EXHIBIT 2
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is entered into this 26th day of May, 1995,
by and between Metcalf & Eddy, Inc. ("M&E"), on its own behalf and on behalf
of all of its subsidiaries, including, specifically, Metcalf & Eddy de Puerto
Rico, Inc. ("MEDPRI"), and Puerto Rico Aqueduct and Sewer Authority ("PRASA").
WITNESSETH
WHEREAS, on September 4, 1990, M&E filed a Complaint in the United
States District Court for the District of Puerto Rico ("Civil Action No.
90-2261 JP") alleging breach of contract and other claims valued at nearly $65
million and primarily related to the March 20, 1986 Agreement ("Agreement")
between M&E and PRASA, as amended;
WHEREAS, on July 10, 1991, PRASA filed its Answer, denying the
allegations in M&E's Complaint and asserting Counterclaims against M&E, and
alleging that MEDPRI was an indispensable party to the action;
WHEREAS, M&E and PRASA desire to resolve and to settle all claims and
disputes between them arising out of or in any way relating to the facts and
circumstances referred to in Civil Action No. 90-2261 JP;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which M&E and PRASA acknowledge,
the following terms and conditions are agreed upon:
1. PRASA shall pay $17.5 million to M&E in accordance with the
following schedule and in the following manner:
a. Not later than thirty days (30) days from the date of
this Settlement Agreement, PRASA shall pay $4.5 million (without interest), in
lawful money of the United States of America and in immediately available
funds to a bank account designated in writing by M&E.
b. Three (3) years from the date of this Settlement
Agreement, PRASA shall pay $6.5 million plus accrued interest thereon from the
date of this Settlement Agreement at a rate of 5.5% per annum, in lawful money
of the United States of America and in immediately available funds, to M&E or,
if the promissory note referred to in this paragraph has been transferred, to
the holder of that promissory note. Interest shall be calculated on the basis
of a year of 365 or 366 days (as the case may be) and paid for the actual
number of days elapsed. Interest shall be paid in arrears on December 1 and
June 1 of each year, commencing on December 1, 1995, and the balance of
interest accrued from December 1, 1997, on same date as the remaining $6.5
million referred to above is paid. These payment obligations shall be
evidenced by PRASA's execution of a promissory note in the form attached
hereto as Exhibit A ("Promissory Note 1"), which note shall be delivered by
PRASA to M&E on the date of this Settlement Agreement. The terms and
conditions of Promissory Note 1 are incorporated by reference into this
Settlement Agreement.
c. Five (5) years and three (3) months from the date of this
Settlement Agreement, PRASA shall pay the remaining $6.5 million plus accrued
interest thereon from the date of this Settlement Agreement at a rate of 5.75%
per annum, in lawful money of the United States of America and in immediately
available funds, to M&E or, if the promissory note referred to in this
paragraph has been transferred, to the holder of that promissory note.
Interest shall be calculated on the basis of a year of 365 or 366 days (as the
case may be) and paid for the actual number of days elapsed. Interest shall
be paid in arrears on December 1 and June 1 of each year commencing on
December 1, 1995, and the balance of interest accrued from June 1, 2000, on
the same date as the remaining $6.5 million referred to above is paid. These
payment obligations shall be evidenced by PRASA's execution of a promissory
note in the form attached hereto as Exhibit B ("Promissory Note 2"), which
note shall be delivered by PRASA to M&E on the date of this Settlement
Agreement. The terms and conditions of Promissory Note 2 are incorporated by
reference in this Settlement Agreement.
d. All payments of principal and interest made pursuant to
Paragraphs 1(a)-1(c) and the execution and delivery by PRASA of Promissory
Note 1 and Promissory Note 2 shall be made without any set-off or counterclaim
and without any restriction or condition (including laws, regulations, orders
decrees or interpretations of or by the Government of Puerto Rico) and shall
be made free and clear of, and without deduction or withholding for, or on
account of, any taxes imposed by the Government of Puerto Rico or its
political subdivisions. M&E agrees to abide by all Puerto Rico tax laws with
respect to any payments made to M&E pursuant to this Settlement Agreement. At
PRASA's option, the promissory notes may be voluntarily prepaid in whole or in
part at any time without penalty but together with accrued interest on any
amount so prepaid.
e. No pre-settlement interest on the principal amount shall
be paid.
f. Government Development Bank for Puerto Rico ("GDB") shall
execute an unconditional Payment Guarantee in the form attached hereto as
Exhibit C guaranteeing the prompt payment of amounts due under the three
preceding subparagraphs, under Promissory Note 1 and Promissory Note 2, and
under paragraph 7 of this Settlement Agreement.
