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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 2, 1997
OMEGA ENVIRONMENTAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20267 91-1499751
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
of incorporation)
19805 North Creek Parkway, P.O. 3005
Bothell, Washington
(Address of principal executive office)
98041-3005
(Zip Code)
(206) 486-4800
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 3. Bankruptcy or Receivership
On May 2, 1997, Registrant filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code. Prior to July
2, 1997, the United States Bankruptcy Court entered a series
of agreed cash collateral orders authorizing Registrant to use
cash collateral for continuing operation of its business. On
July 2, 1997, Registrant and BNY Financial Corp. ("BNY"),
Registrant's primary secured creditor, entered into a
stipulation providing for debtor-in-possession financing of
Registrant's business during the Chapter 11 proceedings. On
July 2, 1997. the United States Bankruptcy Court entered an
interim order approving the stipulation and
debtor-in-possession financing. The Court set July 30, 1997 as
the date for consideration of a final order approving the
stipulation and debtor-in-possession financing.
Item 5. Other Events
Change in Executive Officers
On June 23, 1997, Stanford Springel was elected as Chief
Executive Officer of Registrant. Mr. Springel (50) has been an
independent consultant providing domestic and international
turnaround management services to distressed companies since
1991. Between November 1996 and May 1997, he was Chief
Financial Officer of Aonix, a corporation resulting from the
merger of Interactive Development Environments, Inc. ("IDE"),
a software company, and two software companies owned by
Thomson-CSF. From September 1996 to November 1996, he was
Interim Chief Financial Officer of IDE. From January 1997 to
May 1997, he was Chief Executive Officer of Virtual i-O, a
start-up producer of virtual reality goggles for video and
personal computer applications. From February 1995 to December
1995, Mr. Springel was Interim Chief Operating Officer and
Interim President of Interlogic Trace, Inc., a nationwide
provider of computer maintenance and repairs services, and
from January 1994 to March 1996, he was Interim Chief
Executive Officer and President of Riedel Environmental
Technologies, Inc., an environmental remediation and services
company. Virtual i-0, Interlogic Trace, Inc. and Riedel
Environmental Technologies, Inc. all filed for bankruptcy
protection while Mr. Springel held the above positions with
such respective company and he assumed such positions after
each company was in financial distress.
Edward J. O'Sullivan, a director of Registrant, has been
elected as Interim Chairman of the Board of Directors.
Louis J. Tedesco has resigned as Chairman of the Board of
Directors, Chief Executive Officer, President and a director
of Registrant and Jeffery Weinress
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has resigned as Executive Vice President and Chief Financial
Officer of Registrant. In addition, T. M. " Michael" Gurr,
formerly President, Environmental Services Division, has been
terminated by the Registrant.
Operations and Operating Results
Registrant has terminated its construction related businesses
in the United States and is in the process of liquidating the
assets of such businesses. Registrant's construction
operations had previously constituted a majority of
Registrant's revenues. Registrant's current operations include
two divisions in the United States engaged in (i)
environmental engineering, consulting and remediation and (ii)
servicing of petroleum dispensing equipment. The Registrant
also has a subsidiary operating in Mexico in the petroleum
service business.
Registrant reported a net loss of $13,644,000 for the nine
months ended December 31, 1996. Registrant expects to report a
significant loss for the fourth quarter and fiscal year ended
March 31, 1997, the total amount of which is currently
unknown. Included in such loss for the fourth quarter will be
a write off of all goodwill, which goodwill amounted to
$19,442,000 as of December 31, 1996.
Late Form 10-K and Form 10-Q
Until debtor-in-possession financing was agreed to, Registrant
had access to only limited operating funds and Registrant was
not able to commence its annual independent audit of
operations for the fiscal year ended March 31, 1997.
Registrant upon obtaining the debtor-in-possession financing
had intended to begin the preparation of the information for
such audit and had intended to engage its independent
auditors' to perform such audit. However, since BNY has not
authorized Registrant to pay fees and expenses for such audit
from advances of the financing or from proceeds of
pre-petition and post-petition collateral, Registrant's
independent auditors' have not agreed to commence such audit.
Therefore, at the current time Registrant can not engage its
independent auditors' to begin the audit for the fiscal year
ended March 31, 1997. Without such audit, Registrant can not
complete and file its Form 10-K for such fiscal year or any
Form 10-Qs for subsequent quarterly periods.
Registrant intends to file a request with the Staff of the
Securities and Exchange Commission (the "SEC") to seek relief
from having to file Form 10-Ks and Form 10-Qs during the
Bankruptcy proceedings. However, such request may be denied
because granting such a request is discretionary, such request
will be filed latter than the SEC has indicated such a request
should be filed and because Registrant's Common Stock is
currently quoted on the Nasdaq National Market System. As a
result of the failure to file the Form 10-K for the fiscal
year ended March 31, 1997, there is a strong possibility that
Nasdaq will
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remove Registrant's Common Stock from quotation on the Nasdaq
National Market System. Further, Registrant may seek such
removal as a possible condition to obtaining relief from the
requirements to file Forms 10-Ks and Forms 10-Qs while
Registrant is in Bankruptcy. If Registrant's Common Stock is
no longer quoted on the National Market System, quotations, if
any, would be available only in the "National Daily Quotation
Sheets" published by the National Quotation Bureau.
In the interim, Registrant will file with the SEC under cover
of Form 8-K, copies of all material financial reports filed
with the United States Bankruptcy Court, including monthly
financial reports.
Item 7. Financial Statements and Exhibits
(c) Exhibit:
10.1 Executive Service Agreement with Stanford Springel.
10.2 Interim Order Re Authority to Borrow; Relief From
Stay; Granting Security Interests and Priority.
10.3 Stipulation Regarding Financing.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
OMEGA ENVIRONMENTAL, INC.
(Registrant)
Date: July 9, 1997 By: c/ Stanford Springel
----------------------------------
Stanford Springel,
Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit Number Description of Exhibits
- -------------- -----------------------
10.1 Executive Service Agreement with Stanford Springel.
10,2 Interim Order Re Authority to Borrow; Relief From Stay;
Granting Security Interests and Priority.
10.3 Stipulation Regarding Financing.
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EXHIBIT 10.1
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT ("Agreement") is entered
into as of June 23, 1997, between OMEGA ENVIRONMENTAL, INC. ("Company"), a
Delaware corporation, having its principal place of business at 19805 North
Creek Parkway, Bothell, Washington 98041, and STANFORD SPRINGEL ("Executive"),
whose address is 110 Edinburgh Circle, Danville, California 94528.
AGREEMENT
In consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, receipt of which
each of the parties hereto acknowledges, it is hereby agreed as follows:
1. Services.
1.1 Services. The Company hereby contracts with Executive, and
Executive hereby agrees to perform management services for the Company in the
capacity of President and Chief Executive Officer for the period beginning on
the date of this Agreement and ending on the earlier of (i) December 31, 1997,
or (ii) earlier termination of the Agreement.
1.2 Reporting and Termination. Executive shall report solely
to the Board of Directors of the Company and shall comply with the policy
direction set by said Board. Either party may terminate this Agreement, with or
without cause, at any time, which termination shall be effective thirty days
from written notice to the other party. Notwithstanding any other provision of
this Agreement to the contrary, failure by the Company to make payments provided
for in Section 1.3 shall be deemed a termination by the Company. Executive shall
devote full time and attention to the performance of the services to be rendered
to the Company hereunder.
1.3 Compensation. During the term of this Agreement, the
Company shall pay Executive for the services to be rendered hereunder at the
rate of $35,000.00 monthly immediately upon Executive's submission of an invoice
containing appropriate supporting documentation. The Company shall also pay
Executive's reasonable expenses for travel, meals and lodging while traveling to
Seattle or on Company business. Executive shall be paid a retainer against
monthly invoicing of $35,000.00 and a $5,000.00 expense advance, payable upon
execution of this Agreement. In the event the Company or Executive terminates
this Agreement, Executive shall return any unused portion of the retainer or
advance paid hereunder after satisfaction of all outstanding invoices.
Additionally, the parties agree at a subsequent date to discuss providing the
Executive with the potential of earning a bonus or success fee for the
achievement of to be defined performance criteria.
