Subordinated Notes (collectively referred to as the "Notes"). The
Senior Note Holders have agreed to defer the payment of interest due May 21,
1996 and the interest which will accrue and become due on November 21, 1996 and
May 21, 1997. The Amended Agreement provides for the issuance of additional
notes (maturing on November 21, 2004) in lieu of such deferred semi-annual
interest payments plus two interest payments previously deferred. The effect
as of March 31, 1996 of this deferral was to reclassify approximately $1.5
million of accrued interest expenses to long-term debt under the Notes which is
reflected in the Company's financial statements. All of the interest converted
to principal will be subject to conversion rights on the same terms and
conditions as the original principal amount of the Notes. The amended
agreements and related documents are currently not completed and will be filed
with a subsequent 8-K upon the completion of the documents.
An arbitration hearing related to a contract entered into by Canonie
Environmental Services Corp. in May 1992 in connection with the performance of
equipment at the Gould Superfund Site in Portland Oregon was completed on June
14, 1996. The Company was notified on June 27, 1996 that the arbitration
panel, with one panelist dissenting, made an award of $4.5 million in favor of
NL Industries, Inc.; Johnson Controls; Battery Group, Inc.; Gould Electronics,
Inc.; AT&T Technologies, Inc.; Rhone-Poulenc AG Co. and Rhone-Poulenc, Inc.;
Burlington Northern
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Railroad Co.; and Exide Corporation (the "PRPs") against the Company. The
Company does not agree that the decision is binding and will contest the
finality of the award and an earlier decision of the Circuit Court of the State
of Oregon compelling arbitration. At the same time, the Company is filing a
claim with its professional liability carrier and intends to pursue settlement
discussions with the PRPs. The Company has approximately $1.5 million in
receivables and $2.5 million of equipment relating to the Gould project
recorded in its financial statements which will not be fully recovered.
Item 7. Financial Statements and Exhibits
c. Exhibits
The following exhibits are filed herewith:
10.24 - Third Amendment, Waiver and Consent to the Chemical
Loan and Security Agreement dated May 15, 1996.
10.25 - Forbearance Agreement made as of June 7, 1996 to the
Chemical Loan and Security Agreement.
99.1 - Award of Arbitrators dated June 27, 1996 with
Dissenting Opinion
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SIGNATURE
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 hereunto duly authorized.
SMITH ENVIRONMENTAL
TECHNOLOGIES CORPORATION
By: /s/ William T. Campbell
----------------------------
William T. Campbell
Vice President-Finance
July 24, 1996
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EXBIBIT 10.24
EXECUTION COPY
THIRD AMENDMENT, WAIVER AND CONSENT dated as of May 15, 1996
("Amendment") to LOAN AND SECURITY AGREEMENT dated as of October 18, 1995 (as
amended through the date hereof, the "Loan Agreement") among SMITH
ENVIRONMENTAL TECHNOLOGIES CORPORATION, BCM ENGINEERS INC., a Pennsylvania
corporation, BCM ENGINEERS INC., an Alabama corporation, RIEDEL ENVIRONMENTAL
SERVICES INC., each of the Lenders which are or which may become parties to the
Loan Agreement and CHEMICAL BANK, as Agent for the Lenders. Terms which are
capitalized herein and not otherwise defined shall have the meanings ascribed
to them in the Loan Agreement.
WHEREAS, pursuant to paragraph 14(l) of the Loan Agreement, Smith
Environmental may not pay dividends on its Junior Securities, including the
outstanding shares of non-voting preferred stock of Smith Environmental held by
the ESOP (the "ESOP Stock"), unless all of the conditions precedent to any such
payment, as set forth in sub-clause (I) following the proviso to clause (ii) of
such paragraph 14(l), shall have occurred (such conditions, the "Compliance
Conditions"); and
WHEREAS, Smith Environmental has advised the Agent that (i) Smith
Environmental has made dividend payments in cash to the ESOP, as holder of the
ESOP Stock, in the aggregate amount of approximately $97,500 (such amount, the
"ESOP Dividend") during the fiscal quarter ending in March, 1996,
notwithstanding the fact that the Compliance Conditions did not occur at the
time of such payment, (ii) Smith Environmental has redeemed shares of ESOP
Stock during the month of April, 1996 and proposes to redeem additional shares
of ESOP Stock during the month of May, 1996, notwithstanding the fact that any
such redemption requires the prior written consent thereto of the Lenders,
which consent has not heretofore been given and (iii) Smith Environmental and
its Subsidiaries have failed to comply with certain financial covenants
required to be maintained under paragraph 14(o) of the Loan Agreement for the
measuring periods described therein; and
WHEREAS, Smith Environmental has requested that the Agent and the
Lenders (i) waive the fulfillment of the Compliance Conditions as a condition
precedent to the payment of the ESOP Dividend and consent to the payment of the
ESOP Dividend and to the redemption of certain of the shares of ESOP Stock and
(ii) waive as an Event of Default the failure of Smith Environmental and its
Subsidiaries to comply with such financial covenants, and the Agent and each of
the Lenders have so agreed, upon the terms and subject to the conditions set
forth in this Amendment;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the amendment of certain terms and provisions of the Agreement, the
payment of the fee described in Section 6(g) hereof, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows:
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1. Waiver of Compliance Conditions; Consent. Upon the fulfillment
of the conditions set forth in Section 6 hereof, effective as of the date
hereof, each of the Lenders and the Agent waives as a condition precedent to the
payment of the ESOP Dividend Smith Environmental's fulfillment of the Compliance
Conditions and each of the Lenders and the Agent consents to the payment in cash
to the ESOP of the ESOP Dividend for the fiscal quarter ending in March, 1996.
2. Redemption of ESOP Stock; Waiver and Consent. Upon the
fulfillment of the conditions set forth in Section 6 hereof, effective as of
the date hereof, each of the Lenders and the Agent consents to the redemption
of up to $281,191.49, in the aggregate, of ESOP Stock, provided that (a) not
more than $122,667.28 of the cost of such redemption is paid for in cash, (b)
such cash payment or payments are made not later than May 31, 1996, (c) the
debt securities issued in connection with such redemption, by their terms,
provide for the payment of interest quarterly at the per annum rate of 5% and
for the level amortization of principal annually over a five-year period,
commencing 365 days from the date of issuance thereof, and (d) the original
principal amount of such debt securities, in the aggregate, does not exceed
$158,524.21.
