<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
(Amendment No._____)/1/
Environmental Safeguards, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.001 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
294 069 307
- --------------------------------------------------------------------------------
(CUSIP Number)
Victor I. Chang, Esq. (617) 248-7000
c/o Testa, Hurwitz & Thibeault, LLP, High Street Tower,
125 High Street, Boston, MA 02110
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 17, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[_].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
- ----------------------
/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- -------------------------
CUSIP NO. 294 069 307
- -------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Edward L. Cahill
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [X]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- -------------------------
CUSIP NO. 294 069 307
- -------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
David L. Warnock
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [X]
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3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- -------------------------
CUSIP NO. 294 069 307
- -------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Cahill, Warnock Strategic Partners, L.P.
IRSN: 52-1970604
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [X]
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3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- -------------------------
CUSIP NO. 294 069 307
- -------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Cahill, Warnock Strategic Partners Fund, L.P.
IRSN: 52-1970619
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
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3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- -------------------------
CUSIP NO. 294 069 307
- -------------------------
- ------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Cahill, Warnock & Company, LLC
IRSN: 52-1931617
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [X]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland Limited Liability Company
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7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP NO. 294 069 307
- -------------------------
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Strategic Associates, L.P.
IRSN: 52-1991689
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
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3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OR LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
2,347,879
OWNED BY
-----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
2,347,879
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,347,879
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.2%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer:
--------------------
This statement relates to the Common Stock, $.001 par value per share, of
Environmental Safeguards, Inc., a Nevada corporation (the "Issuer"). The
address of the Issuer's principal executive offices is 2600 West Loop South,
Suite 645, Houston, TX 77054.
Item 2. Identity and Background:
------------------------
This statement is being filed by (i) Cahill, Warnock Strategic Partners Fund,
L.P. ("Strategic Partners Fund"), (ii) Cahill Warnock Strategic Partners, L.P.
("Strategic Partners"), the sole general partner of Strategic Partners Fund,
(iii) Strategic Associates, L.P. ("Strategic Associates"), (iv) Cahill, Warnock
& Company, LLC ("Cahill, Warnock & Co."), the sole general partner of Strategic
Associates, (v) Edward L. Cahill ("Cahill"), a general partner of Strategic
Partners and a member of Cahill, Warnock & Co., and (vi) David L. Warnock
("Warnock"), a general partner of Strategic Partners and a member of Cahill,
Warnock & Co. Strategic Partners Fund, Strategic Partners, Strategic
Associates, Cahill, Warnock & Co., Cahill, and Warnock are sometimes referred to
collectively herein as the "Reporting Persons."
The address of the principal business and principal office of Strategic
Partners Fund, Strategic Partners, Strategic Associates and Cahill, Warnock &
Co. is 1 South Street, Suite 2150, Baltimore, MD 21202. The business address
of Cahill and Warnock is 1 South Street, Suite 2150, Baltimore, MD 21202.
The state of organization for Strategic Partners Fund, Strategic Partners and
Strategic Associates is Delaware. The state of organization for Cahill, Warnock
& Co. is Maryland. Both Cahill and Warnock are citizens of the United States of
America.
The principal business of Strategic Partners Fund and Strategic Associates is
to make private equity investments in micro-cap public companies seeking capital
for expansion or undergoing a restructuring of ownership. The principal
business of Strategic Partners is to act as the sole general partner of
Strategic Partners Fund. The principal business of Cahill, Warnock & Co. is to
act as the sole general partner of Strategic Associates and Camden Partners,
L.P. ("Camden Partners") and to manage the activities of Strategic Partners
Fund, Strategic Associates, and Camden Partners. The principal occupations of
Cahill and Warnock are their activities on behalf of Strategic Partners Fund,
Strategic Partners, Strategic Associates, Cahill, Warnock & Co. and Camden
Partners.
The principal business of Camden Partners is to make passive investments in
public companies. The principal office of Camden Partners is 1 South Street,
Suite 2150, Baltimore, MD 21202.
During the five years prior to the date hereof, none of the Reporting Persons
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or has been a party to a civil proceeding ending in a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws, or finding
a violation with respect to such laws.
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration:
--------------------------------------------------
On December 17, 1997 Strategic Partners Fund acquired 1,722,900 shares of
Series B Convertible Preferred Stock of the Issuer for a total purchase price of
$1,827,321.43. The Series B Convertible Preferred Stock acquired by Strategic
Partners Fund is currently convertible into 1,722,900 shares of the Issuer's
Common Stock. The working capital of Strategic Partners Fund was the source of
funds for this purchase. No part of the purchase price was or will be
represented by funds or other consideration borrowed or otherwise obtained for
the purpose of acquiring, holding, trading or voting the Series B Preferred
Stock.
On December 17, 1997 Strategic Partners Fund acquired warrants to purchase
323,044 shares of the Issuer's Common Stock (the "Fund Warrants") in partial
consideration for a loan of $2,740,982.14 made to the Issuer. The working
capital of Strategic Partners Fund was the source of funds for the loan. No
part of the purchase price was financed by funds or other consideration borrowed
or otherwise obtained for the purpose of acquiring, holding, trading, or voting
the Fund Warrants.
On December 17, 1997 Strategic Associates acquired 95,464 shares of Class B
Preferred Stock of the Issuer for a total purchase price of $101,250. The
Series B Convertible Preferred Stock acquired by Strategic Associates is
currently convertible into 95,464 shares of the Issuer's Common Stock. The
working capital of Strategic Associates was the source of funds for this
purchase. No part of the purchase price was or will be represented by funds or
other consideration borrowed or otherwise obtained for the purpose of acquiring,
holding, trading or voting the Series B Preferred Stock.
On December 17, 1997 Strategic Associates acquired warrants to purchase
17,900 shares of the Issuer's Common Stock (the "Associate Warrants") in partial
consideration for a loan of $151,875 made to the Issuer. The working capital of
Strategic Associates was the source of funds for the loan. No part of the
purchase price was financed by funds or other consideration borrowed or
otherwise obtained for the purpose of acquiring, holding, trading, or voting the
Associates Warrants.
Item 4. Purpose of Transaction:
----------------------
Strategic Partners Fund and Strategic Associates acquired the Issuer's
securities for investment purposes. Depending on market conditions, their
continuing evaluation of the business and prospects of the Issuer and other
factors, Strategic Partners Fund and Strategic Associates may dispose of or
acquire additional securities of the Issuer. Except as otherwise described
herein or as expressly stated below, none of the Reporting Persons has any
present plans which relate to or would result in:
(a) The acquisition by any person of additional securities of the Issuer,
or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or of
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term
of directors or to fill any existing vacancies on the board;
<PAGE>
(e) Any material change in the present capitalization or dividend policy
of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Exception. Pursuant to the terms of a certain Co-Sale Agreement dated as
---------
of December 17, 1997 (the "Co-Sale Agreement," attached hereto as Exhibit 11) by
----------
and among Strategic Partners Fund, Strategic Associates, James Percell
("Percell"), Newpark Resources, Inc. ("Newpark"), and James H. Stone ("Stone"),
the parties thereto agreed that if any party to the Co-Sale Agreement sells
shares beneficially owned by such party which represents 35% or more shares of
all of the then outstanding Common Stock of the Company to a third-party buyer,
each of the other parties to the Co-Sale Agreement shall have the right to
participate in such transaction. If the shares being offered by all transferors,
in the aggregate, exceeds the number of shares the third-party buyer is willing
to purchase, the number of shares to be sold or transferred to the buyer by each
transferor shall be reduced, so that each transferor is entitled to sell or
transfer the same percentage of its own shares as each other transferor.
Exception. Pursuant to a Loan and Security Agreement dated December 17,
---------
1997 (the "Loan Agreement," attached hereto as Exhibit 4) by and among the
---------
Issuer, National Fuel and Energy, Inc. ("NFE"), Onsite Technology, LLC
("Onsite"), Strategic Partners Fund, Strategic Associates, Newpark, and Stone
(the Issuer, NFE and Onsite are sometimes referred to herein as the "Borrowers,"
Strategic Partners Fund, Strategic Associates, Newpack, and store are sometimes
referred to herein as the "Lenders,") Strategic Partners Fund made a loan in the
principal amount of $2,740,982.14 to the Borrowers and Strategic Associates made
a loan in the principal amount of $151,875 to the Borrowers. If the Borrowers do
not repay such loans, in full, 26 months from the date of the Loan Agreement,
the Issuer must issue warrants to purchase 323,044 shares of the Issuer's Common
Stock to Strategic Partners Fund, and warrants to purchase 17,900 shares of the
Issuer's Common Stock to Strategic Associates (collectively, the "Loan
Warrants'). Each Loan Warrant will have an exercise price of $0.01 and will be
immediately exercisable.
In addition, pursuant to the Loan Agreement, upon sixty days prior notice
of any of the Borrowers, the Leaders will be obligated to make a supplemental
loan to the Borrowers. Assuming, for the purposes of this Schedule 13D, that
Strategic Partner Fund and/or Strategic Associates provide the entire
supplemental loan, Strategic Partners Fund and Strategic Associates may, in the
aggregate, receive warrants to purchase up to 188,571 shares of the Issuer's
Common Stock as partial consideration for the making the supplemental loan (the
"Supplemental Loan Warrants"). Each Supplemental Loan Warrant will have an
exercise price of $0.01 and will be immediately exercisable.
<PAGE>
Item 5. Interest in the Securities of the Issuer:
----------------------------------------
(a) Strategic Partners Fund is the record owner of 1,722,900 shares of
Series B Convertible Preferred Stock of the Issuer which are currently
convertible into 1,722,900 shares of the Issuer's Common Stock (the "Fund B
Preferred") and warrants to purchase 323,044 shares of the Issuer's Common Stock
(the "Fund Warrants"). The Fund B Preferred and the Fund Warrants are currently
convertible, in the aggregate, into 2,045,944 shares of the Issuer's Common
Stock (the "Fund Conversion Shares").
Strategic Associates is the record owner of 95,464 shares of Series B
Convertible Preferred Stock of the Issuer which are currently convertible into
95,464 shares of the Issuer's Common Stock (the "Associates B Preferred") and
warrants to purchase 17,900 shares of the Issuer's Common Stock (the "Associates
Warrants"). The Associates B Preferred and the Associates Warrants are
currently convertible, in the aggregate, into 113,364 shares of the Issuer's
Common Stock (the "Associates Conversion Shares").
The Fund Conversion Shares and the Associates Conversion Shares are
sometimes referred to herein collectively as the "Environmental Safeguards
Shares."
Because of their relationship as affiliated entities, both Strategic
Partners Fund and Strategic Associates may be deemed to own beneficially the
Environmental Safeguards Shares. As general partners of Strategic Partners Fund
and Strategic Associates, respectively, Strategic Partners and Cahill, Warnock &
Co. may be deemed to own beneficially the Environmental Safeguards Shares. As
the individual general partners of Strategic Partners and as the members of
Cahill, Warnock & Co., both Cahill and Warnock may be deemed to own beneficially
the Environmental Safeguards Shares.
Pursuant to the Co-Sale Agreement (attached hereto as Exhibit 11), the
----------
parties thereto agreed that if any party to the Co-Sale Agreement sells such
shares beneficially owned by such party which represents 35% or more shares of
all of the then outstanding Common Stock of the Company to a third-party buyer,
each of the other parties to the Co-Sale Agreement shall have the right to
participate in such transaction. If the shares being offered by all
transferors, in the aggregate, exceeds the number of shares the third-party
buyer is willing to purchase, the number of shares to be sold or transferred to
the buyer by each transferor shall be reduced, so that each transferor is
entitled to sell or transfer the same percentage of its own shares as each other
transferor. Consequently, the parties to the Co-Sale Agreement may be deemed
to be members of a group pursuant to Rule 13d-5(b)(1) of the Securities and
Exchange Act of 1934. As a result, each of the Reporting Persons may be deemed
to beneficially own, in addition to the Environmental Safeguards Shares, an
additional 3,420,524 shares of the Issuer's Common Stock (the "Agreement
Shares"). Each of the Reporting Persons disclaims membership in the
aforementioned group.
Pursuant to the Loan Agreement (attached hereto as Exhibit 4), upon sixty
---------
days prior notice of any of the Borrowers, the Lenders will be obligated to make
a supplemental loan to the Borrowers. Assuming, for the purposes of this
Schedule 13D, that Strategic Partners Fund and/or Strategic Association provide
the entire supplemental loan. Strategic Partners Fund and Strategic Associates
may, in the aggregate, receive warrants to purchase up to 188,571 shares of the
Issuer's Common Stock as partial consideration for providing the supplemental
loan (the "Supplemental Loan Warrants"). Each Supplemental Loan Warrant will
have an exercise price of $0.01 and will be immediately exercisable.
Consequently, each of the Reporting Persons may be deemed to own, in addition to
the Environmental Safeguards Shares, an additional 188,571 shares of the
Issuer's Common Stock (the "Supplemental Loan Shares").
<PAGE>
Strategic Partners Fund disclaims beneficial ownership of the Associates
Conversion Shares and the Agreement Shares. Strategic Associates disclaims
beneficial ownership of the Fund Conversion Shares and the Agreement Shares.
Strategic Partners, Cahill, Warnock & Co., Cahill, and Warnock each disclaim
beneficial ownership of the Environmental Safeguards Shares, the Agreement
Shares, and the Supplemental Loan Shares, except with respect to their pecuniary
interest therein, if any.
Each of the Reporting Persons may be deemed to own beneficially 20.2% of
the Issuer's Common Stock, which percentage is calculated based upon 9,282,265
shares of the Issuer's Common Stock reported as outstanding by the Issuer in a
certain Stock Purchase Agreement dated December 17, 1997 by and among the
Issuer, Strategic Partners Fund, Strategic Associates, Newpark, and Stone
(attached hereto as Exhibit 3) and 2,347,879 shares of the Issuer's Common Stock
---------
issuable upon conversion of the Fund B Preferred, the Fund Warrants, the
Associates B Preferred, the Associates Warrants and the Supplemental Loan
Shares. The calculation of beneficial ownership percentage does not reflect
potential deemed beneficial ownership of the Agreement Shares.
In Amendment No. 1 to the Limited Partnership Agreement of Strategic
Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic
---------
Partners and the limited partners of Strategic Partners Fund agreed that any
securities of a particular issuer that are acquired by both Strategic Partners
Fund and Strategic Associates shall be sold or otherwise disposed of at
substantially the same time, on substantially the same terms and in amounts
proportionate to the size of each of their investments. As a consequence,
Strategic Associates and Strategic Partners Fund may be deemed to be members of
a group pursuant to Rule 13d-5(b)(1) of the Securities Exchange Act of 1934.
Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim
membership in the aforementioned group.
(b) Number of Shares as to which each such person has
(i) Sole power to vote or direct the vote:
0 shares for each Reporting Person;
(ii) Shared power to vote or direct the vote:
2,347,879* shares for each Reporting Person;
(iii) Sole power to dispose or to direct the disposition:
0 shares for each Reporting Person;
(iv) Shared power to dispose or to direct the disposition:
2,347,879* shares for each Reporting Person.
* Does not reflect potential deemed beneficial ownership of the Agreement
Shares.
<PAGE>
(c) Except as set forth above, none of the Reporting Persons has effected
any transaction in the Shares during the last 60 days.
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or any proceeds from the sale of, the
Shares beneficially owned by any of the Reporting Persons.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer:
In Amendment No. 1 to the Limited Partnership Agreement of Strategic
Partners Fund, dated July 26, 1996, Strategic Partners and the limited partners
of Strategic Partners Fund agreed that any securities of a particular issuer
that are acquired by both Strategic Partners Fund and Strategic Associates shall
be sold or otherwise disposed of at substantially the same time, on
substantially the same terms and in amounts proportionate to the size of each of
their investments.
Pursuant to the terms of a certain Series B Convertible Preferred and
Series C Preferred Stock Purchase Agreement dated December 17, 1997 (the "Stock
Purchase Agreement," attached hereto as Exhibit 3) by and among the Issuer,
---------
Strategic Partners Fund, Strategic Associates, Newpark, and Stone, Strategic
Partners Fund acquired 1,722,900 shares of Series B Convertible Preferred Stock
and 182,732 shares of Series C Preferred Stock (non-voting, non-convertible).
Pursuant to the Stock Purchase Agreement, Strategic Associates acquired 95,464
shares of Series B Preferred Stock and 10,125 shares of Series C Preferred Stock
(non-voting, non-convertible).
Pursuant to the terms of the Co-Sale Agreement (attached hereto as Exhibit
-------
4), by and among, Strategic Partners Fund, Strategic Associates, Percell,
- -
Newpark, and Stone, the parties thereto agreed that if any party to the Co-Sale
Agreement sells 35% or more shares of Common Stock beneficially owned by such
party to a third-party buyer, each of the other parties to the Co-Sale Agreement
shall have the right to participate in such transaction; provided that if the
shares being offered, in the aggregate, exceeds the number of shares the third
party buyer is willing to purchase, the number of shares to be sold or
transferred to the third party buyer by each transferor shall be reduced so that
each transferor is entitled to sell or transfer the same percentage of its
shares as each other transferor.
Pursuant to the Loan Agreement (attached hereto as Exhibit 4) by and among
---------
the Issuer, NFE, Onsite, Strategic Partners Fund, Strategic Associates, Newpark,
and Stone (the Issuer, NFE, and Onsite are collectively referred to herein as
the "Borrowers"; Strategic Partners Fund, Strategic Associates, Newpark, and
Stone are collectively referred to herein as the "Lenders"), Strategic Partners
Fund provided a loan in the principal amount of $2,740,982.14 to the Borrowers,
and Strategic Associates provided a loan in the principal amount of $151,875 to
the Borrowers. If the Borrowers do not repay such loans, in full, 26 months from
the date of the Loan Agreement, the Issuer must issue warrants to purchase
323,044 shares of the Issuer's Common Stock to Strategic Partners Fund, and
warrants to purchase 17,900 shares of the Issuer's Common Stock. Each such
warrant will have an exercise price of $0.01 and will be immediately
exercisable. In addition, pursuant to the Loan Agreement, upon sixty days prior
notice of any of the Borrowers, the Lenders will be obligated to make a
supplemental loan to the Borrowers. Assuming for the purposes of this Schedule
13D, that Strategic Partners Fund and/or Strategic Associates provide the
entire supplemental loan, Strategic
<PAGE>
Partners Fund and Strategic Associates may, in the aggregate, receive warrants
to purchase up to 188,571 shares of the Issuer's Common Stock as partial
consideration for the making the supplemental loan. Each such warrant will also
have an exercise price of $0.01 and will be immediately exercisable.
Pursuant to a certain Registration Rights Agreement dated December 17, 1997
(attached hereto as Exhibit 7) by and among the Issuer, Strategic Partners Fund,
---------
Strategic Associates, Newpark, and Stone, Strategic Partners Fund, Strategic
Associates, Newpark, and Stone are granted, subject to certain restrictions and
limitations, certain demand and "piggyback" registration rights with respect to
the shares of Common Stock issuable upon the conversion of the Series B
Convertible Preferred Stock.
Pursuant to a certain Warrant Agreement dated December 17, 1997 between the
Issuer, Strategic Partners Fund, Strategic Associates, Newpark, and Stone (the
"Warrant Agreement," attached hereto as Exhibit 10), Strategic Partners Fund
----------
acquired warrants to purchase 323,044 shares of the Issuer's Common Stock at an
exercise price of $.01 per share. Pursuant to the Warrant Agreement, Strategic
Associates acquired warrants to purchase 17,900 shares of the Issuer's Common
Stock at an exercise price of $.01 per share. The warrants are immediately
exercisable and shall expire on December 16, 1997.
Item 7. Material to be Filed as Exhibits:
Exhibit 1 - Agreement regarding filing of joint Schedule 13D.
Exhibit 2 - Amendment No. 1 to the Limited Partnership Agreement of
Strategic Partners Fund.
Exhibit 3 - Preferred Stock Purchase Agreement dated December 17, 1997, by
and among the Issuer, Strategic Partners Fund, Strategic
Associates, Newpark, and Stone.
Exhibit 4 - Loan Agreement dated December 17, 1997, by and among the
Issuer, National Fuel & Energy, Inc., Onsite Technology, LLC,
Strategic Partners Fund, Strategic Associates, Newpark, and
Stone.
Exhibit 5 - Certificate of the Designation, Preferences, Rights and
Limitations of Series B Convertible Preferred Stock of the
Issuer executed as of December 17, 1997 by the Issuer.
Exhibit 6 - Certificate of the Designation, Preferences, Rights and
Limitations of Series C Preferred Stock of the Issuer executed
as of December 17, 1997 by the Issuer.
Exhibit 7 - Form of Registration Rights Agreement dated December 17, 1997
as executed by the Issuer with Strategic Partners, Strategic
Associates, Newpark, and Stone, respectively, on an individual
basis.
Exhibit 8 - $2,740,982.14 Term Note dated December 17 1997 executed by the
Issuer, National Fuel & Energy, Inc., and Onsite Technology,
LLC to the order of Strategic Partners Fund.
Exhibit 9 - $151,875.00 Term Note dated December 17, 1997 executed by the
Issuer, National Fuel & Energy, Inc., and Onsite Technology,
LLC to the order of Strategic Associates.
<PAGE>
Exhibit 10 - Warrant Agreement dated December 17, 1997 by and among the
Issuer, Strategic Partners Fund, Strategic Associates,
Newpark, and Stone
Exhibit 11 - Co-Sale Agreement dated December 17, 1997 by and among
Percell, Strategic Partners Fund, Strategic Associates, Newpark,
and Stone.
<PAGE>
SCHEDULE 13D
Signature
After reasonable inquiry and to the best of our knowledge and belief, we
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 29, 1997.
/s/ Edward L. Cahill
---------------------------------
Edward L. Cahill
/s/ David L. Warnock
---------------------------------
David L. Warnock
CAHILL, WARNOCK STRATEGIC PARTNERS
FUND, L.P.