g. If any Event of Default under Promissory Note 1 or
Promissory Note 2 shall have occurred and be continuing for a period of ten
(10) Business Days, after written notice of such Event of Default shall have
been given to PRASA and GDB, all amounts due under the promissory notes shall
become forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by PRASA. If
PRASA or GDB cures the Event of Default within ten (10) Business Days after
its receipt of the aforementioned written notice, M&E or the holder of the
promissory note shall not have the right under this paragraph to declare the
amounts owed to be forthwith due and payable.
h. The parties hereto understand and agree that PRASA's
payment obligations under this Settlement Agreement and the PRASA Notes are
junior and subordinate in all respects to PRASA's obligations under that
certain Trust Agreement, dated as of October 1, 1988, as amended, by and
between PRASA and The Chase Manhattan Bank (National Association), trustee.
2. Upon payment of the amount set forth in Paragraph 1(a) above,
counsel for M&E and PRASA shall file a Stipulation of Dismissal With Prejudice
as to all of the claims and counterclaims in Civil Action No. 90-2261 JP.
The Stipulation of Dismissal shall be in the form attached hereto as Exhibit
D. Upon the execution of this Settlement Agreement, the parties will file
this Settlement Agreement and a Joint Motion to Stay Proceedings seeking a
suspension of the litigation until the operation of Paragraph 1(a) above at
which time the parties will file the Stipulation of Dismissal with Prejudice
as aforementioned.
3. This Settlement Agreement is being executed in settlement of
all disputed claims and does not constitute, and shall not be deemed, an
admission by either M&E or PRASA of any liability for the claims asserted in
Civil Action No. 90-2261 JP.
4. This Settlement Agreement shall be binding upon and shall inure
to the benefit of M&E, MEDPRI, and PRASA, their officers, directors,
attorneys, or other representatives, employees, agents, heirs, parent
companies, subsidiaries, successors and assigns.
5. Except for enforcement of the terms of this Settlement
Agreement, PRASA and its officers, directors, legal or other representatives,
employees, agents, parents, subsidiaries, successors and assigns hereby
release M&E, its officers, directors, legal or other representatives,
employees, agents, parents, subsidiaries, successors and assigns from any and
all liabilities and claims, disputes, demands, motions, actions, or causes of
action, whether direct or consequential, liquidated or unliquidated presently
existing or which may arise hereafter relating to or arising in connection
with transactions or dealings involving PRASA and M&E prior to the date hereof
including, but not limited to, the transactions or dealings which are or were
the subject of the litigation.
6. Except for enforcement of the terms of this Settlement
Agreement, M&E and its officers, directors, legal or other representatives,
employees, agents, parents, subsidiaries, successors and assigns hereby
release PRASA, its officers, directors, legal or other representatives,
employees, agents, parents, subsidiaries, successors and assigns from any and
all liabilities and claims, disputes, demands, motions, actions, or causes of
action, whether direct or consequential, liquidated or unliquidated, presently
existing or which may arise hereafter relating to or arising in connection
with transactions or dealings involving M&E and PRASA prior to the date hereof
including, but not limited to, the transactions or dealings which are or were
the subject of the litigation.
7. In the event that a claim for payment of services previously
rendered is brought against M&E by a subcontractor pursuant to a subcontract
between M&E and the subcontractor, PRASA agrees to indemnify and defend M&E
from and against any and all such claims up to an aggregate limit of
$393,776.83, provided, however, PRASA shall not be required to indemnify M&E
against claims resulting from M&E's gross negligence or wilful misconduct.
PRASA's indemnification and defense of M&E shall only apply to a claim brought
by a subcontractor pursuant to an invoice previously submitted to M&E by the
subcontractor, and shall not apply to a claim for other than past due
accounts. PRASA's liability to indemnify and defend M&E under this provision
as to any individual subcontractor shall be limited to the amount identified
to PRASA as an account payable on M&E's books for that particular contractor
as of May 25, 1995. PRASA's liability under this paragraph shall terminate
five (5) years from the date of this Settlement Agreement. M&E shall not
settle any action for which indemnification is sought for without PRASA's
prior written consent. PRASA, at its option, shall be entitled to assume the
defense or to conduct all settlement negotiations with respect to any claim
for which indemnification is provided hereunder.