3. Waiver of Financial Covenants. Upon the fulfillment of the
conditions set forth in Section 6, hereof, effective as of the date hereof,
each of the Lenders and the Agent waives the following financial covenant
violations as an Event of Default, such waiver to be effective only for the
period ending on the last day of the fiscal quarter ending in March, 1996,
except for the waiver set forth in clause (b) below, which waiver shall be
effective for the period ending on June 29, 1996:
(a) the failure of Smith Environmental and its
Subsidiaries, on a consolidated basis, to have a Net Loss of
no greater than $100,000 for each of the fiscal quarters
ending in December, 1995 and March, 1996, as required under
paragraph 14(o)(i);
(b) the failure of Smith Environmental and its
Subsidiaries, on a consolidated basis, to maintain a Tangible
Net Worth of not less than (i) $5,800,000 at all times during
the period from December 31, 1995 through March 30, 1996 and
(ii) $6,400,000 at all times during the period from March 31,
1996 through June 29, 1996, as required under paragraph
4(o)(ii), provided that the actual Tangible Net Worth of Smith
Environmental and its Subsidiaries, on a consolidated basis,
is not less than (x) $4,900,000 at all times during the period
from April 1, 1996 through May 30, 1996, (y) $5,500,000 at all
times during the period from May 31, 1996 through June 28,
1996 and (z) $5,800,000 on June 29, 1996;
(c) the failure of Smith Environmental and its
Subsidiaries, on a consolidated basis, to maintain an interest
coverage ratio as of the end of the two fiscal quarters ending
in March, 1996 of not less than 2.00 to 1.00, as required
under paragraph 14(o)(iii);
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(d) the failure of Smith Environmental and its
Subsidiaries, on a consolidated basis, to maintain a debt
service coverage ratio as of the end of the two fiscal
quarters ending in March, 1996 of not less than .85 to 1.00,
as required under paragraph 14(o)(v); and
(e) the failure of Smith Environmental and its
Subsidiaries, on a consolidated basis, as of the two fiscal
quarters ending in March, 1996, to have an amount of Funded
Indebtedness of not greater than 14 times FFO minus Capital
Expenditures, as required under paragraph 14(o)(vii).
4. Amendment. Upon the fulfillment of the conditions set forth
in Section 6 hereof, effective as of the date hereof (except with respect to
the amendment of paragraph 14(a) of the Loan Agreement as set forth in Section
4(e) below, which amendment shall be effective as of March 30, 1996), the Loan
Agreement is hereby amended as follows:
(a) Paragraph 3. Term Loans. Paragraph 3(c) is deleted
in its entirety and the following is substituted in lieu thereof (it being
understood that paragraphs 3(c)(i) and (ii) shall continue without modification
or amendment):
"(c) If any Borrower, any other Account
Owner or BCM-Parent sells any Equipment, or any real
property subject to a Mortgage, Smith Environmental
shall cause such Borrower, Account Owner or
BCM-Parent, as the case may be, to pay to the Agent,
unless otherwise specifically provided herein or
otherwise agreed to by the Majority Lenders, as and
when received by such Borrower, such Account Owner,
or BCM-Parent, as the case may be, as a mandatory
prepayment of the Term Loans, to be applied pro rata
against the scheduled installments of principal of
the Term Loans, in the inverse order thereof, a sum
equal to the proceeds received from such sale by such
Borrower, such Account Owner, or BCM-Parent, as the
case may be, provided, that if such Borrower, such
Account Owner, or BCM-Parent sells, transfers or
otherwise disposes of any Equipment which has no
"Appraised Value," as hereinafter defined, Smith
Environmental shall cause such Borrower, such Account
Owner, or BCM- Parent, as the case may be, to pay to
the Agent all of the cash proceeds received from such
sale, transfer or other disposition, twenty-five
percent (25%) of which proceeds shall be applied
against the outstanding Revolving Loans and
seventy-five percent (75%) of which proceeds shall be
applied pro rataagainst the scheduled installments of
principal of the Term Loans, in the inverse order
thereof, where "Appraised Value" shall mean the
orderly liquidation value, if any, ascribed to
Equipment of
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the Borrowers, BCM, such Account Owner, or
BCM-Parent, pursuant to the Accuval Associates
Incorporated and MB Valuation Company valuation
analyses performed for the Agent and provided further
that without the Agent's consent, unless and until an
Event of Default has occurred and is continuing:"
(b) Paragraph 5. Interest, Fees and Charges. Paragraph
5(b) is deleted in its entirety and the following is substituted in lieu
thereof:
"(b) Determination of Applicable Margin. The
Applicable Margin shall mean (i) at all times prior to May 15,
1996, 1.50% in the case of ABR Revolving Loans, 3.25% in the
case of Eurodollar Revolving Loans, 1.75% in the case of ABR
Term Loans and 3.50% in the case of Eurodollar Term Loans, and
(ii) on and after May 15, 1996, 2.00% in the case of ABR
Revolving Loans, 3.75% in the case of Eurodollar Revolving
Loans, 2.25% in the case of ABR Term Loans and 4.00% in the
case of Eurodollar Term Loans, provided, however, that if the
Leverage Ratio for the Borrowers' fiscal year ending September
30, 1996 is less than 3.00 to 1.00, as reflected in the annual
certified financial statements of Smith Environmental and its
Subsidiaries, on a consolidated basis, for such period, and as
certified pursuant to a Leverage Ratio Certificate delivered
in connection therewith, then, commencing on the first day of
the month following the date of delivery to the Lenders and
the Agent of such financial statements and such Leverage Ratio
Certificate, so long as no Event of Default has occurred and
is then continuing, the Applicable Margin shall mean 1.75% in
the case of ABR Revolving Loans, 3.50% in the case of
Eurodollar Revolving Loans, 2.00% in the case of ABR Term
Loans and 3.75% in the case of Eurodollar Term Loans,
provided, further, that if for any period of four (4)
consecutive fiscal quarters ending after September 30, 1996,
the Leverage Ratio equals or exceeds 3.00 to 1.00, as
certified pursuant to a Leverage Ratio Certificate delivered
in connection with the internally prepared monthly financial
statements of Smith Environmental and its Subsidiaries, on a
consolidated basis, for the last month of such period, then,
commencing on the first day of the month following the date of
delivery to the Lenders and the Agent of such financial
statements and such Leverage Ratio Certificate, until such
time, if any, as the Leverage Ratio for any period of four (4)
consecutive fiscal quarters is again less than 3.00 to 1.00
(as certified in the manner hereinabove described) the
Applicable Margin shall revert back to, and shall mean, 2.00%
in the case of ABR Revolving Loans, 3.75% in the case of
Eurodollar Revolving Loans, 2.25% in the
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case of ABR Term Loans and 4.00% in the case of Eurodollar
Term Loans, provided, in addition, that irrespective of the
Leverage Ratio for any measuring period, the Applicable Margin
in the case of both ABR Revolving Loans and Eurodollar
Revolving Loans (but not ABR Term Loans or Eurodollar Term
Loans) otherwise in effect shall be reduced by one half of one
percent ( 1/2 of 1%) for any period commencing at the
beginning of a fiscal quarter (the "reduction date") and
ending on the sooner of (i) the date an Event of Default shall
have occurred and (ii) the date on which the Lenders shall
have made a Revolving Loan based on any Eligible Unbilled
Accounts, so long as no Event of Default shall have occurred
and then be continuing on the reduction date, if no portion of
the Revolving Loans outstanding at any time during the fiscal
quarter immediately preceding the reduction date shall have
been based on any Eligible Unbilled Accounts."
(c) Paragraph 6. Loan Administration. Paragraph 6(e) is
deleted in its entirety and the following is substituted in lieu thereof:
"(e) Limitation on Eurodollar Loans. Notwithstanding
anything to the contrary contained herein, at all times on and
after May 15, 1996 (i) each Eurodollar Loan made on and after
such date shall be for an Interest Period consisting of one
month only and (ii) the Interest Period with respect to all
outstanding Eurodollar Loans made on and after May 15, 1996 as
of any date of determination shall end on the same day."