By: Cahill, Warnock Strategic
Partners, L.P., its Sole General
Partner
By: /s/ Edward L. Cahill
-------------------------
Edward L. Cahill,
General Partner
By: /s/ David L. Warnock
-------------------------
David L. Warnock,
General Partner
CAHILL, WARNOCK STRATEGIC PARTNERS,
L.P.
By: /s/ Edward L. Cahill
------------------------------
Edward L. Cahill,
General Partner
By: /s/ David L. Warnock
------------------------------
David L. Warnock,
General Partner
<PAGE>
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Co., LLC, its
sole General Partner
By: /s/ Edward L. Cahill
--------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
--------------------------
David L. Warnock, Member
CAHILL, WARNOCK & CO., LLC
By: /s/ Edward L. Cahill
------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
------------------------------
David L. Warnock, Member
<PAGE>
EXHIBIT 1
---------
AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, the
undersigned hereby agree that only one statement containing the information
required by Schedule 13D need be filed with respect to the ownership by each of
the undersigned of shares of stock of Environmental Safeguards, Inc.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
Executed this December 29, 1997.
/s/ Edward L. Cahill
--------------------
Edward L. Cahill
/s/ David L. Warnock
--------------------
David L. Warnock
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: Cahill, Warnock Strategic Partners,
L.P., its Sole General Partner
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, General Partner
CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.
By: /s/ Edward L. Cahill
--------------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
--------------------------------------
David L. Warnock, General Partner
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Co., LLC, its sole General
Partner
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, Member
CAHILL, WARNOCK & CO., LLC
By: /s/ Edward L. Cahill
--------------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
--------------------------------------
David L. Warnock, Member
<PAGE>
EXHIBIT 2
AMENDMENT NO. 1 TO
LIMITED PARTNERSHIP AGREEMENT
OF
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
AMENDMENT NO. 1 dated as of the 26th day of July, 1996, by and among
Cahill, Warnock Strategic Partners, L.P., a Delaware limited partnership, as
general partner (the "General Partner") of Cahill, Warnock Strategic Partners
Fund, L.P., a Delaware limited partnership (the "Partnership"), and the Limited
Partners of the Partnership listed on Schedule A to the Limited Partnership
Agreement of the Partnership, dated as of April 11, 1996 (the "Partnership
Agreement"), at least 66 2/3% in interest of whom have executed a counterpart
signature page to this Amendment No. 1:
WHEREAS, immediately prior to the admission on the date hereof of
additional Limited Partners to the Partnership pursuant to Section 8(c) of the
Partnership Agreement, the parties hereto desire to amend the Partnership
Agreement and approve Amendment No. 1 to the Management Agreement, the form of
which Management Agreement is attached to the Partnership Agreement as Schedule
B.
NOW, THEREFORE, the parties hereto, in consideration of the premises
and the agreements herein contained and intending to be legally bound hereby,
agree as follows:
1. Section 4(k)(2) of the Partnership Agreement is amended by deleting
the second sentence thereof in its entirety and substituting the
following:
"Notwithstanding Section 4(e)(1) to the contrary, the Principals
may organize, after the date of this Agreement, other investment
funds and client investment vehicles for the benefit of
employees, associates and advisors of the General Partner and the
Principals and for investors who may be strategically important
to the Partnership, specifically for the purpose of co-investing
with the Partnership; provided that the aggregate amount of
capital committed to such other investment funds and client
investment vehicles does not exceed $7 million; and provided,
further, that any such investment funds or client investment
vehicles which are
<PAGE>
managed by the General Partner or the Principals shall sell or
otherwise dispose of each such co-investment at substantially the
same time and on substantially the same terms as the Partnership
in amounts proportionate to the relative size of the investments
made by such investment funds and client investment vehicles and
the Partnership."
2. Section 7(a) of the Partnership Agreement is amended by deleting the
first sentence thereof in its entirety and substituting the following:
"The Partnership shall have a Valuation Committee which shall
consist of at least three (3) but not more than five (5) members,
none of whom shall be an officer, director, member or employee of
the General Partner, the Management Company or any affiliate
thereof, and none of whom shall be related to any Principal."
3. Section 8(a) of the Partnership Agreement is amended by adding the
following text at the end thereof:
"Each notice for an Additional Capital Contribution from the
General Partner shall include a general description of the
purposes and uses for which the Additional Capital Contribution
is being called including, for example, the payment of
Partnership expenses (including the Management Fee) and the
purchase of Portfolio Company Securities; provided that the
General Partner shall not be required to identify the purposes
and uses of 100% of any Additional Capital Contribution or be
required to identify the name of any particular Portfolio Company
or proposed Portfolio Company. After the fourth anniversary of
the last admittance of any additional Limited Partners pursuant
to Section 8(c) hereof, the General Partner shall not make any
further calls for Additional Capital Contributions for the
purpose of investing in the Securities of any entity that was not
a Portfolio Company (including as a Portfolio Company for such
purpose, any predecessor of such entity) on such anniversary
date, except with the approval of the Valuation Committee. After
the fifth anniversary of the last admittance of any additional
Limited Partners pursuant to Section 8(c) hereof, the General
Partner shall not make any further calls for Additional Capital
Contributions for the purpose of investing in the Securities of
any entity that was a Portfolio Company (including as a Portfolio
Company for such purpose, any predecessor of such entity) on such
anniversary date, except with the approval of the Valuation
Committee."
<PAGE>
4. Section 11(b) of the Partnership Agreement is amended by adding the
following subsection (8) at the end thereof:
"(8) An amount equal to 50% of all distributions made to the
General Partner, other than (A) Tax Distributions plus (B)
distributions the General Partner would have received if it had
made its Capital Contributions as a Limited Partner and did not
hold an interest as a General Partner (excluding any Tax
Distributions on account thereof which are included in (A)),
shall be used by the General Partner immediately upon
distribution thereof to prepay any promissory notes contributed
by the General Partner to the Partnership."
5. Section 16 of the Partnership Agreement is amended by adding the
following text at the end thereof:
"No Principal will voluntarily assign, pledge, mortgage,
hypothecate, sell or otherwise dispose of or encumber (a
"Disposition") all or any part of his interest in the allocations
made to the General Partner of "20% of such additional Net
Realized Gain" pursuant to Section 10(b)(1)(A)(iv) (the "20%
carried interest"), except for (a) Dispositions to members of his
immediate family or trusts for the benefit of such general
partner or members of his immediate family (and, in the case of
any Dispositions to such family members or such trusts, the
transferee shall thereafter be subject, as to further transfers,
to the same restrictions on transfer as were applicable to the
transferor), (b) Dispositions to other persons who are associated
with or employed by the General Partner, the Principals or the
Management Company, and (c) Dispositions to another Principal;
provided, that, the Dispositions of all Principals pursuant to
clauses (a) and (b) shall not exceed in the aggregate 45% of
their aggregate interests in the 20% carried interest."
6. Section 19(c) of the Partnership Agreement is amended by adding the
following text at the end thereof:
"The General Partner shall transmit to each Partner within sixty
(60) days after the close of each fiscal year, a report
describing any fees and other remuneration which, pursuant to
Section 4(b) of the Management Agreement, reduced the Management
Fee payable in such fiscal year. Such description will be
organized by the type of such fees and other remuneration (e.g.,
director's fees and consulting fees) and the dollar amount
attributable to each such category."
<PAGE>
7. Pursuant to Section 7 of the Management Agreement, the Limited
Partners hereby consent to Amendment No. 1 to the Management Agreement
dated the date hereof, which amends Section 4(b) of the Management
Agreement by adding the following text at the end thereof:
"If in any year such reductions exceed the Management Fee
otherwise payable, the excess amount of such reductions shall be
carried forward on a year-by-year basis."
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the day and year first above written.
GENERAL PARTNER
CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.
By: /s/ Edward L. Cahill
------------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
------------------------------------
David L. Warnock, General Partner
<PAGE>
AMENDMENT NO. 1 TO
LIMITED PARTNERSHIP AGREEMENT
OF
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
LIMITED PARTNER SIGNATURE PAGE
------------------------------
The undersigned Limited Partner hereby executes Amendment No. 1 to
Limited Partnership Agreement of Cahill, Warnock Strategic Partners Fund, L.P.
and hereby authorizes this signature page to be attached to a counterpart of
such document executed by the General Partner of Cahill, Warnock Strategic
Partners Fund, L.P.
Please type or print exact
name of Limited Partner *
-----------------------------------------
Please sign here By
---------------------------------------
Please type or print exact
name of signer
-----------------------------------------
Please type or print
title of signer Title
------------------------------------
* Signature pages of the limited partners will be provided upon request.
<PAGE>
Exhibit 3.0
SERIES B CONVERTIBLE PREFERRED
AND
SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
DATED DECEMBER 17, 1997
BY AND AMONG
ENVIRONMENTAL SAFEGUARDS, INC.,
AS THE COMPANY
AND
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.,
AND
STRATEGIC ASSOCIATES, L.P.,
AND
NEWPARK RESOURCES, INC.,
AND
JAMES H. STONE
AS THE PURCHASERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
Page
----
SECTION 1 Definitions................................................................. 2
1.1. Defined Terms........................................................ 2
1.2. Other Defined Terms.................................................. 5
1.3. Other Definitional Provisions........................................ 6
SECTION 2 Authorization and Sale of Preferred Stock; Warrants and Warrant Shares...... 6
2.1. Authorization of Preferred Stock..................................... 6
2.2. Sale and Purchase of Preferred Stock................................. 6
2.3. Use of Proceeds...................................................... 7
SECTION 3 Closing Date; Delivery...................................................... 7
3.1. Closing Date......................................................... 7
3.2. Delivery............................................................. 7
SECTION 4 Representations and Warranties of the Company............................... 8
4.1. Organization, Good Standing and Qualification........................ 8
4.2. Capitalization....................................................... 8
4.3. Subsidiaries......................................................... 9
4.4. Partnerships, Joint Ventures......................................... 9
4.5. Authorization........................................................ 9
4.6. Governmental Consents................................................ 10
4.7. Conformity with Law; Absence of Litigation........................... 10
4.8. Insurance............................................................ 10
4.9. Patents and Trademarks............................................... 10
4.10. Compliance with Other Instruments and Legal Requirements............. 11
4.11. Material Agreements; Action.......................................... 11
4.12. Brokers' Fees........................................................ 12
4.13. Registration Rights.................................................. 12
4.14. Corporate Documents.................................................. 12
4.15. Real Property........................................................ 12
4.16. Tangible Personal Property........................................... 13
4.17. Environmental Matters................................................ 14
4.18. Company SEC Reports and Financial Statements......................... 15
4.19. Changes.............................................................. 15
4.20. Employee Benefit Plans............................................... 16
4.21. Taxes................................................................ 19
4.22. Labor and Employment Matters........................................ 20
4.23. No Pending Transactions.............................................. 20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.24. Disclosure........................................................... 20
4.25. Minute Books......................................................... 21
4.26. Foreign Corrupt Practices............................................ 21
4.27. No Undisclosed Liabilities........................................... 21
SECTION 5 Representations and Warranties of the Purchasers............................ 21
5.1. Accredited Investor; Experience; Risk................................ 21
5.2. Investment........................................................... 22
5.3. Authorization........................................................ 22
5.4. Governmental Consents................................................ 22
5.5. Organization, Good Standing and Qualification........................ 22
SECTION 6 Conditions to Closing of Purchasers......................................... 23
6.1. Representations and Warranties Correct............................... 23
6.2. Covenants............................................................ 23
6.3. Opinion of Company's Counsel......................................... 23
6.4. No Material Adverse Change........................................... 23
6.5. Certificates of Designation.......................................... 23
6.6. State Securities Laws................................................ 23
6.7. Issuance of Shares................................................... 23
6.8. Certificates......................................................... 23
6.9. Registration Rights Agreement........................................ 24
6.10. Loan Agreement....................................................... 24
6.11. Conditions to Closing on Loan Agreement.............................. 24
6.12. Loan Warrants........................................................ 24
6.13. Parker Transaction................................................... 24
6.14. Fairness Opinion..................................................... 24
6.15. Co-Sell Agreement.................................................... 24
SECTION 7 Conditions to Closing of the Company........................................ 24
7.1. Representations...................................................... 24
7.2. Purchase Price....................................................... 24
7.3. Certificate.......................................................... 25
7.4. Opinion of Counsel................................................... 25
7.5. State Securities Laws................................................ 25
7.6. Registration Rights Agreement ....................................... 25
7.7. Loan Agreement....................................................... 25
7.8. Conditions to Closing on Loan Agreement.............................. 25
7.9. Parker Transaction................................................... 25
7.10. Fairness Opinion..................................................... 25
7.11. Co-Sell Agreement.................................................... 25
7.12. Newpark Letter Agreement............................................. 25
SECTION 8 Covenants of the Company.................................................... 25
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C> <C>
8.1. Information.......................................................... 26
8.2. Regulatory Matters................................................... 27
8.3. Access............................................................... 27
8.4. Directors' and Officers' Insurance................................... 28
8.5. Confidentiality...................................................... 28
8.6. Shelf Registration................................................... 28
8.7. Foreign Corrupt Practices............................................ 30
8.8. Issuance of Additional Warrants...................................... 30
SECTION 9 Miscellaneous............................................................... 30
9.1. Amendment; Waiver.................................................... 30
9.2. Notices.............................................................. 30
9.3. Severability......................................................... 32
9.4. Successors and Assigns............................................... 32
9.5. Survival of Representations, Warranties and Covenants................ 32
9.6. Entire Agreement..................................................... 32
9.7. Choice of Law........................................................ 32
9.8. Counterparts......................................................... 32
9.9. Costs and Expenses................................................... 32
9.10. No Third-Party Beneficiaries......................................... 33
9.11. Indemnification...................................................... 33
</TABLE>
iii
<PAGE>
ENVIRONMENTAL SAFEGUARDS, INC.
SERIES B CONVERTIBLE PREFERRED
AND SERIES C PREFERRED
STOCK PURCHASE AGREEMENT
SERIES B CONVERTIBLE PREFERRED AND SERIES C PREFERRED STOCK PURCHASE
AGREEMENT dated as of December 17, 1997 (this "Agreement"), by and among
---------
ENVIRONMENTAL SAFEGUARDS, INC., a Nevada corporation (the "Company"), CAHILL,
-------
WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the
laws of the State of Delaware, and STRATEGIC ASSOCIATES, L.P., a limited
partnership organized under the laws of the State of Delaware. NEWPARK RESOURCES
INC., a Delaware corporation, and JAMES H. STONE, an individual whose address is
c/o Stone Energy, 909 Poydras Street, Suite 2650, New Orleans, LA 70112 (each a
"Purchaser" and collectively the "Purchasers").
--------- ----------
W I T N E S S E T H
WHEREAS, the Company has issued and outstanding the shares of capital stock
described in Section 4.2 hereof and the Company has reserved for issuance
additional shares of capital stock upon the exercise of the outstanding
convertible securities, including rights, options and warrants, identified in
Section 4.2; and
WHEREAS, the Company proposes to issue and sell, and the Purchasers desire
to purchase from the Company, severally and in the amounts set forth on Exhibit
-------
A hereto, shares of the Company's Series B Convertible Preferred Stock, par
- -
value $.001 per share, and shares of the Company's Series C Preferred Stock, par
value $.001 per share, on the terms and conditions set forth herein; and
WHEREAS, the Company and the Purchasers desire to enter into a loan
agreement prior to Closing (the "Loan Agreement") pursuant to which the
--------------
Purchasers will loan the Company cash and the Company will pay the Purchasers
interest and issue a warrant to each of the Purchasers (the "Loan Warrants");
-------------
and
WHEREAS, the Company and the Purchasers desire to enter into a registration
rights agreement of even date herewith (the "Registration Rights Agreement"),
-----------------------------
attached hereto as Exhibit B, pursuant to which the Purchasers have, among other
---------
rights, certain registration rights; and
WHEREAS, concurrent with the Closing (as defined in Section 2.1), the
Company shall purchase the 50% interest of Parker Drilling Company's ("Parker")
------
in OnSite Technology, L.L.C. ("OnSite") and repay in full the outstanding
balance owed by the Company to an affiliate of Parker pursuant to a loan
agreement and term note dated as of December 19, 1996 (including without
limitation repurchasing warrants to purchase 300,000 shares of the Company's
Common Stock issued pursuant to that loan agreement).
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
-----------
1.1. Defined Terms. The following terms are defined as follows:
-------------
"Affiliate" means, with respect to any Person, (i) any Person that holds
---------
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 5% of the outstanding equity
securities or equity interests in a Person, (ii) any brother, sister, parent,
child or spouse of such Person or any Person described in clause (i), and (iii)
any Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such entity.
"Benefit Arrangement" means any benefit arrangement, obligation, custom, or
-------------------
practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors, other than any obligation,
arrangement, custom or practice that is an Employee Benefit Plan, including,
without limitation, employment agreements, severance agreements, executive
compensation arrangements, incentive programs or arrangements, sick leave,
vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, any plans subject to
Section 125 of the Code, and any plans providing benefits or payments in the
event of a change of control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors, or agents.
"Code" means the Internal Revenue Code of 1986 (or any successor thereto),
----
as amended from time to time.
"Common Stock" means the Common Stock, par value $.001 per share, of the
------------
Company.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored or
---------------------------
maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former
2
<PAGE>
directors, employees, or agents of the Company or the Subsidiaries.
"Company Plan" means, as of the Closing Date, any Employee Benefit Plan for
------------
which the Company or any Subsidiary is the "plan sponsor" (as defined in Section
3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the Company or any
Subsidiary or to which the Company or any Subsidiary is obligated to make
payments, in each case with respect to any present or former employees of the
Company or the Subsidiaries.
"Effectiveness Period" means the period commencing upon the SEC declaring
--------------------
the Initial Shelf Registration (as defined in Section 8.6) effective and ending
on the date that all Registrable Securities (as hereafter defined) shall have
ceased to be Registrable Securities.
"Employee Benefit Plan" has the meaning given in Section 3(3) of ERISA.
---------------------
"Environmental Law" means any applicable foreign, federal, state or local
-----------------
statute, regulation, ordinance or rule of common law as now in effect in any way
relating to the protection of human health and the environment including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S)(S) 9601 et seq.), the Hazardous Materials
-- ----
Transportation Act (49 U.S.C. App. (S)(S) 1801 et seq.), the Resource
-- ----
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.), the Clean Water
-- ----
Act (33 U.S.C. (S)(S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S)(S) 7401 et
-- ---- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S)(S) 2601 et seq.), the
- ---- -- ----
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S)(S) 136 et
--
seq.), and the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et
- ---- --
seq.), regulations promulgated pursuant to these statutes, and common law
- ----
principles of tort liability.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any regulation or rule issued thereunder.
"ERISA Affiliate" means any Person that together with the Company, would be
---------------
or was at any time treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA and any general partnership of which the Company is or has
been a general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Hazardous Material" means any substance, material or waste that is
------------------
regulated by the United States, the foreign jurisdictions in which the Company
or its Subsidiaries conducts business, or any applicable state or local
governmental authority including, without limitation, petroleum and its by-
products, asbestos, and any material or substance that is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of Environmental Law.
3
<PAGE>
"Knowledge" or derivations thereof shall mean the knowledge of the officers
---------
of the Company and each Subsidiary, and, with respect to Sections 4.20 and 4.22,
each person who conducts human resource and employee benefits management
functions for the Company or any Subsidiary, whether or not an officer of the
Company or such Subsidiary.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
----
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
"Loan Agreement" means the loan agreement of even date herewith by and
--------------
among the Purchasers and the Company.
"Loan Warrants" means the warrants of even date herewith issued by the
-------------
Company and granted to the Purchasers pursuant to the Loan Agreement.
"Multiemployer Plan" means any Employee Benefit Plan described in Section
------------------
3(37) of ERISA.
"OnSite" means OnSite Technology, L.L.C., a limited liability company
------
organized under the laws of the State of Oklahoma.
"OnSite Colombia" means OnSite Colombia, Inc., a corporation formed under
---------------
the laws of the Cayman Islands.
"OnSite Venezuela" means OnSite Venezuela, Inc., a corporation formed under
----------------
the laws of the Cayman Islands.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permits" means any approvals, authorizations, consents, licenses, permits
-------
or certificates.
"Person" means an individual, partnership, limited liability company,
------
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Preferred Stock" means the Series B Convertible Preferred Stock, par value
---------------
$.001 per share, and the Series C Preferred Stock, par value $.001 per share, of
the Company.
"Qualified Plan" means any Employee Benefit Plan that meets, purports to
--------------
meet, or is intended to meet the requirements of Section 401(a) of the Code.
"Registrable Securities" means (i) shares of Common Stock or other
----------------------
securities issued or issuable upon exercise of the Preferred Stock; (ii) shares
of Common Stock issued in connection
4
<PAGE>
with the exercise of the Loan Warrants; and (iii) any other shares of Common
Stock or securities issued in respect of such shares (because of stock splits,
stock dividends, reclassifications, recapitalization, mergers, consolidation,
share exchange or similar events).
"Registration Rights Agreement" means the registration rights agreement of
-----------------------------
even date herewith by and between the Company and the Purchasers.
"Release" means any release, spill, emission, leaking, pumping, injection,
-------
deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or in
---------------
any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
"SEC" means the United States Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Subsidiaries" means each corporation in which the Company owns or
------------
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests, and includes without limitation OnSite, OnSite Colombia, and OnSite
Venezuela.
"U.S. Foreign Corrupt Practices Act" means the U.S. Foreign Corrupt
----------------------------------
Practices Act of 1977, Pub. L. No. 95-213, Sections 101-104, as amended, and any
other U.S. law, regulation, order, decree or directive having the force of law
and relating to bribes, kick-backs or similar business practices.
"Welfare Plan" means any Employee Benefit Plan described in Section 3(1) of
------------
ERISA.
1.2. Other Defined Terms. The following terms shall have the meanings
-------------------
assigned to them in the identified Sections of this Agreement.
"Balance Sheet" as defined in Section 4.18.
-------------
"Balance Sheet Date" as defined in Section 4.18.
------------------
"Certificate of Designation" as defined in Section 2.1.
--------------------------
"Closing" as defined in Section 2.1.
-------
"Closing Date" as defined in Section 2.1.
