NCD980602163_20030616_Warren County PCB Landfill_SERB C_Bankruptcy correspondence, 2002 - 2003-OCR

I \ ,~-'\ /__\
SliaWThe Shaw Group lnc.n,
June 16, 2003
North Carolina Department of Environment and Natural Resources
Division of Waste Management
1646 Mail Service Center
Raleigh, NC 27699-1646
Attn: Ms. Patricia Backus, P .E.
Project Manager
[phone], ext 308 phone
[phone] fax
Re: Warren County PCB Landfill Detoxification Contract
NCSCO ID #010440101 0A, Shaw Project #827062
Bond rider
Dear Ms. Backus,
Shaw Environmental & Infrastructure, Inc.
200 Horizon Center Blvd.
Trenton, NJ 08691-1904
Direct Dial: 609-588-6373
FAX: [phone]
Enclosed is the signed original of the Change Rider from the bonding company corresponding to NCDENR
Change Order #6. As we discussed this morning, although there is a spot for DENR to sign as accepted, I
have confirmed with our agent that this is not required; the rider is effective as is.
Also enclosed is your copy of the Geo Testing Express report that you loaned me in May.
If you have any further questions on this matter please contact me at [phone] or at
[e-mail].
Sincerely,
Shaw Environmental & Infrastructure, Inc.
-'2 £?~
Gary :v,;. Duke, P .E.
Project Manager
Duke file c:\mydocs\nclf\c01TesDENR\bond rider 061603.doc
To be attached to and form a part of Performance/Payment Bond Number28-95-09
day of AUGUST 2002 , issued by The Insurance Company of the State of Pennsylvania
behalf of SHAW ENVIRONMENTAL & INFRASTRUCTURE, INC.
in favor of NORTH CAROLINA DEPT. OF ENVIRONMENT AND NATURAL RESOURCES,
DNISION OF WASTE MANAGEMENT
The Principal and the Surety hereby consent to changing the attached bond as follows:
PER CHANGE ORDER #6, INCREASE CONTRACT AMOUNT BY $4,469,300.00
This change is effective the _?_th ___ day of OCTOBER , 2002
'
CHANGE
RIDER
dated the 20th
(the "Surety") on
(the "Principal")
(the "Obligee").
The attached bond shall be subject to all of its terms, conditions and limitations except as herein modified.
DATED as of this _5_th ______ day of _J_U_N_E _________ , 2003
WITNESS/ATTEST:
...
ACCEPTED:
NORTH CAROLINA DEPT. OF ENVIRONMENT AND
· NATURAL RESOURCES,
(Obligee)
Name:~'-'0--()_, LJ O,;v.v~•
Title: DU~ECTOR
DV OF PURCHME AND SERVICES
Date: ____ G"'--· -----=z=o~---....:0....,3 _________ _
SHAW ENVIRONMENTAL & INFRASTRUCTURE, INC. (Seal)
(Principal)
Byh-t/~L 7
Name: Scott P.LaGrang
Title: Executive Vice-President 8i CFO
The Insurance Company of the State of Pennsylvania (Seal)
(Surety)
Attorney-In-Fact
#The .(nsurai1ce Company of the State of Pennsylvania
l'rincir;tl Bond Otfo:c: 70 Pinc Street, New York, N.Y. 10270
Ki\OW ALL MEN BY THESE PRESENTS:
POvVER OF ATT0Rl'.1'EY
No.47-B-40293
That The Insurance Company of the State of Pennsylvania; a Pennsylvania corporation, does hereby appoint
---Troy Wagener, Jim Eley Brashier, Catherine Fountain, Belinda Tubbs, John B. Sneed, Charles R. Frost, Jr.
L. Wayne Tisdale, J. Nick Myers: of Biloxi, Mississippi---
its true and lawful Attorney(s)-in-Fact, with full authority to execute _on its behalf bonds, undertakings, recognizances and other
contracts of indemnity and writings obligatory in the nature thereof, issued in the course of its business, and to bind the company
thereby.
IN WITh"ESS WHEREOF, The Insurance Company of the State of Pennsylvania has exec~ted these presents
STATE OF ~"E\V YORK }
COUNTY OF ~EW_ YORK}ss.
On this 2nd day of July, 1999 before me came the above
named officer of The Insurance ~Company of the State of
Pennsylvania, to me personally known to be the individual and
officer described herein, and acknowledged that he executed
the foregoing instrument and affixed the seal of said
corporation thereto by authority of h ;s office.
CERTIFICATE
this 2nd day of July, 1999.
Excerpts of Reso lution adopted by th e Board of Dir::c tors of The lnsura:ice Comp"r.y of the State of Penn:::::lvania, on May 18, 1976:
"RESOLVED, fr.J: the Chairm::rn o:· the .Board, th..: President, or Jny Vice Pi-:sident be, and hereby is, authorized to appoint Attorneys-in-Fact to
represent and act for and on behalf of the Company to execute bonds, undertakings, recognizances and other contracts of indemnity and writings
obligatory in the nature thereof, and_ to attach thereto the corporate seal of th e Company, in the transaction of its surety business;
"RESO L YEO, that the signatures and attestations of such officers and the seal of the Company may be affixed to any such P9wer of Attorney or to any
certifieatt' relating thereto by facsimile, and any such· Power of Atiorn~y or certificate bearing such facsimile ·;ignatures or facsimile seal shall be valid
and binding upon the Company when so affixed with respect to any bond, und ertaking, recognizance or othe, ccntra~t of ir.!~mnity or wri ting
obligatory in the nature thereof;
"RF:SOLVED, that any such Attorney-in-Fact delivering a secretarial certification that the foregoing resolutions still be in effect may insert in such
cc:rtitication the: date thereof, said date:: to be not later than the date of delivery thereof by such Attorney-in-Fact."