(d) Paragraph 11. Schedules and Reports. Paragraph
11(b) is amended by (i) deleting the word "and" at the end of clause (iv)
thereof and substituting a semi-colon in lieu thereof and (ii) deleting the
period at the end of clause (v) thereof and substituting the following in lieu
thereof:
", (vi) a schedule of all Equipment and real property sold
during the previous month, all cash received during the
previous month in payment of past due Accounts, and all cash
due and unpaid as of the end of the previous month and which
is not payable in connection with an Account, (vii) a report
of the outstanding work orders and work backlog, as of the end
of the previous month, of each Borrower and Account Owner,
(viii) a backup report in reasonable detail of the Unbilled
Accounts of such Account Owner outstanding as of the end of
the previous month and (ix) a report in reasonable detail of
(A) all requests which Smith Environmental or any other
Borrower shall have received during the prior month for the
redemption, exchange or conversion of any shares of non-voting
preferred stock of Smith Environmental held by the ESOP
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and (B) any such shares which by their terms will become
during the following three-month period redeemable,
exchangeable or convertible, in each case together with a
schedule setting forth in reasonable detail the terms of
payment of all such shares."
(e) Paragraph 14. Covenants. Paragraph 14(a) is amended
by deleting the date "March 31, 1996" and by substituting therefor the date
"September 30, 1996".
5. Representations and Warranties. In order to induce the
Lenders and the Agent to enter into this Amendment, Smith Environmental and
each other Borrower makes the following representations and warranties in favor
of each of the Lenders and the Agent (which representations and warranties
shall survive the execution and delivery of this Amendment) as of the date
hereof:
(a) Smith Environmental and each other Borrower has the
corporate power, authority and legal right to execute, deliver and perform this
Amendment, and the instruments, agreements, documents and transactions
contemplated hereby, and has taken all actions necessary to authorize the
execution, delivery and performance of this Amendment, and the instruments,
agreements, documents and transactions contemplated hereby;
(b) No consent of any Person (including, without
limitation, shareholders or creditors of Smith Environmental, as the case may
be) other than the Lenders, and no consent, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority, is required in connection with the execution,
delivery, performance, validity or enforceability of this Amendment, and the
instruments, agreements, documents and transactions contemplated hereby;
(c) This Amendment has been duly executed and delivered
on behalf of Smith Environmental and each other Borrower by its duly authorized
officer, and constitutes the legal, valid and binding obligation of Smith
Environmental and each such Borrower, enforceable in accordance with its terms;
(d) Neither Smith Environmental nor any other Borrower is
in default under any indenture, mortgage, deed of trust, agreement or other
instrument to which it is a party or by which it may be bound. Neither the
execution and delivery of this Amendment, nor the consummation of the
transactions herein contemplated, nor compliance with the provisions hereof or
thereof will (i) violate any law or regulation, (ii) result in or cause a
violation by Smith Environmental or by any other Borrower of any order or
decree of any court or government instrumentality, (iii) conflict with, or
result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument to which Smith
Environmental or any other Borrower is a party or by which it may be bound,
(iv) result in the creation or imposition of any lien, charge, or encumbrance
upon any of the property of Smith Environmental or of any other Borrower,
except in favor of the Agent for the benefit of the Lenders, to secure the
Liabilities, or (v) violate any provision of the Articles or Certificate of
Incorporation, By-Laws or any capital stock provisions of Smith Environmental
or of any other Borrower;
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(e) No Default or Event of Default has occurred and is
continuing, except for such Default and Event of Default as have been waived
pursuant to this Amendment;
(f) Since the date of the Agent's receipt of Smith
Environmental's consolidated and consolidating financial statements for the
period ended ______________, no change or event has occurred which has had or
is reasonably likely to have a Material Adverse Effect; and
(g) The recitals contained in this Amendment are true and
correct in all respects.
6. Conditions Precedent. This Amendment shall not become
effective until all of the following conditions, the fulfillment of each of
which is a condition precedent to the effectiveness of this Amendment, shall
have occurred or shall have been waived in writing by the Agent and the
Lenders.
(a) The Agent and each of the Lenders shall have received
a fully executed counterpart or original of this Amendment, together with all
schedules and exhibits hereto appropriately completed to the extent required.
(b) Upon the effectiveness of this Amendment, all
representations and warranties set forth in the Loan Agreement (except for such
inducing representations and warranties that were only required to be true and
correct as of a prior date) shall be true and correct in all material respects
on and as of the effective date hereof, and no Default or Event of Default
shall have occurred and be continuing.
(c) No event or development shall have occurred since the
date of delivery to the Lenders of the Borrowers' most recent financial
statements which event or development has had or is reasonably likely to have a
Material Adverse Effect.
(d) The Agent shall have received a certificate from
Smith Environmental, executed by its Chief Executive Officer or other
authorized officer, as to the accuracy and completeness of the representations
and warranties contained in Section 5 hereof.
(e) All corporate and legal proceedings and all documents
and instruments executed or delivered in connection with this Amendment shall
be satisfactory in form and substance satisfactory to the Lenders and their
counsel, and the Lenders and their counsel shall have received all information
and copies of all documents which the Lenders and their counsel may have
requested in connection herewith and the matters contemplated hereunder, such
documents, when requested by them, to be certified by appropriate corporate
authorities.
(f) The Lenders shall have received such further
agreements, consents, instruments and documents as may be necessary or proper
in the reasonable opinion of the Lenders, the Agent and their counsel to carry
out the provisions and purposes of this Amendment.
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(g) The Agent shall have received from Smith
Environmental, for the pro rata benefit of the Lenders a non-refundable fee, in
cash, in the amount of $10,000. Smith Environmental hereof hereby authorizes
the Agent to debit Smith Environmental's loan account by the amount of $10,000
in payment of such fee.
(h) The Agent shall have received from Smith
Environmental a written undertaking pursuant to which Smith Environmental shall
have agreed to pay to the Agent an administrative fee equal to $50,000 per
annum, payable annually in advance on each yearly anniversary of the Closing
Date, commencing with October 18, 1996.
(i) The Borrowers shall have entered into an agreement
with CVC, the terms and conditions of which shall be satisfactory to the Agent,
the Lenders and their counsel, which agreement shall provide for, among other
things (i) the deferral of payment of, and the addition to the unpaid principal
balance of the CVC Notes of, the two installments of interest on the CVC Notes
scheduled to have been paid on May 21, 1995 and November 21, 1995, (ii) the
deferral of payment of, and the addition to the unpaid principal balance of the
CVC Notes and the CVC Bridge Notes of, the three installments of interest on
the CVC Notes and the CVC Bridge Notes, respectively, scheduled to be paid on
May 21, 1996, November 21, 1996 and May 21, 1997 and (iii) the waiver by CVC
(or the current holders of the CVC Bridge Notes and CVC Notes, if applicable)
of all defaults or events of default, if any, which have occurred and are
continuing under the CVC Note Purchase Agreement.