8. M&E and PRASA represent, each on their own behalf, that neither
party to the best of their knowledge and information is aware of any potential
or existing claim that would fall within Paragraphs 5 and 6 with the express
exception of the potential claims that would be subject to Paragraph 7 and (i)
a claim delineated in a letter dated September 9, 1991 to M&E, and (ii) a
third party action brought by PRASA against MEDPRI styled Federico Villafane
Lopez v. Municipal de San Juan, et al. M&E represents that it has determined
that the claim delineated in the letter dated September 9, 1991 to M&E to be
without merit.
9. M&E agrees to notify PRASA's Office of General Counsel of any
claims or demands for payment that would be subject to Paragraph 7 above as
soon as such claims or demands for payment become known to M&E. M&E and PRASA
further agree to take no action and to make no statements that might induce or
encourage any person to bring a claim against the other. PRASA agrees to
notify M&E's Office of General Counsel if it makes any additional payment or
payments to subcontractors on M&E's behalf.
10. This Settlement Agreement represents the entire agreement
between M&E and PRASA with respect to the subject matters hereof and shall not
be modified or affected by any offer, proposal, statement, or representation,
either oral or written made by or for any party in connection with the
negotiations of the terms hereof. This Settlement Agreement may not be
modified except in a writing executed by M&E, PRASA and GDB. Any modification
of this Settlement Agreement without the prior written consent of GDB will
discharge GDB from all responsibilities and liabilities under this Settlement
Agreement and Payment Guarantee.
11. Each of the promises, conditions, and terms set forth herein is
essential to this Settlement Agreement. Breach of any such promise,
condition, or term is a material breach of this Settlement Agreement.
Anything herein to the contrary notwithstanding, nothing contained in this
Settlement Agreement shall be construed as a waiver or release of any rights
or obligations created under this Settlement Agreement.
12. Each of the signatories of this Settlement Agreement warrants
and represents that he is authorized to execute this Settlement Agreement and
to bind the party that he represents thereto. This Agreement is for the
benefit of the parties hereto and not for the benefit of any other party,
including, but not limited to any M&E subcontractor.
13. This Settlement Agreement shall be governed, in all respects,
under the laws of the Commonwealth of Puerto Rico.
14. Any dispute involving this Settlement Agreement shall be
brought exclusively and solely in the United States District Court for the
District of Puerto Rico. The parties of this Settlement Agreement hereby
consent to the jurisdiction of that court. If any party breaches this
Settlement Agreement, the party aggrieved shall be entitled to recover from
the party who breaches, in addition to any other relief provided by law, such
reasonable attorneys' fees and court costs as may be incurred by the
non-breaching party in enforcing this Settlement Agreement.
15. No covenant, stipulation, obligation or agreement herein
contained shall be deemed to be a covenant, stipulation, obligation or
agreement of any director, officer, agent or employee of PRASA in his/her
individual capacity, and neither such director, officer, agent, contractor or
employee in their individual capacities shall be liable personally hereunder.
IT WITNESS WHEREOF, the parties have signed, sealed, and acknowledged
this Settlement Agreement as of the date shown above.
WITNESS: METCALF & EDDY, INC.
_____________________________ By:_________________________________
Date:_______________________________
WITNESS: METCALF & EDDY DE PUERTO RICO, INC.
_____________________________ By:_________________________________
Date:_______________________________
WITNESS: PUERTO RICO AQUEDUCT AND SEWER
AUTHORITY
_____________________________ By:_________________________________
Date:_______________________________
NEGOTIABLE PROMISSORY NOTE
Six Million, Five Hundred Thousand San Juan, Puerto Rico
Dollars ($6,500,000) May 26, 1995
FOR VALUE RECEIVED, the undersigned PUERTO RICO AQUEDUCT AND SEWER
AUTHORITY, an instrumentality of the Commonwealth of Puerto Rico (hereinafter
called the "Obligor"), hereby promises to pay to the order of METCALF & EDDY,
INC. or any assignee (hereinafter called the "Holder") the principal sum of
six million, five hundred thousand dollars ($6,500,000), in full on August 26,
2000 (the "Maturity Date").
The Obligor also promises to pay interest on the unpaid principal
amount outstanding from the date hereof until such principal amount is paid in
full at the rate of 5.75% per annum calculated on the basis of a 365/366 day
year and the actual number of days elapsed. Interest will be paid in arrears
semiannually on June 1 and December 1 of each year, commencing December 1,
1995, until such principal amount is paid in full, with interest accrued from
June 1, 2000 to August 26, 2000, payable at the Maturity Date.