I. Elizabeth 1\1. Tuck, Secretary of The Insurance Company of the State of Pennsylvania, do hereby certify that the foregoing excerpts of Resolut ion
adortc<l by the Board of Director6 of this corporation, and the Power of Attorney issued pursuant thereto, are t~ue and correct, and that both the
Resolution and the Power of Attorney an; in Lill force: and effect.
IN \VITNESS WHEREOF, J have hereunto set my hand and affixed the facsimile seal of the corporation
this 5th clay of ,IJJoe, 2003
'fu,/f~
2323X ( 4/99) J,
POLICYHOLDER DISCLOSURE STATEMENT
UNDER
TERRORISM RISK INSURANCE ACT OF 2002
In accordance with the Terrorism Risk Insurance Act of 2002 (the "Act"), we are
providing this disclosure notice for bonds for which a member company of the American
International Companies is the surety. "Terrorism" is defined in the Act as an act certified by
the Secretary of the Treasury (i) to be an act of terrorism, (ii) to be a vfolent act or an act that
is dangerous to (A) human life; (B) property or (C) infrastructure, (iii) to have resulted in
damage within the United States, or outside of the United States in case of an air carrier or
vessel or the premises of a U.S. mission and (iv) to have been committed by an individual or
individuals acting on behalf of any foreign person or foreign interest, as part of an effort to
coerce the civilian population of the United States or to influence the policy or affect the
conduct of the United States Government by coercion. You should read the Act for a
complete description of its coverage. The Secretary's decision to certify or not to certify an
event as an Act of Terrorism and thus covered by this law is final and not subject to review.
There is a $100 billion dollar annual cap on all losses resulting from Acts of Terrorism above
which no coverage will be provided under this policy and under the Act unless Congress
makes some other determination.
For your information, coverage provided by this policy for losses caused by an Act of
Terrorism may be partially reimbursed by the United States under a formula established by
the Act. Under this formula the United States pays 90% of terrorism losses covered by this
law exceeding a statutorily established deductible that must be met by the insurer, and which
deductible is based on a percentage of the insurer's direct earned premiums for the year
preceeding the Act of Terrorism.
Acts of Terrorism are not excluded from any surety bonds issued on your behalf and
your charge for Terrorism coverage is 0% of what would have been your final premium.
INFORCEM'ITH EXCLUSION
,,. .., Shaw Environmental & Infrastructure, Inc.
200 Horizon Center Boulevard
Trenton, NJ 08691-1904
609.584.8900
Fax [phone] ~ Stiaw The Shaw Group Inc."·
VIA FAX MAY 23 TO [phone], HARD COPY TO FOLLOW VIA MAIL
May 23, 2002
North Carolina Department of Environment and Natural Resources
Division of Purchase and Services
1605 Mail Service Center
Raleigh, NC 27699-1605
Attn: Mr. Laird A Davison, Director
Division of Purchase and Services
[phone] phone
[phone] fax
Re: Warren County PCB Landfill Detoxification Contract
NCSCO ID #0104401010A, Shaw Project #827062
Dear Mr. Davison,
This is in response to your letter of May 7, 2002 to Mr. Gary Gardner asking for clarification of the
position of Shaw Environmental, Inc. on assuming this contract.
Gary Gardner is no longer with the company, and Mr. Thomas Horst has assumed his responsibilities as the
executive sponsor for this project in his capacity as Executive Vice President of Shaw Environmental, Inc.
Shaw Environmental, Inc. is the Shaw Group (Shaw) subsidiary that has actually assumed the contract
under the bankruptcy proceedings of The IT Group (IT). I will continue in my capacity as Project Manager
and will continue to serve as the primary point of contact for Shaw with regard to this contract.
From a practical standpoint, Shaw Environmental, Inc. has already assumed the responsibility to fulfill the
contract and fully intends to complete it in accordance with the terms of the contract. To that end Shaw
personnel have mobilized to the site to prepare it for the delivery of the thermal treatment equipment and a
significant amount of heavy equipment has already been delivered, including portions of the thermal plant.
Our key subcontractor, Midwest Soil Remediation, Inc. (Midwest) has been paid all amounts currently due
and has resumed work on the project.
With regard to the issues that led to a Notice of Default, as you are aware, on January 16, 2002, IT and
certain of its subsidiaries, including IT Corporation, filed for bankruptcy under Chapter 11 proceedings.
Simultaneous with the bankruptcy filing, IT announced the signing of a letter of intent to sell substantially
all of its assets to The Shaw Group. On January 25, 2002 the two firms signed a definitive agreement for
this sale of assets, subject to approval by the court. The final court order approving the sale was signed on
April 25, 2002. The sale closing procedures were completed on May 3, 2000 and Shaw and its designated
subsidiaries, including Shaw Environmental, Inc., immediately assumed control of virtually all of the assets
ofIT, specifically including the assumption of this contract and all of the associated subcontracts and
purchase orders. With this close the default condition of"committing any act of bankruptcy" has
effectively been cured.
The other default condition concerned lack of payments to vendors for which IT had already been paid by
the state. As of May 10, 2002 only one week after the close of the sale to Shaw, checks had been cut for all
except one vendor invoice that fall into this category. The sole exception is a check that requires special
processing, as it is a two party check to our subcontractor Yancey Electric Services, Inc. and one of his
suppliers, Consolidated Electrical Distributors; this arrangement was made at Yancey's request. We expect
that check to be cut by the end of May. In addition to the payments referenced above, the May 9-10, 2002
check run also included all payments to vendors which were due under our standard net 60 payment terms,
despite the fact that we have not yet received payment from the state for any work performed in 2002.
One other subcontractor, Kearneco Grading, still has to submit an invoice for an additional undisputed
amount of $20,013.77 after they use their most recent payment to reimburse their suppliers and obtain
releases of lien from them. We found it necessary to withhold this amount to protect both our interests and
those of the state after Kearneco failed to provide the payment bond required by their subcontract and we
became aware that several of their suppliers have not been paid for work for which IT had paid Keameco.