(j) The Agent shall have received from Smith
Environmental a schedule setting forth in reasonable detail the number of
shares of ESOP Stock redeemed by Smith Environmental, as described in Section 2
of this Amendment, the dates on which such shares were or shall be redeemed,
the value of such shares and the terms of payment of such redemption(s).
7. Conditions Subsequent. Notwithstanding anything contained in
this Amendment to the contrary, the waivers contained in Sections 1, 2 and 3 of
this Amendment shall become automatically null and void and of no force or
effect:
(a) on May 31, 1996 if the Agent shall not have received
by such date a duly executed counterpart of a certain subordination agreement
between the Agent and Bankers Leasing Association, Inc., the terms and
conditions of which shall be satisfactory to the Agent; and
(b) on June 15, 1996 if the Agent and the Lenders shall
not have received by such date updated disclosure schedules to the Agreement,
which schedules shall set forth in reasonable detail all of the pertinent
information requested thereon and which information shall be satisfactory in
both form and substance to the Agent and the Lender.
8. General Provisions.
(a) Nothing contained in this Amendment shall be deemed
to be a waiver of any Defaults or Events of Default other than those set forth
in Sections 1, 2 and 3 hereof,
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whether or not the Agent or any of the Lenders shall have any knowledge
thereof, nor shall anything contained in this Amendment be deemed to be a
waiver of any future Default or Event of Default whatsoever, it being
understood that the waivers contained herein shall only extend to the specific
Defaults and Events of Default identified herein and then only throughout the
periods specifically stated herein.
(b) Except as herein expressly amended, the Loan
Agreement and all other agreements, documents, instruments and certificates
executed in connection therewith, are ratified and confirmed in all respects
and shall remain in full force and effect in accordance with their respective
terms.
(c) All references in the Other Agreements to the Loan
Agreement shall mean the Loan Agreement as waived and amended as of the
effective date hereof, and as waived and amended hereby and as hereafter
amended, supplemented or modified from time to time. From and after the date
hereof, all references in the Loan Agreement to "this Agreement," "hereof,"
"herein," or similar terms, shall mean and refer to the Loan Agreement as
waived and amended by this Amendment.
(d) This Amendment may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all which shall constitute one and the same agreement.
(e) This Amendment shall be governed and controlled by
the laws of the State of New York without reference to its choice of law
principles.
IN WITNESS WHEREOF, each of the Borrowers, BCM-Alabama, the Lenders
and the Agent have caused this Amendment to be duly executed by their
respective officers thereunto duly authorized as of the day and year first
above written.
SMITH ENVIRONMENTAL TECHNOLOGIES RIEDEL ENVIRONMENTAL SERVICES INC.
CORPORATION
By:________________________________ By:________________________________
(Title) (Title)
BCM ENGINEERS INC., CHEMICAL BANK, as a Lender and as
a Pennsylvania corporation Agent
By:________________________________ By:________________________________
(Title) (Title)
BCM ENGINEERS INC., BTM CAPITAL CORPORATION, formerly
Alabama corporation known as BOT Financial Corporation
By:________________________________ By:_______________________________
(Title) (Title)
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EXHIBIT 10.25
EXECUTION COPY
FORBEARANCE AGREEMENT made as of June 7, 1996 (the "Agreement") among
SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION, BCM ENGINEERS INC., a
Pennsylvania corporation, BCM ENGINEERS INC., an Alabama corporation, RIEDEL
ENVIRONMENTAL SERVICES INC., each of the Lenders which are parties to the Loan
Agreement, as hereinafter defined, and CHEMICAL BANK, as Agent for the Lenders.
This Agreement is entered into in connection with a certain Loan and Security
Agreement dated as of October 18, 1995 (as amended through the date hereof, the
"Loan Agreement") among the parties to this Agreement. Terms which are
capitalized herein and not otherwise defined shall have the meanings ascribed
to them in the Loan Agreement.
WHEREAS, based on certain information provided by the Borrowers to the
Agent with respect to the collectibility of a certain Account (such Account,
the "Referenced Account" and the Account Debtor indebted thereon, the
"Referenced Account Debtor"), on June 7, 1996, with the knowledge and agreement
of the Borrowers, the Agent exercised its right, pursuant to paragraph 2(b) of
the Loan Agreement, to establish a reserve against availability in the amount
of $2,697,795.07, in consequence of which the amount of the Consolidated
Borrowing Base was (i) reduced by $2,160,000 and (ii) exceeded by the aggregate
outstanding principal balance of the Revolving Loans (the amount of such
excess, the "Overadvance");
WHEREAS, pursuant to Paragraph 2(a) of the Loan Agreement, the
Borrowers were obligated to immediately repay the Overadvance in full upon the
creation thereof, the Borrowers have failed to make such payment, such failure
continues without cure through the date hereof and such failure constitutes an
Event of Default under paragraph 16(a) of the Loan Agreement (such Event of
Default, the "Designated Default"); and
WHEREAS, the Borrowers have requested and the Lenders have agreed, on
the terms and subject to the conditions set forth in this Agreement, to refrain
for a limited period of time from exercising the rights and remedies available
to the Lenders on account of the Designated Default, in consideration of which
the Borrowers have jointly and severally agreed to reduce the Overadvance to
zero in accordance with the scheduled contained herein and have jointly and
severally agreed to pay interest on the unpaid principal balance of the
Overadvance at a certain rate, all as more fully set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. AFFIRMATION OF INDEBTEDNESS AND OTHER LIABILITIES.
(a) Each of the Borrowers acknowledges, agrees and certifies to
the Agent and the Lenders that as of the close of business on June 7, 1996, the
aggregate outstanding and unpaid principal amount of (i) the Revolving Loans
equals $21,677,766.82 and (ii) the Term Loans equals $4,981,038.76. Each of
the Borrowers (i) represents and warrants to the Lenders that with respect to
the Liabilities there is no offset, defense, claim or counterclaim of any
nature whatsoever (whether known or unknown) as of the date hereof, including
without limitation any offset, defense, claim or counterclaim arising under the
U.S. Bankruptcy Code
<PAGE> 2
(the "Code") and (ii) waives any such offset, defense, claim or counterclaim to
the extent the same may exist as of the date hereof, whether known or unknown;
(b) Each of the Borrowers acknowledges and agrees that the prompt
payment and performance when due of all Liabilities is guaranteed by each
Borrower pursuant to an instrument of Continuing Unconditional Guaranty dated
as of October 18, 1995 (each such instrument a "Guaranty") executed in favor of
the Agent and the Lenders by such Borrower (in such capacity, a "Guarantor")
and each Borrower acknowledges and agrees that the Guaranty executed by it
continues to be valid, binding and enforceable against it; and
(c) Each of the Borrowers acknowledges and agrees that the lien
and security interest held by the Agent for the ratable benefit of the Lenders
in and to the Collateral continues to be a perfected lien against the
Collateral, subject to no other liens or encumbrances thereon except for
Permitted Liens.