The principal hereof and the interest hereon are payable in lawful
money of the United States of America and in immediately available funds to a
bank account designated in writing by the Holder. Whenever any payment
hereunder shall be stated to be due on a day which is not a "Business Day,"
such payment shall be made on the next succeeding "Business Day." "Business
Day" shall mean any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the United States and/or the
Commonwealth of Puerto Rico. All payments under this Note shall be made
without any set-off or counterclaim and without any restriction or condition
(including laws, regulations, orders, decrees or interpretations of or by the
Government of Puerto Rico) and shall be made free and clear of and without
deduction or withholding for, or on account of, any taxes imposed by the
Government of Puerto Rico or its political subdivisions.
The occurrence of any one or more of the following events (regardless
of the reason therefor) shall constitute an "Event of Default" hereunder.
a) The Obligor shall fail to make, when due, any payment of
principal or interest under this Note;
b) The Obligor shall fail to make, when due the payment provided
for the Paragraph 1(a) of a certain Settlement Agreement dated May 26, 1995,
between the Obligor and Metcalf & Eddy, Inc.
c) A case or proceeding shall have been commenced against the
Obligor in a court having competent jurisdiction seeking a decree or order in
respect of the Obligor (i) under applicable State, Commonwealth of Puerto Rico
or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of the Obligor, or of any substantial part of its properties, or (iii)
ordering the winding-up or liquidation of the affairs of the Obligor, and any
such case or proceeding shall remain undismissed or unstayed for forty-five
(45) consecutive days or such court shall enter a decree or order granting the
relief sought in such case or proceeding.
d) The Obligor shall (i) file a petition seeking relief under
Title 11 of the U.S. Bankruptcy Code, as now constituted or hereafter amended,
or any other applicable State, Commonwealth of Puerto Rico or foreign
bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Obligor, or of
any substantial part of its properties, (iii) fail generally to pay its debts
as such debts become due, or (iv) take any action in furtherance of any such
action.
If any Event of Default shall have occurred and be continuing for a
period of ten (10) Business Days after written notice of such Event of Default
shall have been given to the Obligor by the Holder, such Holder shall notify
Government Development Bank for Puerto Rico ("GDB"), which shall pay all
amounts due under this Note within ten (10) Business Days, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by the Obligor. If the Obligor cures the Event of Default
within ten (10) Business Days after its receipt of the aforementioned written
notice, the Holder shall not have the right under this Note to notify GDB that
the amounts owed to the Holder under this Note are forthwith due and payable
as a result of the occurrence of such Event of Default.
In the event that any action, suit or other proceeding is brought by
the Holder to collect under the provisions of this Note, the Obligor shall be
liable for all court costs and expenses of collection, including, without
limitation, attorneys' fees and disbursements.
This Note:
a) may be modified only by a writing duly executed by the Holder
hereof and the Obligor;
b) constitutes an obligation of an instrumentality of the
Commonwealth of Puerto Rico pursuant to Section 1022(b)(4) of the Puerto Rico
Internal Revenue Code of 1994, as amended;
c) shall be interpreted, governed, construed and enforced in
accordance with the laws of the Commonwealth of Puerto Rico.
Prompt payment of principal and interest on this Note is guaranteed
absolutely by GDB pursuant to the provisions of a certain Payment Guarantee
dated May 26, 1995.
All notices, demands and other communications to the Obligor or GDB,
relating to this Note shall be in writing and shall be hand delivered, or
mailed by certified or registered mail, return receipt requested, as follows:
Puerto Rico Aqueduct and Sewer Authority
604 Barbosa Avenue
Hato Rey, Puerto Rico 00918
Attention: Executive Director
Government Development Bank for Puerto Rico
Minillas Government Center
De Diego Avenue
Stop 22
San Juan, Puerto Rico 00940
Attention: President
or at such other address that the Obligor or GDB shall furnish to the Holder
in writing.
At the Obligor's option, this Note may be voluntarily prepaid in
whole or in part at any time without penalty but together with accrued
interest on any amount so prepaid. This Note is intended to be a negotiable
instrument under the laws of the Commonwealth of Puerto Rico, freely
transferable by endorsement and delivery. Any subsequent holder of this Note
acquiring the same by endorsement and delivery shall be entitled to all of the
rights and benefits granted herein and under the laws of the Commonwealth of
Puerto Rico.
The Holder of this Note understands and agrees that the obligation of
the Obligor hereunder to pay principal of and interest on this Note is junior
and subordinate in all respects to the Obligor's obligations under that certain
Trust Agreement, dated as of October 1, 1988, as amended, by and between the
Obligor and The Chase Manhattan Bank (National Association), trustee.