Kearneco also has disputed charges of approximately $45,000, which we have been attempting to negotiate
with them for several months; we are presently awaiting a response from their attorney to a settlement offer
we made on April 24, 2002. To our knowledge, Keameco is the only vendor who has either uninvoiced or
disputed amounts related to work for which the state has already paid.
With regard to your request to provide evidence that Shaw will maintain the bonding and insurance
requirements, Shaw provided a new certificate of insurance on May 20, 2002.
For bonds, Shaw's intent had been to continue the existing bonds at least through a transition period, and
this approach has proved successful on the majority of the projects assumed from IT. However, Kemper
Insurance Company, as the surety for this and several other of the former IT contracts, has declined to
adopt this approach, as reflected in their letter dated May 13, 2002 to your Project Manager, Ms. Patricia
Backus. That letter states, in part," ...... Kemper's position that IT has no right to assume and assign such
bonds to Shaw ..... We do not believe that IT/Shaw disputes Kemper's position ...... Accordingly,
Kemper' s performance and payment bonds issued in connection with this project are no longer in force and
effect for any action or inaction occurring after April 25, 2002. Please note that at this time Kemper is not
in a position to determine whether it would agree if requested by Shaw to continue on the bonds on behalf
of Shaw, as principal."
I became aware ofKemper's position only after your Ms. Backus's receipt of the letter on May 20, 2002.
At that time I requested that Shaw's legal and risk management departments review what obligations, if
any, Kemper and Shaw have to each other if, as Kemper asserts, IT had no right to assume and assign such
bonds to Shaw. The primary issues are continuation and/or replacement of the bonds and the responsibility
for cure payments to Kemper to reimburse them for payments to subcontractors that they made on behalf of
IT under the payment bond prior to April 25, 2002.
Pending completion of those reviews and subsequent negotiations with Kemper and/or other bonding
companies already utilized by Shaw I am unable to provide a definitive answer as to exactly how these
bonding issues will be resolved. However, I can assure you that it is Shaw's intent to either persuade
Kemper to reinstate the bonds or to obtain replacement bonds, whether from Kemper or from another
bonding firm. In the event that replacement bonds must be obtained I would appreciate guidance from the
state as to the required amount. Of the current total contract value of$6,658,539.00, the amount of
$4,435,323.37 has been invoiced and approved for payment as of Application for Payment #14. Therefore,
it would seem that only the remaining work of$2,223,215.63 should require bonding, and we will proceed
on that basis unless advised to the contrary.
Shaw also intends to fulfill whatever legal obligations we may have to Kemper with regard to the cure
. payments to them. I am in almost daily contact with your Ms. Backus and will keep her advised of
significant developments in these areas as they arise.
A final item not mentioned in your letter is the status of state business licenses required to perform our
work under this contract. Under the terms of the sale ofIT's assets, Shaw may utilize existing engineering
and general contractor's licenses until such time as licenses can be obtained in the name of Shaw
Environmental, Inc., which we expect to occur in the next 60 days based upon the time required by the
licensing agencies.
If the state has any procedures for effecting an administrative change of name of the contractor I ask that
those be provided to me. Please note that until the process of obtaining the state business licenses
referenced above in the name of Shaw is completed we will not be in a position to execute any documents
changing the name of the contractor.
If you have any further questions or concerns on this matter please contact me at [phone] or at
[e-mail].
Sincerely,
Sh~w E~l~ _;;?~
Gary W. Duke, P.E.
Project Manager
cc via e-mail, with follow-up by fax or mail only if requested by recipient:
Mike Kelly, NCDENR
Patricia Backus, NCDENR
Stephen Beatty, Kemper Insurance (surety)
Jim Cloonan, Earth Tech Inc.
Tom Horst, Shaw Environmental
Dennis Galligan, Shaw Environmental
Ben Kosek, Shaw Environmental
John Wilpert, Shaw Environmental
Mark Harland, Shaw Environmental
Anne Alger, Shaw Environmental
Reed Waters, Shaw Environmental
Shaw project file 827062
Duke file c:\mydocs\nclf\5-23-02 response to NCDENR Shawl.doc
AVA
NCDENR
North Carolina Department of Environment and Natural Resources
Division of Purchase and Services
Michael F. Easley, Governor Laird A. Davison, Director
May 7, 2002
VIA FAX AND FEDERAL EXPRESS
Mr. Gary L. Gardner, President
Commercial Engineering and Construction Group
Shaw Environmental and Infrastructure
200 Horizon Center Blvd.
Trenton, NJ 08691-1904
RE: Warren county PCB Landfill Detoxification Contract
NCSCO ID #0104401010A, IT Corp. Project #827062
Dear Mr.Gardner:
William G. Ross Jr., Secretary
On May 3, 2002, . The Shaw Group purchased The IT Group and stated that The IT Group will become part
of Shaw Environmental and Infrastructure. With this letter I am requesting that you provide the State of
North Carolina a written response within fifteen (15) days clarifying your company's position on assuming
the referenced contract and your plan to complete the project according to the terms and provisions of the
contract.
In the response I would suggest that you address the issues pursuant to the contract and to Article 29 of the
General Conditions of the contract, that led to a Notice of Default. Previous correspondences from the
State concerning this matter are enclosed. Also please provide evidence that Shaw will maintain the
bonding and insurance requirements of the contract.
Sincerely,
Laird A Davison, Director
Division of Purchase and Services
Enclosures (3)
cc: Zack Abegunrin, State Construction Office
Mike Kelly, DENR
Gary Duke, Shaw Environment and Infrastructure
-?ID Cloonan, Earth Tech, Inc.
A>atricia Bad..'lls, DENR-DWM
Stephen Beatty, Kemper Insurance
1605 Mail Service Center, Raleigh, North Carolina 27699-1605
Phone: [phone] \ FAX: [phone] \ Internet: www.admin,enr.state.nc.us/purchase/
An Equal Opportunity\ Affirmative Action Employer -50% Recycled\ 10% Post Consumer Paper
,.