SECTION 2. FORBEARANCE. Except as specifically set forth in Section 5
hereof, this Agreement does not constitute a waiver of any Event of Default
(including the Designated Default), whether or not known to the Agent or the
Lenders, or any Event of Default or other Default now or hereafter existing,
and all Events of Default or Defaults (except the Event of Default described in
Section 5 hereof) shall remain in effect and shall be deemed to be continuing
(and are in fact continuing) unless and until they are cured in accordance with
the Loan Agreement. However, for the period commencing on the date hereof and
terminating on June 28, 1996 (the "Forbearance Period"), so long as (a) no
Event of Default or other event which, with the giving of notice or passage of
time would constitute an Event of Default (other than the Designated Default)
shall have arisen during the Forbearance Period and (b) no default by any
Borrower in the performance of the terms of this Agreement shall have occurred,
the Lenders shall not demand payment of the Liabilities, nor shall the Lenders
otherwise seek to exercise any of their rights or remedies under the Loan
Agreement, any of the Other Agreements or applicable law with respect to the
Designated Default.
SECTION 3. MANDATORY REDUCTIONS OF OVERADVANCE; PAYMENTS OF INTEREST.
The Borrowers jointly and severally agree to reduce the Overadvance to zero no
later than June 28, 1996, and further jointly and severally agree that prior to
such date, the maximum amount of the Overadvance shall not exceed the following
amounts during each of the following periods (collectively the "Overadvance
Period"):
<TABLE>
<CAPTION>
Overadvance Period Maximum Overadvance
<S> <C>
June 7 - June 10, 1996 $2,000,000
June 11 - June 13, 1996 $1,860,000
June 14 - June 20, 1996 $1,560,000
June 21 - June 27, 1996 $1,260,000
June 28, 1996 and at all time thereafter $ -0-
</TABLE>
-2-
<PAGE> 3
In addition, the maximum amount of the Overadvance which may be outstanding
during the Overadvance Period shall be automatically and permanently reduced
by, and the Borrowers shall make mandatory payments of principal of the
Revolving Loans in amounts equal to, the amount of all of cash, checks and
other remittances ("Collections") received from time to time by the Borrowers
in payment of any Account which is no longer an Eligible Account and for which
the Agent has maintained or will institute a reserve (or additional reserve)
against availability, including without limitation Accounts owing (i) directly
or indirectly by the Referenced Account Debtor arising from remediation
services performed or scheduled to have been performed jointly between Smith
Environmental and a subsidiary of Woodward-Clyde and (ii) with respect to
remediation services performed in connection with the Waukegan Harbor Trust
(collectively the "OMC Account"). All such payments shall be made, and the
maximum amount of the Overadvance which may be outstanding during the
Overadvance Period shall be automatically and permanently reduced, as and when
such Collections are received. Effective as of June 7, 1996, notwithstanding
anything to the contrary contained in Paragraph 5(b) of the Loan Agreement,
interest on that portion of the Revolving Loans which, as of any date of
determination, exceeds the amount of the Consolidated Borrowing Base, as of
such date, shall accrue at an annual rate equal to five percent (5%) plus the
ABR, as determined and adjusted in the manner set forth in the Loan Agreement.
SECTION 4. ADDITIONAL RESERVES. Without limiting the generality of the
terms and provisions contained in paragraph 2(b) of the Loan Agreement or
contained elsewhere in this Agreement, the Agent, in the exercise of its
commercially reasonable judgment, may continue to maintain existing reserves
and/or establish additional reserves against availability with respect to (i)
the balance of the Referenced Account, and any Unbilled Accounts relating
thereto, based on the status of the current discussions between the Borrowers'
management and the Referenced Account Debtor, (ii) the OMC Account, in the
event that the Borrowers fail to receive by June 20, 1996 Collections in the
aggregate amount of not less than $500,000 in payment against the OMC Account,
and (iii) the remaining lease payments owing by Smith Environmental to Bankers
Leasing Association Inc., if Smith Environmental fails to cure the default
which currently exists under leasing schedules 3 and 4 of the lease agreement
between such parties. Each of the Borrowers confirms its understanding and
agreement that under the terms of the Loan Agreement, the Agent has the right,
exercised in a commercially reasonable manner, at any time and from time to
time, to maintain reserves and/or establish additional reserves against
availability and has no obligation to provide notice thereof or to obtain the
consent thereto of any other Person, including the Borrowers.
SECTION 5. REDEMPTION OF ESOP STOCK; WAIVER AND CONSENT. Pursuant to
Section 2 of the Third Amendment, Waiver and Consent dated as of May 15, 1996
(the "Third Amendment") to the Loan Agreement, each of the Lenders and the
Agent consented to the redemption of up to $281,191.49, in the aggregate, of
ESOP Stock (as defined in the Third Amendment), provided, among other things,
that not more than $122,667.28 of the cost of such redemption was paid for in
cash and that such cash payments were made not later than May 31, 1996. Smith
Environmental has now advised the Agent that the information it previously
provided to the Agent with respect to the aggregate value and cost of
redemption of the ESOP Stock was incomplete, and that in fact Smith
Environmental has redeemed, and proposes to further redeem, $331,077.37, in the
aggregate, of ESOP Stock and proposes to pay accrued interest with respect
-3-
<PAGE> 4
thereto. Upon the fulfillment of the conditions set forth under Section 6
hereof, each of the Lenders and the Agent rescinds the waiver and consent
previously given by it under Section 2 of the Third Amendment, and instead,
each of the Lenders and the Agent consents to (i) the redemption of up to
$331,077.37, in the aggregate, of ESOP Stock and (ii) the payment of accrued
interest with respect thereto, and hereby waives as an Event of Default the
redemption of such ESOP Stock and the payment of such interest, provided that
(a) not more than $173,775.68 of the cost of such redemption is paid for in
cash and the cash amount of such accrued interest so paid does not exceed more
than $5,000, (b) all such cash payments are made not later than July 10, 1996,
(c) the debt securities issued in connection with such redemption, by their
terms, provide for the payment of interest quarterly at the per annum rate of
5% and for the level amortization of principal annually over a five-year
period, commencing 365 days from the date of issuance thereof, and (d) the
original principal amount of such debt securities, in the aggregate, does not
exceed $160,494.80.
SECTION 6. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. This
Agreement shall not be effective unless and until each of the following
conditions shall have been satisfied in the sole discretion of the Lenders or
waived by the Lenders, for whose sole benefit such conditions exist:
(a) The Agent and each of the Lenders shall have received
a fully executed counterpart or original of this Agreement.
(b) Upon the effectiveness of this Agreement, all
representations and warranties set forth in the Loan Agreement (except for such
inducing representations and warranties that were only required to be true and
correct as of a prior date and except for such representations and warranties
as relate to the defaults described in clause (ii) hereof) shall be true and
correct in all material respects on and as of the effective date hereof, and no
Default or Event of Default shall have occurred and be continuing, other than
(i) the Designated Default and (ii) defaults under agreements made in the
ordinary course of business between or among any of the Borrowers and Persons
other than the Agent, the Lenders, or any Affiliate of the Borrowers, such as
lease agreements, none of which agreements is material to the business of such
Borrower and none of which defaults, singly or in the aggregate, has had or is
reasonably likely to have, a Material Adverse Effect.
(c) Except for the collectibility of the Referenced
Account, no event or development shall have occurred since the date of delivery
to the Lenders of the Borrowers' most recent financial statements which event
or development has had or is reasonably likely to have a Material Adverse
Effect.