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2. Independent Contractor. In performing services under this Agreement,
Executive shall at all times act as and be an independent contractor (and not an
employee of the Company) and, except as provided in Section 1.3 above, Executive
shall be solely liable for all his expenses and labor in connection therewith.
Executive agrees to take or forbear from taking all such action as may be
necessary or appropriate to establish and maintain his status as an independent
contractor. The Company and Executive agree that the Company is not required to
deduct from Executive's compensation any withholding, social security or other
taxes.
3. Confidential Information.
3.1 Acknowledgment. Executive acknowledges that, during the course
of rendering the services to the Company hereunder, he may acquire Proprietary
information and Trade Secrets of the Company (as hereinafter defined). For
purposes of this Agreement:
a. "Proprietary Information" shall mean all unpublished
materials and information created, discovered, owned, controlled or
otherwise known by the Company and/or in which property rights have
been assigned or otherwise conveyed to the Company, which
information has commercial or economic value. "Proprietary
Information" includes, without limitation, Trade Secrets (as
hereinafter defined), confidential information, data or other
information of the Company relating to products, processes, designs,
software programs, formulas, test procedures and results,
improvements, inventions or techniques, customer lists, business
plans, business affairs, marketing plans and strategies, and pricing
strategies or other subject matter pertaining to any business of the
Company.
The term "Proprietary Information" shall not include any
information which:
(i) is or becomes generally known or available through no
act or failure on the part of Executive;
(ii) is known by Executive at the time of receipt of such
information, as demonstrated by written documentation bearing a
date prior to the date of receipt of such information, where the
source of such information legally obtained such information and
the right to disclose it to Executive;
(iii) is hereafter furnished to Executive by a third party
without restriction on disclosure, where such third party
legally obtained such information and the right to disclose it
to Executive;
(iv) is developed by Executive independently of any
obligation to the Company and without violation of any rights
which the Company may have in such information.
b. "Trade Secrets" shall mean the whole or any portion or phase
of any business, scientific or technical information, design,
process, procedure, formula
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or improvement which is secret and not generally available to the
public, which Company considers confidential, and which gives the
one who uses it an advantage over competitors who do not know of or
use the Trade Secret. The term "Trade Secret" may include, without
limitation, information relating to any computer program listings,
source code or object code, computer (hardware or software) design
or architecture, or other information relating to processes,
programs, or products now existing or currently under design or
development.
3.2 Nondisclosure and Nonuse. The Executive agrees that he shall
not, directly or indirectly, either use or disclose to any third person any
Proprietary Information or Trade Secrets of the Company except as may be
necessary in the course of performing the services under this Agreement, in
which case the Executive will take reasonable steps to protect the
confidentiality of such information. The prohibitions contained in this
paragraph shall survive the termination of this Agreement.
4. Indemnification. The Company hereby agrees to indemnify and hold
harmless Executive, to the fullest extent allowed by law, from and against all
claims, demands and causes of action (including, without limitation, attorney
fees, court costs and other liabilities) in any way arising out of or in
connection with the services rendered to the Company by Executive under this
Agreement; provided, however, nothing in this Section shall impose on Company
the obligation to indemnify Executive with respect to any damages resulting
solely from Executive's intentional tort, criminal act, breach of fiduciary
duty, or act of gross negligence. The parties acknowledge that liability
insurance coverage for Executive is a key issue for Executive and that Executive
may terminate his services hereunder if coverage is not available. Therefore,
the Company will use its best efforts to provide coverage for Executive under
the Company's directors and officers liability insurance and other applicable
insurance programs. Executive shall not be responsible for any action of the
Board of Directors of the Company in following or declining to follow his advice
or recommendations.
5. General Provisions.
5.1 No Waiver. No provision of this Agreement shall be deemed to
have been waived unless such waiver is in writing signed by the waiving party.
No failure by any party to insist upon the strict performance of any provision
of this Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach, of such provision or of
any other provision. No waiver of any provision of this Agreement shall be
deemed a waiver of any other provision of this Agreement or a waiver of such
provision with respect to any subsequent breach, unless expressly provided in
writing.
5.2 Notices. All notices required or permitted to be given under
this Agreement shall be in writing.
5.3 Integration; Amendment. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof. There are no
promises, terms, conditions,
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obligations, or warranties other than those contained in this Agreement. This
Agreement supersedes all prior communications, representations, or agreements,
verbal or written, among the parties relating to the subject matter hereof. This
Agreement may not be amended except in a writing executed by the parties.
5.4 Severability. Any provision of this Agreement that is deemed
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without rendering invalid or unenforceable the remaining
provisions of this Agreement.
5.5 Assignment. No party may assign, sell, subcontract, delegate or
otherwise transfer its rights or obligations under this Agreement without the
prior written consent of the other party, and any attempted assignment or
delegation shall be void and without effect.
5.6 Governing Law, Service or Process and Venue. The parties hereto
intend that this Agreement shall be governed by and construed in accordance with
the laws of the State of Washington.
5.7 Attorney Fees and Court Costs. If any suit or action arising out
of or related to this Agreement is brought by any party, the prevailing party or
parties shall be entitled to recover the costs and fees (including without
limitation reasonable attorney fees), incurred by such party or parties in such
suit or action, including without limitation any post-trial or appellate
proceeding.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute an agreement binding
on all the parties, notwithstanding that all parties are not signatories to the
same counterpart.
5.9 Survival. All rights and obligations shall cease upon
termination of this Agreement, except for the rights and obligations set forth
in or arising out of Sections 3, 4 and 5, which shall survive the termination of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
OMEGA ENVIRONMENTAL, INC.
By: /s/ Edward J. O' Sullivan
---------------------------------
Name: Edward J. O'Sullivan
Title: Chairman
EXECUTIVE
/s/ Stanford Springel
------------------------------------
Stanford Springel
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EXHIBIT 10.2
GIBSON, DUNN & CRUTCHER LLP Honorable Samuel J. Steiner
JONATHAN M. LANDERS, SBN 103501 Chapter 11
DESMOND CUSSEN, SBN 154936 Hearing Date:
One Montgomery Street Hearing Time:
Telesis Tower, 31 st Floor Response Date:
San Francisco, CA 94104-505
(415) 393-8200
HELSELL FETTERMAN LLP
RAGAN L. POWERS, WSBA #11935
1500 Puget Sound Plaza
1325 Fourth Avenue
Seattle, WA 98101-2509
(206) 292-1144
Attorneys for DEBTOR
OMEGA ENVIRONMENTAL, INC.
UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In Re:
OMEGA ENVIRONMENTAL, INC., a NO. 97-06084
Delaware corporation,
Debtor. INTERIM ORDER RE AUTHORITY TO
BORROW; RELIEF FROM STAY; GRANTING
SECURITY INTERESTS AND PRIORITY
The Application of Debtor and Debtor-in-Possession: For Authority to
Borrow On A Secured Basis; For Relief From Stay; And For Order Granting Security
Interests And Priority (the "Application"); came on for hearing before the
undersigned Bankruptcy Judge on July 2, 1997. Capitalized terms not otherwise
defined herein shall have the meaning ascribed thereto in the Application or the
Stipulation (as hereinafter defined), as applicable. Based upon the Application
and the Stipulation Regarding Financing between Debtor and BNY (which includes,
by reference, the Pre-Petition Loan Documents) (the "Stipulation"), both of
which are incorporated herein and made a
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 1
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part of this Order by this reference, other oral and written evidence presented
to the Court, other documents on file in this case, and other good cause
appearing therefor, this Court finds that:
1. Notice of the Application was appropriate in the particular
circumstances of this case and was made in accordance with the requirements of
Section 102(l) of the Bankruptcy Code and the Bankruptcy Rules.
2. On May 2, 1997, Debtor filed its petition for relief under Chapter
II of the Bankruptcy Code. Debtor continues to operate its business as a
debtor-in-possession under Sections 1107 and 1108 of the Bankruptcy Code.
3. Debtor does not have available sources of working capital and
financing needed to continue the operation of Debtor's business.
4. Debtor is unable pursuant to Sections 364(a) or (b) of the
Bankruptcy Code (or otherwise) to obtain unsecured credit allowable under
Section 503(b)(1) of the Bankruptcy Code as an administrative expense, and is
unable to obtain any secured financing other than that provided in the
Stipulation.