------------
5
<PAGE>
"Company 401(k) Plan" as defined in Section 4.20.
-------------------
"Company Property" as defined in Section 4.16.
----------------
"Company SEC Reports" as defined in Section 4.18.
-------------------
"GAAP" as defined in Section 4.18.
----
"Intellectual Property" as defined in Section 4.9.
---------------------
"IRS" as defined in Section 4.20.
---
"Leased Properties" as defined in Section 4.15.
-----------------
"Owned Properties" as defined in Section 4.15.
----------------
"Personal Property Leases" as defined in Section 4.16.
------------------------
"Preferred Stock" as defined in Section 4.2.
---------------
"Real Property Leases" as defined in Section 4.15(a).
--------------------
"Transaction Documents" as defined in Section 4.5.
---------------------
1.3. Other Definitional Provisions. Terms defined in the singular shall
-----------------------------
have a comparable meaning when used in the plural and vice versa.
SECTION 2
Authorization and Sale of Preferred Stock; Warrants and Warrant Shares
----------------------------------------------------------------------
2.1. Authorization of Preferred Stock. At Closing, the Company will have
---------------------------------
authorized the issuance and sale to the Purchasers of (i) 3,771,421 shares of
Series B Convertible Preferred Stock, having the rights, preferences, privileges
and restrictions set forth in the Certificate of Designation attached to this
Agreement as Exhibit C hereto (the "Series B Certificate of Designation") and
--------- -----------------------------------
(ii) 400,000 shares of Series C Preferred Stock, having the rights, preferences,
privileges and restrictions set forth in the Certificate of Designation attached
to this Agreement as Exhibit C-1 hereto (the "Series C Certificate of
----------- -----------------------
Designation"). In addition, the Company will have authorized the issuance of
- -----------
warrants to each of the Purchasers pursuant to the Loan Agreement and shall have
reserved for issuance the number of shares of Common Stock issuable, from time
to time, thereunder.
6
<PAGE>
2.2. Sale and Purchase of Preferred Stock. In reliance on the
-------------------------------------
representations and warranties of the Company contained herein and subject to
the terms and conditions hereof, at Closing, the Purchasers agree to purchase
from the Company, severally and in the amounts set forth on Exhibit A hereto,
---------
and the Company agrees to sell to the Purchasers, (i) 3,771,421 shares of Series
B Convertible Preferred Stock for the aggregate purchase price of Four Million
Dollars ($4,000,000) and (ii) 400,000 shares of Series C Preferred Stock for the
aggregate purchase price of Four Million Dollars ($4,000,000). The aggregate
number of shares of Common Stock issuable upon conversion of the Preferred Stock
represents 20% of the issued and outstanding Common Stock of the Company at the
date of Closing on a fully diluted basis (assuming, without limitation, the
exercise of all warrants and options held by and distributed to the Company's
agents and management and the Loan Warrants).
2.3. Use of Proceeds. The Company agrees to use the full proceeds from the
---------------
sale of the Preferred Stock and the loan proceeds from the Loan Agreement to (i)
purchase Parker's 50% interest in OnSite, (ii) repay in full the outstanding
balance owed by the Company to an affiliate of Parker pursuant to a loan
agreement and term note dated as of December 19, 1996 (including without
limitation repurchasing warrants to purchase 300,000 shares of the Company's
Common Stock issued pursuant to that loan agreement), (iii) pay fees and
expenses, and (iv) use as working capital.
SECTION 3
Closing Date; Delivery
----------------------
3.1. Closing Date. The closing of the purchase and sale of the Preferred
------------
Stock (the "Closing") shall be held at the offices of Axelrod, Smith &
-------
Kirshbaum, 5300 Memorial Drive, Houston, Texas 77007 on December 12, 1997, or on
such other date or at such other place as the Purchasers and the Company shall
mutually agree (the date of the Closing being referred to herein as the "Closing
-------
Date").
- ----
3.2. Delivery. At the Closing, the Company shall: (a) deliver to each
--------
Purchaser a certificate or certificates evidencing the shares of Preferred
Stock being purchased by it registered in such Purchaser's name against delivery
to the Company of payment in an amount equal to the full purchase price of the
shares of Preferred Stock being purchased by the Purchasers by certified check
or wire transfer to an account designated by the Company; (b) close under the
Loan Agreement and receive funds thereunder; (c) issue the Loan Warrants; and
(d) purchase Parker's 50% interest in OnSite and repay in full the outstanding
balance owed by the Company to an affiliate of Parker pursuant to a loan
agreement and term note dated as of December 19, 1996 (including without
limitation repurchasing warrants to purchase 300,000 shares of the Company's
Common Stock issued pursuant to that loan agreement).
7
<PAGE>
SECTION 4
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to, and agrees with, the
Purchasers as follows:
4.1. Organization, Good Standing and Qualification. Each of the Company
----------------------------------------------
and its Subsidiaries (i) is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (ii) has
all requisite power and authority to carry on its business, (iii) is duly
qualified to transact business and is in good standing in all jurisdictions
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except where the failure to do so would
not be material to the Company. The Company has the corporate power and
authority and is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders to (i) own, lease and operate its properties and to carry on its
business as now being conducted and (ii) execute and deliver this Agreement and
the documents and instruments contemplated hereby and to consummate the
transactions contemplated hereby.
4.2. Capitalization.
--------------
(a) The authorized capital stock of the Company is 60,000,000 shares,
consisting of 50,000,000 shares of common stock, par value $.001 per share
("Common Stock") of which 9,282,265 shares are issued and outstanding and no
- --------------
shares are held in treasury, and 10,000,000 shares of preferred stock, par value
$.001 per share ("Preferred Stock"), none of which are issued and outstanding.
---------------
There are no outstanding shares of Series A Preferred Stock. Schedule 4.2 lists
------------
the options, rights and warrants of the Company issued and outstanding prior to
Closing. The Company has reserved for issuance 4,391,221 shares of Common Stock
upon exercise or conversion of currently outstanding shares of convertible
preferred stock and rights, options, warrants and other convertible securities.
The Company has no employee stock purchase plans, stock option plans or other
Employee Benefit Plans. The Company has reserved for issuance 6,354,334 shares
of Common Stock upon conversion of the authorized shares of Preferred Stock and
the Loan Warrants and management options. Except as listed on Schedule 4.2,
------------
there are outstanding (a) no shares of capital stock or other voting stock of
the Company, (b) no securities of the Company, any Subsidiary or any Person
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (c) no options, warrants or other rights to acquire
from the Company or any Subsidiary (including any rights issuable or issued
under any shareholder rights plan or similar arrangement), and no obligations,
contingent or otherwise, of the Company or any Subsidiary to issue any capital
stock, voting securities or
8
<PAGE>
securities convertible into or exchangeable for capital stock or voting
securities of the Company or any Subsidiary, (d) no equity equivalent in the
earnings or ownership of the Company, any Subsidiary or any Person or any
similar rights to share earnings or ownership, and (e) no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any of its
securities or to make any investment (by loan, capital contribution or
otherwise) in any entity or Person. All outstanding options, rights and warrants
have been duly and validly issued and are in full force and effect. All shares
of capital stock subject to issuance upon exercise of any options, rights or
warrants or otherwise, upon issuance pursuant to the instruments under which
they are issuable, shall be duly authorized, validly issued, fully paid for and
non-assessable and free of all preemptive rights. No outstanding options,
warrants or other securities exercisable for or convertible into shares of
capital stock of the Company require anti-dilution adjustments by reason of the
consummation of the transactions contemplated hereby.
(b) The issued and outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable. The shares
of Preferred Stock to be issued pursuant to this Agreement, upon delivery to the
Purchasers of certificates therefor against payment in accordance with the terms
of this Agreement, and the shares of Common Stock issuable upon conversion of
the Preferred Stock or upon exercise of the Loan Warrants, (i) will be validly
issued, fully paid and non-assessable, (ii) will be free and clear of all Liens,
and (iii) assuming that the representations of the Purchasers in Section 5
hereof are true and correct, will be issued in compliance with all applicable
federal and state securities laws.
4.3. Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of
------------ ------------
all Subsidiaries of the Company, showing (as to each such Subsidiary) the date
of its incorporation, the jurisdiction of its incorporation, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding, the names of all stockholders of such Subsidiaries
and the number and percentage of the outstanding shares of each such class
owned, directly or indirectly, by all such stockholders, including the Company.
At Closing, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary (except for OnSite Colombia), is owned by the
Company, directly or indirectly, free and clear of any Lien or any other
limitation or limitation or restriction (including restrictions on the right to
vote). All outstanding shares of the capital stock of the Company and any
Subsidiary have been duly authorized and validly issued and are fully paid and
non-assessable and are free of any preemptive rights. There are no outstanding
securities of any Subsidiary convertible into or evidencing the right to
purchase or subscribe for any shares of capital stock of any Subsidiary, there
are no outstanding or authorized options, warrants, calls, subscriptions,
rights, commitments or any other agreements of any character obligating any
Subsidiary to issue any shares of its capital stock or any securities
convertible into or evidencing the right to purchase or subscribe for any shares
of such stock, and there are no agreements or understandings with respect to the
voting, sale, transfer or registration of any shares of capital stock of any
Subsidiary, except for the right of first refusal contained in the Member's
Agreement of OnSite Columbia, effective as of November 25, 1996.
4.4. Partnerships, Joint Ventures. Except as set forth on Schedule 4.4,
---------------------------- ------------
9
<PAGE>
the Company is not a party to, and does not hold, any equity interests in any
partnership, limited partnership, limited liability company or other joint
venture of any kind.
4.5. Authorization. The Company has all requisite corporate power and
-------------
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered by it as contemplated herewith
(the "Transaction Documents") and to perform its obligations hereunder and
---------------------
thereunder. The execution, delivery and performance of the Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
corporate, including shareholder (if required), action on the part of the
Company. Each Transaction Document to which it is a party has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.6. Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the valid execution and delivery by the Company of
the Transaction Documents to which it is a party, or the consummation by the
Company of the transactions contemplated by the Transaction Documents to which
it is a party, except for (i) filings pursuant to federal or state securities
laws and (ii) the filing of registration statements with the SEC and any
applicable state securities commission.
4.7. Conformity with Law; Absence of Litigation. To its Knowledge, the
------------------------------------------
Company has not violated any law or regulation or any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it which would have a
material effect. Except as set forth on Schedule 4.7, there are no claims,
------------
actions, suits, proceedings or investigations pending or, to the Knowledge of
the Company, threatened against the Company or any of its Subsidiaries, or any
properties or rights of the Company or its Subsidiaries, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign.
4.8. Insurance. The Company and its Subsidiaries maintain adequate
---------
insurance with respect to their respective businesses and are in compliance with
all material requirements and provisions thereof.
4.9. Patents and Trademarks. The Company and its Subsidiaries have
----------------------
sufficient title and ownership of (or rights under license agreements to use)
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes ("Intellectual Property") necessary for their
---------------------
businesses. There are no outstanding
10
<PAGE>
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company or any of its Subsidiaries bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, proprietary rights and
processes of any other Person. A list of all patents, patent applications,
registered trademarks, trademark applications, registered copyrights and
copyright applications owned by the Company or any of its Subsidiaries is set
forth on Schedule 4.9. Within the past five years, the Company has not received
-------------
any communications alleging that the Company or any of its Subsidiaries has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes of any other Person, nor is the Company aware
of any such violations.
4.10. Compliance with Other Instruments and Legal Requirements.
---------------------------------------------------------
(a) None of the Company or any of its Subsidiaries is in violation or
default of any provisions of its certificate of incorporation, by-laws, or
comparable organizational documents. None of the Company or any of its
Subsidiaries is in violation or default in any respect under any provision,
instrument, judgment, order, writ, decree, contract or agreement to which it is
a party or by which it is bound or of any provision of any federal, state or
local statute, rule or regulation applicable to the Company or any of its
Subsidiaries (including, without limitation, any law, rule or regulation
relating to protection of the environment and the maintenance of safe and
sanitary premises) that would be material to the Company. The execution,
delivery and performance of each Transaction Document and the consummation of
the transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time or giving of notice, either a default under or give rise to any
obligations under, the Certificate of Incorporation or By-Laws of the Company,
or any note, bond, mortgage, indenture, lease, license, permit, contract,
agreement or other instrument or obligation, decree or order to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or its properties or assets is or may be bound, or violate any law, order, rule
or regulation applicable to the Company or any Subsidiary, and does not require
any consent, waiver or approval thereunder, or constitute an event that results
in the creation of any Lien upon any assets of the Company or any of its
Subsidiaries.
(b) The Company and its Subsidiaries have all Permits of all
governmental entities required to conduct their respective businesses as
currently conducted.
(c) The transactions contemplated by this Agreement and the
Transaction Documents will not constitute a change of control under any Employee
Benefit Plan, rights plan, contract or agreement to which it is a party, or
under any law, rule or regulation to which it is subject.
4.11. Material Agreements; Action. Except as set forth on Schedule
--------------------------- --------
4.11, there are no material contracts, agreements, commitments, understandings
- ----
or proposed transactions, whether written or oral, to which the Company or any
11
<PAGE>
of its Subsidiaries is a party or by which it is bound that involve or relate
to: (i) any of their respective officers, directors, stockholders or partners
or any Affiliate thereof; (ii) the sale of any of the assets of the Company or
any of its Subsidiaries other than in the ordinary course of business; (iii)
covenants of the Company or any of its Subsidiaries not to compete in any line
of business or with any Person in any geographical area or covenants of any
other Person not to compete with the Company or any of its Subsidiaries in any
line of business or in any geographical area; (iv) the acquisition by the
Company or any of its Subsidiaries of any operating business or the capital
stock of any other Person; (v) the borrowing of money; (vi) the expenditure of
more than $50,000 in the aggregate or the performance by the Company or any
Subsidiary extending for a period more than one year from the date hereof, other
than in the ordinary course of business, or (vii) the license of any
Intellectual Property or other material proprietary right to or from the Company
or any of its Subsidiaries. There have been made available to the Purchasers
and its representatives true and complete copies of all such agreements. All
such agreements are in full force and effect and are the legal, valid and
binding obligation of the Company or its Subsidiaries, enforceable against them
in accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). None of the Company or any of its Subsidiaries is in default under any
such agreements nor is any other party to any such agreements in default
thereunder in any respect.
4.12. Brokers' Fees. Except as set forth on Schedule 4.12, no broker,
------------- -------------
finder, investment banker or other Person is entitled to any brokerage fee,
finder's fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by the Company.
4.13. Registration Rights. Except as set forth in Schedule 4.13 or
------------------- -------------
pursuant to the Registration Rights Agreement, the Company has not granted or
agreed to grant any registration rights, including piggyback registration
rights, to any Person.
4.14. Corporate Documents. True and correct copies of the Articles of
-------------------
Incorporation and the By-laws of the Company, as amended and as are currently in
effect, have been delivered to the Purchasers.
4.15. Real Property.
-------------
(a) Schedule 4.15(a) sets forth a complete list of all real property
----------------
and interests in real property owned (the "Owned Properties") or leased (the
"Leased Properties") by the Company and its Subsidiaries as lessee or lessor
(the Leased Properties together with the Owned Properties, being referred to
herein individually as a "Company Property" and collectively as the "Company
---------------- -------
Properties"). The Company Property constitutes all interests in real property
- ----------
currently used or currently held for use in connection with the businesses of
the Company and its Subsidiaries and which are necessary for the continued
operation of the businesses of the Company and its Subsidiaries as such
businesses are currently conducted. The Company and its
12
<PAGE>
Subsidiaries have a valid and enforceable leasehold interest under each of the
leases for Leased Property (the "Real Property Leases"), and none of the Company
--------------------
or any of its Subsidiaries has received any written notice of any default or
event which, with notice or lapse of time, or both, would constitute a default
by the Company or any of its Subsidiaries under any of the Real Property Leases.
All of the Company Property, buildings, fixtures and improvements thereon owned
or leased by the Company and its Subsidiaries are in good operating condition
and repair (subject to normal wear and tear). The Company has delivered or
otherwise made available to the Purchasers true, correct and complete copies of
the Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto.
(b) The Company and its Subsidiaries have all certificates of
occupancy and Permits of any governmental body necessary or useful for the
current use and operation of each Company Property, and the Company and its
Subsidiaries have fully complied with all conditions of the Permits applicable
to them. No default or violation, or event which, with the lapse of time or
giving of notice or both would become a default or violation, has occurred in
the due observance of any such Permit.
(c) There does not exist any actual or threatened or contemplated
condemnation or eminent domain proceedings that affect any Company Property or
any part thereof, and none of the Company or any of its Subsidiaries has
received any notice, oral or written, of the intention of any governmental body
or other Person to take or use all or any part thereof.
(d) None of the Company or any of its Subsidiaries has received any
written notice from any insurance company that has issued a policy with respect
to any Company Property requiring performance of any structural or other repairs
or alterations to such Company Property.
(e) None of the Company or any of its Subsidiaries owns or holds, and
is obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
4.16. Tangible Personal Property.
--------------------------
(a) Schedule 4.16(a) sets forth all leases of personal property
----------------
("Personal Property Leases") involving annual payments in excess of $15,000
- --------------------------
relating to personal property used in the business of the Company and its
Subsidiaries or to which the Company or any of its Subsidiaries is a party or by
which the properties or assets of the Company or any of its Subsidiaries is
bound. The Company has delivered or otherwise made available to the Purchasers
true, correct and complete copies of the Personal Property Leases, together with
all amendments, modifications or supplements, if any, thereto.
(b) Each of the Company and its Subsidiaries has a valid leasehold
interest
13
<PAGE>
under each of the Personal Property Leases under which it is a lessee, and there
is no default under any Personal Property Lease by the Company or any of its
Subsidiaries, by any other party thereto, and no event has occurred which, with
the lapse of time or the giving of notice or both would constitute a default
thereunder.
(c) Except as set forth on Schedule 4.16(c), each of the Company and
----------------
its Subsidiaries has good and marketable title to all of the items of tangible
personal property reflected in the balance sheets referred to in Section 4.18
and Schedule 4.16(c) hereto with respect to OnSite Colombia (except as sold or
----------------
disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practice), free and clear of any and all Liens. All such
items of tangible personal property that, individually or in the aggregate, are
material to the operation of the business of the Company and its Subsidiaries
are in good condition and in a state of good maintenance and repair (ordinary
wear and tear excepted) and are suitable for the purposes used.
(d) All of the items of tangible personal property used by the Company
and its Subsidiaries under the Personal Property Leases are in good condition
and repair (ordinary wear and tear excepted) and are suitable for the purposes
used.
4.17. Environmental Matters.
---------------------
Except as set forth on Schedule 4.17:
-------------
(a) The operations of each of the Company and its Subsidiaries are in
compliance with all applicable Environmental Laws and all Permits issued
pursuant to Environmental Laws or otherwise;
(b) Each of the Company and its Subsidiaries has obtained all Permits
required under all applicable Environmental Laws necessary to operate its
business;
(c) None of the Company or any of its Subsidiaries is the subject of
any outstanding written order, agreement or arrangement with any governmental
authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;
(d) None of the Company or any of its Subsidiaries has received any
written communication alleging either or both that the Company or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(e) At Closing, none of the Company or any of its Subsidiaries has any
current contingent liability in connection with any Release of any Hazardous
Materials into the indoor or outdoor environment (whether on-site or off-site)
and has no reason to believe that such contingent liability exists;
14
<PAGE>
(f) There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of the Company or any
of its Subsidiaries pending or, to its Knowledge, threatened that could lead to
the imposition of any liability pursuant to Environmental Law;
(g) There is not located at any of the properties owned at any of the
properties leased or operated by the Company or any of its Subsidiaries any (i)
underground storage tanks, (ii) asbestos-containing material, (iii) equipment
containing polychlorinated biphenyls, any (iv) Hazardous Materials located at
any Company Property (other than for Hazardous Materials used or stored by the
Company or any Subsidiary in the ordinary course of business and in material
compliance with applicable Environmental Laws and Permits); and
(h) The Company has provided to the Purchasers all environmentally
related audits, studies, reports, analyses and results of investigations, if
any, that have been performed with respect to the currently or previously owned,
leased or operated properties of the Company or any of its Subsidiaries.
4.18. Company SEC Reports and Financial Statements.
--------------------------------------------
(a) The Company has made available to Purchasers true and complete
copies of all periodic reports, statements and other documents that the Company
has filed with the SEC under the Exchange Act since December 31, 1996
(collectively, the "Company SEC Reports"), each in the form (including exhibits
-------------------
and any amendments thereto) required to be filed with the SEC. As of their
respective dates, each of the Company's SEC Reports (i) complied in all respects
with all applicable requirements of the Securities Act and the Exchange Act, and
the rules and regulations promulgated thereunder, respectively, (ii) were filed
in a timely manner, and (iii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the Subsidiaries is required to
file any forms, reports or other documents with the SEC.
(b) Each of the audited consolidated financial statements of the
Company (including any related notes and schedules thereto) included (or
incorporated by reference) in its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996, are accurate and complete and fairly presents, in
conformity with generally accepted accounting principles ("GAAP") applied on a
----
consistent basis throughout the periods involved (except as may be noted
therein), and in conformity with the SEC's Regulation S-B, the consolidated
financial position of the Company and its consolidated subsidiaries as of its
date and the consolidated results of operations and changes in financial
position for the period then ended.
(c) Except as and to the extent set forth (or incorporated by
reference) in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996 (the
15
<PAGE>
"Balance Sheet Date"), none of the Company or any of its Subsidiaries has
------------------
incurred any liability or obligation of any nature whatsoever (whether due or to
become due, accrued, fixed, contingent, liquidated, unliquidated or otherwise)
that would be required by GAAP to be accrued on, reflected on, or reserved
against it, on a consolidated balance sheet (the "Balance Sheet") (or in the
-------------
applicable notes thereto) of the Company or any of its Subsidiaries prepared in
accordance with GAAP consistently applied as of the date and for the period
required.