(d) The Agent shall have received a certificate from
Smith Environmental, executed by its Chief Executive Officer or other
authorized officer, as to the accuracy and completeness of the representations
and warranties contained in Section 11 hereof.
(e) All corporate and legal proceedings and all documents
and instruments executed or delivered in connection with this Agreement shall
be satisfactory in form and substance satisfactory to the Lenders and their
counsel, and the Lenders and their counsel shall have received all information
and copies of all documents which the Lenders and their
-4-
<PAGE> 5
counsel may have requested in connection herewith and the matters contemplated
hereunder, such documents, when requested by them, to be certified by
appropriate corporate authorities.
(f) The Lenders shall have received such further
agreements, consents, instruments and documents as may be necessary or proper
in the reasonable opinion of the Lenders, the Agent and their counsel to carry
out the provisions and purposes of this Agreement.
(g) The Agent shall have received from Smith
Environmental, for the pro rata benefit of the Lenders, a non-refundable fee,
in cash, in the amount of $10,000. Smith Environmental hereby authorizes the
Agent to debit Smith Environmental's loan account by the amount of $10,000 in
payment of such fee.
SECTION 7. EVENTS OF DEFAULT; REMEDIES.
(a) The occurrence of any one or more of the following events or
conditions shall constitute a default (an "Event of Default") under this
Agreement and an Event of Default under the Loan Agreement and the Other
Agreements:
(i) any of the Borrowers shall fail to pay any amount
when due under this Agreement or shall fail to discharge when
due any other Liability to the Lenders or shall fail to pay
any other indebtedness when due to the Lenders;
(ii) any of the Borrowers shall fail to perform any
obligation or covenant required to be performed by it under
the terms of this Agreement; or
(iii) any of the Borrowers shall make or furnish any
warranty, representation or statement to the Agent or any of
the Lenders in connection with this Agreement, or any other
agreement to which such Borrower, the Agent, or such Lender
are parties, which is or was knowingly false or misleading in
any material respect when made or furnished.
(b) Upon the occurrence and during the continuance of an "Event of
Default", as defined in this Section 7, or any other Event of Default, the
Lenders, at their sole option and in their sole discretion, may exercise any
and all of their rights and remedies under this Agreement or any Other
Agreements, and all other rights and remedies available to the Lenders at law
or in equity.
SECTION 8. RELEASE. For and in consideration of the mutual covenants and
obligations set forth herein, each of the Borrowers (collectively the
"Releasors") hereby releases and discharges each of the Lenders and the Agent,
and each of their respective officers, directors, partners, agents, employees,
attorneys and other professionals, affiliates, successors and assigns
(collectively the "Releasee") from all actions, causes of action, claims for
contribution or
-5-
<PAGE> 6
indemnification that may be brought by the Releasors or any third party, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, premisses, variances,
trespasses, damages, judgments, extents, executions, claims, and demands
whatsoever, in law, admiralty or equity (including, without limitation, any
action under 11 U.S.C. Section Section 542- 553) (all of the foregoing being
collectively, "Claims"), which against the Releasee, the Releasors or the
Releasors' partners, agents, employees, attorneys, affiliates, heirs,
executors, administrators, successors or assigns ever had, now have or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date of the delivery
of this Agreement by reason or on account of or in any way related to any acts,
omissions or circumstances (whether known or unknown) occurring prior to or as
of the date hereof in connection with or arising out of or referring or
relating in any way to (a) any and all Claims based upon, relating to or
arising from any and all transactions, relationships or dealings relating to
loans or other financial accommodations made by the Releasee to or for the
account of Releasors; and (b) all documentation underlying the indebtedness of
the Releasors to the Releasee, provided, however, that the Releasee shall not
be released from any Claim arising from the Releasee's gross negligence or
wilfull misconduct.
SECTION 9. CONSENT TO RELIEF FROM AUTOMATIC STAY. Each of the Borrowers
hereby agrees that if any of them shall (i) file with any bankruptcy court of
competent jurisdiction or be the subject of any petition under the Code, (ii)
be the subject of any order for relief under the Code, (iii) file or be the
subject of any petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency, or other
relief for debtors, (iv) seek, consent to or acquiesce in the appointment of
any trustee, receiver, conservator or liquidator, (v) be the subject of any
order judgement or decree entered by any court of competent jurisdiction
approving a petition filed against any of them for any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency, or relief for debtors, the Agent and the Lenders shall
thereupon be entitled to relief from any automatic stay imposed by Section 362
of the Code or from any other stay or suspension of remedies imposed in any
other manner with respect to the exercise of the rights and remedies otherwise
available to the Agent and the Lenders under the Loan Agreement, any of the
Other Agreements, hereunder or under any documents delivered in connection
therewith.
SECTION 10. INDEMNITY. Each of the Borrowers jointly and severally agrees
to defend and hold the Agent and each of the Lenders harmless from and against
any and all claims, charges, actions, suits, proceedings, lawsuits,
obligations, liabilities, fines, penalties, costs and expenses, including, but
not limited to reasonable attorneys' fees, in connection with the breach of any
representation or warranty of such Borrower, the breach or default by such
Borrower of any term, covenant or condition hereunder, the collection or
recovery of any portion of the Liabilities or the Agent's or any of the
Lenders' enforcement of its rights under this Agreement, the Loan Agreement or
any of the other Agreements. The obligations and provisions contained in this
Section shall continue and remain in full force and effect after the
Liabilities have been paid and discharged in full.
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<PAGE> 7
SECTION 11. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lenders and the Agent to enter into this Agreement, Smith Environmental and
each other Borrower makes the following representations and warranties in favor
of each of the Lenders and the Agent (which representations and warranties
shall survive the execution and delivery of this Agreement) as of the date
hereof:
(a) Smith Environmental and each other Borrower has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement, and the instruments, agreements, documents and transactions
contemplated hereby, and has taken all actions necessary to authorize the
execution, delivery and performance of this Agreement, and the instruments,
agreements, documents and transactions contemplated hereby;
(b) No consent of any Person (including, without
limitation, shareholders or creditors of Smith Environmental, as the case may
be) other than the Lenders, and no consent, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority, is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, and the
instruments, agreements, documents and transactions contemplated hereby;
(c) This Agreement has been duly executed and delivered
on behalf of Smith Environmental and each other Borrower by its duly authorized
officer, and constitutes the legal, valid and binding obligation of Smith
Environmental and each such Borrower, enforceable in accordance with its terms;
(d) Except for the Designated Default and except as
otherwise described in Section 6(b)(ii) hereof, neither Smith Environmental nor
any other Borrower is in default under any indenture, mortgage, deed of trust,
agreement or other instrument to which it is a party or by which it may be
bound. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor compliance with the
provisions hereof or thereof will (i) violate any law or regulation, (ii)
result in or cause a violation by Smith Environmental or by any other Borrower
of any order or decree of any court or government instrumentality, (iii)
conflict with, or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, agreement or other instrument to which
Smith Environmental or any other Borrower is a party or by which it may be
bound, (iv) result in the creation or imposition of any lien, charge, or
encumbrance upon any of the property of Smith Environmental or of any other
Borrower, except in favor of the Agent for the benefit of the Lenders, to
secure the Liabilities, or (v) violate any provision of the Articles or
Certificate of Incorporation, By-Laws or any capital stock provisions of Smith
Environmental or of any other Borrower;
(e) No Default or Event of Default has occurred and is
continuing, except (i) as otherwise described in Section 6(b)(ii) hereof, (ii)
for the Designated Default and (iii) such Default and Event of Default as have
been waived pursuant to this Agreement;
(f) Since the date of the Agent's receipt of Smith
Environmental's consolidated and consolidating financial statements for the
period ended April 30, 1996, no
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<PAGE> 8
change or event has occurred which has had or is reasonably likely to have a
Material Adverse Effect, except for the collectibility of the Referenced
Account;
(g) The recitals contained in this Agreement and the
information contained in the scheduled annexed hereto and prepared by Smith
Environmental (which schedule sets forth in reasonable detail the number of
shares of ESOP Stock redeemed by Smith Environmental, the dates on which such
shares were or shall be redeemed, the value of such shares and the terms of
payment of such redemption(s) and accrued interest with respect thereto) are
true and correct in all respects; and
(h) The Borrowers have consulted with counsel and with
such other experts and advisors as they have deemed necessary in connection
with the negotiation, execution and delivery of this Agreement.