5. BNY has indicated a willingness to lend money and extend credit to
Debtor and to permit Debtor to use BNY's Collateral, all in accordance with and
subject to the terms and conditions set forth in the Application and the
Stipulation.
6. Absent the financing set forth in the Application, Debtor's business
win suffer immediate and irreparable harm and not survive. Without available
cash, Debtor's ability to preserve the going-concern value of its assets will be
destroyed.
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 2
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7. To continue its business operations in the ordinary course, Debtor
is required to continue to use its pre-petition assets, in substantially all of
which BNY holds a first priority lien and security interest.
8. The preservation of the going-concern value of Debtor is of the
utmost significance to Debtor's estate, and the interests of all creditors will
be better served by the continued operation of Debtor's business.
9. The Stipulation and the Pre-Petition Loan Documents incorporated
therein have been negotiated in good faith and at arm's length between Debtor
and BNY, and any credit extended and loans made to Debtor by BNY pursuant to the
Pre-Petition Loan Documents have been and shall be deemed to have been extended
in good faith, as that term is used in Section 364(e) of the Bankruptcy Code.
10. To provide BNY adequate protection from any loss, decrease,
diminution or decline in the value of the assets of Debtor and the property of
the estate caused or resulting from the use, sale or lease thereof by Debtor in
accordance with Section 363(e) of the Bankruptcy Code, or from the automatic
stay imposed by Section 362 of the Bankruptcy Code ("Post-Petition Loss"), BNY
is entitled to adequate protection under Sections 361 and 363(e) of the
Bankruptcy Code in the form of a first priority security interest in all assets
of Debtor's estate as provided below.
11. The proposed financing is in the best interests of the estate and
its creditors.
Based on the foregoing findings and for other good cause, IT IS HEREBY
ORDERED THAT:
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 3
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A. Debtor is hereby authorized to borrow during the course of this
Chapter II case, in accordance with the terms set forth in the Application and
in the Stipulation, up to Twenty-Three Million Dollars ($23,000,000.00),
including both Pre-Petition Obligations and Post-Petition Obligations, at any
one time to be utilized by Debtor for its general operating expenses (including
certain Chapter 11 expenses, as set forth in the Stipulation). The Stipulation
is hereby approved in its entirety except as set forth in this Order. BNY is
hereby granted the rights, priorities, liens and security interests set forth in
the Application and the Stipulation as modified by this Order. All of the
Post-Petition Obligations, including such post-petition loans, advances and
other indebtedness and expenses of BNY made or incurred prior to this Court's
approval of the Stipulation, which may become owing by Debtor to BNY pursuant to
the Stipulation, shall be secured by a first and senior security interest in and
lien upon substantially all assets of Debtor, as more fully described and as
limited below. The terms and conditions of the Pre-Petition Loan Documents, as
modified by the Stipulation, shall continue in full force and effect with
respect to the Pre-Petition Obligations and the Pre-Petition Collateral.
B. Debtor is authorized and directed to comply with the terms and
conditions of the Stipulation. Debtor further is authorized and empowered from
time to time to borrow monies or obtain other financial accommodations from BNY
in accordance with the terms of the Pre-Petition Loan Documents, the Stipulation
and this Order. All Post-Petition Obligations are subject to the interest rate,
terms of payment and other terms and conditions provided for by the Pre-Petition
Loan Documents as modified by the Stipulation. Debtor shall use the money
borrowed exclusively for the operation of its business, including the making of
various payments in connection with the above-captioned bankruptcy case, as
permitted herein. BNY may, in its discretion, apply the proceeds of Pre-Petition
Collateral and
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 4
<PAGE> 5
Post-Petition Collateral, or any other amounts received by BNY in respect of the
Pre-Petition Obligations or Post-Petition Obligations, in such order or manner
as BNY deems appropriate, including first to the Pre-Petition Obligations until
such Pre-Petition Obligations are paid and satisfied in full.
C. To secure Debtor's Post-Petition Obligations, including those as
provided in this Order, and Debtor's Collateral Shortfall, Debtor is authorized,
ordered and directed to grant to BNY, and BNY is hereby provided, a continuing,
perfected first priority security interest and lien, effective from the date of
commencement of this Chapter 11 case, upon all of the Post-Petition Collateral.
BNY shall also have the highest administrative priority and a senior lien and
security interest as specified in Sections 364(c)(1) and (2) of the Bankruptcy
Code, and in Section 364(d)(1) of the Bankruptcy Code (only as Section 364(d)(1)
relates to Collateral in which BNY has a pre-petition security interest), above
all administrative expenses of the kind specified in Sections 503(b) and 507(b)
of the Bankruptcy Code, subject only to the provisions of Paragraph E below, and
above all other security interests, liens or claims.
D. Subject only to the provisions of Paragraph E below, all loans,
extensions of credit and any other obligations which may from time to time
hereafter be owing by Debtor to BNY are hereby granted liens and priority under
Sections 364(c)(1) and (2) of the Bankruptcy Code, and Section 364(d)(1) (only
as Section 364(d)(1) relates to Collateral in which BNY has a pre-petition
security interest), over all liens, security interests or administrative
expenses included in this Chapter 11 case including those of the kind specified
in Section 503(b) or Section 507(b) of the Bankruptcy Code, except the
liquidation expenses of any chapter 7 trustee, No costs or expenses of
administration which have been or may be incurred in this case, in any
conversion of this case pursuant to Section 1112 of the
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 5
<PAGE> 6
Bankruptcy Code, or in any other superseding proceeding, and no priority claims,
except the liquidation expenses of any chapter 7 trustee, are or will be, prior
to or on a parity with the claim of BNY against Debtor arising out of the
Post-Petition Obligations or Collateral Shortfall, or with the security
interests and liens of BNY in and upon the Collateral, and no such costs and
expenses of administration shall be imposed against BNY, its claims or its
Collateral. If BNY's lien and security interest are insufficient to
collateralize the Post-Petition Obligations and the Collateral Shortfall fully,
BNY claim for such insufficiency shall be afforded priority over all other
claims, interests and creditors under Sections 503(b) and 507(b) of the
Bankruptcy Code.
E. Notwithstanding the foregoing grant of security and priority, and as
provided in the Stipulation, Debtor may pay the following (any such sums to be
paid only after notice and allowance by the Court when applicable) in accordance
with the Projections: (i) all reasonable and necessary business expenses of
Debtor included in the ordinary course of business from the Filing Date to the
date of any notice by BNY of an event of default (the "Termination Date"), (ii)
all statutory fees of the Bankruptcy Court and the United States Trustee
incurred on or before the Termination Date; (iii) all amounts payable under the
Independent Contractor Agreement between the Debtor and Stanford Springel
approved by the Court on June 23, 1997 (the "Independent Contractor Agreement")
and the incentive plan for Bradley Powell pursuant to a letter dated July 1,
1997 (the terms of which are subject to approval by the Court); and (iv) all
reasonable fees and costs (exclusive of any pre-petition retainers) up to an
aggregate amount of One Million Dollars ($ 1, 000,000) through September 30,
1997, which amount shall be allocated among the firms of Helsell Fetterman LLP,
Gibson, Dunn & Crutcher LLP, KPMG Peat Marwick, Shulkin Hutton Inc., P. S. and
Ernst & Young, as the parties may agree or as the
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 6
<PAGE> 7
Bankruptcy Court may order, commencing on the Filing Date and continuing until
the Termination Date (with the understanding that the amount set forth above
applies only to the period beginning on the Filing Date and ending on September
30, 1997, that overall professional fees are likely to exceed such amount, and
that BNY is not at this time agreeing that any amounts over One Million Dollars
in which BNY has an interest may be used to pay such professional fees);
however, (a) neither Debtor nor the Creditors' Committee may utilize any portion
of the above allocations to pay the fees and costs of its counsel or accountants
in investigating or commencing any action or other proceeding for the purpose
of, or which may result in, challenging the amount, allowability,
unavoidability, enforceability, validity, perfection or first priority of the
Pre-Petition Obligations or the Pre-Petition Collateral, or reducing or
affecting the obligation of the Debtor to pay the Pre-Petition Obligations, and
(b) all professional fees and expenses of Debtor or the Creditors' Committee
(which shall not include, in any event, fees and expenses payable under the
Independent Contractor Agreement) shall be subject to application, notice and
allowance by the Bankruptcy Court, to which BNY may object. Except as otherwise
provided herein or in the Stipulation, nothing herein is intended to nor shall
require BNY to make advances for such fees and expenses. All professionals shall
report accrued fees and costs to BNY as provided in the Stipulation.