The Holder of this Note shall notify the Obligor of any assignments
hereof and shall give the Obligor the name and address of the assignee to whom
all future payments hereunder shall be made.
In San Juan, Puerto Rico, this 26th day of May, 1995.
PUERTO RICO AQUEDUCT AND
SEWER AUTHORITY
By______________________________
Name____________________________
Title___________________________
PAYMENT GUARANTY
This Payment Guaranty, dated May 26, 1995, by Government Development
Bank for Puerto Rico, a corporation and governmental instrumentality of the
Commonwealth of Puerto Rico, duly created by virtue of Act No. 17 of the
Legislature of Puerto Rico, approved September 23, 1948, as amended
("GDB"), to and for the benefit of Metcalf & Eddy, Inc. ("M&E"), a
Delaware corporation, or any assignee permitted herein (hereinafter
individually with M&E referred to as a "Guaranteed Party").
WITNESSETH:
WHEREAS, Puerto Rico Aqueduct and Sewer Authority, a body corporate
and politic, constituting a public corporation and governmental
instrumentality of the Commonwealth of Puerto Rico ("PRASA"), and M&E have
entered into a Settlement Agreement, dated May 26, 1995 (the "Settlement
Agreement"), under which M&E and PRASA have agreed to settle their lawsuit in
the United States District Court for the District of Puerto Rico, Civil Action
No. 90-2261 JP; and
WHEREAS, pursuant to the Settlement Agreement PRASA has agreed to pay
M&E $17.5 million in accordance with Paragraphs 1(a) - 1(c) of the Settlement
Agreement, with interest in the case of paragraphs (1)(b) and 1(c) (the "PRASA
Obligations"), in consideration for M&E's promise to dismiss said lawsuit with
prejudice in accordance with Paragraph 2 of the Settlement Agreement and to
evidence a portion of this obligation to pay by the issuance of two negotiable
promissory notes to M&E in the form attached hereto as Exhibits A & B,
respectively (collectively, the "PRASA Notes"); and
WHEREAS, as a condition to executing the Settlement Agreement, M&E
requested that a guaranty be provided for the payment of the PRASA
Obligations; and
WHEREAS, GDB is willing to act as guarantor, as set forth herein,
after the execution date of the Settlement Agreement, for payment of the PRASA
Obligations as set forth in Paragraph 1 of this Payment Guaranty;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, as an inducement to M&E to enter the Settlement Agreement and to
and for the parties' mutual benefit, GDB agrees as follows:
1. Obligations. Subject to the terms of this Payment Guaranty,
GDB hereby absolutely guaranties to M&E (and to any assignee of any of the
PRASA Notes) the prompt and full payment of the PRASA Obligations when due and
payable (whether at the stated maturity or by required prepayment,
acceleration or otherwise). GDB shall also indemnify M&E against certain
subcontractor claims ("Subcontractor Claims") set forth in Paragraph 7 of the
Settlement Agreement dated May 26, 1995, between PRASA and M&E (the
"Settlement Agreement"). GDB shall have no obligation to M&E or any assignee
hereunder for other than the PRASA Obligations and the Subcontractor Claims.
Notwithstanding anything contained in this Payment Guaranty to the contrary,
GDB shall be entitled to assert any and all legal or equitable rights or
defenses against M&E which are available to PRASA under or arising out of the
Settlement Agreement; provided, however, GDB shall not be entitled to such
rights or defenses with respect to the PRASA Notes. GDB shall have no
obligations which exceed those of PRASA under the Settlement Agreement or the
PRASA Notes and shall have no obligations directly under the Settlement
Agreement or the PRASA Notes other than those that arise under or through this
Payment Guaranty.
2. Nature of Obligation.
(a) This Payment Guaranty shall become effective on the date
of execution of the Settlement Agreement and shall become null and void upon
the payment to M&E or any assignee of all amounts due pursuant to Paragraph 1
of the Settlement Agreement or the PRASA Notes.
(b) Except as otherwise provided herein, the Guaranteed Party
shall not be entitled to enforce any PRASA Obligation directly or
simultaneously against GDB. With respect to all PRASA Obligations, the
Guaranteed Party shall first make a written demand for payment against PRASA in
accordance with the procedures therefor set forth in the Settlement Agreement
(a "Claim") and shall concurrently provide a copy of such demand to GDB. If a
written demand is made by a Guaranteed Party with respect to the PRASA
Obligations and PRASA has not paid its obligation in full within ten (10)
business days of receipt of the Guaranteed Party's written demand, the
Guaranteed Party shall immediately notify GDB of such failure in writing and
thereupon GDB shall satisfy the Guaranteed Party's claim in full within ten
(10) Business Days of receipt of such written notice, and such satisfaction by
GDB shall be deemed to cure any such default by PRASA in respect of such
failure to pay under the Settlement Agreement and the PRASA Notes.