North Carolina
Depanment of Environment and Natural Resources
Division of Purchase and Services
Michael F. Easley, Governor
William G. Ross Jr., Secretary
Laird A Davison, Director
January 24, 2002
CERTIFIED MAIL
RETURN. RECEIPT REQUESTED
Mr. Gary L. Gardner, President
Commercial Engineering and Construction Group
The IT Group, Inc.
200 Horizon Center Blvd
Trenton, NJ 08691-1904
RE: Warren County PCB Landfill Detoxification Contract
NCSCO ID #01044010IOA, IT Corp Project #827062
Dear Mr . Gardner:
On January 16 the IT Group filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in Wilmington, Delaware, case no. 02-10118. This is a condition listed in
Article 29 of the General Conditions of our contract which could result in declaring the contract
in default.
Pursuant to Article 29, I am requesting that the IT Group provide a written response within fifteen
( 15) days clarifying your company's position on this contract. Please specify how you will
complete the detoxification of the Warren County PCB Landfill according to the terms and
provisions of the contract including payment to creditors whose work has been invoiced to the
State of North Caro1ina.
Failure to respond within fifteen (15) days or failure to provide an acceptable response to correct
this condition will result in the State declaring the contract in default and notification of surety to
assume the work.
Sincerely,
Laird A. Davison, Director
Division of Purchase and Services ·
cc: Stephen Beatty, Kemper Insurance
State Construction Office
Mike Kelly, DENR
Gary Duke, The IT Group, Inc.
Jim Cloonan, Earth Tech Inc.
Patricia Backus, DENR-DWM
1605 Mail Service Center, Raleigh, North Carolina 27699-1605
Phone: [phone] \ FAX: [phone] \ Internet: www.enr.state.nc.us
AN EQUAL OPPORTUNITY\ AFFIRMATIVE ACTION EMPLOYER -50% RECYCLED I I 0% POST CONSUMER PAPER
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04/03/2002 15:44 3123500547 LAV.I IJFF ICES PAGE 01
11 EAST A.DAMS
SUITE 1100
CHICAGO, ILLfNOIS 60603
ARNOLD M. FLANK, LIMITED [phone]
FACSIMILE COVER SHEET
CONFIDENTIALITY NOTE
FAX [phone]
E-MAIL AMFGOBLUE @AOL.COM
TH!i. DOCUME1''1'S ACCOMl'ANlt'ING THIS 'fELECOPY TRANSMISSION CONTAIN INFORMATION FROM Tl-IE LAW FIRM OF ARNOW M. FLANK, l.!Mrt6D WHlCH IS
CONFlDEN'rlAL OR PRTV!Lt;Gf.D. THE INFORMATION TS INTENDED TO BE FOR TIJE: USC: OF THE r1>i'oivi6cJAL61fri°NTifY NMiP.b ON TEIS TRANSMJSS!ON' SHEET. 11' YOU
ARE NOT THE lNTENDED RECfPIENT, BE AWAl'I.£ THAT /I.NY D!SCLOSURE, COPYING, 1)[$'!'R1BUTION OR USE OF HIE CONTENTS OF THIS TELECOP!l:.D INFORMATfON !S
P,~OHIBITED. IF YOU HAVE R~lVED THIS TELSCOPY IN ERROR, !'LEASe NOTJFY US SY T!:.LE!'HONE IMMf.DlATEL Y $0 THAT WE CAN ARRANGF. FOR THE RETRIEVAL
01' 'fHE ORJGlNAL DOCUMENTS AT NO COST TO YOU.
PROM FAX NO. [phone]
PAGE 1 01' B PAGES
DATE: April 3 , 2001
FROM: ARNOLD M. FLANK, Esq,
TO FAX NO. [phone]
TELE.PHONE No. [phone]. Ext 308
TIME:
1, ' ,!~
To: Patricia Backus
RE: WARftEN COUNTY LANDFILL PROJECT
NCSCO ID# 0l04401010A
AT: North Carolina Departmtnt-Environ.ment/ J\'amr~l
:Resource
lT C01U' PROJECT# 827062
PLEASE DELIVER THE FOLLO\.VING INFORlv1ATION:
As counsel to Midwest Soil Remediation, Inc. ("MWSR") one of the subcontractors of lT Group in connection
with the above-referenced Project, and in order to expedite payment of the amounts which are, and will become,
due to MWSR as a result of the post-petition work performed and to be performed by MWSR at this Project,
I have prepared, and I am sending with this FAX for your review, a draft of a Stipulation which I would like
to have submitted to Judge Mar.y F. Walrath on April 10, 2002 at the hearing presently scheduled for that date
in the IT GTOup bankruptcy proceeding in Wilmington Delaware, Case No. 02-10118 (MFW). I would
appreciate it if you, and counsel to NCDENR, would review the accompanying draft Stipulation, and then call
me to let me know if NCDENR will sign the Stipulation. If not, I would appreciate being abk to discuss,
directly with your counsel, any concerns that NCDENR may have,
cc/FAX: Richard HoweJJ-CFO/MWSR [phone] -or -[phone]
Laird A. Davidson-Director:Division of Purcha5ing and Services [phone]
Ii.\RD COJi'Y TO FOLLOW BY MAIL 0 URGENT X
No HARD Copy 'tO FOLLOW X FOR YOUR INPORMATION X
PLEASE REPLY X FOR SIGNATURE D
PLEASE NOTIFY SAKlE SCOTT AT [phone] IF NOT CORRECTLY TRANSMITTED.
04/03/2002 15:44 3123500547 LAW OFFICES PAGE 02
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
THE IT GROUP, INC., et. al.,
Debtors.
)
)
)
)
)
)
)
)
Chapter 11
Case No. 02-10118(tv1FW)
(Jointly Administered)
Related to Docket No. ----
· .. ·· SJ:':tPULAl'ED.ORDERANO. AGREEMENT REGARDING PAYMENT -11••-···--•-.......... , .. ,, •• ,,, ........... A'f''-••. ...... ., ••• ,~ ••• ,,._.., ,.. j _, ...... .