4.19. Changes. Except as set forth on Schedule 4.19, since December
------- -------------
31, 1996, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries, except changes in
the ordinary course of business;
(b) any damage, destruction or loss, whether or not covered by
insurance;
(c) any waiver by the Company or any of its Subsidiaries of a valuable
right or of a debt owed to it outside of the ordinary course of business;
(d) any satisfaction or discharge of any Lien or payment of any
obligation by the Company or any of its Subsidiaries;
(e) any change or amendment to a contract or arrangement by which the
Company or any of its Subsidiaries or any of their respective assets or
properties is bound or subject;
(f) other than in the ordinary course of business, any material
increase in excess of $15,000 annually in any compensation arrangement or
agreement with any employee of the Company or any of its Subsidiaries receiving
compensation;
(g) any events or circumstances that otherwise could reasonably be
expected, individually or in the aggregate, to have a material effect; and
(h) none of the Company or any of its Subsidiaries has (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock or equity interests, (ii) incurred
any indebtedness for money borrowed in excess of $15,000, (iii) made any loans
or advances to any Person, other than ordinary advances for travel expenses not
exceeding $15,000, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights for consideration in excess of $15,000 in any one transaction
or series of related transactions.
4.20. Employee Benefit Plans.
----------------------
(a) Schedule 4.20(a) contains a complete and accurate list of all
----------------
Company Plans and Company Benefit Arrangements. Schedule 4.20(a) specifically
----------------
identifies all Company Plans (if any) that are Qualified Plans.
16
<PAGE>
(b) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements:
(i) true, correct, and complete copies of all of the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to the Purchasers: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including, but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or 5500
C/R and any financial statements attached thereto for the prior three years; (C)
the most recent Internal Revenue Service (the "IRS") determination letter and
---
the latest IRS determination letter that covered the qualification of the entire
Company Plan (if different), and copies of the materials submitted by the
Company to obtain those letters; (D) the most recent summary plan descriptions ;
(E) the most recent written descriptions of all non-written agreements relating
to any such plan or arrangement (if such documents or writings exist), (F) all
reports submitted within the four years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all notices that were given to the Company
within the three years preceding the date of this Agreement by the IRS,
Department of Labor, or any other governmental agency or entity with respect to
any plan or arrangement; and (H) employee manuals or handbooks containing
personnel or employee relations policies;
(ii) Neither the Company nor any Subsidiary has ever maintained,
contributed to, or been obligated to contribute to any Qualified Plan.
(iii) the Company and the Subsidiaries have never sponsored or
maintained, had any obligation to sponsor or maintain, or had any liability
(whether actual or contingent, with respect to any of its assets or otherwise)
with respect to any Employee Benefit Plan subject to Section 302 of ERISA or
Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Company Plan and each Company Benefit Arrangement has been
operated with its constituent documents and with all applicable provisions of
the Code, ERISA and other laws, including federal and state securities laws;
(v) There are no pending claims or lawsuits by, against, or relating
to any Employee Benefit Plans or Benefit Arrangements that are Company Plans or
Company Benefit Arrangements that would, if successful, result in liability of
the Company or any Stockholder, and no claims or lawsuits have been asserted,
instituted or to the Company's Knowledge threatened by, against, or relating to
any Company Plan or Company Benefit Arrangement, against the assets of any trust
or other funding arrangement under any such Company Plan, by or against the
Company or the Subsidiaries with respect to any Company Plan or Company Benefit
Arrangement, or by or against the plan administrator or any fiduciary of any
Company Plan or Company Benefit Arrangement, and the Company and the
Subsidiaries do not
17
<PAGE>
have knowledge of any fact that could form the basis for any such claim or
lawsuit. The Company Plans and Company Benefit Arrangements are not presently
under audit or examination (nor has notice been received of a potential audit or
examination) by the IRS, Department of Labor, or any other governmental agency
or entity;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred no
non-exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for the Company or any Stockholder, officer, director,
or employee of the Company;
(viii) all reporting, disclosure, and notice requirements of
ERISA and the Code have been fully and completely satisfied with respect to each
Company Plan and each Company Benefit Arrangement;
(ix) all amendments and actions required to bring the Company Benefit
Plans into conformity with the applicable provisions of ERISA, the Code, and
other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on Schedule 4.20(b)(ix);
--------------------
(x) payment has been made of all amounts that the Company and each
Subsidiary is required to pay as contributions to the Company Benefit Plans as
of the last day of the most recent fiscal year of each of the plans ended before
the date of this Agreement; all benefits accrued under any unfunded Company Plan
or Company Benefit Arrangement will have been paid, accrued, or otherwise
adequately reserved in accordance with GAAP as of the Balance Sheet Date; and
all monies withheld from employee paychecks with respect to Company Plans have
been transferred to the appropriate plan within 30 days of such withholding;
(xi) except as disclosed on Schedule 4.20(b)(xi), the Company and the
--------------------
Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust,
reserve, premium stabilization, or similar account, nor do they provide benefits
through a voluntary employee beneficiary association as defined in Section
501(c)(9);
(xii) no statement, either written or oral, has been made by
the Company or the Subsidiaries to any Person with regard to any Company Plan or
Company Benefit Arrangement that was not in accordance with the Company Plan or
Company Benefit Arrangement and that could have an adverse economic consequence
to the Company or the Subsidiaries;
18
<PAGE>
(xiii) the Company and the Subsidiaries have no liability
(whether actual, contingent, with respect to any of its assets or otherwise)
with respect to any Employee Benefit Plan or Benefit Arrangement that is not a
Company Benefit Arrangement or with respect to any Employee Benefit Plan
sponsored or maintained (or which has been or should have been sponsored or
maintained) by any ERISA Affiliate;
(xiv) all group health plans of the Company and its ERISA
Affiliates have been operated in material compliance with the requirements of
Sections 4980B (and its predecessor) and 5000 of the Code; and
(xv) no employee or former employee of the Company or
beneficiary of any such employee or former employee is, by reason of such
employee's or former employee's employment, entitled to receive any benefits,
including, without limitation, death or medical benefits (whether or not
insured) beyond retirement or other termination of employment as described in
Statement of Financial Accounting Standards No. 106, other than (i) death or
retirement benefits under a Qualified Plan, (ii) deferred compensation benefits
accrued as liabilities on the Closing Statement or (iii) continuation coverage
mandated under Section 4980B of the Code or other applicable law.
(c) Schedule 4.20(c) hereto sets forth an accurate list, as of the
----------------
date hereof, of all officers, directors, and key employees of the Company and
lists all employment agreements with such officers, directors, and key employees
and the rate of compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such Person as of (a)
December 31, 1996 and (b) the date hereof.
(d) Except as set forth in Schedule 4.20(d), the Company has not
----------------
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement.
4.21. Taxes. All federal, state and local and foreign tax returns,
-----
reports and statements required to be filed by the Company and its Subsidiaries
have been filed or have been caused to be filed with the appropriate
governmental agencies in all jurisdictions in which such returns, reports and
statements are required to be filed and all such returns, reports and statements
are true, complete and correct in all respects. All taxes, charges and other
impositions due and payable by the Company and its Subsidiaries have been paid
in full on a timely basis except where contested in good faith and by
appropriate proceedings if adequate reserves therefor have been established on
the books and records of the Company or Subsidiary in accordance with GAAP. The
provision for taxes of each of the Company and its Subsidiaries as shown in the
Company SEC Reports, or other governmental filing with respect to OnSite
Colombia and OnSite Venezuela, is sufficient for all unpaid taxes, charges and
other impositions of any nature due or accrued as of the date thereof, whether
or not assessed or disputed. Proper and accurate amounts have been withheld by
the Company and its Subsidiaries from their respective employees for all periods
in full and complete compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law and
19
<PAGE>
such withholdings have been timely paid to the respective governmental agencies.
The Company has not received notice of any audit or of any proposed deficiencies
from any governmental authority, and no controversy with respect to taxes of any
type is pending or to its Knowledge threatened. Except for routine filing
extensions granted as a matter of right under applicable law, none of the
Company or any of its Subsidiaries has executed or filed with the IRS or any
other governmental authority any agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
taxes, charges or other impositions. None of the Company or any of its
Subsidiaries has agreed or is required to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Further, none of the Company or any of its Subsidiaries has any obligation under
any tax-sharing agreement.
4.22. Labor and Employment Matters. With respect to employees of and
-----------------------------
service providers to the Company and the Subsidiaries: (a) the Company and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice; (b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company or any Subsidiary
pending or, to the Company's or any Subsidiary's Knowledge, threatened before
the National Labor Relations Board or any other comparable authority; (c) there
is not now, nor within the past three years has there been, any labor strike,
slowdown or stoppage actually pending or, to the Company's or any Subsidiary's
Knowledge, threatened against or directly affecting the Company or any
Subsidiary; (d) to the Company's or any Subsidiary's Knowledge, no labor
representation organization effort exists nor has there been any such activity
within the past three years; (e) no grievance or arbitration proceeding arising
out of or under collective bargaining agreements is pending and, to the
Company's or any Subsidiary's Knowledge, no claims therefor exist or have been
threatened; (f) the employees of the Company and the Subsidiaries are not and
have never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary; and (g) all Persons
classified by the Company or its Subsidiaries as independent contractors do
satisfy and have satisfied the requirements of law to be so classified, and the
Company and its Subsidiaries have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
4.23. No Pending Transactions. Except for the transactions
-----------------------
contemplated by this Agreement, neither the Company nor any Subsidiary is a
party to or bound by or the subject of any agreement, undertaking, commitment or
discussions or negotiations with any person that could result in (i) the sale,
merger, consolidation or recapitalization of the Company or any Subsidiary,
(ii) the sale of all or substantially all of the assets of the Company or any
Subsidiary, or (iii) a change of control of more than five percent of the
outstanding capital stock of the Company or any Subsidiary.
20
<PAGE>
4.24. Disclosure. All written agreements, lists, schedules,
----------
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to the Purchasers pursuant hereto or in connection with this
Agreement or the transactions contemplated hereby, are and will be complete and
accurate in all material respects. No representation or warranty by the Company
contained in this Agreement, in the schedules attached hereto or in any
certificate furnished or to be furnished by the Company to the Purchasers in
connection herewith or pursuant hereto contains or will contain any untrue
statement or a material fact or omits or will omit to state any material fact
necessary in order to make any statement contained herein or therein not
misleading. There is no fact known to the officers and directors of the Company
that has specific application to the Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as such
officers and directors can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or any Schedule hereto.
4.25. Minute Books. The minute books of the Company and each of its
------------
Subsidiaries contain a complete summary of all material actions by their
respective directors and stockholders since the date of their respective
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
4.26. Foreign Corrupt Practices. Neither the Company nor any
-------------------------
Subsidiary nor any of their respective officers, directors, employees or agents
has made, offered or agreed to offer anything of value to any governmental
official, political party or candidate for government office nor has it
otherwise taken any action that would cause the Company to be in violation of
the U.S. Foreign Corrupt Practices Act or any law of similar effect.
4.27. No Undisclosed Liabilities. Neither the Company or any
--------------------------
Subsidiary has any obligation or liability (contingent or otherwise) that would
be required to be reflected in the financial statements of the Company in
accordance with GAAP except as reflected in the Company's Balance Sheet.
SECTION 5
Representations and Warranties of the Purchasers
------------------------------------------------
Each of the Purchasers (severally and not jointly), hereby represents and
warrants to and agrees with the Company, as follows:
5.1. Accredited Investor; Experience; Risk.
-------------------------------------
(a) Such Purchaser is an accredited investor and has been advised and
understands
21
<PAGE>
that the Preferred Stock has not been registered under the Securities Act, on
the basis that no public offering of the Preferred Stock is to be effected,
except in compliance with the applicable securities laws and regulations or
pursuant to an exemption therefrom; provided, however, that nothing in this
--------- --------
Section 5.1 shall limit the Purchasers right to convert the Preferred Stock for
Common Stock as set forth in this Agreement, the Registration Rights Agreement,
or the Certificates of Designation
(b) Such Purchaser is purchasing the Preferred Stock for investment
purposes, for its own account and not with a view to, or for sale in violation
of federal or state securities laws.
(c) Such Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of the Preferred Stock pursuant to this Agreement.
(d) The certificates representing the Preferred Stock and any Conversion
Shares shall bear a legend evidencing such restriction on transfer substantially
in the following form:
"The securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933,
as amended (the "Act") or the securities laws of any state and may not be
sold or transferred except pursuant to registration under the Act or an
exemption therefrom."
5.2. Investment. Such Purchaser is acquiring the Preferred Stock for
----------
investment purposes only, for its own account and not as a nominee or agent for
any other Person, and not with a view to, or for resale in violation of
applicable law.
5.3. Authorization. Such Purchaser has all requisite power and authority
-------------
to execute and deliver this Agreement and each of the Transaction Documents and
to perform its obligations hereunder and thereunder. The execution, delivery
and performance of the Agreement and the transactions contemplated hereby have
been duly authorized by all necessary, action on the part of such Purchaser.
Each Transaction Document to which it is a party has been duly and validly
executed and delivered by such Purchaser and constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
5.4. Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of such Purchaser is
required in connection with the valid execution and delivery by such Purchaser
of the Transaction Documents to which it is a party, or the consummation by such
Purchaser of the transactions contemplated by the Transaction Documents to which
it is a party, except for such filings as have been made prior to the Closing.
22
<PAGE>
5.5. Organization, Good Standing and Qualification. Such Purchaser (i) is
----------------------------------------------
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (ii) has all requisite power and
authority to carry on its business, (iii) is duly qualified to transact business
and is in good standing in all jurisdictions where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to do so would not be material to the
Purchaser. Such Purchaser has the power and authority and is in possession of
all material franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders to (i) own, lease and operate its
properties and to carry on its business as now being conducted and (ii) execute
and deliver this Agreement and the documents and instruments contemplated hereby
and to consummate the transactions contemplated hereby.
SECTION 6
Conditions to Closing of Purchasers
-----------------------------------
Each Purchaser's obligation to purchase the Preferred Stock at the Closing
is, at the option of such Purchaser, subject to the fulfillment on or prior to
the Closing Date of the following conditions:
6.1. Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of such date.
6.2. Covenants. All covenants, agreements and conditions contained in this
---------
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
6.3. Opinion of Company's Counsel. The Purchasers shall have received from
----------------------------
Axelrod, Smith & Kirshbaum, counsel to the Company, an opinion addressed to the
Purchasers, dated the Closing Date, that is customary for a transaction of this
type.
6.4. No Material Adverse Change. Since December 31, 1996, there shall not
--------------------------
have occurred any events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a material effect.
6.5. Certificates of Designation. Each of the Series B Certificate of
---------------------------
Designation and the Series C Certificate of Designation shall have been duly
adopted and executed by the Company and filed with the Nevada Secretary of
State.
23
<PAGE>
6.6. State Securities Laws. All registrations, qualifications and Permits
---------------------
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
6.7. Issuance of Shares. The Company shall have issued (i) 3,771,421
------------------
shares of Series B Convertible Preferred Stock and (ii) 400,000 shares of Series
C Preferred Stock at the Closing pursuant to this Agreement, and shall have
delivered to each Purchaser a stock certificate or certificates representing
such Preferred Stock.
6.8. Certificates. Each of the Purchasers shall have received a
------------
certificate of the President or a Vice President of the Company to the effect
set forth in Sections 6.1, 6.2 and 6.4.
6.9. Registration Rights Agreement. The Company and all other parties
-----------------------------
thereto shall have executed and delivered the Registration Rights Agreement in
the form of Exhibit B hereto to Purchasers.
---------
6.10. Loan Agreement. The Company shall have executed and delivered
--------------
the Loan Agreement to Purchasers.
6.11. Conditions to Closing on Loan Agreement. All of the conditions
---------------------------------------
to closing on the Loan Agreement shall have been satisfied or waived.
6.12. Loan Warrants. The Company shall have executed and delivered the
-------------
Loan Warrants to Purchasers.
6.13. Parker Transaction. All of the conditions to closing with
------------------
respect to the Company's purchase of Parker's 50% interest in OnSite and
repayment in full the outstanding balance owed by the Company to an affiliate of
Parker pursuant to a loan agreement and term note dated as of December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of the Company's Common Stock issued pursuant to that loan agreement) shall have
been satisfied or waived.
6.14. Fairness Opinion. The Company shall have received a fairness
----------------
opinion from George K. Baum & Company on the transactions contemplated hereby.
6.15. Co-Sell Agreement. James S. Percell, Chairman and Chief Executive
-----------------
Officer of the Company, and all other parties thereto shall have executed and
delivered a co-sell agreement in the form attached hereto as Exhibit D (the "Co-
---------
Sell Agreement").
24
<PAGE>
SECTION 7
Conditions to Closing of the Company
------------------------------------
The Company's obligation to issue and sell the Preferred Stock at the
Closing is, at the option of the Company, subject to the fulfillment of the
following conditions:
7.1. Representations. The representations and warranties made by the
---------------
Purchasers in Section 5 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of such date.
7.2. Purchase Price. The Purchasers shall have tendered the purchase price
--------------
for the Preferred Stock of Eight Million Dollars ($8,000,000).
7.3. Certificate. The Company shall have received a certificate from the
-----------
Purchasers to the effect set forth in Section 7.1.
7.4. Opinion of Counsel. The Company shall have received from Wilmer,
------------------
Cutler & Pickering, counsel to Cahill, Warnock Strategic Partners Fund, L.P. and
Strategic Associates, L.P., an opinion addressed to the Company, dated the
Closing Date, that is customary for a transaction of this type.
7.5. State Securities Laws. All registrations, qualifications and Permits
---------------------
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
7.6. Registration Rights Agreement. The Purchasers and the Company shall
-----------------------------
have executed and delivered the Registration Rights Agreement in the form of
Exhibit B hereto to the Company.
- ---------
7.7. Loan Agreement. The Company and all other parties thereto shall have
--------------
executed and delivered the Loan Agreement and funding shall have occurred
thereunder.
7.8. Conditions to Closing on Loan Agreement. All of the conditions to
---------------------------------------
closing on the Loan Agreement shall have been satisfied or waived.
7.9. Parker Transaction. All of the conditions to closing with respect to
------------------
the Company's purchase of Parker's 50% interest in OnSite and repayment in full
the outstanding balance owed by the Company to an affiliate of Parker pursuant
to a loan agreement and term note dated as of December 19, 1996 (including
without limitation
25
<PAGE>
repurchasing warrants to purchase 300,000 shares of the Company's Common Stock
issued pursuant to that loan agreement) shall have been satisfied or waived.
7.10. Fairness Opinion. The Company shall have received a fairness
----------------
opinion from George K. Baum & Company on the transactions contemplated hereby.
7.11. Co-Sell Agreement. The Purchasers shall have executed and
-----------------
delivered the Co-Sell Agreement to James S. Percell, Chairman and Chief
Executive Officer of the Company.
7.12. Newpark Letter Agreement. The Company shall have received a
------------------------
letter agreement from Newpark Resources, Inc. ("Newpark") stating that Newpark
will not make or participate in any tender offer for, or obtain control of, the
Company for a period of two (2) years from the Closing Date.
SECTION 8
Covenants of the Company
------------------------
8.1. Information. Commencing on the Closing Date and continuing so long
-----------
as any shares of Preferred Stock remain outstanding (or such earlier time as
provided below), the Company shall deliver to the Purchasers the information
specified in this Section 8.1 unless any such Purchaser at any time
specifically requests that such information not be delivered to it:
(a) Quarterly Financial Statements. As soon as available, but in any
------------------------------
event not later than forty-five (45) days after the end of each quarterly fiscal
period (other than the last quarterly fiscal period in any fiscal year of the
Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form (i) the figures as of the
end of and for the comparable periods of the preceding fiscal year and (ii) the
figures reflected in the operating budget (if any) for such period as specified
in the financial plan of the Company. All such financial statements shall be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods reflected therein except as stated therein.
(b) Annual Financial Statements. As soon as available, but in any
---------------------------
event within one hundred twenty (120) days after the end of each fiscal year of
the Company, a copy of the audited consolidated balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year and the related audited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for such fiscal year, all in reasonable detail
and stating in comparative form the figures as at the end of and for the
immediately preceding
26
<PAGE>
fiscal year, accompanied (in the case of the audited consolidated financial
statements) by an opinion of an accounting firm of recognized national standing
selected by the Company, which opinion shall state that such accounting firm's
audit was conducted in accordance with generally accepted auditing standards.
All such financial statements shall be prepared in accordance with GAAP applied
on a consistent basis throughout the periods reflected therein except as stated
therein.
(c) Material Litigation. Within twenty (20) days after the Company
-------------------
learns of the commencement or written threat of commencement of any litigation
or proceeding against the Company, any of its Subsidiaries or any of the
Partnerships or any of their respective assets that could reasonably be expected
to have a material effect, written notice of the nature and extent of such
litigation or proceeding.
(d) Material Agreements. Within five (5) days after the expiration of
-------------------
the applicable cure period, if any, or if no such cure period exists within five
(5) days after the receipt by the Company of written notice of a default by the
Company or any of its Subsidiaries under any material contract, agreement or
document to which it is a party or by which it is bound, written notice of the
nature and extent of such default.
(e) Other Reports and Statements. Promptly upon any distribution to
----------------------------
its stockholders generally, to its directors or to the financial community of an
annual report, quarterly report, proxy statement, registration statement or
other similar report or communication, a copy of each such annual report,
quarterly report, proxy statement, registration statement or other similar
report or communication and promptly upon filing by the Company with the SEC or
with The National Market System, Inc., the National Association of Securities
Dealers, Inc. or any national securities exchange or other market system of any
all regular and other reports or applications, a copy of each such report or
application; and a copy of such report or statement and copies of all press
releases and other statements made available generally by the Company to the
public concerning material developments in the Company.
(f) Accountants' Management Letters, Etc. Promptly after receipt by
-------------------------------------
the Company, copies of all accountants' management letters and all management
and board responses to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material litigation or similar
matters relating to the Company and its Subsidiaries, which shall be prepared by
the Company or its officers and delivered to the third parties.