(c) The amount of this Payment Guaranty is for a sum equal to
the amount not paid by PRASA (without duplication) pursuant to the terms of
Paragraphs 1 and 7 of the Settlement Agreement or the PRASA Notes.
(d) This Payment Guaranty to the extent of the amount payable
under Paragraph 1(a) of the Settlement Agreement is not assignable by M&E
without GDB's prior written consent; otherwise this Payment Guaranty shall run
with the PRASA Notes.
3. Enforceable Conditions. This Payment Guaranty shall not be
affected, modified, released or impaired by any of the following circumstances
or conditions:
(a) any other preconditions aside from the execution and
delivery of the Settlement Agreement;
(b) any term or provision of any other instrument or
agreement applicable to M&E other than the Settlement Agreement ("Other
Agreements"), or any assignment or transfer thereof;
(c) any assignment of this Payment Guaranty in accordance
with the terms hereof, or any furnishing or acceptance of additional security
for the benefit of the Guaranteed Party;
(d) any amendment, waiver, consent, extension, indulgence,
release or discharge or other action or inaction (including, without
limitation, any lack of diligence or failure to mitigate damages) under or in
respect of any Other Agreements;
(e) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets of, or
marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar proceeding affecting PRASA
(each, an "Insolvency Proceeding"), or any action taken by any trustee or
receiver or by any court in any such proceeding, or the disaffirmance,
rejection or postponement in any such proceeding of any of the obligations or
undertakings of PRASA set forth in any such instrument or agreement; or
(f) any limitation on the ability of PRASA to pay the PRASA
Obligations.
4. Agreement Modifications. GDB and M&E hereby agree that at any
time and from time to time, M&E and PRASA may modify, extend, amend, change,
compromise, settle, release, terminate, waive or surrender (each a
"Modification") any provision of the Settlement Agreement in accordance with
the procedures set forth therein; and provided such Modification neither
increases GDB's obligations or potential obligations hereunder, nor has any
other adverse effect on GDB (an "Adverse Modification"), then such
Modification shall be binding on GDB without its consent, and this Payment
Guaranty shall remain in full effect. Any Adverse Modification shall require
the written consent of GDB for such Adverse Modification to be binding upon
GDB.
5. GDB Claim Against PRASA. GDB shall have the right of
subrogation against PRASA for any payments to the Guaranteed Party that GDB
shall make hereunder; however, no set-off or counterclaim to any obligation
that GDB may have against PRASA shall be available to GDB against a Guaranteed
Party to reduce GDB's obligations under this Payment Guaranty.
6. GDB's Representations and Warranties. GDB represents and
warrants to the Guaranteed Party as follows:
(a) Corporate Organization. GDB is a corporation and
governmental instrumentality of the Commonwealth of Puerto Rico duly created
and validly existing, in compliance with and under the laws of the
Commonwealth of Puerto Rico, and has full power, authority and legal right to
execute and deliver this Payment Guaranty, to comply with the terms hereof and
perform its obligations hereunder.
(b) Due Authorization. The execution, delivery and
performance by GDB of this Payment Guaranty have each been duly authorized by
all necessary action on the part of GDB and do not require any other approval
or other action.
(c) Validity. This Payment Guarantee is a legal, valid and
binding obligation of GDB enforceable against GDB in accordance with its terms.
7. Notices. All notices, demands, claims and other communications
hereunder unless otherwise stated herein shall be in writing and shall be hand
delivered, or mailed by certified or registered mail, return receipt requested,
as follows:
If to GDB:
Government Development Bank for Puerto Rico
Minillas Government Center
De Diego Avenue, Stop 22
Santurce, Puerto Rico 00940
Attention: President
With a copy to:
Brown & Wood
One World Trade Center
58th Floor
New York, NY 10048
Attention: Lawrence A. Bauer, Esq.
and to:
Verner, Liipfert, Bernhard, McPherson and Hand
901 Fifteenth St., N.W.
Washington, D.C. 20005-2301
Attention: Gary J. Klein, Esq.
if to M&E:
Metcalf & Eddy, Inc.
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
Attention: President
with a copy to:
Air & Water Technologies Corporation
U.S. Highway 22 West and Station Road
Branchburg, New Jersey 08876
Attention: General Counsel
or at such other addresses any party shall furnish to the other in writing.