AND USE OF FUNDS AMONG DEBTOR, 1\flDWEST SOIL REMEDIATION INC.
AND AMERICAN MOTORISTS INSURANCE COMPANY
This Stipulated Order and Agreement Regarding Payment and Use of Funds (this
"Stipulation") is entered into by and between the The IT Group, Inc., et al., the debtors and
debtors-in-possession in these jointly-administered Chapter 11 cases (collectively, the
'
1Debtors11
), Midwest Soil Remediation, Inc. C'MWSR1
') and American Motorists Insurance
Company ("Kemper'').
Recitals
1. The Debtors filed voluntaiy petitions under Chapter 11 of the United States
Bankruptcy Code, 11 U.S.C. §§ 101 et seq., in the United States Bankruptcy Court for the
District of Delaware (the "Court") on January 16, 2002 (the "Petition Date").
2. Prior to the Petition Date, one of the Debtors, IT Corporation (hereinafter referred to
as 11IT") and MWSR were parties to one contract to perform certain tasks in connection with the
Warren County Landfill Project in Warren County, North Carolina (the "Site). This contract is
commonly referred to as the Warren County Landfill Project contract (hereinafter, the "Contract)
IT had been hired by the North Carolina Department of Natural Resources ("NCDENR") to clean
C:12002Liti~ation\ITStip11latcdOrdcr l April 3, 2002
(11:ISAM)
r
04/03/2002 15:44 3123600547 LAW OFFICES PAGE 03
up the Site, and MWSR subcontracted with IT to handle certain portions of this clean-up.
3. Among IT's undertakings pursuant to the Contract was the requirement that IT obtain
and maintain in force performance and payment bonds guaranteeing the perfo.rmance of IT and
the payment by IT of sums due to the subcontractors, suppliers, vendors and the like
(collectively, 11SubcontractorsH) engaged by IT for its work on the Site. Accordingly, IT obtained
from Kemper certain bonds (the "Kemper Bonds") in conn_ection with its work on the Site.1
. . . . .. 4 .. ..VarioUS,,.G.QJllIJll!Uic.ation..§ .fr.~m. Kemper informed IT that claims had been made to
'· •· ...r •, l•~•· .. •• ....... ~,,.t.,.,-ut,11•,t,-1-.·• _..,_......,,.""_, ..... ,.,u •, ., .• ··•·-••-f ,-,;,i,,.,t,J ,.,.
Kemper by certain Subcontractors. Kemper may also have directed NCDENR not to release any
further funds to IT "without the advanced written consent of Kemper". Currently, Kemper 111.ay
have received claims in excess of $500,000 from Subcontractors for work on the Site. Son.1.e or
all of these claims may have been paid by Kemper.
S. At the time NCDENR received communications from Kemper, no funds \Vere due to
IT from NCDENR. Since the Petition Date, IT has, or may have, submitted Invoices to
NCDENR for work performed both before and after the Petition Date.
6. On or about January 16, 2002, the Debtors filed a Motion fo r Interim and Final Order,
Under 11 U.S.C. §§ 105(a) and 362, Prohibiting Certain Project Owners from Withholding and
Offestting Payments Due to Debtors or Paying Subcontractors Directly on Account of Prepetition
Claims (the "Project Owners Motion''). On Febmary 28, 2002, MWSR timely objected (the
11MWSR Objection°) to the relief sought in the Project Owners Motion. This Stipulation, inter
alia, resolves the MWSR Objection to the Project Owners Motion on an interinl basis as to
1 IT also obtained othcT bonds from other sureties.
C'.\2002Litig;ilicnlITSti-p11laiedOrdcr 2 April 3, 2002
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MWSR. The Debtors extended the time within which Kemper rnust object or othenvise respond
to the Project Owners Motion due to negotiations between Kemper and the Debtors vvith respect
to the Project Owners Motion.
7. NCDENR has recently requested that IT, together with all Subcontractors (including
:MWSR) return to the Site and continue to perform services in order to complete remediation of
the Site, pursuant to the Contract. The Subcontractors are reluctant to return to the Site without
of whoever becomes responsible for completing the contract between IT and NCDENR.
8. The Debtors, MWSR and Kemper desire to avoid and resolve any disputes between
them regarding the payment of the lnvoices submitted by or on behalf ofIT to NCDENR
including, but not limited to, ownership of the funds to be paid and the use and application of
those funds. The Debtors, MWSR and Kemper have a&c,,reed to the process set forth in this
Agreement to avoid and resolve any such disputes.
~reement
NOW, THEREFORE. s1.lbject only to the approval of this Court, the Debtors, !v1WSR and
Kemper agree as follows:
Payment by NCDENR
A. On or before the close of the third business day following execution of this
Stipulation, NCDENR shall make payments to IT in accordance with the Contract on account of
any Invoices now ontstanding. Upon the receipt of such payment, IT shall hold each payment in
separate, segregated interest-bearing special purpose bank accounts (the ''Contract Special
Purpose Account") and use those payments only in the manner described below. All payments
C;\2002Litigatioo\1TS~pulatcd0rdcr 3 Apnl 3. 2002
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~,.J~if:•r~t i I i1• made by NCDENR to IT pursuant to this Stipulation shall be held by IT in trust for the express
purposes set fortl1 in this Stipulation.
Payment and Certification by Debtors
B. On or before the close of the third business day following IT's receipt of each
payment from NCDENR) IT shall (a) use so much of the payment as is necessary to pem1it IT to
make payment to) and to satisfy in fnll, all outstanding claims of Subcontractors underlying any
outstanding Jnyoices.and !1;>),9ertifyjr;i_v~1riting to Kemper and to NCDENR that such payments
. !!••· .. •-~--~ "*• ...................... --~---.. • . •.....•• •· ·-~-1 '' •
have been made and to whom. Notwithstanding anythjng to the contrary herein, and pending
further order of the Court, IT shall use the funds received on each Invoice only to pay claims of
Subcontractors who provided goods or services on the Contract to which that Invoice relates;
provided, however, that in the event Kemp er has paid any claims submitted to it by any
Subcontractor, and, as a result of any such payment, Kemper became an assignee of any such
Subcontractor, IT shall pay to Kemper the amount which IT would have had to pay a
Subcontractor had that Subcontractor not already been paid. IT may pay any such claims
underlying an Invoice, whether those claims are for pre-petition or pqst-petition goods and
services.
