Indenture the Agency assigned its rights to the rent payments from Island Recycling to the Bank for the benefit of the bondholders. For the benefit of the bondholder, the Trustee also perfected UCC-1 financing statements evidencing a security interest in the Fund by filing the statements with the Clerk of Nassau County, on May 7, 1993.
According to the plaintiff, on August 16, 1993 the Bank represented to Island Recycling's subcontractors that it was ready to start making payments from the Fund to Island Recycling for payment of the reconstruction costs.
2. The Island Recycling-Interel Contract and Events Precipitating the Present Dispute.
In an agreement dated September 30, 1993 (the "contract"), Island Recycling agreed to purchase and the plaintiff Interel agreed to install certain air pollution control and related equipment. The price for the job was $ 1,735,433.
Relying on the contract and the other agreements governing the Facility and payment for the reconstruction, namely the Management Agreement, Lease Agreement, and Trust Indenture, Interel commenced work at the Facility. From September through December, 1993, Interel submitted applications for four progress payments to Island Recycling for work performed at the Facility. Each application for payment was approved by Island Recycling, then included in a disbursement request to Glen Cove which was approved by Glen Cove's engineers, and ultimately paid from the monies in the Fund.
In January, 1994, a new administration took office in Glen Cove. According to Interel, the new mayor, Thomas Suozzi, opposed reopening the Facility. Eventually, a dispute arose between Glen Cove and Island Recycling and the City refuses to authorize the Bank to release monies from the Fund to pay Island Recycling or its subcontractors for work performed at the Facility.
On May 18, 1994, Interel submitted its fifth requisition to Island Recycling in the amount of $ 583,268 for work performed in January, 1995, prior to the time Glen Cove decided to stop paying for any further construction costs. The requisition was approved by Island Recycling, and sent to the Glen Cove engineers for approval. The engineers approved the requisition, and on July 29, 1994 recommended to the City that Interel's requisition be paid. Glen Cove, however, has not sought the release of Fund monies to Island Recycling so that Interel's requisition can be paid.
In addition to this amount, Interel contends that Island Recycling also approved an additional $ 296,626 in requisitions, but has not submitted these requisitions to the City for approval. Interel blames the lack of payment of its reimbursement requests on the dispute between Glen Cove and Island Recycling.
According to Interel, because the monies in the Fund are designated to pay for the reconstruction costs of the Facility, the Fund constitutes a trust asset under section 70.1 of the New York State Lien Law. In Interel's view, it and the other subcontractors it represents are entitled to a lien on the Fund pursuant to the Lien Law, to the extent of the amount they are owed by Island Recycling for work performed at the Facility.
On June 17, 1994, Interel filed its notice of lien with the Nassau County Clerk. It also commenced an article 78 proceeding in the New York State Supreme Court, Nassau County to compel the City of Glen Cove to approve and release the monies in the Fund held by the Bank. That action is still pending.
3. Interel's Complaint.
Interel alleges that the defendants now intend to withdraw the money in the Fund in order to redeem some or all of the bonds. According to section 3.05(d) of the Lease Agreement, approximately $ 4.5 million dollars in the Fund were reserved, and are prevented from being disbursed to Island Recycling until, among other things, Island Recycling provides the Bank with a confirmation by the DEC that the Facility is in compliance with the Consent Order and that certain other improvements have been constructed at the Facility. The language of Section 3.05 of the Lease Agreement states that:
(d) Notwithstanding any provisions to the contrary contained herein, $ 4,396,359 shall not be disbursed from the Series A Account of the Project Fund and $ 136,092 (representing a portion of the underwriter's discount) shall not be disbursed from the Series A Account of the Issuance Costs Fund pursuant to this Section 3.05 until such time that, in addition to all other provisions and certificates required under this Section 3.05, (i) the Company receives and provides the Trustee with a true copy of a written confirmation from the DEC stating that the Company has the Facility as required by the Order on Consent and that the Company may resume accepting Processible Water (as defined in the Management Agreement) at the Facility for the purposes of incineration, and (ii) a certification is submitted to the Trustee by an Independent Engineer stating that the installation of the improvements to the north furnace train of the Facility are in substantial compliance with the Company's design criteria as outlined in the Plans.
In the event that Company is unable to comply with the requirements of this subsection on or before July 31, 1995, such undisbursed funds, together with an amount equal to ten percent (10%) of said undisbursed funds which shall be withdrawn from the Debt Service Reserve Fund, shall be used to redeem Series A Bonds pursuant to the provisions of Section 3.01(b) of the Indenture.