(g) Stockholders' Lists. Within sixty (60) days after the end of each
-------------------
fiscal year, a stockholders' list, showing the authorized and outstanding shares
by class (including the Common Stock equivalents of any convertible security),
the holders of all outstanding shares (both before giving effect to dilution and
on a fully diluted basis) and all outstanding options, warrants and convertible
securities, and detailing all options and warrants granted, exercised or lapsed
(including in each case, without limitation, all option and warrant exercise
prices, stock issuance prices' and other terms) and all shares issued or sold
(whether to directors or managers, in connection with financing or otherwise).
27
<PAGE>
8.2. Regulatory Matters. Each of the Company and Purchasers will (i) make
------------------
on a prompt and timely basis all governmental or regulatory notifications,
filings or submissions, as necessary for the consummation of the transactions
contemplated hereby, including any filings required pursuant to the Hart-Scott-
Rodino Antitrust Act, if required, (ii) use all reasonable efforts to cooperate
with the other and its representatives in (A) determining which notifications,
filings and submissions are required to be made prior to the Closing Date with,
and which consents, approvals, permits or authorizations are required to he
obtained prior to the Closing Date from, any governmental authority in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, and (B) timely making of all such
notifications, filings or submissions and timely seeking all such consents,
approvals, permits or authorizations, and (iii) use all reasonable efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other reasonable things necessary or appropriate to consummate the transactions
contemplated by this Agreement. The Purchasers shall have no obligation to
expend any funds in connection with the action to be taken by the Company
pursuant to this section; provided however that Purchasers shall pay their own
attorney fees, if any.
8.3. Access. So long as the Purchasers hold at least fifteen percent (15%)
------
of the Preferred Stock purchased hereunder, subject to the provisions of Section
8.5 hereof, upon the written request of the Purchasers, the Company shall afford
the Purchasers and its accountants, counsel and other representatives, full
access during normal business hours to all of its properties, books, contracts,
commitments and records, permit them to copy or make extracts therefrom and, the
Company shall furnish promptly to Purchasers all information concerning its
business, properties and personnel as Purchasers may reasonably request;
provided, however, that no investigation pursuant to this Section 8.3 shall
- -------- -------
affect any representations or warranties of either party hereunder.
8.4. Directors' and Officers' Insurance. The Company shall maintain a
----------------------------------
directors' and officers' liability insurance policy providing coverage in the
amount of not less than $1 million and having such other terms as are reasonably
acceptable to Purchasers.
8.5. Confidentiality. From and after the date of this Agreement, each of
---------------
the Company and Purchaser agree to hold, and will cause its employees, agents
and representatives to hold, in confidence, unless compelled to disclose by
judicial or administrative process or, in the written opinion of their counsel,
by other requirements of law, information furnished by the Company, on the one
hand, to Purchaser and information furnished by Purchaser, on the other hand, to
the Company in connection with the transactions contemplated by this Agreement,
and each of such persons agree that they shall not release or disclose such
information to any other person, except their respective officers, directors,
partners, employees, auditors, attorneys, financial advisors and other
consultants, advisors and representatives who need to know such information and
who have been informed of the confidential nature of such information and have
been directed to treat such information as confidential. The foregoing
provisions of this Section 8.5 shall not apply to any such information which (i)
becomes generally
28
<PAGE>
available to the public other than as a result of a disclosure by any person
bound hereunder, (ii) was available to a person bound hereunder on a non-
confidential basis prior to its disclosure hereunder, or (iii) becomes available
to any person bound hereunder on a non-confidential basis by virtue of the
disclosure thereof by a source other than the party providing such information
in reliance upon the protection of confidentiality reposed hereby.
Notwithstanding anything herein to the contrary, from and after the date of
this Agreement, if either party to this Agreement or any agreement contemplated
herein shall be required by law to file as part of any public record this
Agreement or the agreements relating to any transactions contemplated hereby,
both parties shall jointly identify those provisions, if any, of such agreements
that shall remain confidential and shall request and seek confidential treatment
of those provisions in accordance with the applicable provisions of any
applicable law, rule or regulation, and shall take all reasonable actions
necessary to secure such confidential treatment.
8.6. Shelf Registration.
------------------
(a) Prior to March 1, 1998, the Company shall prepare and file with
the SEC a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
-----
Registration") registering the resale from time to time by Purchasers and their
- ------------
transferees and distributees of all of the Registrable Securities (the "Initial
-------
Shelf Registration"). The Registration Statement for any Shelf Registration
- ------------------
shall be on Form S-3 or another appropriate form permitting registration of such
Registrable Securities for resale by Purchasers and their transferees and
distributees in the manner or manners designed by them. The Company shall use
its best efforts to cause the Initial Shelf Registration to become effective
under the Securities Act as promptly as is practicable and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the end
of the Effectiveness Period. If the Company fails to file the Initial Shelf
Registration prior to March 1, 1998, then, unless such a delay is attributable
to any Purchaser not timely providing information reasonably requested by the
Company, a dividend shall be payable upon the Preferred Stock of 7% per annum
until such Initial Shelf Registration is filed. In such instance, upon filing
such Initial Shelf Registration, the dividend shall revert to 0%.
Notwithstanding the foregoing, until the Initial Shelf Registration is declared
effective by the Securities and Exchange Commission, no shares of Preferred
Stock shall be converted pursuant to the Series B Certificate of Designation.
(b) If the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below) ceases to be effective for any reason at any
time during the Effectiveness Period (other than because all Registrable
Securities shall have been sold or shall have ceased to be Registrable
Securities), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional Shelf
Registration covering all of the Registrable Securities (a "Subsequent Shelf
----------------
Registration"). If a
- -------------
29
<PAGE>
Subsequent Shelf Registration is filed, the Company shall use all reasonable
efforts to cause the Subsequent Shelf Registration to become effective as
promptly as is practicable after such filing and to keep such Registration
Statement continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration, if required
by the Securities Act or the SEC, or if reasonably requested by Purchasers.
(d) From time to time, the Company shall prepare and file with the SEC
a post-effective amendment to the Shelf Registration or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or any other required document, so that such Registration
Statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and so that, as thereafter delivered to
purchasers of the Registrable Securities being sold thereunder, such Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provide Purchasers copies of any documents filed in such numbers as
Purchasers shall reasonably request; and inform Purchasers that the Company has
complied with its obligations and that the Registration Statement and related
Prospectus may be used for the purpose of selling all or any of such Registrable
Securities (or that, if the Company has filed a post-effective amendment to the
Shelf Registration which has not yet been declared effective, the Company will
notify Purchasers to that effect, will use its best efforts to secure promptly
the effectiveness of such post-effective amendment and will immediately so
notify Purchasers when the amendment has become effective).
8.7. Foreign Corrupt Practices. Neither the Company nor any Subsidiary nor
-------------------------
any of their respective officers, directors, employees or agents will offer or
agree to offer anything of value to any governmental official, political party
or candidate for government office nor will it otherwise take any action that
would cause the Company to be in violation of the U.S. Foreign Corrupt Practices
Act or any law of similar effect.
8.8. Issuance of Additional Warrants. Upon the earlier of (i) an Event of
-------------------------------
Default (as defined in the Loan Agreement) or (ii) twenty six (26) months after
the Closing Date, the Company shall issue an additional warrant to each
Purchaser in the same amount as the Warrant received on the Closing Date;
provided, however, that if the Loans (as defined in the Loan Agreement) are
- -------- -------
paid in full prior to twenty six (26) months after the Closing Date, the Company
will not be obligated to issue any additional warrants under this Agreement.
SECTION 9
30
<PAGE>
Miscellaneous
-------------
9.1. Amendment; Waiver. Neither this Agreement nor any provision hereof
-----------------
may be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) the Purchasers.
9.2. Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
(a) if to the Company:
Environmental Safeguards, Inc.
2600 South Loop West, Suite 645
Houston, TX 77054
Attn: James S. Percell
Telephone No.: 713-641-3838
Facsimile No.: 713-641-0756
with a copy to:
Axelrod, Smith & Kirshbaum
5300 Memorial, Suite 700
Houston, TX 77007
Attn: Robert D. Axelrod, Esq.
Telephone No.: 713-861-1996
Facsimile No.: 713-552-0202
(b) if to the Purchasers:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David L. Warnock
Telephone No.: 410-895-3800
Facsimile No.: 410-895-3805
31
<PAGE>
and
Newpark Resources, Inc.
3850 N. Causeway
Suite 1770
Metairie, LA 70002-1756
Telephone No.: 504-838-8222
Facsimile No.: 504-833-9506
Attn: James Cole
and
James H. Stone
Stone Energy
909 Poydras Street, Suite 2650
New Orleans, LA 70112
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: George P. Stamas, Esq.
Telephone No.: 410-986-2800
Facsimile No.: 410-986-2828
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
9.3. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9.4. Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. No party hereto may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other parties hereto.
32
<PAGE>
9.5. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of any Purchaser, and the sale
and purchase of the Preferred Stock and payment therefor for a period of two (2)
years; provided, however, that the representations and warranties made in
-------- -------
Sections 4.17 (Environmental), 4.20 (Benefits) and 4.21 (Taxes) shall survive
the applicable statutory period of limitations with respect to any liabilities
covered thereby.
9.6. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written (including, without limitation, the
Series B Convertible Preferred Stock Purchase Agreement, dated November 17,
1997), among the parties hereto and thereto or their respective agents with
respect to or in connection with the subject matter hereof.
9.7. Choice of Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Maryland, without regard to principles
of conflict of laws.
9.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
9.9. Costs and Expenses. The Company and Purchasers shall each pay their
------------------
own respective fees and disbursements incurred in connection with this
Agreement; provided, however, that the Company shall pay all fees and expenses
-------- -------
of any required governmental filings or other filings.
9.10. No Third-Party Beneficiaries. Nothing in this Agreement will
----------------------------
confer any third party beneficiary or other rights upon any Person (specifically
including any employees of the Company and its Subsidiaries) or entity that is
not a party to this Agreement.
9.11. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Purchasers
and their Affiliates, and their respective partners, co-investors, officers,
directors, employees, agents, consultants, attorneys and advisers (each, an
"Indemnified Party"), from and against any and all actual losses, claims,
- ------------------
damages, liabilities, costs and expenses (including, without limitation,
environmental liabilities, costs and expenses and all reasonable fees, expenses
and disbursements of counsel), joint or several (hereinafter collectively
referred to as a "Loss"), which may be
----
33
<PAGE>
incurred by or asserted or awarded against any Indemnified Party in connection
with or in any manner arising out of or relating to any investigation,
litigation or proceeding or the preparation of any defense with respect thereto,
arising out of or in connection with or relating to this Agreement, the other
Transaction Documents or the transactions contemplated hereby or thereby or any
use made or proposal to be made with the proceeds of the Purchasers' purchase of
the Preferred Stock pursuant to this Agreement, whether or not such
investigation, litigation or proceeding is brought by the Company, any of its
Subsidiaries, shareholders or creditors, whether or not any of the transactions
contemplated by this Agreement or the other Transaction Documents are
consummated, except to the extent such Loss is found in a final judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct.
(b) An Indemnified Party shall give written notice to the Company of
any claim with respect to which it seeks indemnification within ten (10) days
after the discovery by such parties of any matters giving arise to a claim for
indemnification pursuant to Section 9.11(a); provided that the failure of any
--------
Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations under this Section 9.11, except to the extent that
the Company is actually prejudiced by such failure to give notice. In case any
such action or claim is brought against any Indemnified Party, the Company shall
be entitled to participate in and, unless in the reasonable good faith judgment
of the Indemnified Party a conflict of interest between such Indemnified Party
and the Company may exist in respect of such action or claim, to assume the
defense thereof, with counsel satisfactory to the Indemnified Party and after
notice from the Company to the Indemnified Party of its election so to assume
the defense thereof, the Company shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the Company elects in writing to
assume and does so assume the defense of any such action or claim the
Indemnified Party's costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Losses subject to
indemnification hereunder. If the Company elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The Company
shall not be liable for any settlement of any action or claim effected without
its written consent. Anything in this Section 9.11 to the contrary
notwithstanding, the Company shall not, without the Indemnified Party's prior
written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof that imposes any future obligation on the
Indemnified Party or that does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party, a release
from all liability in respect of such claim.
[Remainder of Page Intentionally Left Blank]
34
<PAGE>
SERIES B CONVERTIBLE PREFERRED
AND SERIES C PREFERRED
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed effective as of the date first above written.
THE COMPANY:
ENVIRONMENTAL SAFEGUARDS, INC.
By: /s/ James S. Percell
---------------------------------------------
Name: James S. Percell
Title: Chairman and Chief Executive Officer
PURCHASERS:
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ David L. Warnock
---------------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC,
its General Partner
By: /s/ David L. Warnock
---------------------------------------------
Name: David L. Warnock
Title: Managing Member
35
<PAGE>
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
---------------------------------------------
Name: James D. Cole
Title: Chairman of the Board, President and
Chief Executive Officer
JAMES H. STONE
/s/ James H. Stone
------------------------------------
36
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
Name Total Number of Shares Total Cost
- ---- ---------------------- ----------
<S> <C> <C> <C>
Series B Series C
Cahill, Warnock Strategic
Partners Fund, L.P. 1,722,900 182,732 $3,654,642.86
--------- ------- -------------
Strategic Associates, L.P. 95,464 10,125 $ 202,500.00
--------- ------- -------------
Newpark Resources, Inc. 1,885,711 200,000 $4,000,000.00
--------- ------- -------------
James H. Stone 67,347 7,143 $ 142,857.14
--------- ------- -------------
</TABLE>
37
<PAGE>
EXHIBIT B
---------
Registration Rights Agreement
38
<PAGE>
EXHIBIT C
---------
Certificate of Designation of Series B Convertible Preferred Stock
39
<PAGE>
EXHIBIT C-1
-----------
Certificate of Designation of Series C Preferred Stock
40
<PAGE>
EXHIBIT D
----------
Co-Sale Agreement
41
<PAGE>
EXHIBIT 4.0
- --------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
DATED DECEMBER 17, 1997
BY AND AMONG
ENVIRONMENTAL SAFEGUARDS, INC.
AND
NATIONAL FUEL & ENERGY, INC.,
AND
ONSITE TECHNOLOGY, L.L.C.
AS BORROWERS
AND
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
AND
NEWPARK RESOURCES, INC.
AND
JAMES H. STONE,
AS LENDERS
AND
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.,
AS AGENT FOR EACH LENDER
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS............................................. 2
1.1. Definitions............................................. 2
SECTION 2 THE LOAN................................................ 12
2.1. Commitment for the Loan................................. 12
2.2. Interest on the Loan.................................... 13
2.3. Payments................................................ 14
2.4. Late Charges............................................ 14
2.5. Prepayment; No Revolver................................. 14
2.6. Additional Warrant if No Prepayment by December 12, 2001 15
SECTION 3 COLLATERAL.............................................. 15
3.1. Grant of Security Interest.............................. 15
3.2. Obligations Secured..................................... 16
3.3. Collateral Disclosure List.............................. 16
SECTION 4 APPLICATION OF PROCEEDS................................. 16
4.1. Loan.................................................... 16
SECTION 5 REPRESENTATIONS AND WARRANTIES OF BORROWERS............. 16
5.1. Organization; Charter and Bylaws........................ 17
5.2. Power and Authority..................................... 17
5.3. No Violation............................................ 17
5.4. Litigation.............................................. 17
5.5. Financial Statements.................................... 18
5.6. Compliance with Licenses and Laws....................... 18
5.7. Investments and Guaranties.............................. 18
5.8. Title to Properties; Liens.............................. 18
5.9. ERISA................................................... 18
5.10. Chief Executive Office.................................. 21
5.11. Inventory............................................... 21
5.12. Indebtedness............................................ 21
5.13. Compliance with Environmental, Health and Safety Laws... 22
5.14. Solvency................................................ 23
5.15. Security Interests...................................... 23
5.16. Taxes................................................... 23
5.17. No Event of Default..................................... 23
5.18. Investment Company Act.................................. 23
5.19. Public Utility Holding Company Act...................... 23
i
<PAGE>
5.20. Full Disclosure......................................... 23
5.21. Foreign Person.......................................... 24
5.22. Capitalization.......................................... 24
5.23. No Indebtedness to Shareholders, Officers, Directors or
Affiliates............................................. 25
5.24. Foreign Corrupt Practices............................... 25
5.25. Labor Agreements and Actions............................ 25
SECTION 6 THE CLOSING; CONDITIONS PRECEDENT....................... 26
6.1. Time and Place of Closing............................... 26
6.2. Conditions on Closing Date.............................. 26
6.3. Additional Conditional Precedent........................ 29
SECTION 7 BORROWER'S AFFIRMATIVE COVENANTS........................ 29
7.1. Punctual Payment and Performance........................ 29
7.2. Taxes and Other Charges; Accounts Payable............... 29
(a) Taxes and Other Charges........................ 29
(b) Accounts Payable............................... 30
7.3. Conduct of Business, etc. .............................. 30
(a) Types of Business.............................. 30
(b) Maintenance of Properties...................... 30
7.4. Compliance with Applicable Laws......................... 30
7.5. Information............................................. 31
(a) Annual Audited Financial Statements............ 31
(b) Quarterly Financial Statements................. 31
(c) Additional Information......................... 31
(d) Immediate Notices.............................. 31
(e) Taxes.......................................... 32
(f) Inventory Listing.............................. 32
(g) Annual Budget.................................. 32
7.6. Insurance............................................... 33
7.7. Inventory and Equipment Insurance....................... 33
7.8. Corporate Existence; Compliance with Laws............... 33
7.9. Issuance of Additional Warrants......................... 33
7.10. Key Man Insurance....................................... 33
7.11. Visits and Inspections.................................. 33
7.12 ERISA Compliance........................................ 34
SECTION 8 THE AGENT............................................... 35
8.1. Appointment............................................. 35
8.2. Nature of Duties........................................ 35
(a) In General..................................... 35
(b) Express Authorization.......................... 36
8.3. Rights, Exculpation, Etc. .............................. 36
8.4. Reliance................................................ 37
ii
<PAGE>
8.5. Indemnification......................................... 38
8.6. Cahill, Warnock Strategic Partners Fund, L.P., as
Agent Individually..................................... 38
8.7. Successor Agent......................................... 38
(a) Resignation.................................... 38
(b) Appointment of Successor....................... 39
(c) Successor Agent................................ 39
8.8. Collateral Matters...................................... 39
(a) Release of Collateral.......................... 39
(b) Confirmation of Authority, Execution of
Releases...................................... 40
(c) Absence of Duty................................ 40
8.9. Agency for Perfection................................... 40
8.10. Exercise of Remedies.................................... 41
8.11. Consents................................................ 41
8.12. Dissemination of Information............................ 41
SECTION 9 BORROWER'S NEGATIVE COVENANTS........................... 42
9.1. Disposition of Collateral............................... 42
9.2. Indebtedness............................................ 42
9.3. Liens................................................... 42
9.4. Dividends............................................... 43
9.5. Loans................................................... 43
9.6. Guarantees.............................................. 43
9.7. Merger.................................................. 43
9.8. Affiliates.............................................. 43
9.9. Financial Covenants..................................... 43
SECTION 10 ADDITIONAL COVENANTS AND ASSURANCES..................... 44
10.1. Additional Assurances.................................. 44
10.2. Possession Following Event of Default.................. 44
10.3. Additional Collateral Actions.......................... 44
10.4. Verification of Accounts and Leases.................... 45
10.5. Inspection of Collateral............................... 45
10.6. Power of Attorney...................................... 45
10.7. Insurance Assignment................................... 45
10.8. Payments by Lender..................................... 45
10.9. Access to Records...................................... 46
10.10. License to Use Premises................................ 46
10.11. Instruments Evidencing Accounts........................ 46
10.12. Continuing Security Interest........................... 46
10.13. No Lender Liability.................................... 47
SECTION 11 EVENTS OF DEFAULT...................................... 47
11.1. Events of Default...................................... 47
iii
<PAGE>
SECTION 12 AGENT'S RIGHTS AND REMEDIES UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT...................................... 49
12.1. Remedies............................................... 49
12.2. Exercise of Remedies................................... 49
12.3. Disposition of Collateral.............................. 49
12.4. Cumulative Remedies.................................... 50
12.5. Waivers................................................ 50
SECTION 13 INDEMNIFICATION, ETC................................... 50
13.1. Environmental Indemnity................................ 50
13.2. GENERAL INDEMNITY...................................... 50
13.3. Exculpation............................................ 52
13.4. Collateral Secures Indemnification..................... 52
SECTION 14 MISCELLANEOUS PROVISIONS............................... 52
14.1. Notices................................................ 52
14.2. No Waiver.............................................. 54
14.3. Assignment............................................. 54
14.4. Headings............................................... 54
14.5. Term................................................... 55
14.6. Waiver of Remedies..................................... 55
14.7. Further Assurances..................................... 55
14.8. Counterparts........................................... 55
14.9. Fees and Expenses...................................... 55
14.10. Consent of all Lenders................................. 56
14.11. Usury Laws............................................. 56
SECTION 15 GOVERNING LAW; JURISDICTION............................ 57
15.1. Governing Law.......................................... 57
15.2. SUBMISSION TO JURISDICTION............................. 57
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of December 17,
1997 is entered into by and among CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.,
a limited partnership organized under the laws of the State of Delaware, and
STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of
the State of Delaware, NEWPARK RESOURCES, INC., a Delaware corporation, and
JAMES H. STONE, an individual whose address is c/o Stone Energy, 909 Poydras
Street, Suite 2650, New Orleans, LA 70112 (each a "Lender" and collectively, the
"Lenders") and CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., in its capacity as
both collateral and administrative agent for each of the Lenders (the "Agent")
and ENVIRONMENTAL SAFEGUARDS, INC. ("EVSF" or the "Company"), a Nevada
corporation, NATIONAL FUEL & ENERGY, INC. ("NFE"), a Wyoming corporation and
wholly-owned Subsidiary of EVSF, and ONSITE TECHNOLOGY, L.L.C. ("OnSite"), a
limited liability company organized under the laws of the State of Oklahoma
(collectively, each a "Borrower" and collectively the "Borrowers").