C. Any fonds paid by NCDENR to IT pursuant to this Stipulation that are in excess of
the amounts required to make the payments to Subcontractors authorized in the preceding
paragraph may be used by IT next to reimburse IT fo r any documented payments IT has
previously made during these Chapter 11 cases to critical vendors in cormection vvith the
contract, and thereafter to cover IT' s directly related labor, costs and overhead in an amount not
to exceed$~-----· Within seven (7) days after IT disburses any funds from the Contract
Special Purpose Accounts, IT shall provide each of NCDENR and Kemper with a written
C;\2002Litigation\lTSlipulan:dOn;l•r 4 April 3. 2002
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04/03/2002 15:44 3123500547 LAVJ DFFICES F'AGE 05
certification of to whom each payment was made as well as the amount of each such payn:ient.
Should there be any fonds remaining in the Contract Special Purpose Accounts after all payments
authorized in this Stipulation have been paid, then IT shall continue to hold such funds in the
Contract Special Purpose Accounts, and such funds shall not be used or dissipated pending either
further order of this Court or written consent of the parties to this Stipulation.
D. Execution oftlris Stipulation by Kemper shall constitute the "advance written
con_sent" c~Hed_for by Ke~per in "D.:Y ~o.Il11!lunications previously made by Kemper to either
--... -'ii""',,, ......... , _,.,, .... -~··•··' -'•~~~ ,. ·• ' • ,,~,·• ·J--1 I •
NCDENR or to IT. NCDENR may make the payments described herein to IT upon such
execution, and IT agrees to use aud hold the received funds only in accordan.ce with this
Stipulation. None of the parties may use the agreements set forfu in this Stipulation as precedent
for any other action that they may wish to be taken in the future.
Reservation ofRights.
E. Nothing in this Stipulation shall constitute a waiver of the rights or remedies of any
party hereto, all of which are expressly reserved.
Miscellaneous.
F. No term or provision of this Stipulation may be varied, changed, modified, w aived,
discharged or terminated orally, but only by an instnnnent in writing signed by the party against
whom the enforcement of the variation, change, modification. waiver, discharge or termination is
sought.
G. This Stipulation may be signed in counte.lparts, each of which shall be deemed an
original, but all of which taken together, shall constitute the same instrument. A facsimile
signature of this Stipulation shall be de'-111ed an original for all purposes.
C;\l002Litigatiou\ITStipulill<!dOrder 5 April 3, 2002
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! •
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H. This Stipulation may be signed by the duly-authorized attorney of each party hereto
and shall become effective once signed by one attorney for each of the parties hereto.
I. Nothing contained herein shall be construed as an admission, of liability or othervvise,
on the part of any of the parties to this Stipulation, and the parties agree that this Stipulation shall
not be used in any matter other than in connection with the enforcement of its tenns or seeking
its approval by the Court.
J .. Other than .as explicitly provided in this Stipula.ti9J1, ~hl~ $tipula,ti_on shall not affect the , , , · · ··· ••··· · " • . • • •.• "'◄ • . '~~ • '
rights, duties or liabilities of the parties hereto or of any third parties. Nothing in this Stipulation
sh.all be deemed to create any rights in third parties to enforce the terms of or compliance with
this Stipnlation.
K. This Stipulation shall remain in effect until terminated or modified by an order of the
Court or by written agreement of all the parties hereto, and nothing contained herein shall affect
the right of any party to seek such an order of the Court on appropriate notice to the other parties
hereto.
C:\2002Liriz~tion\l!StipulaCC,j()nk( 6 April 3, ;.002
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NORTll CAROLlNA THE l'l' CROUP .. INC., et. al.,
D:EPARTMENT OF ay their attorneys,
ENVIRONMENT AND
NATURAL
RESOURCES
By its a ttol'Ileys,
Gregg M. Galardi (1.D.2991)
Marion M. Quirk (l.D. 4136)
Ga1-y A. Rubin (No. 4140)
SKADOEN, ARPS, SLA'fE,
MEAGHER & FLOM LLP
Rodney Squaro
P.O. Box 636
Wilmington, Oolawan: 19899
651-3000
a· ~ . :;, ~ , .. " ., .... ,., .j ... ~ '·• ;,, -a.: Ill h. ~. ) ~~· ... , ' . ,· ~ ~·
So Ordered
Mary F. Walrath,
U.S. Bankruptcy Judge
C:\2002Litig~t;c:,n\11"Stipulntcd0•der 7
LAW OFFICES PAGE 08
AMERICAN MOTORISTS MIDWF,ST son.,
INSURA!'.CE REMEDlA1'lON INC.
:By its attorney:; By its anomcys,
Arnold M. Flank, Esq.
11 East A(tams Street, 111100
Chicago, TL 60603
Tel. [phone]
Fax [phone]
-~no-
S • t ii"''" Y--• •• ._, ~>·•• •j ........ ,., r ••~ ••~
Noel Burnhan, Esq. (DE#3483)
MONTGOMERY,
MCCRACKEN, WALKER ,
RHOADS,LLP
300 Dclawar~ Avenue; #750
Wilmington, DE 19801-6600
Tel (302) 504"7890
Fax [phone]
Dated: ,2002 ---------
April 3, 2002
{11:JS,.;,M)
INFORMATION CONCERNING
THE IT CONTRACT WITH THE STATE OF NORTH CAROLINA
FOR THE DETOXIFICATION
OF THE WARREN COUNTY PCB LANDFILL
1. The State of North through DENR entered into a contract with The IT Group for the detoxification of
the Warren County PCB Landfill in March of 2000. The contract was awarded to IT based on a
competitive bidding process among firms that had been pre-qualified based on very strenuous criteria.