8. Third Party Beneficiaries. This Payment Guaranty is for the
benefit of M&E, any Guaranteed Party and GDB exclusively and shall not create
any rights in favor of any other person, whatsoever.
9. PRASA Dissolution. In the event
(a) of a final dissolution of PRASA, so that it is not
available to respond, defend or make an appearance to defend a Claim, or
(b) PRASA enters an Insolvency Proceeding; then the
Guaranteed Party need not exhaust its remedies against PRASA or take any other
action against PRASA and there shall be no requirement that the assets of
PRASA first be applied in satisfaction of the Guaranteed Party's demand for
payment, and in any such event (but in no other event) the Guaranteed Party
may make any unpaid and any subsequent claims on account of the PRASA
Obligations directly against GDB under, and in accordance with, the provisions
of the Settlement Agreement and GDB shall stand in the place of PRASA under
the Settlement Agreement with respect to such claims.
10. No Waiver. No delay or omission to exercise any right, remedy,
power or privilege accruing upon a default, omission or failure of performance
hereunder shall impair any such right, remedy, power or privilege or be
construed to be a waiver thereof, but any such right, remedy, power or
privilege may be exercised from time to time and as often as may be deemed
expedient.
11. Counterparts. This Payment Guaranty may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12. Reduction of GDB Obligation. All payments by PRASA to the
Guaranteed Party of PRASA's Obligations under the Settlement Agreement or the
PRASA Notes shall to the extent of such payments (but without duplication)
reduce the amount otherwise payable by GDB hereunder.
13. Consent to Jurisdiction. GDB and the Guaranteed Party hereby
agree that any suit, action, or proceeding arising out of or relating to this
Payment Guaranty shall be brought exclusively and solely in the United States
District Court for the District of Puerto Rico, and GDB and the Guaranteed
Party hereby agree to submit to the jurisdiction and venue of such court in
any such suit, action, or proceeding.
14. Assignment. M&E may enforce, transfer, negotiate and assign
the PRASA Obligations, in whole or in part, and each assignee or transferee
may enforce this Payment Guarantee with respect to the PRASA Obligations so
assigned or transferred.
15. Amendments. No amendment or waiver or any provision of this
Payment Guarantee, nor consent to any departure by GDB therefrom, shall be
effective unless it is in writing and signed by M&E and GDB, and such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
16. Captions. The headings and captions of this Payment Guarantee
are for convenience only and shall not affect the interpretation or
construction of this Payment Guarantee.
17. Invalidity. If any term, covenant or condition of this Payment
Guarantee shall to any extent be invalid or unenforceable, the remainder of
this Payment Guarantee shall not be affected thereby.
18. Governing Law. This Payment Guaranty shall be governed,
construed, and enforced in every respect by the laws of the Commonwealth of
Puerto Rico.
IN WITNESS WHEREOF, the parties have signed, sealed, and acknowledged
this Payment Guaranty as of the date shown above.
WITNESS: METCALF & EDDY, INC.
_____________________________ By:_________________________________
Date:_______________________________
WITNESS: GOVERNMENT DEVELOPMENT BANK
FOR PUERTO RICO
_____________________________ By:_________________________________
Date:_______________________________
NEGOTIABLE PROMISSORY NOTE
Six Million, Five Hundred Thousand San Juan, Puerto Rico
Dollars ($6,500,000) May 26, 1995
FOR VALUE RECEIVED, the undersigned PUERTO RICO AQUEDUCT AND SEWER
AUTHORITY, an instrumentality of the Commonwealth of Puerto Rico (hereinafter
called the "Obligor"), hereby promises to pay to the order of METCALF & EDDY,
INC. or any assignee (hereinafter called the "Holder") the principal sum of
six million, five hundred thousand dollars ($6,500,000), in full on May 26,
1998 (the "Maturity Date").
The Obligor also promises to pay interest on the unpaid principal
amount outstanding from the date hereof until such principal amount is paid in
full at the rate of 5.50% per annum calculated on the basis of a 365/366 day
year and the actual number of days elapsed. Interest will be paid in arrears
semiannually on June 1 and December 1 of each year, commencing December 1,
1995, until such principal amount is paid in full, with interest accrued to
May 26, 1998, payable at the Maturity Date.