WHEREAS, Borrowers have requested that Lenders advance an initial amount of
$6,000,000 upon the terms and conditions set forth in this Agreement and the
Loan Documents (as hereinafter defined) and a second tranche of $5,000,000 upon
the terms and conditions set forth in this Agreement and the Loan Documents; and
WHEREAS, each Borrower has agreed to pledge and to grant security interests
in all of its interests in all of its assets, where applicable, as collateral
for the loan; and
WHEREAS, EVSF has agreed to issue Warrants to each Lender in consideration of
the Loan; and
WHEREAS, EVSF also has agreed to issue and sell its Series B Convertible
Preferred Stock and Series C Preferred Stock (collectively, the "Preferred
Stock") to the Lenders pursuant to a Stock Purchase Agreement of even date
herewith; and
WHEREAS, concurrent with the Closing (as defined in Section 6.1), EVSF shall
purchase the 50% interest of Parker Drilling Investment Company ("Parker") in
OnSite and repay in full the outstanding balance owed by EVSF to Casuarina, Ltd.
("Casuarina"), a Bermuda corporation and wholly-owned subsidiary of Parker
pursuant to a loan agreement and term note dated as of December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of EVSF's Common Stock issued pursuant to that loan agreement) (the "Parker
Transaction").
WHEREAS, Lenders severally are willing to make such advance to Borrowers
jointly and severally upon such terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereby agree as follows:
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SECTION 1
DEFINITIONS
-----------
1.1. Definitions.
----------------
As used herein the following terms have the meanings set forth below:
"Accounts" means all of Borrowers' accounts, accounts receivable, contract
rights, notes, bills, drafts, acceptances, instruments, documents, chattel paper
and all other debts, obligations and liabilities in whatever form owing to
Borrowers from any Person for goods sold by it or for services rendered by it,
or however otherwise established or created; all guarantees and security
therefor, all right, title and interest of each Borrower in the goods or
services which gave rise thereto, including rights to reclamation and stoppage
in transit and all rights of an unpaid seller of goods or services; whether any
of the foregoing be now existing or hereafter arising, now or hereafter received
by or owing or belonging to Borrowers.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person and any other Person
that is an officer, director, or full time employee of such other Person.
"Agent" means Cahill, Warnock Strategic Partners Fund, L.P. or any
successor Agent appointed pursuant to Section 8.
"Agreement of Purchase and Sale" shall mean the agreement pursuant to which
Borrower is acquiring Parker's interest in OnSite.
"Business Day" means any day (except a Saturday, Sunday or other day) on
which commercial banks are open for domestic and international business,
including dealing in dollar deposits in the City of Baltimore, Maryland.
"Capital Equipment" means machinery and equipment acquired by a Person and
used in such Person's operations, excluding furnishings, fixtures and leasehold
improvements.
"Casuarina" means Casuarina, Ltd., a Bermuda corporation and wholly-owned
subsidiary of Parker.
"Change of Control" means any event or series of events by which (i) any
Person or group obtains a majority (by voting or otherwise) of the securities of
EVSF ordinarily having the right to
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vote in the election of directors; (ii) during any two year period, individuals
who at the beginning of any such two year period constituted the Board of
Directors of EVSF (together with any new directors whose election by such Board
or whose nomination for election by the stockholders of EVSF was approved by a
vote of the majority of the directors then still in office who were either
directors at the beginning of such period or whose election, recommendation, or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of EVSF then in office; (iii)
the merger, consolidation, reorganization, recapitalization, dissolution or
liquidation of EVSF if as a result the current stockholders no longer own more
than 50% of the voting securities of EVSF, (iv) any sale, lease, exchange or
other transfer of all, or substantially all, of the assets of EVSF; or (v) the
adoption of a plan leading to the liquidation or dissolution of EVSF.
"Closing" shall each have the respective meaning set forth in Section 6.1.
"Closing Date" means December 17, 1997, provided that Borrower has
--------
satisfied all of the conditions precedent in Section 6.1, or such other time as
may be specified by Agent in its sole discretion.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and published interpretations thereunder. Section
references to the Code and its regulations are to those provisions as in effect
at the date of this Agreement, together with any subsequent provisions of the
Code that amend, supplement, or replace the provisions to which reference is
made.
"Collateral" has the meaning given such term in Section 3 hereof.
"Collateral Disclosure List" has the meaning set forth in Section 3.3.
"Commitment" means the obligation of each Lender, subject to the terms and
conditions of this Agreement, to make the Loan to the Borrowers in an aggregate
amount not exceeding the Commitment Amount.
"Commitment Amount" means an aggregate unpaid amount of principal
outstanding under the Agreement not exceeding Eleven Million Dollars
($11,000,000) as set forth in Section 2.
"Commitment Period" means the period from and including the Closing Date to
and including the Maturity Date.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored or
maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of any Closing
Date, in each case with respect to any present or former directors, employees,
or agents of the Company or the Subsidiaries.
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<PAGE>
"Company Plan" means, as of any Closing Date, any Employee Benefit Plan for
which the Company or any Subsidiary is the "plan sponsor" (as defined in Section
3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the Company or any
Subsidiary or to which the Company or any Subsidiary is obligated to make
payments, in each case with respect to any present or former employees of the
Company or the Subsidiaries.
"Contracts" means all contracts, agreements or understandings and all
rights thereunder to which any Person now or hereafter shall be a party or by
which any Person nor or hereafter shall be bound.
"Convertible Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $.001 per share.
"Current Liabilities" means for any period all liabilities of a Person
which would, in accordance with GAAP, be classified as current liabilities.
"Debt or Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments issued by
such Person, (iii) all obligations of such Person to pay the deferred purchase
price of assets, property or services, (iv) all obligations of such Person under
any lease of property, real or personal, the obligations of the lessees in
respect of which are required in accordance with GAAP to be capitalized on a
balance sheet of the lessee, (v) all reimbursement obligations of any Person in
respect of letters of credit or other similar instruments, (vi) all debt of
others secured by a lien on any asset or property of any Person, whether or not
such debt is otherwise an obligation of such Person, and (vii) all debts or
obligations guaranteed by any Person.
"Default Rate" shall have the meaning set forth in Section 12.2.
"Demand" means written notice from Agent addressed and sent in
accordance with Section 13(a) to a Borrower requiring payment of a Loan or
Loans, in whole or in part, in the sole discretion of the Agent.
"Dividends" or "Distributions" means, for the applicable period, the
aggregate of all amounts paid or payable (without duplication) as dividends,
distributions or owner withdrawals with respect to the shares of stock of a
Borrower organized as a corporation or the limited liability company interests
of a Borrower organized as a limited liability company, as the case may be,
whether now or hereafter outstanding and includes any purchase, redemption or
other retirement of any shares of stock of a Borrower organized as a corporation
or any limited liability company interests of a Borrower organized as a limited
liability company, as the case may be, directly or indirectly through a
Subsidiary of a Borrower or otherwise, and includes return of capital by a
Borrower to its stockholders or members, as the case may be.
"Dollars" and "$" means lawful money of the United States. Any
reference to
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<PAGE>
payment means payment in immediately available Dollar funds.
"Employee Benefit Plan" has the meaning given in Section 3(3) of
ERISA.
"Environmental Complaint" shall mean any citation, complaint, demand,
order, or notice by any person, association, entity, or governmental authority
alleging, asserting or claiming that Borrower or any of its properties: (i) is
in material violation of applicable Environmental Laws, (ii) does not comply in
all material respects with applicable Environmental Laws, or (iii) does not have
or maintain all material permits, licenses, and/or approvals required under
applicable Environmental Laws.
"Environmental Laws" shall mean any one or more of the following: (i)
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42
U.S.C. (S) 9601 et seq. ("CERCLA"), (ii) the Resource Conservation and Recovery
-- ---
Act, as amended by the Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.
(S) 6901 et seq. ("RCRA"), (iii) the Clean Air Act, 42 U.S.C. (S) 7401 et seq.,
-- --- -- ---
(iv) the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq., (v)
-- ---
the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (vi) the Federal
-- ---
Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f to 300j-11, (vii) the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. (S) 1101 et seq.,
-- ---
(viii) the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq.,
-- ---
(ix) applicable laws of the states of Nevada, Texas, Oklahoma, Utah and Wyoming,
and (x) all other foreign, federal, state, tribal and local laws (whether common
or statutory), rules, regulations, consent agreements, compliance schedules, and
orders directly and/or indirectly relating to public health and safety, air
pollution, water pollution, noise control, wetlands, oceans, waterways, and/or
the presence, use, generation, manufacture, transportation, processing,
treatment, handling, discharge, release, disposal, or recovery of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
materials and/or underground storage tanks, as each of the foregoing laws,
rules, regulations and orders may be amended, supplemented, and/or reauthorized
from time to time.
"Equipment" means all "equipment," as such term is defined in (S)9-
109(2) of the UCC, now or hereafter owned by a Borrower, and also means and
includes all personal property constituting machinery, equipment, plant,
furnishings, fixtures, and other fixed assets now owned or hereafter acquired by
a Borrower, including (without limitation) all items of machinery and equipment
of any kind, nature and description, as well as vessels, trucks and vehicles of
every description, trailers, handling and delivery equipment and office
furniture, and all additions to, substitutions for, replacements of or
accessions to any of the foregoing items and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, and all fuel for any thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder. Section references to ERISA and its regulations are
to those provisions as in effect at the date of this Agreement, together with
any subsequent provisions of ERISA that amend, supplement, or
5
<PAGE>
replace the provisions to which reference is made.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) that, together with a Borrower, would be treated as a single employer
under Section 4001(b) of ERISA or that would be deemed to be a member of the
same "controlled group" within the meaning of Section 414(b), (c), (m), and (o)
of the Code (provided, however, that when the subject of the provision is a
Multiemployer Plan only subsections (b) and (c) of Section 414 shall be taken
into account).
"Event of Default" means any event specified in Section 11.
"Fully Registered Company Common Stock" shall mean the unrestricted
common stock, par value $.001 per share, of EVSF that has been registered with
the SEC under the Securities Act and is freely transferable without restriction.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date hereof, consistently applied.
"General Intangibles" means all "general intangibles," as such term is
defined in (S)9-106 of the UCC, and all intangible personal property not
included in Accounts, or in Instruments and Documents, now or hereafter owned or
acquired by a Borrower, and also means and includes all right, title and
interest of a Borrower now or hereafter owned or acquired in intellectual
property, patents, patent applications, goodwill, trademarks, trademark
applications, trade names, service marks, copyrights, permits, licenses,
federal, state, or local tax refunds, claims under insurance policies (whether
or not Proceeds), other rights (if any) to payment, rights of set off, chooses
in action, rights under judgments, computer programs and software, customer
lists, and all contracts and agreements to, or of which a Borrower is a party or
beneficiary, and all leasehold interests of a Borrower in real estate to the
extent considered personal property under applicable law.
"Hazardous Materials" shall mean any one or more of the following
substances, wastes and materials:
(a) Any substance, waste or material defined as a "hazardous
substance," "hazardous material," "hazardous waste," "pollutant,"
"contaminant," "toxic material," or "toxic substance," in any of the
applicable Environmental Laws, or in the standards, criteria, rules and/or
regulations promulgated pursuant to any of said Environmental Laws; and
(b) Any substance, waste or material, the presence of which
requires investigation or remediation under any Environmental Laws.
"Interest Pledge Agreement" means the Limited Liability Company
Interest Assignment and Agreement by and among EVSF, NFE and the Agent, dated as
of December 17, 1997.
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"Instruments" and "Documents" means all "instruments," "documents,"
"deposit accounts," and "chattel paper," as defined in (S)9-105 of the UCC, all
securities, and includes (without limitation) all warehouse receipts and other
documents of title, policies and certificates of insurance, checking, savings,
and other bank accounts, certificates of deposit, checks, notes and drafts, now
or hereafter acquired, to the extent not included in Accounts.
"Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished under contracts
of service, finished goods, work in process, raw materials, materials used or
consumed by a Borrower, parts, supplies, all wrapping, packaging, advertising,
labeling, and shipping materials, devices, names and marks, all contracts,
rights and documents relating to any of the foregoing, whether any of the
foregoing be now existing or hereafter arising, wherever located, now owned or
hereafter acquired by Borrower.
"Knowledge" or derivations thereof shall mean the knowledge of the
officers of a Borrower and each Subsidiary, and, with respect to ERISA, each
person who conducts human resource and employee benefits management functions
for or any Subsidiary, whether or not an officer of a Borrower or such
Subsidiary.
"Leases" means all leases from time to time outstanding between a
Borrower and other Persons for the lease of personal property, including without
limitation all computer hardware, peripheral equipment and software, all of
which are pledged to Lender to secure payment of the Loans and other Obligations
hereunder.
"Lien" means any mortgage, pledge, assignment, lien, charge,
encumbrance or security interest of any kind whatsoever, or the interest of a
vendor or lessor under a conditional sale, title retention or capital lease
Agreement.
"Loan" means a term loan made to Borrowers pursuant to Section 2.1.
"Loans" means the term loans, collectively, made to Borrowers pursuant
to Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Collateral
Disclosure List, the Stock Pledge Agreements, the Interest Pledge Agreement, the
Patent Security Agreement and the Trademark Security Agreement and any and all
other agreements, instruments and documents now existing or hereafter entered
into, relating to, evidencing or securing the Obligations.
"Maturity Date" means December 17, 2002.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA
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"Net Earnings" means net income of a Person from continuing operations
(or deficit) excluding all extraordinary and nonrecurring items, as determined
in accordance with GAAP.
"Note" means the term note evidencing the Loan, in the form of the
term note attached hereto as Exhibit A, as amended or modified, from time to
---------
time (as the context permits).
"Obligations" means all loans, advances, interest, fees, debts,
liabilities, guaranties, obligations (including without limitation contingent
obligations under guaranties and letters of credit), agreements, undertakings,
covenants and duties owing or to be performed or observed by a Borrower to or in
favor of Agent and/or Lenders, of every kind and description (whether or not
evidenced by any note or other instrument; for the payment of money; arising out
of the Loans, this Agreement or any other Agreement between Lenders and/or Agent
and a Borrower or any other instrument of a Borrower in favor of Lenders and/or
Agent; arising out of or relating or similar to transactions described herein;
or contemplated as of the Closing Date), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, including
without limitation all interest, fees, charges, and amounts chargeable to a
Borrower under Section 10.
"OnSite" means OnSite Technology, L.L.C., a limited liability company
organized under the laws of the State of Oklahoma.
"OnSite Colombia" means OnSite Colombia, Inc., a Cayman Island
corporation.
"Patent Security Agreement" means the Patent Security Agreement, dated
as of December 17, 1997, by and among the Borrowers and the Agent.
"Parker" means Parker Drilling Company, an Oklahoma corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA or other applicable
federal law.
"Permits" shall mean all governmental licenses, permits, certificates,
orders, concessions, grants, franchises, approvals and authorizations necessary
for the conduct of the business of a Borrower.
"Permitted Indebtedness" has the meaning given to such term in Section
9.2.
"Permitted Liens" has the meaning given such term in Section 9.3.
"Person" means any individual, partnership, firm, association,
business enterprise, trust, estate, company, joint venture, governmental
authority, corporation or other entity.
8
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"Plan" means any employee plan subject to Title IV of ERISA maintained
for employees of Borrower, any subsidiary of Borrower or any other trade or
business under common control with Borrower within the meaning of (S)414(c) of
the Internal Revenue Code or the regulations thereunder.
"Proceeds" has the meaning given such term under the UCC and, in any
event, includes (but is not limited to) (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any Person acting under
color of governmental authority), or (c) whatever is received upon any
collection, exchange, sale, lease or other disposition of any of the Collateral
and any property into which any of the Collateral is converted, whether cash or
non-cash proceeds, and (d) any and all other products of, or any rents, profits
or other amounts from time to time paid or payable under, or in connection with,
any of the Collateral.
"Preferred Stock" means the Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock, par value $.001 per share.
"Prohibited Transaction" shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Qualified Plan" means any Employee Benefit Plan that meets, purports
to meet, or is intended to meet the requirements of Section 401(a) of the Code.
"Real Estate" means all real property now or hereafter owned, leased
or acquired by any Person and all rights thereto, including all appurtenances,
fixtures and ascensions thereto, and all substitutions on replacements
therefore, now owner or hereafter acquired by any Person or to which any Person
now has or hereafter acquires any rights or interests.
"Related Collateral" means all goodwill; cash; deposit accounts;
claims under insurance policies (whether or not proceeds of other Collateral);
rights of set off; rights under judgments; tort claims and chooses in action;
computer programs and software; books and records (including without limitation
all electronically recorded data); contract rights; and all contracts and
agreements to or of which it is a party or beneficiary, whether any of the
foregoing be now existing or hereafter arising, now or hereafter received by or
belonging to any Person.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the indoor
or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor
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environment; or (z) perform pre-remedial studies and investigations or post-
remedial monitoring and care.
"Reportable Event" shall mean any event described in Section 4043(b)
of ERISA with respect to an Employee Benefit Plan subject to Title IV of ERISA,
other than those as to which the PBGC has waived the notice requirement.
"Requirement of Law" shall mean, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person and any law, treaty, rule or regulation, any determination of an
arbitrator or a court or other governmental authority or agency, or the terms of
any license, permit, certificate, authorization or other direction or
requirement (including, without limitation, any of the foregoing which relate to
energy regulations, drilling or production regulations, occupational, safety and
health standards or controls, and requirements under the Environmental Laws), in
each case applicable to or binding upon such Person or to which any of its
property is subject.
"Responsible Officer" means for each Borrower, its chief executive
officer or president or, with respect to its financial matters, its chief
financial officer or such similar Member with respect to a limited liability
company.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Pledge Agreements" means the Stock Pledge and Hypothecation
Agreement between EVSF, and the Agent, as Pledgee, of even date herewith and the
Stock Pledge and Hypothecation Agreement between OnSite, and the Agent, as
Pledgee, of even date herewith.
"Stock Purchase Agreement" mans the Series B Convertible Preferred and
Series C Preferred Stock Purchase Agreement of even date herewith by and among
Environmental Safeguards, Inc., as issuer, and Cahill, Warnock Strategic
Partners Fund, L.P., Strategic Associates, L.P., Newpark Resources, Inc. and
James H. Stone, as the purchasers.
"Subsidiaries" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof voting power to elect a majority of the board of directors or other
persons performing similar functions of such corporation, partnership, limited
liability company or entity is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such person, and shall include (without
limitation) OnSite, OnSite Colombia, Environmental Technology Services, Inc., a
Cayman Island corporation and Environmental Leasing Company, a Cayman Island
Corporation.
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"Termination Event" shall mean (i) a Reportable Event; (ii) the
withdrawal of a Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a "substantial employer," as such term is
defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by
Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination
of a Multiple Employer Plan; (iii) submission to a governmental authority of a
request for a waiver of minimum funding standards required by ERISA or the Code,
with respect to any Employee Benefit Plan; (iv) the existence or likely creation
of a lien under ERISA or the Code on Borrower or any ERISA Affiliate on account
of any Employee Benefit Plan; (v) the disclosure to affected parties of a notice
of intent to terminate an Employee Benefit Plan under Section 4041 of ERISA
other than in a "standard termination" within the meaning of Section 4041 of
ERISA; (vi) the institution of proceedings by the PBGC to terminate an Employee
Benefit Plan under Section 4042 of ERISA; (vii) any other event or condition
that might reasonably constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Employee
Benefit Plan; (viii) the commencement or, to the knowledge of Borrower, likely
commencement of a proceeding against Borrower or any ERISA Affiliate under
Section 515 of ERISA to collect a delinquent contribution to a Multiemployer
Plan; or (ix) any other event or condition reasonably indicating that Borrower
or any ERISA Affiliate will or may incur any material liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from an Employee Benefit Plan or Multiemployer Plan under Section
4062, 4063, 4064, 4201, or 4204 of ERISA.
"Trademark Security Agreement" means the Trademark Security Agreement,
dated as of December 17, 1997 by and between the Borrowers and the Agent.
"UCC" means the Uniform Commercial Code, as adopted in the states of
Nevada, Texas, Oklahoma, Utah and Wyoming, and, unless the context otherwise
requires, the following terms shall have the same meanings given therein:
"account," "account debtor," "chattel paper" and "good faith."
"Unfunded Current Liability" of any Employee Benefit Plan shall mean
the amount, if any, by which the present value of the accrued benefits under the
plan as of the close of its most recent plan year exceeds the value, determined
in accordance with Section 412 of the Code, of the plan's assets.
"U.S. Foreign Corrupt Practices Act" means the U.S. Foreign Corrupt
Practices Act of 1977, Pub. L. No. 95-213, Sections 101-104, as amended, and any
other U.S. law, regulation, order, decree or directive having the force of law
and relating to bribes, kick-backs or similar business practices.
"Withdrawal Liability" shall have the meaning given such term under
Part 1 of Subtitle E of Title VI of ERISA.
All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Borrowers, Agent
and Lenders pursuant to the
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definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. Any accounting terms used
herein unless otherwise defined in this Agreement shall have the meanings
customarily given such term in accordance with GAAP. Wherever, pursuant to this
Agreement, an action is required or permitted to be taken or omitted by Agent in
its discretion, such discretion shall be exercised in good faith.
SECTION 2
THE LOAN
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1.2. Commitment for the Loan.
----------------------------
(1) Subject to and upon the provisions of this Agreement, each Lender
severally agrees to make an initial loan (the "Initial Loan"; and collectively
with the Supplemental Loan (as defined below), the "Loans") to the Borrowers on
the Closing Date in the principal amount set forth below opposite such Lender's
name (herein called such Lender's "Initial Committed Amount"). The
proportionate share set forth below opposite each Lender's name is herein called
such Lender's "Pro Rata Share"
- --------------------------------------------------------------------------------
Lender Initial Committed Amount Pro Rata Share
- --------------------------------------------------------------------------------
Cahill Warnock Strategic
Partners Fund, L.P. $2,740,982.14 45.683%
- --------------------------------------------------------------------------------
Strategic Associates, L.P. $151,875 2.531%
- --------------------------------------------------------------------------------
Newpark Resources, Inc. $3,000,000 50%
- --------------------------------------------------------------------------------
James H. Stone $107,142.86 1.786%
- --------------------------------------------------------------------------------
Initial Committed Amount $6,000,000 100%
- --------------------------------------------------------------------------------
The obligation of each Lender to make the Initial Loan is several and
is limited to its Committed Amount, and such obligation of each Lender is herein
called its "Loan Commitment". The Loan Commitment of each of the Lenders are
herein collectively referred to as the "Loan Commitments". The Agent shall not
be responsible for the Commitment of any Lender; and similarly, none of the
Lenders shall be responsible for the Commitment of any of the other Lenders; the
failure, however, of any Lender to perform its Commitment shall not relieve any
of the other Lenders from the performance of their respective Commitments.