The process was conducted with the guidance and support of the State Construction Office. The
project is design-build and required approval from the State Building Commission as an alternate
contracting method. The award was based on a total project cost of $13.5M, but the contract is only
for a "Phase I" ($6,658,000) because the available funding. The contract states that the contract will be
extended to Phase II when funding is available. This phased approach was discussed with and
approved by the State Budget Office. Phase I includes site preparation (utility extensions, grubbing
and grading of the site, installation of a very large concrete pad, construction and maintenance of
erosion and sediment measures), modification and fabrication of treatment equipment, preparation of
permit applications ( especially a permit from EPA TSCA), mobilization of equipment to the site, and a
full scale demonstration test that is required under TSCA. Phase II includes the continued treatment of
the remainder of contaminated soil in the landfill, destruction of the liquid PCBs using the Base
Catalyzed Decomposition Process, decontamination and demobilizing, and site restoration.
2. On January 16, 2002, The IT Group filed voluntary petitions for relief under chapter 11 of the U.S.
Bankruptcy Code. In connection with those filings and the proposed transaction, The Shaw Group
agreed in principle to provide The IT Group with debtor-in-possession (DIP) financing.
Full case name: In re: The IT Group, Inc., et al.
Case number: 02-10118
Place filed: U.S . Bankruptcy Court in Wilmington, Delaware
Judge: Mary F. Walwrath
3. On January 25, 2002, The IT Group entered into a defmitive asset purchase agreement to sell
substantially all of the Company to The Shaw Group. The Company also obtained court approval, on
an interim basis, for Sugar Acquisition Inc., a subsidiary of The Shaw Group, to provide a DIP credit
facility of$55 million.
4. A number of motions, notices, and orders have been filed. IT is going a very good job of making this
information available at their Internet site http://\\,ww.theitgroup.com under the heading of
restructuring news. Several motions are being heard next Tuesday which should provide more insight
as to what their future will be.
5. The project has performance and payment bonding. The bonds are with Kemper Insurance and are
each for the full amount of the contract, $6,658,000. I have been contacted by Kemper concerning IT's
performance. My response letter is attached to email. That information was as of January 8. An
invoice of with payment of$12,105.12 for January is in the invoice review process. I have received a
few calls from subcontractors and have supplied them with bonding company information. The
contact for these bonds is as follows.
Prepared by
Pat Backus
02/06/02
Page 1 of3
Mr. Stephen J. Beatty
Associate Surety Counsel
Surety Group
Kemper Insurance Companies
1 Kemper Drive
Building 4, Floor 3, K-7
Long Grove, IL 60049-0001
Voice: 847-320-2170
Fax: [phone]
Email: sbeattv(ii?kemperinsurance.com
Bond: 4LS 502 255
.
6. After notifying the State Construction Office of the bankruptcy filing, I was advised to send a letter to
cure to The IT Group. The procedure is explained under Article 29 of the General Conditions of our
contract with IT. The General Conditions are essentially the same as the standard State Construction
Office contract. Some modifications were made to make it applicable to a design-build, remediation
project Our letter was signed by Laird Davison and received by IT on February 1. It is attached to
this email. They have fifteen days to respond.
7. IT invoices the State each month for work that has been completed. The invoice is certified by our
oversight contractor, Earth Tech, and sent to me for final approval for payment. This is not a "rubber
stamp" process. We examine and question and modify to ensure that work is completed before we
approve. A 5% retainage is held by the State until completion of the project.
8. Phase I is approximately 60% complete. Essentially all the site work has been completed and most of
the equipment work has been completed. What remains is completion of equipment modification,
mobilization of equipment, and demonstration testing. The current schedule estimates that Phase I will
be completed at the end of the fiscal year in June.
9. The State does not pay in advance. A significant amount has been paid to IT for work being performed
to modify and fabricate equipment for the job. The equipment is being assembled and tested by
Midwest Soil Remediation in Elgin, IL. IT has contracted with MSR for the actual soil treatment. I
have visited the firm and seen the equipment and work done. We have required a consent of surety on
the work done in IL before we pay. IT is paying MSR in advance on a subcontract. MSR is
continuing to work on obtaining the TSCA permit but has ceased working on the equipment until they
receive a $300,000 payment from IT.
10. Most of work that will be performed by subcontractors on Phase I, excluding the treatment by
Midwest, has been completed and paid for. Prior to the bankruptcy filing, subcontractors had been
paid before terms and even in advance in some cases. The IT Group has bent over backward to work
with local and minority subcontractors on the project. (An example is suspending their bonding
requirement to allow participation). The following table lists the subcontractors and/or vendors with
outstanding invoices with IT which have not been paid as of February 5, 2002. At least a portion of
each invoice covers work for which IT has received payment from the State.
Prepared by
Pat Backus
02/06/02
Page 2 of3
Subcontractor Service Date Invoiced Amount
KPH Trucking and Landscaping Seeding and Maintenance 11/16/01 $9,486.25
Bailey Co. Portable Toilet Rental/Service 11/28/01 $362.01
Geotechnics Civil Laboratory Services 11/30/01 $1,600.00
Williams Engineering Management Services 12/02/01 $16,284.62
Yancey Electric Service ( copay Electrical Installation 12/07/01 $6,695.72
with CED)
Yancey Electric Service Electrical Installation 12/07/01 $33,916.28
Ellington & Sons Concrete Sealing and Building 12/17/01 $49,139.00
Erection
Kearneco Grading Road Installation 12/17/01 $30,800.00
KPH Trucking and Landscaping Seeding and Maintenance 12/20/01 $3,600.00
Henderson Travel Lodge Hotel 12/28/01 $5,809.02
Geotechnics Civil Laboratory Services 12/31/01 $300.00
Williams Engineering Management Services 01/02/02 $8,291.00
Aiken&Yelle Surveying 01/10/02 $10,080.56
Total $176,364.46
Several days prior to the bankruptcy filing, IT made a payment of $418,521.57 to Ellington &
Sons for concrete installation that was invoiced on 10/23/01.