F. (i) This Order shall be sufficient and conclusive evidence of the
validity, perfection and priority of BNY's security interests and liens upon the
Collateral without the necessity of filing or recording any financing
statements, notices or other documents which may otherwise be required under the
law of any jurisdiction or the taking of any other action to validate or perfect
the security interests and hens granted to BNY in this Order and the
Pre-Petition Loan Documents, as
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 7
<PAGE> 8
modified by the Stipulation, or to entitle BNY to the priority granted herein.
If, however, BNY shall, in its sole discretion, elect for any reason to file or
record any such financing statements, notices or other documents, or to take any
other such actions, Debtor shall execute or cooperate with the same upon BNY's
request and the filing or recording of such financing statements, notices or
documents or the taking of such other actions shall be deemed to have been made
or taken at the time and on the date of the commencement of this Chapter 11
case.
(ii) The Debtor is authorized to incur and pay the Post-Petition
Obligations pursuant to the Stipulation.
(iii) The Debtor is authorized, ordered and directed to perform
all acts, and execute and comply with the terms of such further agreements,
instruments and documents which BNY may reasonably require and or which may be
otherwise deemed reasonable and necessary by BNY to effectuate the terms and
conditions of this Order.
G. The Debtor is hereby authorized without further order of this Court
to reimburse BNY for all BNY Expenses, as defined in the Stipulation.
H. The signature of any officer of Debtor or any other person
designated by this Court as the party responsible for the operations of Debtor,
whether by letter to BNY or appearing on any documents, shall bind Debtor.
I. In the event of (i) failure of Debtor substantially to perform any
of its obligations as provided in this Order, (ii) the occurrence of any default
under the Pre-Petition Loan Documents as modified by the Stipulation, or (iii)
the failure of Debtor to perform any of its obligations under the Stipulation
(collectively, the "Default Events"), then and upon the occurrence of any of the
foregoing,
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 8
<PAGE> 9
and at all times thereafter, BNY is entitled to apply to this Court for relief
from the automatic stay pursuant to Section 362(d) of the Bankruptcy Code to
enforce its liens and security interests in any manner provided in the
Pre-Petition Loan Documents, as modified by the Stipulation, or applicable law
on shortened notice of no more than five (5) days from the date of such
application. Debtor shall comply with the terms of the Stipulation and shall
after such notice segregate and refrain from use of all cash. The only issue to
be considered any such hearing is whether a Default Event has occurred. Upon a
default, BNY may, without notice, cease making advances to Debtor and may
continue to collect and apply proceeds of its Collateral in the ordinary course
in accordance with the Stipulation.
J. The provisions of this Order and any actions taken pursuant hereto
shall survive entry of any order which may be entered converting this case from
Chapter 11 to Chapter 7, and the terms and provisions of this Order, as well as
the priorities in payment, liens and security interests granted pursuant to this
Order and the Pre-Petition Loan Documents, as modified by the Stipulation, shall
continue in this or any superseding case under the Bankruptcy Code or upon
dismissal of this case, and such priorities in payment, liens and security
interests shall maintain their priority as provided by this Order until all
Pre-Petition Obligations, Post-Petition Obligations and other indebtedness due
and owing to BNY by Debtor are indefeasibly satisfied and discharged.
K. The provisions of this Order shall be binding upon and inure to the
benefit of BNY, Debtor and each of their respective successors and assigns,
including, but not limited to, any trustee in bankruptcy hereinafter appointed
as a representative of Debtor's estate, whether under Chapter II or Chapter 7 of
the Bankruptcy Code, or to Debtor's successor upon dismissal of this case,
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 9
<PAGE> 10
provided that the administrative priority claims, if any, of BNY shall not in
any event "prime" the liquidation expenses of any chapter 7 trustee.
L. Pursuant to Section 364(e) of the Bankruptcy Code, if any or all of
the provisions of this Order are hereinafter modified or vacated by subsequent
order of this or any Court, then, notwithstanding such modification or vacating,
any advances of funds made pursuant to this Order by BNY, and the priority of
any and all liens and security interests granted herein, prior to such
modification or vacating, to or for the benefit of BNY shall be governed in all
respects by the original provisions of this Order.
M. Debtor shall forthwith mail copies of this Order together with a
notice of final hearing to be had upon the Application to all secured creditors,
the United States Internal Revenue Service, the attorneys for the Creditors'
Committee, all parties requesting special notice and the United States Trustee,
and a notice of final hearing to the twenty (20) largest unsecured creditors.
All such parties in interest shall have until 4:30 p.m. PDT on Thursday, July
24, 1997, to file and serve written objections to this Order or the Application
upon:
Ragan L. Powers
Helsell Fetterman LLP
1500 Puget Sound Plaza
1325 Fourth Avenue
Seattle, WA 98101-2509
Fax: (206) 340-0902
Bradford Anderson
George E. Frasier
Graham & James LLP/Riddell Williams P.S.
1001 Fourth Avenue Plaza, Suite
4500 Seattle, WA 98154-1065
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 10
<PAGE> 11
Fax: (206) 389-1708
Any such objection shall set forth with particularity the legal and
factual basis for such objection. The final hearing on the Application shall be
had on Wed., July 30, 1997, at 9:00 a.m. PDT (the "Hearing Date"). The Hearing
Date may be continued from time to time by agreement of BNY and Debtor, or by
oral or written Order of the Court, without further notice.
N. Before the Hearing Date, Debtor is authorized to execute and comply
with the term of the Stipulation and this Order and is further authorized and
empowered from time to time to borrow monies or obtain financial accommodations
from BNY under all of the terms and conditions provided in the Stipulation and
this Order. This Order shall not become final until after the aforesaid hearing
is held. If any provision of this Order is hereafter modified, vacated, or
stayed by subsequent Order of this or any other Court for any reason, including
but not limited to objections of creditors, such modification, vacating, or stay
shall not affect the validity of any indebtedness arising out of the Obligations
incurred pursuant to the Pre-Petition Loan Documents as modified by the
Stipulation and this Order, or the validity, enforceability, or priority of the
liens and security interests authorized by this Order with respect to any such
Obligations, all of which shall be governed in all respects by the original
provisions of this Order, and BNY shall be entitled to all of the rights,
privileges and benefits, including the liens and security interest and
priorities granted herein, with respect to the Obligations.
0. The Debtor is authorized to spend $25,000, in addition to the
amounts already authorized by, and notwithstanding other terms of, the Order
Authorizing Use of Cash Collateral, entered May 7, 1997, to pay pre-petition
wage, bonus and commission claims of continuing employees of the Debtor, as well
as unreimbursed expenses of continuing employees of the Debtor. To the extent
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 11
<PAGE> 12
this Order is inconsistent with such Order Authorizing Use of Cash Collateral,
the terms of this Order shall govern.
DATED this 2 day of July, 1997.
/s/ Samuel J. Steiner
-----------------------------------
Honorable Samuel J. Steiner
United States Bankruptcy Judge
Presented by:
HELSELL FETTERMAN LLP
By /s/ Ragan L. Powers
-----------------------------------
Ragan L. Powers, WSBA #11935
Attorneys for Debtor and Debtor-in-Possession
GRAHAM & JAMES LLP/RIDDELL WILLIAMS P. S.
By /s/ Bradford Anderson
-----------------------------------
Bradford Anderson, WSBA #15213
Attorneys for BNY Financial Corporation
INTERIM ORDER RE AUTHORITY TO BORROW; RELIEF
FROM STAY; GRANTING SECURITY INTERESTS AND
PRIORITY - 12
<PAGE> 1
GIBSON, DUNN & CRUTCHER LLP Honorable Samuel J. Steiner
JONATHAN M. LANDERS, SBN 103501 Chapter 11
DESMOND CUSSEN, SBN 154936 Hearing Date:
One Montgomery Street Hearing Time:
Telesis Tower, 31st Floor Response Date:
San Francisco, CA 9410-44505
(415) 393-8200
HELSELL FETTERMAN LLP
RAGAN L. POWERS, WSBA #11935
1500 Puget Sound Plaza
1325 Fourth Avenue
Seattle, WA 98101-2509
(206) 292-1144
Attorneys for DEBTOR
OMEGA ENVIRONMENTAL, INC.
UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In re
OMEGA ENVIRONMENTAL, INC., a NO. 97-06084
Delaware corporation,
Debtor. STIPULATION REGARDING FINANCING
This Stipulation is entered into by and between OMEGA ENVIRONMENTAL,
INC., Debtor and Debtor-in-Possession ("Debtor"), and BNY FINANCIAL CORPORATION,
("BNY"). Reference is made to the Application by Debtor and
Debtor-in-Possession: For Authority to Borrow on a Secured Basis; For Relief
from Stay; And For Order Granting Security Interests and Priority (the
"Application"). The Application is hereby incorporated herein by reference, and
the parties to this Stipulation hereby stipulate to each and every fact as
represented in the Application. Except as otherwise defined herein, any
capitalized terms defined in the Application, the Interim Order or the
Pre-Petition Loan Documents (as such terms are defined in the Application) shall
have the same meaning herein. "Pre-Petition Obligations" means all of Debtor's
obligations to BNY arising out of the Pre-Petition Loan Documents,
STIPULATION REGARDING FINANCING - 1
<PAGE> 2
including without limitation principal, accrued but unpaid interest, contingent
liabilities arising from letters of credit issued but not yet drawn against, and
any costs, expenses, attorneys' fees or other fees incurred by BNY and
recoverable under the terms of the Pre-Petition Loan Documents. "Post-Petition
Obligations" means all of Debtor's obligations to BNY arising out of the
financing provided pursuant to this Stipulation, including without limitation
principal, accrued but unpaid interest, contingent liabilities arising from
letters of credit issued but not yet drawn against, plus any costs, expenses,
attorneys' fees or other fees incurred by BNY in connection with such financing
and recoverable under the terms of the Prepetition Loan Documents as modified by
this Stipulation ("BNY Expenses").
In light of those facts, the parties hereby stipulate and agree as
follows:
1 . Except as modified, supplemented or superseded by the terms of this
Stipulation, Debtor and BNY expressly agree that the terms and provisions of the
Pre-Petition Loan Documents shall govern the post-petition extension of credit
by BNY to Debtor in this case, and the terms of such Pre-Petition Loan Documents
are hereby incorporated by reference in this Stipulation as though set forth in
full herein.
2. Based upon the Debtor's own internal review of the Pre-Petition Loan
Documents, Debtor hereby stipulates that:
(a) The Pre-Petition Loan Documents are valid and enforceable
agreements in accordance with their terms;
(b) The Pre-Petition Obligations are the valid, enforceable,
allowable and unavoidable obligations of Debtor, and there are no claims,
set-offs or defenses to the Pre-Petition Obligations, and the Pre-Petition
Obligations are now due and owing; and
STIPULATION REGARDING FINANCING - 2
<PAGE> 3
(c) Lender's lien on and security interest in the Pre-Petition
Collateral is in all material respects valid, perfected, and first in priority
3. As provided in the Application, any proper party-in-interest other
than Debtor, including all secured creditors, the United States Internal Revenue
Service, the Creditors' Committee, all parties requesting special notice, the
United States Trustee and Debtor's twenty (20) largest unsecured creditors, may
file and serve upon Debtor and BNY no later than four (4) days prior to the
final hearing on the Application, which hearing shall be held within thirty (30)
days following the entry of the Interim Order approving this Stipulation, any
objection to the Pre-Petition Obligations or to BNY's hen on and security
interest in the Pre-Petition Collateral. If no objections are timely filed and
served or if objections which are timely filed and served are not sustained, the
Pre-Petition Obligations shall be deemed valid, enforceable, allowable and
unavoidable, and BNY's lien on and security interest in the Pre-Petition
Collateral shall be deemed valid, enforceable, unavoidable, perfected and first
in priority.
4. Subject to the conditions hereof, BNY shall extend post-petition
secured financing to Debtor upon the terms and provisions of the Pre-Petition
Loan Documents, as modified below, provided that no advance shall be made prior
to the entry of an Interim Order approving this Stipulation. Debtor shall assume
all of its covenants and obligations and shall remain liable with respect to its
representations and warranties, as set forth in the Pre-Petition Loan Documents,
as modified by this Stipulation. Such covenants and obligations shall continue
for so long as any Pre-Petition Obligations or Post-Petition Obligations remain
outstanding, and such representations and warranties shall be deemed reaffirmed
by Debtor with each loan and advance.
STIPULATION REGARDING FINANCING - 3
<PAGE> 4
5. As of the Filing Date, the Pre-Petition Obligations totalled
approximately $20,400,000.00.
6. So long as Debtor is not in default under the Pre-Petition Loan
Documents as modified hereby, and subject to Debtor's compliance with the
month-end loan balances set forth in the definition of "Formula Amount" and with
any financial covenants negotiated pursuant to paragraph 8 hereof, BNY agrees to
extend credit to Debtor in a total amount at any time, including both
Pre-Petition Obligations and Post-Petition Obligations, in an amount not
exceeding the lesser of (i) the Formula Amount (as the definition thereof is
modified herein) as of the date of such extension of credit and (ii)
Twenty-Three Million Dollars ($23,000,000.00) ( such lesser amount being
hereinafter referred to as the "Maximum Amount") on the terms and conditions set
forth in the Pre-Petition Loan Documents, as modified and supplemented by the
terms of this Stipulation. Debtor and BNY may agree that the Maximum Amount be
increased from time to time if BNY consents to such increase in writing. Debtor
and BNY may agree that the Maximum Amount be decreased from time to time if
Debtor consents to such decrease in writing. BNY shall not be required to make
any advance to Debtor if such advance would cause the sum of the outstanding
Pre-Petition Obligations plus the outstanding Post-Petition Obligations
(collectively, the "Total Obligations") to exceed the Maximum Amount. If such
Total Obligations at any time exceed the Maximum Amount (the amount of any such
excess, an "Overadvance"), Debtor shall pay to BNY on demand an amount
sufficient to eliminate such Overadvance.
7. BNY shall be entitled to charge Debtor's revolving loan account for
t interest on the Total Obligations at the Alternate Base Rate, as defined in
the Pre-Petition Loan Documents, plus 1.5%. Immediately before the Debtor filed
this case, the rate of interest that applied under the Pre-
STIPULATION REGARDING FINANCING - 4
<PAGE> 5
Petition Loan Documents was the Alternate Base Rate plus 2.0%. BNY shall be
entitled to charge Debtor's revolving loan account as provided in the
Pre-Petition Loan Documents for all costs, fees and expenses (including, without
limitation, all filing and recording fees and other BNY Expenses) incurred by
BNY in connection with (i) the preparation and administration of this
Stipulation, the Application, the related Interim and Final Orders, and any and
all related instruments, documents and agreements, (ii) the preservation and
protection of BNY's rights hereunder and thereunder, (iii) any other proceedings
in this case, and (iv) the collection by BNY of its loans to Debtor, all
chargeable as Post-Petition Obligations, provided, however, that the parties do
not intend by this provision to alter the effect of Section 506(b) of the
Bankruptcy Code. Debtor shall indemnify BNY for all BNY Expenses incurred by BNY
in connection with this Stipulation and the financing arrangements provided for
herein.