The principal hereof and the interest hereon are payable in lawful
money of the United States of America and in immediately available funds to a
bank account designated in writing by the Holder. Whenever any payment
hereunder shall be stated to be due on a day which is not a "Business Day,"
such payment shall be made on the next succeeding "Business Day." "Business
Day" shall mean any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the United States and/or the
Commonwealth of Puerto Rico. All payments under this Note shall be made
without any set-off or counterclaim and without any restriction or condition
(including laws, regulations, orders, decrees or interpretations of or by the
Government of Puerto Rico) and shall be made free and clear of and without
deduction or withholding for, or on account of, any taxes imposed by the
Government of Puerto Rico or its political subdivisions.
The occurrence of any one or more of the following events (regardless
of the reason therefor) shall constitute an "Event of Default" hereunder.
a) The Obligor shall fail to make, when due, any payment of
principal or interest under this Note;
b) The Obligor shall fail to make, when due the payment
provided for the Paragraph 1(a) of a certain Settlement Agreement dated May
26, 1995, between the Obligor and Metcalf & Eddy, Inc.
c) A case or proceeding shall have been commenced against
the Obligor in a court having competent jurisdiction seeking a decree or order
in respect of the Obligor (i) under applicable State, Commonwealth of Puerto
Rico or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of the Obligor, or of any substantial part of its properties, or (iii)
ordering the winding-up or liquidation of the affairs of the Obligor, and any
such case or proceeding shall remain undismissed or unstayed for forty-five
(45) consecutive days or such court shall enter a decree or order granting the
relief sought in such case or proceeding.
d) The Obligor shall (i) file a petition seeking relief
under Title 11 of the U.S. Bankruptcy Code, as now constituted or hereafter
amended, or any other applicable State, Commonwealth of Puerto Rico or foreign
bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Obligor, or of
any substantial part of its properties, (iii) fail generally to pay its debts
as such debts become due, or (iv) take any action in furtherance of any such
action.
If any Event of Default shall have occurred and be continuing for a
period of ten (10) Business Days after written notice of such Event of Default
shall have been given to the Obligor by the Holder, such Holder shall notify
Government Development Bank for Puerto Rico ("GDB"), which shall pay all
amounts due under this Note within ten (10) Business Days, without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by the Obligor. If the Obligor cures the Event of Default
within ten (10) Business Days after its receipt of the aforementioned written
notice, the Holder shall not have the right under this Note to notify GDB that
the amounts owed to the Holder under this Note are forthwith This Note:
a) may be modified only by a writing duly executed by the
Holder hereof and the Obligor;
b) constitutes an obligation of an instrumentality of the
Commonwealth of Puerto Rico pursuant to Section 1022(b)(4) of the Puerto Rico
Internal Revenue Code of 1994, as amended;
c) shall be interpreted, governed, construed and enforced in
accordance with the laws of the Commonwealth of Puerto Rico.
Prompt payment of principal and interest on this Note is
guaranteed absolutely by GDB pursuant to the provisions of a certain Payment
Guarantee dated May 26, 1995.
All notices, demands and other communications to the Obligor or
GDB, relating to this Note shall be in writing and shall be hand delivered, or
mailed by certified or registered mail, return receipt requested, as follows:
Puerto Rico Aqueduct and Sewer Authority
604 Barbosa Avenue
Hato Rey, Puerto Rico 00918
Attention: Executive Director
Government Development Bank for Puerto Rico
Minillas Government Center
De Diego Avenue
Stop 22
San Juan, Puerto Rico 00940
Attention: President
or at such other address that the Obligor or GDB shall furnish to the Holder
in writing.
At the Obligor's option, this Note may be voluntarily prepaid in
whole or in part at any time without penalty but together with accrued
interest on any amount so prepaid. This Note is intended to be a negotiable
instrument under the laws of the Commonwealth of Puerto Rico, freely
transferable by endorsement and delivery. Any subsequent holder of this Note
acquiring the same by endorsement and delivery shall be entitled to all of the
rights and benefits granted herein and under the laws of the Commonwealth of
Puerto Rico.
The Holder of this Note understands and agrees that the obligation of
the Obligor hereunder to pay principal of and interest on this Note is junior
and subordinate in all respects to the Obligor's obligations under that certain
Trust Agreement, dated as of October 1, 1988, as amended, by and between the
Obligor and The Chase Manhattan Bank (National Association), trustee.
The Holder of this Note shall notify the Obligor of any assignments
hereof and shall give the Obligor the name and address of the assignee to whom
all future payments hereunder shall be made.
In San Juan, Puerto Rico, this 26th day of May, 1995.
PUERTO RICO AQUEDUCT AND
SEWER AUTHORITY
By:____________________________________
Name___________________________________
Title__________________________________