(2) The Loan shall be evidenced by and payable in accordance with a
term note (the "Note" and collectively, the
12
<PAGE>
"Notes") in the form of Exhibit A hereto and shall be in the principal amount
---------
of such Lender's Committed Amount.
(3) Subject to and upon the provisions of this Agreement, each Lender
severally agrees to make a supplemental loan (a "Supplemental Loan") to the
Borrowers on sixty (60) days' prior written notice from the Borrowers to each of
the Lenders, with a copy to the Agent, in the principal amount of Five Million
Dollars ($5,000,000). Borrowers hereby acknowledge and agree that they are
prohibited from obtaining the Supplemental Loan in the event that they are in
default on the Initial Loan. The obligation of each Lender to make a
Supplemental Loan is several and shall be determined by agreement among the
Lenders, and if no agreement can be reached among Lenders, then the obligation
of each Lender to make a Supplemental Loan shall be consistent with its
respective Pro Rata Share on the Initial Loan. The Agent shall not be
responsible for a Commitment of any Lender; and similarly, none of the Lenders
shall be responsible for the Commitment of any of the other Lenders; the
failure, however, of any Lender to perform its Commitment under the Supplemental
Loan shall not relieve any of the other Lenders from the performance of their
respective Commitments. The terms of the Supplemental Loan with respect to
Maturity Date, interest, payments, late charges, Events of Default, etc. shall
be the same for the Supplemental Loan as it is for the Initial Loan.
1.3. Interest on the Loan.
--------------------------
(1) Each Loan shall bear interest calculated on the basis of actual
days elapsed and a 360-day year, at the prime rate, as reported in the Wall
Street Journal five (5) Business Days prior to the end of each calendar month or
if not reported on such date then the closest Business Day thereto, plus one and
five-tenths percent (1.5%). Interest shall accrue daily on the aggregate
outstanding principal balance of the Loan for the period commencing on the date
the Loan is made until the Loan is paid in full.
(2) If not earlier paid, or if not accelerated for payment, each Loan
shall be payable to each Lender (for its Pro Rata Share), with notice of such
payment to the Agent, quarterly in arrears in substantially equal periodic
installments consisting of principal plus interest accrued at the rate set forth
in the Note, on the fifth (5th) day of each March, June, September and December
(each an "Interest Payment Date"), commencing on March 5, 1998, with the entire
remaining principal balance of the Loan and all interest accrued thereon due and
payable on the Maturity Date.
1.4. Payments.
-------------
(1) Principal and interest shall be payable in lawful
13
<PAGE>
money of the United States of America without set-off, deduction or counterclaim
to each of the Lenders (for its Pro Rata Share) at each Lender's principal
business office not later than 10:00 a.m. local time for each Lender on the date
on which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day).
(2) The payments shall be made to the addresses and accounts as set
forth in Schedule 2.3.
1.5. Late Charges. Any principal or interest payment due under any
-----------------
Note not paid within five (5) days from the date such payment is due, by
acceleration, conversion or otherwise, shall, to the extent permitted by law, be
subject to an additional interest charge equal to five percent (5%) above the
then prevailing interest rate under the Note. The charging or collection of any
late charge shall not be deemed a waiver of any of Agent's and/or Lenders'
rights arising thereby or hereunder, including Agent's right to declare an
"Event of Default" hereunder.
1.6. Prepayment; No Revolver.
---------------------------
(1) Borrowers may prepay all of the Loans with accrued interest
thereon, or any part of the Loans with accrued interest thereon in increments of
One Million Dollars ($1,000,000), at any time (except as provided in Section
2.5(d)) by payment in cash of the Pro Rata Share to each of the Lenders, with a
notice of such payment to the Agent, without premium or penalty. Such payment
shall be made by 12:00 noon local time of each Lender on any Business Day.
(2) Borrowers shall give Agent notice of prepayment hereunder not less
than thirty (30) days prior to the date of the prepayment. Such notice shall
specify the Loans to be prepaid and the amount of the Loans to be prepaid and
the date of prepayment (which shall be a Business Day).
(3) Amounts paid or prepaid on account of the Loans may not be
reborrowed.
(4) Borrowers hereby agree that they shall not make any prepayments on
the Loans unless and until EVSF shall have redeemed any and all of the shares of
Series C Preferred Stock as may be outstanding from time to time.
2.6 Additional Warrant if No Prepayment by December 12, 2001. In the
-------------------------------------------------------------
event that the Borrowers have not paid in full all Obligations, including
without limitation all unpaid principal and accrued interest thereon by December
17, 2001, EVSF shall
14
<PAGE>
authorize, issue and deliver an additional warrant for 188,571 shares of common
stock, substantially in the form of Exhibit B.
SECTION 3
COLLATERAL
----------
3.1. Grant of Security Interest. As security for the prompt
--------------------------------
performance, observance and payment in full of all Obligations, each Borrower
hereby grants to Agent for the ratable benefit of the Lenders and for the
benefit of the Agent a continuing first priority security interest in and lien
on, and assigns, transfers, sets over and pledges to Agent all property of such
Borrower whether now owned by such Borrower or hereafter acquired or existing,
and wherever located (collectively, the "Collateral"), including without
limitation:
(1) all Real Estate;
(2) all Accounts;
(3) all Inventory;
(4) all Equipment;
(5) all General Intangibles;
(6) all Instruments and Documents;
(7) all Leases;
(8) all stock of NFE owned by EVSF, all interests in OnSite held by NFE
and/or EVSF and all stock in OnSite Colombia, OnSite Venezuela, Environmental
Leasing Company and Environmental Technology Services, Inc. held by OnSite, NFE
and/or EVSF;
(9) all Related Collateral;
(10) all accessions to and additions to, substitutions for, replacements,
products and Proceeds to any and all of the foregoing; and
(11) all patents, copyrights, intellectual property, trademarks, and all
other properties requiring additional steps to perfect.
The term "Collateral" shall also refer to any other property in which Agent
is granted a Lien to secure any of the Obligations
15
<PAGE>
pursuant to an Agreement supplemental hereto or otherwise (whether or not such
Agreement makes reference to this Agreement or the Obligations of a Borrower
hereunder).
1.7. Obligations Secured. The security interest granted by each
------------------------
Borrower and created hereby secures the payment and performance of all of the
Obligations under this Agreement and the other Loan Documents, however
evidenced, whether now existing or hereafter arising, direct or indirect,
absolute or contingent, including all costs and reasonable attorneys' fees
incurred by Agent in enforcing this Agreement and the other Loan Documents
and/or collecting or attempting to collect on the Notes. The Obligations of each
Borrower under the Notes and all other Obligations of Borrowers to Agent and/or
Lenders are also secured by the security interest created pursuant to the Patent
Security Agreement, the Trademark Security Agreement, Stock Pledge Agreements
with respect to NFE and Interest Pledge Agreement with respect to OnSite.
1.8. Collateral Disclosure List. On or prior to the Closing Date, the
-------------------------------
Borrowers shall deliver to the Agent a list (the "Collateral Disclosure List")
which shall contain such information with respect to each Borrower's business
and real and personal property as the Agent may require and shall be certified
by a Responsible Officer of each of the Borrowers, all in the form provided to
the Borrowers by the Agent. Promptly after demand by the Agent, the Borrowers,
as appropriate, shall furnish to the Agent an update of the information
contained in the Collateral Disclosure List at any time and from time to time as
may be requested by the Agent.
SECTION 4
APPLICATION OF PROCEEDS
-----------------------
1.9. Loan. EVSF shall apply the proceeds of the Loan for (i) the
---------
purchase of the 50% interest of Parker in OnSite and repayment in full of the
outstanding balance owed by EVSF to Casuarina, a wholly-owned subsidiary of
Parker, pursuant to a loan agreement and term note dated as of December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of EVSF's common stock issued pursuant to that loan agreement), (ii) payment of
fees and expenses, and (iii) working capital.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF BORROWERS
-------------------------------------------
Each Borrower represents and warrants to Lender on the issuance of the
Initial Loan and of the Supplemental Loan that:
16
<PAGE>
1.10. Organization; Charter and Bylaws. Borrower is validly existing
--------------------------------------
and in good standing under the laws of its state of incorporation or
organization and has the requisite power to own, lease and operate its
properties and to carry on its business as now being conducted. Borrower is duly
qualified to do business and is in good standing in each jurisdiction in which
the character or location of the properties owned or leased by Borrower or the
nature of the business conducted by Borrower makes such qualification necessary
or advisable, except where the failure to do so would not be material to the
Company.
1.11. Power and Authority. Borrower has the requisite power to
-------------------------
execute, deliver and perform the Loan Documents, and to consummate the
transactions contemplated thereby. The execution and delivery of the Loan
Documents by Borrower and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate or company action
on the part of Borrower. Each of the Loan Documents has been duly executed and
delivered by Borrower and constitutes a legal, valid and binding obligation of
Borrower and is enforceable against Borrower in accordance with its terms except
(i) that such enforcement may be subject to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights and (ii) that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought. No consent or approval of any Person
(including, without limitation, any stockholder or member approval), no consent
or approval of any landlord or mortgagee and no waiver of any Lien is required
in connection with execution, delivery or performance by Borrower, or the
validity, enforcement or priority, of the Loan Documents or any Lien created and
granted thereunder.
1.12. No Violation. The execution and delivery of the Loan Documents
------------------
by Borrower do not, and the performance of the Loan Documents will not, (i)
conflict with or result in a breach of the certificate or articles of
incorporation or bylaws or other formation documents of Borrower, or (ii)
violate, or conflict with, or constitute a default under, or (except for Liens
created pursuant to the Loan Documents) result in the creation or imposition of
any security interest, mortgage, pledge, lien, encumbrance, claim, restriction,
or other charge upon any property or assets of Borrower under any mortgage,
indenture or agreement to which Borrower is a party or by which the property or
assets of Borrower is bound, or (iii) violate any Requirement of Law, the effect
of which violation would be material and adverse to the business, assets or
financial condition of Borrower, or (iv) violate any permit, concession, grant,
franchise, license, or other governmental authorization or approval necessary
for the appropriate conduct of the business of Borrower, the effect of which
violation would be material and adverse to the business, assets or financial
condition of Borrower.
1.13. Litigation. Except as provided in Schedule 5.4 hereto, there are
----------------
no actions, suits, proceedings or governmental investigations or inquiries
pending, or to the knowledge of Borrower threatened against Borrower or any of
its Affiliates or their respective properties, assets, operations or businesses
(i) that might prevent or interfere with the consummation of the transactions
contemplated hereunder or (ii) that might, singly or in the
17
<PAGE>
aggregate, result in any material adverse effect on the prospects, results of
operation, properties, liabilities, assets, financial condition or business of
Borrower.
1.14. Financial Statements. The financial statements of Borrower
--------------------------
heretofore delivered to Agent by Borrower (the "Financial Statements") fairly
represent the financial condition of Borrower as of the date thereof and for the
periods reflected therein. Since the date of such Financial Statements, there
has been no material adverse change in the assets, business, financial condition
or prospects of Borrower.
1.15. Compliance with Licenses and Laws. Except as disclosed in
---------------------------------------
writing to Agent by Borrower, Borrower possesses all Permits, and Borrower is in
compliance with the Permits and all Requirements of Law except where the failure
to possess any Permits or the failure to be in compliance with the Permits or
Requirements of Law would not, singly or in the aggregate, have a material
adverse effect on the business, assets, financial condition or operations of
Borrower. There are no proceedings pending or, to the knowledge of Borrower,
threatened that may result in the revocation, cancellation, or suspension or any
materially adverse modification of any of the aforementioned Permits. Borrower
has not received any written notice to the effect that, or otherwise been
advised that, it is not in compliance with any Permit or Requirement of Law.
Except as set forth in Schedule 5.6 hereto, no consent, approval or
------------
authorization of, or declaration, filing or registration with, any United States
federal, state, or local governmental or regulatory authority, or any foreign
government or governmental authority, is required to be made or obtained by
Borrower in connection with the execution, delivery and performance of any Loan
Document or the consummation by Borrower of the transactions contemplated
thereunder.
1.16. Investments and Guaranties. Except as listed in Schedule 5.7 at
--------------------------------
the date of this Agreement, Borrower has not made investments in, advances to or
guaranties of the obligations of any Person not otherwise disclosed on the
Financial Statements.
1.17. Title to Properties; Liens. Borrower owns all of its assets and
--------------------------------
properties and such assets and properties together with any other assets and
properties acquired since such date, including, without limitation, the
Collateral, are subject to no Liens except Permitted Liens. The Liens granted to
Lender under the Loan Documents constitute valid perfected first Liens on the
Collateral, subject to no prior or equal Lien, except for Permitted Liens.
1.18. ERISA. (a) Schedule 5.9(a) contains a complete and accurate
----------- ---------------
list of all Company Plans and Company Benefit Arrangements. Schedule 5.9(a)
---------------
specifically identifies all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements:
18
<PAGE>
(i) true, correct, and complete copies of all of the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to the Lenders: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including, but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or 5500
C/R and any financial statements attached thereto for the prior three years; (C)
the most recent Internal Revenue Service (the "IRS") determination letter and
---
the latest IRS determination letter that covered the qualification of the entire
Company Plan (if different), and copies of the materials submitted by the
Company to obtain those letters; (D) the most recent summary plan descriptions;
(E) the most recent written descriptions of all non-written agreements relating
to any such plan or arrangement (if such documents or writings exist), (F) all
reports submitted within the four years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all notices that were given to the Company
within the three years preceding the date of this Agreement by the IRS,
Department of Labor, or any other governmental agency or entity with respect to
any plan or arrangement; and (H) employee manuals or handbooks containing
personnel or employee relations policies;
(ii) Neither the Company nor any Subsidiary has ever maintained,
contributed to, or been obligated to contribute to any Qualified Plan.
(iii) the Company and the Subsidiaries have never sponsored or
maintained, had any obligation to sponsor or maintain, or had any liability
(whether actual or contingent, with respect to any of its assets or otherwise)
with respect to any Employee Benefit Plan subject to Section 302 of ERISA or
Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Company Plan and each Company Benefit Arrangement has been
operated with its constituent documents and with all applicable provisions of
the Code, ERISA and other laws, including federal and state securities laws;
(v) There are no pending claims or lawsuits by, against, or relating
to any Employee Benefit Plans or Benefit Arrangements that are Company Plans or
Company Benefit Arrangements that would, if successful, result in liability of
the Company or any Stockholder, and no claims or lawsuits have been asserted,
instituted or to the Company's Knowledge threatened by, against, or relating to
any Company Plan or Company Benefit Arrangement, against the assets of any trust
or other funding arrangement under any such Company Plan, by or against the
Company or the Subsidiaries with respect to any Company Plan or Company Benefit
Arrangement, or by or against the plan administrator or any fiduciary of any
Company Plan or Company Benefit Arrangement, and the Company and the
Subsidiaries do not have knowledge of any fact that could form the basis for any
such claim or lawsuit. The Company Plans and Company Benefit Arrangements are
not presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, Department of
19
<PAGE>
Labor, or any other governmental agency or entity;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred no non-
exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for the Company or any Stockholder, officer, director,
or employee of the Company;
(viii) all reporting, disclosure, and notice requirements of ERISA
and the Code have been fully and completely satisfied with respect to each
Company Plan and each Company Benefit Arrangement;
(ix) all amendments and actions required to bring the Company Benefit
Plans into conformity with the applicable provisions of ERISA, the Code, and
other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on Schedule 5.9(b)(ix);
-------------------
(x) payment has been made of all amounts that the Company and each
Subsidiary is required to pay as contributions to the Company Benefit Plans as
of the last day of the most recent fiscal year of each of the plans ended before
the date of this Agreement; all benefits accrued under any unfunded Company Plan
or Company Benefit Arrangement will have been paid, accrued, or otherwise
adequately reserved in accordance with GAAP as of the Balance Sheet Date; and
all monies withheld from employee paychecks with respect to Company Plans have
been transferred to the appropriate plan within 30 days of such withholding;
(xi) except as disclosed on Schedule 5.9(b)(xi), the Company and the
-------------------
Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust,
reserve, premium stabilization, or similar account, nor do they provide benefits
through a voluntary employee beneficiary association as defined in Section
501(c)(9);
(xii) no statement, either written or oral, has been made by the
Company or the Subsidiaries to any Person with regard to any Company Plan or
Company Benefit Arrangement that was not in accordance with the Company Plan or
Company Benefit Arrangement and that could have an adverse economic consequence
to the Company or the Subsidiaries;
(xiii) the Company and the Subsidiaries have no liability (whether
actual, contingent, with respect to any of its assets or otherwise) with respect
to any Employee Benefit
20
<PAGE>
Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with
respect to any Employee Benefit Plan sponsored or maintained (or which has been
or should have been sponsored or maintained) by any ERISA Affiliate;
(xiv) all group health plans of the Company and its ERISA Affiliates
have been operated in material compliance with the requirements of Sections
4980B (and its predecessor) and 5000 of the Code; and
(xv) no employee or former employee of the Company or beneficiary of
any such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits, including, without
limitation, death or medical benefits (whether or not insured) beyond retirement
or other termination of employment as described in Statement of Financial
Accounting Standards No. 106, other than (i) death or retirement benefits under
a Qualified Plan, (ii) deferred compensation benefits accrued as liabilities on
the Closing Statement or (iii) continuation coverage mandated under Section
4980B of the Code or other applicable law.
(c) Schedule 5.9(c) hereto sets forth an accurate list, as of the date
---------------
hereof, of all officers, directors, and key employees of the Company and lists
all employment agreements with such officers, directors, and key employees and
the rate of compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such Person as of (a)
December 31, 1996 and (b) the date hereof.
(d) Except as set forth on Schedule 5.9(d), the Company has not
---------------
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement.
1.19. Chief Executive Office. Borrower's chief executive office and
----------------------------
the office where it keeps its records concerning its Accounts, General
Intangibles and other assets is that shown in Section 14.1 of this Agreement.
Except as set forth in Schedule 5.10 it has no other place of business where
-------------
such records are located.
1.20. Inventory. Borrower's Inventory is (and has been since the date
---------------
of this Agreement) valued (i) for annual financial reporting purposes, at the
lower of cost or market, using the specific identification method consistent
with the basis applied for prior financial periods by Borrower.
1.21. Indebtedness. Borrower has no Indebtedness of any type except as
------------------
set forth on Schedule 5.12 and Indebtedness incurred with Lenders pursuant to
-------------
this Agreement and other than up to $500,000 incurred in the ordinary course of
business.
1.22. Compliance with Environmental, Health and Safety Laws. Except as
set
21
<PAGE>
forth on Schedule 5.13:
-------------
(1) To the Company's best Knowledge, the operations of each of
Borrower and its Subsidiaries are in compliance with all applicable
Environmental Laws and all Permits issued pursuant to Environmental Laws or
otherwise;
(2) Each of Borrower and its Subsidiaries has obtained all Permits
required under all applicable Environmental Laws necessary to operate its
business to the Company's best Knowledge;
(3) None of Borrower or any of its Subsidiaries is the subject of any
outstanding written order, agreement or arrangement with any governmental
authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;
(4) None of Borrower or any of its Subsidiaries has received any
written communication alleging either or both that Borrower or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(5) None of Borrower or any of its Subsidiaries has to the Company's
best Knowledge any current contingent liability in connection with any Release
of any Hazardous Materials into the indoor or outdoor environment (whether on-
site or off-site);
(6) There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of Borrower or any of
its Subsidiaries pending or to the Company's best Knowledge threatened that
could lead to the imposition of any liability pursuant to Environmental Law;
(7) There is not located at any of the properties owned at any of the
properties leased or operated by Borrower or any of its Subsidiaries any (i)
underground storage tanks, (ii) asbestos-containing material, (iii) equipment
containing polychlorinated biphenyls, any (iv) Hazardous Materials located at
any Borrower Property (other than for Hazardous Materials used or stored by the
Borrower or any Subsidiary in the ordinary course of business and in material
compliance with applicable Environmental Laws and Permits); and
(8) Borrower has provided to Agent all environmentally related audits,
studies, reports, analyses and results of investigations, if any, that have been
performed with respect to the currently or previously owned, leased or operated
properties of Borrower or any of its Subsidiaries.
22
<PAGE>
1.23. Solvency. Borrower is, and after giving effect to the
--------------
transactions contemplated hereby will be, solvent.
1.24. Security Interests. Upon filing of all Uniform Commercial Code
------------------------
Financing Statements and any other documents of title or financing statements of
applicable governmental agencies or by applicable law, Lenders will have a first
priority perfected security interest in all of the Collateral, except to the
extent the relevant Uniform Commercial Code provides that a security interest
will be perfected by some other method.
1.25. Taxes. Borrower has filed or caused to be filed within the times
-----------
and within the manner prescribed by law, all federal, state, local and foreign
tax returns and tax reports that are required to be filed by, or with respect
to, Borrower. Such returns and reports reflect accurately all liability for
taxes of Borrower for the periods covered thereby, and all federal, state, local
and foreign income, profits, franchise, sales, use, occupancy, excise and other
taxes and assessments (including interest and penalties) payable by, or due
from, Borrower have been fully paid or adequately disclosed and fully provided
for in the books and Financial Statements of Borrower to the extent required by
generally accepted accounting principles. No examination of any tax return of
Borrower is currently in progress, and there are no unpaid taxes in any material
amount claimed to be overdue by the taxing authority of any jurisdiction. There
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of Borrower.
1.26. No Event of Default. No Event of Default has occurred and No
-------------------------
Event of Default is continuing.