8. The Pre-Petition Loan Documents are hereby supplemented by the
following:
a. Not later than the fifteenth business day after the date of this
Stipulation, Debtor shall provide to BNY projections for the Debtor's business
operations for the period beginning July 1, 1997 and ending not earlier than
December 31, 1997 (the "Projections"). Based on such Projections, Debtor and BNY
will negotiate financial covenants with respect to the financing provided
pursuant to this stipulation, with the understanding that such financial
covenants will measure Debtor's financial performance using indicia and
measurements similar to those referenced in the financial covenants included in
the Pre-Petition Loan Documents;
b. Not later than 30 days after the last day of each month
(beginning with July, 1997 results being reported on or before August 30, 1997),
Debtor shall provide to BNY and to
STIPULATION REGARDING FINANCING - 5
<PAGE> 6
counsel for the Creditors' Committee its income statement and its balance sheet
for the preceding month;
c. BNY shall have reasonable access to Debtor's books, records and
facilities. Debtor agrees to cooperate fully with BNY's representative(s) and
BNY shall take due account of Omega's scheduling and personnel requirements in
requesting and reviewing information and in requesting access to Omega's
facilities and employees;
d. Debtor shall not be deemed to have committed an Event of Default
under the Pre-Petition Loan Agreement solely as a result of (i) Debtor's filing
of the above-captioned bankruptcy case, (ii) Debtor's failure timely to pay
Pre-Petition Obligations as required under the terms of the Pre-Petition Loan
Documents, whether due prior to or after the Filing Date, (iii) Debtor's failure
to comply with any covenants contained in the Pre-Petition Loan Agreement for
the period beginning on the date the Debtor filed its bankruptcy case and ending
on the date of this Stipulation, or (iv) Debtor's termination of, or
renegotiation of favorable lease terms for, any existing leaseholds or leases,
in accordance with the Case Management Order entered herein on June 13, 1997;
f. Debtor shall provide BNY with daily reports of sales, and any
collections received directly by Debtor shall be promptly remitted to the
appropriate existing BNY lock box;
h. The definition of "Formula Amount" in the Pre-Petition Loan
Agreement is hereby deleted in its entirety and a new definition of "Formula
Amount" is substituted therefor as follows:
"Formula Amount" means (a) Receivables Availability, plus (b)
Progress Receivables Availability, plus (c) Inventory Availability,
minus (d) Reserves plus (e) the following amounts during the periods
and on the dates indicated:
STIPULATION REGARDING FINANCING - 6
<PAGE> 7
<TABLE>
<CAPTION>
End End of Month Loan
Month High of Month Balance
<S> <C> <C> <C>
July $ 5,000,000 $ 3,500,000 $20,250,000
August 3,500,000 2,500,000 18,250,000
September 2,500,000 2,000,000 17,250,000
October 2,000,000 1,000,000 17,000,000
November 1,000,000 500,000 17,000,000
December 500,000 0 16,000,000
</TABLE>
The parties stipulate that the amount of Reserves as of the date of
this Stipulation is $362,000.00
i. The definition of "Eligible Receivables" in the Pre-Petition Loan
Agreement is hereby deleted in its entirety and a new definition of "Eligible
Receivables" is substituted therefor as follows.
"Eligible Receivables" means and includes each Receivable which is not
a Progress Receivable and which conforms to the following criteria: (a)
shipment of the merchandise or the rendition of services has been
completed, (b) no return, rejection or repossession of the merchandise
has occurred; (c) merchandise or services shall not have been rejected
or disputed by the Customer and there shall not have been asserted any
offset, defense, counterclaim, or Dispute; (d) continues to be in full
conformity with the representations and warranties made by Borrower to
Lender with respect thereto; (e) Lender is, and continues to be,
satisfied with the credit standing of the Customer in relation to the
amount of credit extended; (f) with respect to Pre-Petition
Receivables, is documented by an invoice in a form approved by Lender
and shall not be unpaid for more than 120 days from the due date
reflected in the BNY system; (g) with respect to Post-Petition
Receivables, is documented by an invoice in a form approved by Lender
and shall not be unpaid for more than 90 days from the due date nor
more than ISO days from the invoice date; (h) with respect to
Post-Petition Receivables, less than 50% of the aggregate amount of
post-petition invoices due from such Customer have at the time remained
unpaid for more than 90 days from the due date or 150 days from the
invoice date; (i) is not evidenced by chattel paper or an instrument of
any kind with respect to or in payment of the Receivable unless such
instrument is duly endorsed to and in possession of Lender or
represents a check in payment of a Receivable; (j) if the Customer is
located outside of the United States, the goods which gave rise to such
Receivable were shipped after receipt by Borrower from or on behalf of
the Customer of an irrevocable letter of credit, assigned and delivered
to Lender and confirmed
STIPULATION REGARDING FINANCING - 7
<PAGE> 8
by a financial institution acceptable to Lender and in form and
substance acceptable to Lender, payable in the full amount of the
Receivable in United States dollars at a place of payment located
within the United States; (k) such Receivable is not subject to any
lien, other than Permitted Liens; (1) does not arise out of
transactions with any employee, officer, agent, director, stockholder
or Affiliate of Borrower; (m) is payable to Borrower; (n) does not
arise out of a bill and hold sale prior to shipment and, if the
Receivable arises out of a sale to any Person to which Borrower is
indebted, the amount of such indebtedness, and any anticipated
indebtedness, is deducted in determining the face amount of such
Receivable; (o) is net of any returns, discounts, claims, credits and
allowances; (p) if the Receivable arises out of contracts between
Borrower and the United States, or any department, agency or
instrumentality thereof, Borrower has so notified Lender, in writing,
prior to the creation of such Receivable, and, if Lender so requests,
there has been compliance with any governmental notice or approval
requirements, including without limitation, compliance with the Federal
Assignment of Claims Act; (q) if the Receivable arises out of contracts
between Borrower and any state or any department, agency or
instrumentality of any state, and any authorizations, consents, filings
or approvals necessary to perfect the security interest in such
Receivable and to permit Lender to collect such Receivable directly
shall have been completed; (r) is a good and valid account representing
an undisputed bona fide indebtedness incurred by the Customer therein
named, for a fixed sum as set forth in the invoice relating thereto
with respect to an unconditional sale and delivery upon the stated
terms of goods sold by Borrower, or work, labor and/or services
rendered by Borrower; and (r) is otherwise satisfactory to Lender as
determined in the exercise of its discretion.
j. Section 3. 1 (a) of the Pre-Petition Loan Agreement is hereby
deleted in its entirety and replaced with the following:
(a) Issuance of the requested Letter of Credit (i) would cause the
Letter of Credit Obligations then outstanding to exceed $500,000 or (ii) would
cause the sum of the principal amount of the then outstanding Total Obligations
to exceed the amount of the Formula Amount; or;
k. BNY and Debtor do not contemplate any Eurodollar Rate Loans
post-petition. Accordingly, Section 4.11 of the Pre-Petition Loan Agreement is
deleted in its entirety. BNY and Debtor have agreed that they will negotiate new
financial covenants with which Debtor must comply promptly upon delivery by the
Debtor of the Projections. Accordingly, Sections 6.11, 7.8, 7.9, 7. 10, 7.12,
7.13 and 7.14 of the Pre-Petition Loan Agreement are hereby deleted in their
entirety; and
STIPULATION REGARDING FINANCING - 8
<PAGE> 9
1. Section 8.1(a) of the Pre-Petition Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"Failure to pay when due and payable or when declared due and payable,
all or any portion of the Obligations (whether of principal, interest
or reimbursement of BNY Expenses) required to be paid under the
Pre-Petition Loan Documents (as modified by the Stipulation), the
Stipulation, or the Orders referred to in the Stipulation."
9. Notwithstanding any provision to the contrary in the Pre-Petition
Loan Documents, it is expressly understood that BNY's agreement to advance funds
hereunder is expressly conditioned on full compliance by Debtor with all of the
terms of this Stipulation, the Pre-Petition Loan Documents and the Orders
referred to herein, and in no event shall BNY be required to make advances after
December 31, 1997 (the "Maturity Date"), and A amounts owed by Debtor to BNY
shall be due and payable at 5:00 p.m., Pacific Standard Time, on the Maturity
Date, unless BNY, although having no obligation to do so, consents in writing to
an extension or modification of the terms of this Stipulation, which extension
or modification shall be effective without further order of the Bankruptcy
Court. Debtor's failure to pay any amount owed to BNY on the Maturity Date shall
constitute a material breach of this Stipulation giving rise to the remedies
provided for in this Stipulation and otherwise.
10. To the extent of any inconsistencies between the terms and
provisions of this Stipulation and the Pre-Petition Loan Documents, the terms of
this Stipulation shall govern. In all other respects, the Pre-Petition Loan
Documents shall remain in full force and effect and BNY shall continue to have
all of the interests, rights and remedies provided in the Pre-Petition Loan
Documents as modified hereby.