SECTION 12. NO PARTNERSHIP. Nothing contained in this Agreement shall be
deemed to create any rights or obligations of partnership, joint venture or
similar association between any of the Lenders and the Agent, on the one hand,
and any of the Borrowers, on the other hand, nor cause the Agent or any Lender
to be responsible in any way for the debts or obligations of the Borrowers or
any Person.
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
SECTION 14. NO OTHER AGREEMENTS. All prior understandings and agreements
among the parties are merged in this Agreement, which alone fully and
completely expresses the understandings and agreements among them and which is
entered into after full investigation. None of the parties hereto is relying
upon any statement or representation made by any other party not embodied in
this Agreement.
SECTION 15. NO WAIVER. No failure or delay of any party hereto in the
exercise of any right given to such party hereunder shall be deemed to be a
waiver thereof. No waiver by any party hereto of any condition hereunder for
its benefit (unless the time specified herein for exercise of such right, or
satisfaction of such condition, has expired), shall constitute a waiver of any
other or further right, nor shall any single or partial exercise of any right
preclude other or further exercise thereof or of any other rights. The waiver
of any breach hereunder shall not be deemed to be a waiver of any other or
subsequent breach hereof. No extensions of time for the performance of any
obligation shall be deemed or construed as an extension of time for the
performance of any other obligation.
SECTION 16. FURTHER ASSURANCES. Each party shall, from time to time,
execute, acknowledge and deliver such further instruments, and perform such
additional acts, as any other party may reasonably request in order to
consummate the transactions contemplated by this Agreement.
SECTION 17. SEVERABILITY. If any term or provisions of this Agreement or
the application thereof to any person or entity or circumstance shall to any
extent be invalid or unenforceable,
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<PAGE> 9
the remainder of this Agreement, or the application of such term or provision
to such person or entity or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
SECTION 18. SUBMISSION TO JURISDICTION.
(a) Any legal action or proceeding with respect to this Agreement
may be brought in the courts of the State of New York or, if requisites of
jurisdiction obtain, of the United States of America for the Southern District
of New York, and, by execution and delivery hereof, each Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Nothing contained
herein, however, shall affect the right of the Agent or the Lenders to commence
legal proceedings or otherwise proceed against any of the Borrowers in any
other jurisdiction. Each of the Borrowers waives (i) the right to trial by
jury in the event of any litigation to which any of the Agent, the Lenders and
such Borrower are parties in respect of any matter arising under or in
connection with this Agreement, whether or not such litigation has been
commenced in respect of the Loan Agreement or this Agreement and whether or not
other persons are also parties thereto, (ii) any claim that New York County,
New York is an inconvenient forum and (iii) any claim against any of the
Lenders for consequential or special damages respecting any loan documents or
the transactions contemplated thereunder or hereunder. Execution of this
Agreement by the Lenders shall be deemed to constitute a waiver by the Lenders
of the right to trial by jury in the event of any litigation in respect of
which a Borrower has waived its right to trial by jury hereunder; and
(b) No delay on the part of the Agent or any of the Lenders in
exercising any of its options, powers or rights, or partial or single exercise
thereof, whether arising hereunder and the Loan Agreement, under any of the
Other Agreements or otherwise, shall constitute a waiver thereof or affect any
right hereunder or thereunder. No waiver of any of such rights under this
Agreement shall be deemed to be made unless the same shall be in writing, duly
signed by the Agent, the Lenders and the Borrowers. Each such waiver (if any)
shall apply only with respect to the specific instance involved and shall in no
way impair the rights of the Agent, the Lenders or the obligations of the
Borrowers hereunder in any other respect at any other time.
SECTION 19. THE GUARANTORS. Each Guarantor (i) has signed below to
indicate its consent to the terms and provisions of this Agreement and all
documents and agreements to be executed or delivered in connection herewith and
(ii) reaffirms, ratifies and confirms the continuing validity and
enforceability of the Guaranty executed by it in accordance with its terms and
acknowledges that its liability, and the rights of the Agent and the Lenders
under such Guaranty, shall be unaffected by the terms of this Agreement and
shall remain in full force and effect through the final and indefeasible
payment of all sums owed to the Lenders under this Agreement and the Loan
Agreement.
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<PAGE> 10
SECTION 20. GENERAL PROVISIONS.
(a) Nothing contained in this Agreement shall be deemed
to be a waiver of any Defaults or Events of Default other than those set forth
in Section 5 hereof, whether or not the Agent or any of the Lenders shall have
any knowledge thereof, nor shall anything contained in this Agreement be deemed
to be a waiver of any future Default or Event of Default whatsoever, it being
understood that the waiver contained herein shall only extend to the specific
Event of Default identified herein.
(b) Except as herein expressly amended, the Loan
Agreement and all other agreements, documents, instruments and certificates
executed in connection therewith, are ratified and confirmed in all respects
and shall remain in full force and effect in accordance with their respective
terms.
(c) All references in the Other Agreements to the Loan
Agreement shall mean the Loan Agreement as waived and amended as of the
effective date hereof, and as waived and amended hereby and as hereafter
amended, supplemented or modified from time to time. From and after the date
hereof, all references in the Loan Agreement to "this Agreement," "hereof,"
"herein," or similar terms, shall mean and refer to the Loan Agreement as
waived and amended by this Agreement.
(d) This Agreement may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all which shall constitute one and the same agreement.
(e) The Third Amendment is hereby modified by deleting
the date "May 31, 1996" set forth in Section 7(a) thereof and by substituting
in lieu thereof the date "June 28, 1996".
(f) This Agreement shall be governed and controlled by
the laws of the State of New York without reference to its choice of law
principles.
(Signature Page Follows)
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<PAGE> 11
IN WITNESS WHEREOF, each of the Borrowers, BCM-Alabama, the Lenders
and the Agent have caused this Agreement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first
above written.
<TABLE>
<S> <C>
SMITH ENVIRONMENTAL TECHNOLOGIES RIEDEL ENVIRONMENTAL SERVICES INC.