11. The State's contract with IT requires payment to the subcontractors within seven days of receipt of
payment from the State. It they go beyond seven days, they are required to pay the subcontractors
interest. Conditions to withhold payments to IT are listed in Article 33 and must be authorized by the
Department of Administration. If the State withholds payment without cause, it is subject to payment
of interest to IT.
12. IT has terms in their subcontracts for payment when they are paid or net 60 days, whichever it later.
13. IT has continued to perform on the contract since the bankruptcy filing and is making progress. The
critical path item at this time is the receipt of a demonstration permit from EPA-TSCA. They have
received a rough draft of the demonstration permit and anticipate the final permit in the next few
weeks. Midwest is the owner of the permit.
Prepared by
Pat Backus
02/06/02
Page 3 of3
North Carolina
Department of Environment and Natural Resources
Division of Purchase and Services
Michael F. Easley, Governor
William G. Ross Jr., Secretary
Laird A. Davison, Director
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Mr. Gary L. Gardner, President
January 24, 2002
Commercial Engineering and Construction Group
The IT Group, Inc.
200 Horizon Center Blvd
Trenton, NJ 08691-1904
RE: Warren County PCB Landfill Detoxification Contract
NCSCO ID #0104401010A, IT Corp Project #827062
Dear Mr. Gardner:
A~A -·~ Or Or ,,;,.-, _____ _
MCDEMR
On January 16 the IT Group filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code in Wilmington, Delaware, case no. 02-10118. This is a condition listed in
Article 29 of the General Conditions of our contract which could result in declaring the contract
in default.
Pursuant to Article 29, I am requesting that the IT Group provide a written response within fifteen
(15) days clarifying your company's position on this contract. Please specify how you will
complete the detoxification of the Warren County PCB Landfill according to the terms and
provisions of the contract including payment to creditors whose work has been invoiced to the
State of North Carolina.
Failure to respond within fifteen (15) days or failure to provide an acceptable response to correct
this condition will result in the State declaring the contract in default and notification of surety to
assume the work.
Sincerely,
Laird A. Davison, Director
Division of Purchase and Services
cc: Stephen Beatty, Kemper Insurance
State Construction Office
Mike Kelly, DENR
Gary Duke, The IT Group, Inc.
Jim Cloonan, Earth Tech Inc.
Patricia Backus, DENR-DWM
1605 Mail Service Center, Raleigh, North Carohna 27699-1605
Phone: [phone] \ FAX: [phone] \ Internet: www.enr.state.nc.us
AN EQUAL OPPORTUNITY \ AFFIRMATIVE ACTION EMPLOYER -50% RECYCLED / 10% POST CONSUMER PAPER
North Carolina
Department of Environment and Natural Resources
Division of Waste Management
Michael F. Easley, Governor
William G. Ross Jr., Secretary
Dexter R. Matthews, Director
February 4, 2002
Mr. Stephen J. Beatty
Surety Group
Kemper Insurance Companies
1 Kemper Drive
Building 4, Floor 3, K-7
Long Grove, IL 60049-0001
RE: Warren County (NC) PCB Landfill Detoxification Project
Bond 4LS 502 255
Claim 167 SU 001 886
Dear Mr. Beatty:
A~A -·~ n ,,,;, , ____ .,
MCDEMR
This letter provides a response to your request for information dated January 23 , 2002 regarding the referenced
project. The information is as of Application for Payment No. 10 dated January 8, 2002.
• Amount of change orders to date: $539
• Revised contract amount: $6,658,539
• Original contract completion date: December 7, 2001
• Present expected completion date: May 31, 2002
• Amount invoiced to date, including retention: $4,012,029.00
• Amount of retention to date: $200,601.41
• Amount paid to the IT Corporation to date: $3,811 ,427.59
• Known subcontractor claims: The following information was provided by IT Corporation. It was stated that at
least a portion of each subcontractor invoice covers work for which IT Corporation had received payment from
the State of North Carolina.
Subcontractor Service Date Amount
Invoiced
Ellington & Sons** Concrete Installation 10/23/01 $418,521.57
KPH Trucking and Landscaping Seeding and Maintenance 11/16/01 $9,486.25
Bailey Co . Portable Toilet Rental/Service 11/28/01 $362.01
Geotechnics Civil Laboratory Services 11/30/01 $1600.00
Williams Engineering Management Services 12/02/01 $16,284.62
Yancey Electric Service Electrical Installation 12/07/01 $33,916.28
Ellington & Sons Concrete Sealing and Building 12/17/01 $49,139.00
Erection
Keameco Grading Road Installation 12/17/01 $30,800.00
Henderson Travel Lodge Hotel 12/28/01 $5,809.02
** IT Corporation notified the state that this invoice was paid prior to the bankruptcy filing.
The contract completion date has been extended due to rain delays and time associated with regulatory approval of
submittals. The given subcontractor claims are from the IT project manager, Gary Duke. The state has no
independent notification of any subcontractor claims for payment.
1646 Mail Service Center, Raleigh, North Carolina 27699-1646
Phone: [phone] \ FAX: [phone] \ Internet: www.enr.state.nc.us
AN EQUAL OPPORTUNITY \ AFFIRMATIVE ACTION EMPLOYER -50% RECYCLED / 10% POST CONSUMER PAPER
Mr. Stephen J. Beatty
February 4, 2002
Page2
Thank you for your prompt action on this important project. Please feel free to call me at [phone], x308 if
you have any questions or require additional information.
Sincerely,
Patricia M. Backus, P.E.
PCB Landfill Project Manager
cc: Laird Davison, DENR-Division of Purchase and Services
Michael A Kelly, DENR
Jim Cloonan, Earth Tech, Inc.
Dexter Matthews, DENR-DWM
State Construction Office