11. With respect to any interest or BNY Expenses which BNY is entitled
to charge Debtor's account under paragraph 7 hereof or as otherwise provided
under this Stipulation or the Pre-Petition Loan Documents, BNY shall provide
statements detailing such expenses, redacted, if necessary, to
STIPULATION REGARDING FINANCING - 9
<PAGE> 10
prevent disclosure of privileged matters, to Debtor and the Debtor will provide
such statements to counsel for the Creditors Committee appointed herein and the
U.S. Trustee. If no party in interest objects to the reasonableness of such
expenses by motion to the Bankruptcy Court filed within thirty (30) days
following receipt of any such statement, such amounts shall be conclusively
deemed reasonable and shall constitute Post-Petition Obligations. In the event
any such amounts are finally determined by the Bankruptcy Court to be
unreasonable, and not to be part of the Post-Petition Obligations, BNY shall
reduce Debtor's Post-Petition Obligations by such amounts plus any interest
charged thereon.
12. All of BNY's claims with respect to the Post-Petition Obligations
shall be secured by a continuing, perfected, first-priority lien on and security
interest in all assets of the estate (whether acquired by Debtor pre-petition or
post-petition) subject only to BNY's interest in the Pre-Petition Collateral,
including, without limitation, all of Debtor's "Receivables," "Inventory,"
"Equipment," "General Intangibles," "Pledged Shares" (as such terms are defined
in the Pre-Petition Loan Agreement), cash, deposit accounts, notes, chattel
paper and other instruments, insurance claims and recoveries, tort claims and
recoveries, and all other real and personal property whether now existing or
hereafter arising or created, and all proceeds and products of the foregoing,
excepting only causes of action for avoidance arising under the Bankruptcy Code
and not otherwise included, whether as proceeds, product or otherwise, in the
Pre-Petition Collateral, which security interest shall be governed by the
Pre-Petition Loan Documents as modified by this Stipulation and as to which
further perfection shall not be required.
STIPULATION REGARDING FINANCING - 10
<PAGE> 11
13. BNY is entitled to adequate protection against any loss, decrease
or decline in the value of the Pre-Petition Collateral since the Filing Date
resulting from the use, sale or lease of such collateral by Debtor under Section
363(e) of the Bankruptcy Code and from the imposition of the automatic stay
imposed by Section 362 of the Bankruptcy Code (the "Collateral Shortfall"). Any
such Collateral Shortfall shall be secured by the security interest provided for
in paragraph 12. BNY shall have the highest expense of administrative priority
as specified in Section 364(c)(1) of the Bankruptcy Code with respect to any
Collateral Shortfall and all Post-Petition Obligations, with priority over all
administrative expenses of the kind specified in Sections 503(b) and 507(b) of
the Bankruptcy Code. BNY's security interest, administrative priority and lien
shall be senior to and shall "prime" all other administrative claims, liens, and
security interests other than the liquidation expenses of any chapter 7 trustee.
The Pre-Petition Obligations shall continue to be secured by a continuing,
perfected, first-priority security interest in all of the Pre-Petition
Collateral and the proceeds and products thereof
14. If there is a Collateral Shortfall, BNY shall have an
administrative priority claim for the amount of such Collateral Shortfall, and
such claim shall be afforded priority under Sections 503(b) and 507(b) of the
Bankruptcy Code,
15. BNY may, in its discretion, apply the proceeds of Pre-Petition
Collateral and Post-Petition Collateral, or any other amounts received by BNY in
respect of the Pre-Petition Obligations and Post-Petition Obligations, in such
order or manner as BNY deems appropriate, including first to the Pre-Petition
Obligations until such Pre-Petition Obligations are paid and satisfied in full.
16. Any one or more of the following events shall constitute an event
of default hereunder:
STIPULATION REGARDING FINANCING - 11
<PAGE> 12
a. the occurrence of an Event of Default under the Pre-Petition Loan
Documents, as modified hereby;
b. the breach of any of the agreements, stipulations, or covenants
herein or to be negotiated pursuant to paragraph 8 of this Stipulation,
including but not limited to failure by Debtor to comply with the month-end loan
balance requirements set forth in the definition of "Formula Amount" pay on
demand any amount required to eliminate an Overadvance as provided in paragraph
7 of this Stipulation;
c. the appointment of a trustee or an examiner with enlarged powers
(powers beyond those set forth in Sections 1106(a)(3) and (4) of the Bankruptcy
Code) in this case;
d. the conversion of this case to a case under Chapter 7 of the
Bankruptcy Code;
e. the dismissal of this case without prior or immediate payment of
all of the Pre-Petition Obligations and Post-Petition Obligations;
f. (i) prior to the Final Order Debtor contests or attempts to
invalidate, subordinate or avoid BNY's lien on or security interest in either
the Pre-Petition Collateral or the Post-Petition Collateral or to reduce or
diminish, except as a result of payments, the Pre-Petition Obligations by reason
of avoidance, invalidation, offset or otherwise or (ii) after the Final Order
any other party in interest obtains an order invalidating, subordinating or
avoiding BNY's lien on or security interest in either the Pre-Petition
Collateral or the Post-Petition Collateral or reducing or diminishing (other
than as a result of payments) the Prepetition Collateral by reason of avoidance,
invalidation, offset or otherwise (an "adverse claim").
STIPULATION REGARDING FINANCING - 12
<PAGE> 13
g. any party-in-interest obtains relief from the automatic stay
applicable under Section 362 of the Bankruptcy Code in this case to exercise its
rights as lienholder or secured party against a material portion of the
Pre-Petition Collateral or the Post-Petition Collateral, unless otherwise
consented to by BNY in writing;
h. an order of the Bankruptcy Court or any other court of competent
jurisdiction shall be entered amending, supplementing, staying for a period in
excess of 10 days, vacating or otherwise modifying the Interim Order, or if a
Final Order acceptable to BNY is not entered by the Bankruptcy Court on or
before thirty days from the date of the Interim Order;
i. the Bankruptcy Court enters any order priming BNY's lien or
security interest in either the Pre-Petition Collateral or the Post-Petition
Collateral under Section 364(d) of the Bankruptcy Code or otherwise or granting
Section 506(c) relief in respect of the Pre-Petition Collateral or the
Post-Petition Collateral except as specifically contemplated herein;
j. there is any written objection sustained in material respects by
the Court to the Application;
k. the failure by Debtor to file a plan of reorganization to which
BNY has given its prior written consent and approval (the "Plan") on or before
one hundred twenty (120) days after the date of this Stipulation;
l. the failure by Debtor to cause the Plan to become confirmed and
effective to BNY's reasonable satisfaction on or before the Maturity Date;
m. Debtor seeks an extension of the exclusivity period as to BNY
beyond the time permitted for filing a plan pursuant to (k) above;
STIPULATION REGARDING FINANCING - 13
<PAGE> 14
n. the filing by Debtor of a plan of reorganization or the filing by
Debtor of a modification to the Plan to which BNY has not given its prior
written consent and approval;
o. the sale, transfer, abandonment or other disposition by Debtor of
any material portion of the Pre-Petition Collateral or the Post-Petition
Collateral without BNY's prior written consent;
p. Debtor does not use its best efforts to dispose of pre-petition
Florida receivables not collected prior to July 31, 1997, on a schedule and in a
manner acceptable to BNY.
17. In the event of default, BNY shall be entitled to apply to this
Court for relief from the automatic stay to enforce its rights or security
interests in any manner provided in the Pre-Petition Loan Documents, as modified
by this Stipulation, or applicable law, on shortened notice of at least five (5)
days from the date of notice from BNY to Debtor and the Creditors' Committee and
the U.S. Trustee of the occurrence of such default, and Debtor hereby consents
to such shortened notice. The only issue to be considered at any such hearing
shall be whether a Default Event has occurred. Debtor further agrees to comply
with the terms of this Stipulation and to refrain from use of BNY's cash
collateral except as provided herein and until notified to the contrary by BNY,
in writing, following an event of default. Further, upon an event of default BNY
may, without notice, cease making advances to Debtor and may continue to collect
proceeds of its collateral and apply such proceeds to the Obligations in
accordance with this Stipulation.