CORPORATION
By:________________________________ By:________________________________
(Title) (Title)
BCM ENGINEERS INC., CHEMICAL BANK, as a Lender and as
a Pennsylvania corporation Agent
By:_______________________________ By:________________________________
(Title) (Title)
BCM ENGINEERS INC., BTM CAPITAL CORPORATION, formerly
Alabama corporation known as BOT Financial Corporation
By:________________________________ By:_______________________________
(Title) (Title)
</TABLE>
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<PAGE> 1
Exhibit 99.1
[AMERICAN ARBITRATION ASSOCIATION LETTERHEAD]
CONSTRUCTION INDUSTRY ARBITRATION TRIBUNAL
- --------------------------------------------------------------------------------
In the Matter of the Arbitration between
Re: 51 110 00025 95
NL Industries, Inc.
and
Johnson Controls, Battery Group Inc.
and
Gould Electronics, Inc.
and
AT&T Technologies, Inc.
and
Rhone-Poulenc AG Co.
and
Burlington Northern Railroad, Co.
and
Exide Corporation
and
Canonie Environmental Services Corp.
(W.D. Nelson)
- --------------------------------------------------------------------------------
AWARD OF ARBITRATORS
WE, THE UNDERSIGNED ARBITRATORS, having been designated in accordance
with the Arbitration Agreement entered into by the above-named Parties, and
dated May, 1992, and having been duly sworn and having duly heard the proofs and
allegations of the Parties, AWARD AS FOLLOWS:
1. Claimants NL Industries, Inc. et al. are hereby awarded the sum of FOUR
MILLION FIVE HUNDRED THOUSAND DOLLARS ($4,500,000.00) on its claim against
Respondent Canonie Environmental Services Corp.
2. The panel further finds the issues in favor of Counter-Respondents NL
Industries, Inc. et al. and against Respondent Canonie Environmental Services
Corp. on its counterclaim and therefore makes no award on said counterclaim.
3. Pursuant to the agreement of the parties it is ordered that the plant
and equipment on the premises shall be the property of Canonie Environmental
Services Corp. The Claimants NL Industries, Inc. et al. shall use their best
efforts to facilitate the release of said property to Canonie Environmental
Corp.
4. It is further ordered that the respective parties shall bear their own
costs of arbitration including attorney fees and disbursements.
5. The administrative fees and expenses of the American Arbitration
Association totaling SIXTEEN THOUSAND EIGHT HUNDRED EIGHTY FIVE DOLLARS AND
<PAGE> 2
[AMERICAN ARBITRATION ASSOCIATION LETTERHEAD]
SIXTY CENTS ($16,885.60) shall be borne equally between NL Industries, Inc. et
al. and Canonie Environmental Corp. Therefore, Canonie Environmental Corp.
shall pay to NL Industries, Inc. et al. the sum of ONE HUNDRED FIFTY SEVEN
DOLLARS AND TWENTY CENTS ($157.20).
6. The compensation of the neutral arbitrator totaling FIFTY TWO THOUSAND NINE
HUNDRED THIRTY NINE DOLLARS AND NO CENTS ($52,939.00) shall be borne equally by
NL Industries, Inc. et al. and Canonie Environmental Corp. Therefore, NL
Industries, Inc. et al. shall pay to the American Arbitration Association the
sum of ONE THOUSAND FOUR HUNDRED SIXTY NINE DOLLARS AND FIFTY CENTS
($1,469.50). Canonie Environmental Corp. shall pay to the American Arbitration
Association the sum of TWO HUNDRED NINETEEN DOLLARS AND FIFTY CENTS ($219.50).
7. This Award is in full settlement of all claims submitted to this
arbitration.
DATED: June 27, 1996 SIGNED: /s/ MEL R. JIGANTI
-------------------------------- ------------------------------
Hon. Mel R. Jiganti
DATED: June 27, 1996 SIGNED: /s/ NICHOLAS J. BUA
-------------------------------- ------------------------------
Hon. Nicholas J. Bua
DATED: SIGNED:
-------------------------------- ------------------------------
Brad Figley, Esq. (dissenting)
<PAGE> 3
In the Matter of the Arbitration between
Re: 51 110 00025 95
NL Industries, Inc. et al.
v.
Canonie Environmental Services Corp.
DISSENTING OPINION
I certainly respect my colleagues on this arbitration panel. However, in my
judgment the award they have settled on is so fundamentally unfair that dissent
is required.
This is a complicated case with complicated issues. I will neither rehash the
evidence presented nor repeat the arguments persuasively advanced by counsel
for both sides. But I will briefly highlight the bases for this dissent.
The parties to this dispute worked together on the Gould Superfund site over a
number of years, NL Industries et al. as principal and Canonie as contractor.
During this time, their relationships were defined by three contracts: two
Professional Service Agreements (PSAs) and one Contract for Remediation
Services. This is a contracts case. The parties' respective rights and
obligations were governed by those contracts, taken in the context of their
intentions, their course of dealing and the outcome and practices of the
industry at the time. So should be the award in this case.
Unfortunately, my colleagues' award disregards the agreements made by the
parties, as established by critical elements of the evidence.
Claimants asserted damages totaling $16.9 million in five components: (1) Costs
to Complete, $10.5 million; the panel was unanimous that this claim was
unjustified. This leaves (2) "Defective Design", $3.7 million, (3) "Overhead",
$0.9 million, (4) "Retention", $0.9 million, and (5) "Additional Studies and
Site Management", $0.9 million ---- a total an additional $6.4 million.
The "Defective Design", "Retention" and "Additional Studies" assertions,
totaling $5.5 million, all necessarily are predicated on the position that
Canonie should have known that actual site conditions were dramatically
different than described in all previous investigation and design documents.
(There is no evidence that Canonie actually knew.)
Assuming for the sake of argument that Canonie should have known (a position I
believe to be in serious error), the question then is when and where did this
duty arise? The evidence established that all of Canonie's activities that
could or "should" have led to this knowledge were conducted under the PSAs, as
was substantially all of Canonie's design work.
What necessarily follows if the terms of the PSAs are honored? First, this
arbitration panel has no purview, no jurisdiction, over issues based on the
PSAs, since these agreements contain no provisions for arbitration. Second,
the PSAs contain one-year limits on assertion of claims -- the claims that
Canonie should have known and that the design was defective appear to be
untimely. Third, the PSAs expressly state the parties' agreement, consistent
with customs and practices of
<PAGE> 4
the industry, that Canonie would rely on prior investigative work -- thus there
was no duty by which they "should have known".
All of which leaves the $0.9 million for "Overhead" as the only damages
remaining that might be assessed against Canonie, a claim that itself was
unsupported by the evidence. How does this become a $4.5 million award?
In fairness, the circumstances of this case should have resulted in an award to
Canonie. An award to Claimants is profoundly unjust, unsupported by the
evidence and inconsistent with the agreements freely bargained by the parties.
At the extreme, the evidence might support a denial of damages to either party.
My colleagues have gone well beyond this extreme. I dissent.
Respectfully submitted,
/s/ BRAD S. FIGLEY 6/27/96
- ------------------------------------------------
Brad S. Figley, Arbitrator June 27, 1996