18. BNY may seek further protection of its security interests if BNY
deems necessary in these or any superseding proceedings. Further, BNY may agree
to modifications to this Stipulation, in its sole discretion, including, without
limitation, additional advances to Debtor.
STIPULATION REGARDING FINANCING - 14
<PAGE> 15
19. Nothing herein constitutes consent by BNY to these proceedings or
to the continuation thereof or to the use of cash collateral (except on the
terms set forth in this Stipulation and any orders entered by the Court in
connection herewith) or to the adequacy of the protections granted or
constitutes a waiver by BNY of any right it may have, including without
limitation, to object to the reasonableness of any fees or costs of
professionals described in paragraph 30 hereof, to oppose or object to any plan
of reorganization, to challenge any impairment of its claim, its security
interests, the Pre-Petition Collateral or the Post-Petition Collateral, and
incident thereto to introduce such evidence of its claim, its security interest
and the value of the Pre-Petition Collateral and the Post-Petition Collateral,
as may be appropriate in the circumstances.
20. Debtor shall execute and deliver to BNY any and all further
agreements, instruments and documents which may be reasonably necessary to
effectuate the purposes of this Stipulation, including, without limitation, any
UCC-1 Financing Statements. Debtor agrees that the reasonable costs of BNY's
searches, title policies or endorsements, recording expenses or other related
items shall be included within BNY Expenses hereunder.
21. It shall be a condition to BNY's financing under this Stipulation
that the Court shall have entered an order substantially in the form of Exhibit
"C" to the Application (the "Interim Order"), affording BNY the rights and
priorities contained in the Application and this Stipulation.
22. The parties understand that the advances to Debtor may be used by
Debtor for general business purposes including payment of ordinary course
compensation to Debtor's officers, and payment of authorized administrative
expenses, and if any payroll is paid by Debtor, Debtor shall pay in accordance
with the Pre-Petition Loan Agreement and shall indemnify BNY and hold it
harmless from
STIPULATION REGARDING FINANCING - 15
<PAGE> 16
and against, any liabilities, including costs and attorneys' fees, resulting
from any claims or demands made by the United States Government for withholdings
and FICA taxes incurred during the operation of the Debtor's business.
23. The parties agree that this Stipulation shall be submitted to the
above-named bankruptcy court for its approval. Upon such approval, this
Stipulation shall be binding upon and shall inure to the benefit of the parties
and their respective successors or assigns, including, without limitation, any
trustee in these or any superseding bankruptcy proceedings. All of BNY's rights
and remedies hereunder are not exclusive and are in addition to all rights and
remedies provided by law, or by any other agreement between Debtor and BNY, or
otherwise.
24. Debtor may use advances from BNY in the ordinary course of its
business as expressly provided herein.
25. If any or all of the provisions of this Stipulation are hereafter
modified, vacated or stayed by order of this or any other court, such stay,
modification or vacation shall not affect the validity of any debt to BNY
incurred pursuant to this Stipulation and which is incurred prior to the
effective date of such stay, modification or vacation, or the validity,
perfection and enforceability of any lien or priority authorized hereby with
respect to any such Post-Petition Obligations, and notwithstanding such stay,
modification or vacation, any advances of funds made pursuant to this
Stipulation by BNY prior to the effective date of such modification, stay or
vacation, to or for the benefit of Debtor, shall be governed in all respects by
the original provisions of this Stipulation and BNY shall be entitled to all the
rights, privileges and benefits, including the liens and security interests and
priorities granted herein, with respect to all such advances.
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<PAGE> 17
26. This Stipulation shall constitute a security agreement between
Debtor and BNY which supplements the Pre-Petition Loan Documents.
STIPULATION REGARDING FINANCING - 17
<PAGE> 18
27. BNY agrees, notwithstanding its lien, security interest and
administrative expense priority, that Debtor may pay, in accordance with the
financial covenants to be negotiated: (i) all reasonable and necessary business
expenses of Debtor incurred in the ordinary course of business from the Filing
Date to the earlier to occur of (x) the Maturity Date and (y) the date of any
notice by BNY of an event of default under the Stipulation (the "Termination
Date"); (ii) all statutory fees of the Bankruptcy Court and the United States
Trustee incurred on or before the Maturity Date; (iii) all amounts payable under
the Independent Contractor Agreement between the Debtor and Stanford Springel
approved by the Court on June 23, 1997 (the "Independent Contractor Agreement")
and the incentive plan for Bradley Powell pursuant to a letter dated July 1,
1997 (the terms of which are subject to approval by the Bankruptcy Court), (iv)
all reasonable fees and costs (exclusive of any prepetition retainers) of
professionals retained by the Debtor or the Creditors' Committee, up to an
aggregate amount of One Million Dollars ($1,000,000) through September 30,
1997, which amount shall be allocated among the firms of Helsell Fetterman LLP,
Gibson, Dunn & Crutcher LLP, KPMG Peat Marwick, Shulkin Hutton Inc., P.S. and
Ernst & Young, as the parties may agree or as the Bankruptcy Court may order,
commencing on the Filing Date and continuing until the Termination Date (with
the understanding that the amount set forth above applies only to the period
beginning on the Filing Date and ending on September 30, 1997, that overall
professional fees are likely to exceed such amount, and that BNY is not at this
time agreeing that any amounts over One Million Dollars in which BNY has an
interest may be used to pay such professional fees); provided, however, neither
Debtor nor the Creditor's Committee may utilize any portion of the above
allocations to pay the fees and costs of its counsel or accountants in
investigating or commencing any action or other proceeding for the purpose
STIPULATION REGARDING FINANCING - 18
<PAGE> 19
of, or which may result in, challenging the amount, allowability,
unavoidability, enforceability, validity, perfection or priority of the
Pre-Petition Obligations or the Pre-Petition Collateral or reducing or affecting
the obligation of the Debtor to pay the Pre-Petition Obligations; provided,
further, however, that all professional fees and expenses (which shall not
include, in any event, fees and expenses payable under the Independent
Contractor Agreement) shall be subject to application, notice and allowance by
the Bankruptcy Court, to which BNY may object. Nothing herein is intended to or
shall require BNY to make advances for such fees and expenses. For professionals
to receive the benefit of this paragraph 27 and the "carve-out" provided herein,
they must report to BNY and the Debtor, by the thirtieth day after the end of
each month, the amount of all accrued fees and costs.
28. This Stipulation may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same agreement. Debtor and BNY
anticipate executing this Stipulation in counterparts in separate locations,
delivering a copy of the executed counterpart signature pages hereof to each
other by facsimile, and subsequently delivering to each other originals of the
executed signature pages. Debtor and BNY hereby agree that this Stipulation
shall be deemed effective upon BNY's receipt by facsimile of a copy of the
signature page hereof executed by Debtor, and no subsequent delay or failure by
either party hereto to deliver to the other party hereto such party's original
signature page shall diminish the effectiveness of this Stipulation.
STIPULATION REGARDING FINANCING - 19
<PAGE> 20
29. Nothing herein shall authorize Debtor to pay, from advances of the
financing provided hereunder, proceeds of Pre-Petition Collateral, or proceeds
of Post-Petition Collateral, fees or expenses of its accountants incurred in
auditing financial statements of the Debtor in connection with any SEC or other
public filings, except as otherwise agreed to by BNY in writing.
30. The Debtor is authorized to spend $25,000 in addition to that
already authorized by, and notwithstanding other terms of, the Order Authorizing
Use of Cash Collateral, entered May 7, 1997 to pay pre-petition wage, bonus and
commission claims of continuing employees, as well as unreimbursed expenses of
continuing employees. To the extent this Stipulation, the Application, and the
Orders entered in connection herewith are
STIPULATION REGARDING FINANCING - 20
<PAGE> 21
inconsistent with such Order Authorizing Use of Cash Collateral, this
Stipulation, the Application, and the Orders entered in connection herewith
shall govern.
Dated: July 2, 1997 Omega Environmental, Inc.,
-------------------------- a Delaware corporation as
Debtor and Debtor-in-Possession
By /s/ S. Springel
--------------------------
Title CEO
-------------------
Dated: July 2, 1997 BNY Financial Corporation
By /s/ Thomas W. Strachan
--------------------------
Title Exec. V.P.
-------------------
STIPULATION REGARDING FINANCING - 21