1.27. Investment Company Act. Borrower is not an "investment company"
----------------------------
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
1.28. Public Utility Holding Company Act. Borrower is not a "holding
----------------------------------------
company,"or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
1.29. Full Disclosure. All written agreements, lists, schedules
---------------------
(including without limitation each Collateral Disclosure List), instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to the Agent and/or Lenders pursuant hereto or in connection with the
Loan Documents or this Agreement or the transactions contemplated hereby, are
and will be complete and accurate in all material respects. No representation or
warranty by Borrower contained in this Agreement, in the schedules attached
hereto (including without limitation each Collateral Disclosure List) or in any
certificate furnished or to be furnished by Borrower to Agent and/or Lenders in
connection herewith or
23
<PAGE>
pursuant hereto or in any of the Loan Documents contains or will contain any
untrue statement or a material fact or omits or will omit to state any material
fact necessary in order to make any statement contained herein or therein not
misleading. There is no fact known to the officers and directors of Borrower
that has specific application to Borrower (other than general economic or
industry conditions) and that materially adversely affects or, as far as such
officers and directors can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of Borrower
that has not been set forth in this Agreement, the Loan Documents or any
schedule hereto (including without limitation each Collateral Disclosure List)
or thereto. No information, schedule, exhibit or report furnished to Agent by
Borrower in connection with the negotiation of this Agreement or the Loan
Documents (including without limitation each Collateral Disclosure List)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statement contained therein not misleading.
1.30. Foreign Person. Borrower is not a non-resident alien, foreign
--------------------
corporation, foreign partnership, foreign trust, foreign estate or foreign
person within the meaning of Sections 1445 or 7701 of the Internal Revenue Code
of 1986, as amended, or the regulations thereto.
1.31. Capitalization.
--------------------
(1) The authorized capital stock of EVSF is 60,000,000 shares,
consisting of 50,000,000 shares of common stock, par value $.001 per share
("Common Stock") of which 9,282,265 shares are issued and outstanding and no
- ----------------
shares are held in treasury, and 10,000,000 shares of preferred stock, par value
$.001 per share ("Preferred Stock"), none of which are issued and outstanding.
-------------------
There are no outstanding shares of Series A Preferred Stock. Schedule 5.22 lists
-------------
the options, rights and warrants of EVSF issued and outstanding prior to
Closing. EVSF has reserved for issuance 4,391,221 shares of Common Stock upon
exercise or conversion of currently outstanding shares of convertible preferred
stock and rights, options, warrants and other convertible securities. EVSF has
no employee stock purchase plans, stock option plans or other Employee Benefit
Plans. EVSF has reserved for issuance 6,354,334 shares of Common Stock upon
conversion of the authorized shares of Convertible Preferred Stock and the Loan
Warrants and management options. Except as listed on Schedule 5.22(a), there are
----------------
outstanding (a) no shares of capital stock or other voting stock of EVSF, (b) no
securities of EVSF or any Person convertible into or exchangeable for shares of
capital stock or voting securities of EVSF, (c) no options, warrants or other
rights to acquire from EVSF (including any rights issuable or issued under any
shareholder rights plan or similar arrangement), and no obligations, contingent
or otherwise, of EVSF to issue any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of EVSF, (d) no equity equivalent in the earnings or ownership of
EVSF or any person or any similar rights
24
<PAGE>
to share earnings or ownership, and (e) no outstanding obligations of EVSF to
repurchase, redeem or otherwise acquire any of its securities or to make any
investment (by loan, capital contribution or otherwise) in any entity or person.
All outstanding options, rights and warrants have been duly and validly issued
and are in full force and effect. All shares of capital stock subject to
issuance upon exercise of any options, rights or warrants or otherwise, upon
issuance pursuant to the instruments under which they are issuable, shall be
duly authorized, validly issued, fully paid for and non-assessable and free of
all preemptive rights. No outstanding options, warrants or other securities
exercisable for or convertible into shares of capital stock of EVSF require
anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
(2) The authorized capital of NFE consists of 10,000,000 shares,
consisting of 10,000,000 shares of common stock, no par value, of which
9,640,000 shares are issued and outstanding and no shares are held in treasury,
and no shares of preferred stock are issued and outstanding. NFE has reserved
for issuance no shares of common stock upon exercise or conversion of currently
outstanding shares of convertible preferred stock and rights, options, warrants
and other convertible securities. NFE has no employee stock purchase plans,
stock option plans or other Employee Benefit Plans. There are outstanding (a) no
securities of NFE or any Person convertible into or exchangeable for shares of
capital stock or voting securities of NFE, (b) no options, warrants or other
rights to acquire from NFE (including any rights issuable or issued under any
shareholder rights plan or similar arrangement), and no obligations, contingent
or otherwise, of NFE to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of NFE,
(c) no equity equivalent in the earnings or ownership of NFE or any person or
any similar rights to share earnings or ownership, and (d) no outstanding
obligations of NFE to repurchase, redeem or otherwise acquire any of its
securities or to make any investment (by loan, capital contribution or
otherwise) in any entity or person. All outstanding options, rights and
warrants have been duly and validly issued and are in full force and effect.
All shares of capital stock subject to issuance upon exercise of any options,
rights or warrants or otherwise, upon issuance pursuant to the instruments under
which they are issuable, shall be duly authorized, validly issued, fully paid
for and non-assessable and free of all preemptive rights. No outstanding
options, warrants or other securities exercisable for or convertible into shares
of capital stock of NFE require anti-dilution adjustments by reason of the
consummation of the transactions contemplated hereby.
(3) At Closing, all of the authorized capital of OnSite shall be owned
by the EVSF.
25
<PAGE>
1.32. No Indebtedness to Shareholders, Officers, Directors or
-------------------------------------------------------------
Affiliates. Except as set forth in Schedule 5.23 Borrower owes no Indebtedness
- ----------
to any Affiliate of Borrower, or any shareholder, officer, or director or
Affiliate of such person.
1.33. Foreign Corrupt Practices. Neither the Borrower nor any
-------------------------------
Subsidiary has made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action that would cause the Borrower or any
Subsidiary to be in violation of the U.S. Foreign Corrupt Practices Act or any
law of similar effect.
1.34. Labor Agreements and Actions. With respect to employees of and
----------------------------------
service providers to Borrower and the Subsidiaries: (a) Borrower and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice; (b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against Borrower or any Subsidiary
pending or, to Borrower's or any Subsidiary's Knowledge, threatened before the
National Labor Relations Board or any other comparable authority; (c) there is
not now, nor within the past three years has there been, any labor strike,
slowdown or stoppage actually pending or, to Borrower's or any Subsidiary's
Knowledge, threatened against or directly affecting Borrower or any Subsidiary;
(d) to Borrower's or any Subsidiary's Knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three years; (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to Borrower's or any
Subsidiary's Knowledge, no claims therefor exist or have been threatened; (f)
the employees of Borrower and the Subsidiaries are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against Borrower or any Subsidiary or currently being
negotiated by Borrower or any Subsidiary; and (g) to Borrower's Knowledge, all
Persons classified by Borrower or its Subsidiaries as independent contractors do
satisfy and have satisfied the requirements of law to be so classified, and
Borrower and its Subsidiaries have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
SECTION 6
THE CLOSING; CONDITIONS PRECEDENT
---------------------------------
1.35. Time and Place of Closing. The closing of the Initial Loan will
-------------------------------
take place at the
26
<PAGE>
offices of Axelrod, Smith & Kirshbaum, 5300 Memorial, Suite 700, Houston,
Texas 77007 or such other place as may be mutually agreed upon by the Borrowers
and the Agent (the "Closing"), on December 17, 1997, provided that each Borrower
has satisfied all of the conditions precedent in Section 6, or such other time
as may be specified by Agent in its sole discretion (the "Closing Date"). The
closing of the Supplemental Loan will take place at such location and on such
date as may be mutually agreed upon by the Borrowers and the Agent; provided
that each Borrower has satisfied all of the conditions precedent in Section 6.
1.36. Conditions on Closing Date. The obligations of Agent and/or
--------------------------------
Lenders to make the Initial Loan and the Supplemental Loan pursuant to Section 2
shall be subject to the satisfaction, on or before each Closing Date, of the
conditions set forth in this Section 6.2, including without limitation, that no
Event of Default has occurred or is occurring. If the conditions set forth in
this Section 6.2 are not met on or prior to each of the Closing Dates, the
Lender shall have no obligation to make any extensions of credit hereunder;
provided, however, that the conditions set forth in Sections 6.2 (b), (c), (f),
- -------- -------
(g), (i), (p) and (q) shall not be required for a closing under the Supplemental
Loan).
(1) Notes. Borrower shall have duly executed and delivered the Notes
---------
to Agent.
(2) Warrants. EVSF shall have duly executed and delivered the Warrants
------------
and Warrant Agreements attached hereto as Exhibit C to Agent.
---------
(3) Stock Purchase Agreement. EVSF shall have duly executed and
----------------------------
delivered the Stock Purchase Agreement of even date herewith.
(4) Perfection of Security. Borrower shall have duly authorized,
--------------------------
executed, acknowledged, delivered, filed, registered and recorded such security
agreements, notices, financing statements and other instruments as Agent may
have requested in order to perfect the Liens purported or required to be created
pursuant to the Loan Documents.
(5) Legal Opinions. On the Closing Date, Agent shall have received
------------------
from Axelrod, Smith & Kirshbaum an opinion with respect to the transactions
contemplated by the Loan Documents, which opinions shall be in form and
substance satisfactory to Agent and its counsel. On the Closing Date, Lender
shall have received an opinion or opinions from Maples and Calder with respect
to the transactions contemplated by the Loan Documents under Cayman Island law.
Borrowers authorize and directs its counsel to furnish the foregoing opinions.
27
<PAGE>
(6) Parker Transaction. Concurrent with the Closing hereunder, EVSF
----------------------
shall purchase the 50% interest of Parker in OnSite and repay in full the
outstanding balance owed by EVSF to Casuarina, a wholly-owned subsidiary of
Parker, pursuant to a loan agreement and term not dated December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of EVSF's Common Stock issued pursuant to that loan agreement).
(7) Certificates. Concurrent with the Closing hereunder, Agent shall
----------------
have received a certificate of a Responsible Officer of EVSF to the effect that
(i) the Parker Transaction has been completed and (ii) each of the conditions
set forth in this Section 6 has been fully satisfied.
(8) Officer's/Member's Certificate. The representations and warranties
----------------------------------
contained in Section 5 shall be true and correct on and as of such Closing Date
with the same force and effect as though made on and as of such date (except as
to any representation or warranty which refers to a specific earlier date and
except to the extent Schedules referred to in Section 5 have been supplemented
in accordance with this Agreement); Borrowers shall be in compliance with each
covenant under the Loan Documents; no Event of Default shall exist on such
Closing Date prior to or immediately after giving effect to the requested
extension of credit; no material adverse change shall have occurred, as
determined by Agent in its sole discretion, in the financial condition, results
of operations, assets or business of Borrowers. Borrowers shall have furnished
to Agent a certificate to these effects.
(9) Corporate/Company Documents; Secretary's Certificate. On the
--------------------------------------------------------
Closing Date, each Borrower shall deliver to Agent:
(1) a certificate of the Secretary of State of Borrower's state of
incorporation or formation, dated not earlier than forty (40) days preceding the
Closing Date, to the effect that Borrower is a corporation validly existing and
in good standing under the laws of such state as of such date;
(2) a certificate of the Secretary of State of each state where
Borrower is required to qualify to do business (including without limitation,
the states where the Collateral is located), dated not earlier than forty (40)
days preceding the applicable Closing Date, to the effect that Borrower is a
corporation duly licensed or qualified to do business in such state and is in
good standing as a foreign corporation under the laws of such state as of such
date; and
28
<PAGE>
(3) certificates of the Secretary or Assistant Secretary of Borrower
including (A) copies of the Articles of Incorporation and By-laws of Borrower as
then in effect or a certification that there has been no change in such
instruments since the last such certification delivered to Agent pursuant to
this Agreement, (B) duly enacted resolutions of Borrower's Board of Directors in
form and substance satisfactory to Agent approving the Loan Documents and
authorizing officers of Borrower to execute and deliver instruments required to
be delivered hereunder as a condition precedent to the Closing, or a
certification that there has been no amendment or revocation of such resolutions
since the last such certification delivered to Agent pursuant to this Agreement,
and (C) specimen signatures of the officers of Borrower authorized to sign such
instruments to the extent such specimen signatures have not previously been
delivered to Lender.
(10) Insurance. Agent shall have received evidence of such insurance
--------------
coverage as Agent may reasonably request.
(11) Other Indebtedness. Agent shall have received written reports in
-----------------------
form and substance satisfactory to it that a search of the public records of the
jurisdiction in which Collateral is located evidence satisfactory to Agent in
its sole discretion that, except for Permitted Indebtedness and the Loans, all
Indebtedness of Borrower has been repaid and discharged in full, and all
security interests relating thereto have been released.
(12) Proper Proceedings. This Agreement, each other Loan Document and
-----------------------
the transactions contemplated hereby and thereby shall have been authorized by
all necessary corporate or company action, or other proceedings. All necessary
consents, approvals and authorizations of any of the transactions contemplated
hereby or by any other Loan Document shall have been obtained and shall be in
full force and effect.
(13) Legality, etc. The transactions contemplated by this Agreement
------------------
shall not (i) subject Agent and/or Lenders to any penalty or special tax or (ii)
be prohibited by any law, rule or regulation of any governmental authority.
(14) General. All legal and corporate or company proceedings in
------------
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Agent and Agent shall have received copies
of all documents, including certified copies of the Charter and By-Laws of
Borrower, records of corporate or company proceedings, certificates as to
signatures and incumbency of officers, and opinions of counsel, which Agent may
have reasonably requested in connection therewith, such documents where
appropriate to be
29
<PAGE>
certified by proper corporate or company or governmental authorities.
(15) Pledge Agreements. Agent shall have received executed Stock
----------------------
Pledge Agreements and an executed Interest Pledge Agreement.
(16) Intellectual Property Security Agreement. Agent shall have
---------------------------------------------
received executed security agreements for patents, copyrights, and other
intellectual property.
6.3. Additional Conditional Precedent. The obligations of Agent and/or
--------------------------------
Lenders to make the Supplemental Loan on or after February 12, 2000 shall be
subject to the condition that the Borrowers shall have delivered the executed
Additional Warrant (as defined in Section 7.9).
SECTION 7
BORROWER'S AFFIRMATIVE COVENANTS
--------------------------------
For so long as any Borrower shall have any Obligations to Lenders under
this Agreement, each Borrower covenants as follows:
1.37. Punctual Payment and Performance. Borrower shall duly and
--------------------------------------
punctually pay the principal and interest on the Loans and all other amounts
provided for in this Agreement, or any other Loan Document, and shall perform
its obligations and covenants under all Loan Documents.
1.38. Taxes and Other Charges; Accounts Payable.
-----------------------------------------------
(1) Taxes and Other Charges. Borrower and its Subsidiaries shall duly
---------------------------
pay and discharge, or cause to be paid and discharged, before the same becomes
in arrears, all taxes, assessments and other governmental charges imposed upon
such Person and its properties, sales or activities, or upon the income or
profits therefrom, as well as all claims for labor, materials or supplies which
if unpaid might be law become a Lien upon any of its property; provided,
--------
however, that any such tax, assessment, charge or claim need not be paid if the
- -------
validity or amount thereof shall at the time be contested in good faith by
appropriate proceedings and if such Person shall, in accordance with GAAP, have
set aside on its books adequate reserves with respect thereto; and provided,
--------
further, that Borrower and its Subsidiaries shall pay or bond, or cause to be
- -------
paid or bonded, all such taxes, assessments, charges or other
30
<PAGE>
governmental claims immediately upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor (except to the
extent such proceedings have been dismissed or stayed).
(2) Accounts Payable. Borrower and its Subsidiaries shall promptly pay
--------------------
when due, or in conformity with customary trade terms, all other Indebtedness
incident to the operations of such Person not referred to in Section 7.2;
provided, however, that any such Indebtedness need not be paid if the validity
- -------- -------
or amount thereof shall at the time be contested in good faith and if such
Person shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto.
1.39. Conduct of Business, etc.
------------------------------
(1) Types of Business. Borrower and its Subsidiaries shall engage only
---------------------
in the business of development, production and sale of environmental
reclamation/remediation technologies and services.
(2) Maintenance of Properties. Borrower and its Subsidiaries:
-----------------------------
(1) shall keep their properties in such repair, working order and
condition, and shall from time to time make such repairs, replacements,
additions and improvements thereto as are necessary for the efficient operation
of its businesses and shall comply at all times in all material respects with
all material franchises, licenses and leases to which it is party so as to
prevent any loss or forfeiture thereof or thereunder, except where (i)
compliance is at the time being contested in good faith by appropriate
proceedings and (ii) failure to comply with the provisions being contested have
not resulted, or do not create a material risk of resulting, in the aggregate in
any material adverse effect on the business, on operations or properties of
Borrower (financial or otherwise); and
(2) shall do all things necessary to preserve, renew and keep in full
force and effect and in good standing its legal existence and authority
necessary to continue its business.
1.40. Compliance with Applicable Laws. Borrower and its Subsidiaries
-------------------------------------
shall comply, and Borrower shall cause its Subsidiaries to comply, in all
material respects with all valid and applicable statutes, laws, ordinances,
zoning and building codes and other rules and regulations, including
environmental regulations, of the United States of America, of the states and
territories thereof and their counties, municipalities and other subdivisions
and of any foreign jurisdiction in which any Collateral is located and
31
<PAGE>
obtain and keep in force any and all licenses, permits, franchises or other
governmental authorizations which it is required to obtain which are necessary
or beneficial to the ownership or use of its properties or to the operation of
its business.
1.41. Information.
-----------------
(1) Annual Audited Financial Statements. Annually, as soon as
---------------------------------------
available but in any event within ninety (90) days after the close of each
fiscal year of Borrower, a balance sheet of Borrower as at the end of such year
and statements of income and retained earnings and of cash flow of Borrower
prepared in accordance with GAAP consistently applied, reflecting the results of
its operations during such year, prepared by Borrower's independent accounting
firm, together with the audit report of such independent accounting, which
financial statements shall be true, correct and accurate and fairly present the
financial position of Borrower as of the date thereof.
(2) Quarterly Financial Statements. As soon as available, but in any
----------------------------------
event not later than forty-five (45) days after the end of each quarterly fiscal
period (other than the last quarterly fiscal period in any fiscal year of the
Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form (i) the figures as of the
end of and for the comparable periods of the preceding fiscal year and (ii) the
figures reflected in the operating budget (if any) for such period as specified
in the financial plan of the Company. All such financial statements shall be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods reflected therein except as stated therein.
(3) Additional Information. Borrower shall promptly provide such
--------------------------
information concerning Borrower and its Subsidiaries, the Collateral (including
without limitation an updated Collateral Disclosure List for any Borrower or
Borrowers), the operation of its business, its financial condition, as Agent may
from time to time reasonably request, and shall also provide copies of such
governmental filings and other documentation as Agent may from time to time
reasonably request.
(4) Immediate Notices. Borrower shall immediately provide notice to
---------------------
Agent of:
(1) any Event of Default or any event which, with
32
<PAGE>
notice or lapse of time or both, might become an Event of Default;
(2) a change in the basis for valuing Inventory from that shown in
Section 5.11;
(3) the institution or commencement of any action, suit, proceeding or
investigation against or affecting Borrower or its Subsidiaries or any of its or
their assets which, if determined adversely could result in judgment in excess
of $100,000;
(4) any judgment, award, decree, order or determination in an amount
in excess of $100,000;
(5) the imposition or creation of any Lien against any asset or
property of Borrower except in favor of Agent or Permitted Liens;
(6) any potential or known release or threat of release of hazardous
or toxic chemicals, materials or substances or oil from, on or onto any site
owned or used by Borrower or the incurrence of any expense or loss in connection
therewith or upon Borrower obtaining knowledge of any investigation, action or
the incurrence of any expense or loss by any governmental authority in
connection with the containment or removal of any hazardous or toxic chemical,
material or substance or oil for which expense or loss Borrower may be liable or
potentially responsible;
(7) any loss or destruction of Collateral or other assets or property
whether or not covered by insurance if the value thereof exceeds $100,000;
(8) the occurrence of any event or the existence of any fact which
would render any representation or warranty in this Agreement or any other Loan
Document inaccurate, incomplete or misleading in any material respect;
(9) any organized labor dispute to which Borrower may become a party
or any walkouts, strikes or other similar events affecting Borrower.
(5) Taxes. If requested by Lender, within ten (10) days after the
---------
accrual in accordance with applicable law of Borrower's obligation to make
deposits for F.I.C.A. and withholding taxes, evidence satisfactory to Agent that
such deposits have been made as required.
(6) Inventory Listing. If requested by Agent, a copy (certified by an
---------------------
authorized officer of Borrower to be true, correct and complete) of any listing
of Inventory but is no event more often than two times a year.
33
<PAGE>
(7) Annual Budget. As soon as available, but in any event not later
-----------------
than thirty (30) days prior to the beginning of each fiscal year of Borrower,
the financial plan of Borrower for such fiscal year, including, without
limitation, a cash flow projection and operating budget, calculated quarterly,
as contained in its operating plan presented to the Borrower's Board of
Directors as well as any updates or revisions to such plan as soon as available.
1.42. Insurance. Maintain property and liability insurance with
---------------
responsible insurance companies (and with deductibles) reasonably satisfactory
to Agent in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas as Borrower operates.
1.43. Inventory and Equipment Insurance. Maintain insurance with
---------------------------------------
responsible insurance companies (and with deductibles) reasonably satisfactory
to Agent covering Borrower's Inventory and Equipment in such amounts as is
usually carried by companies engaged in similar businesses and in any event not
less than Agent may from time to time reasonably require, and deliver to Agent
copies of such insurance policies (and all renewals thereof) together with
Agent's loss payable endorsements naming Agent as a secured party executed by
the insurer(s), such policies to provide that coverage may not be modified or
terminated without prior notice to Agent.
1.44. Corporate Existence; Compliance with Laws. Maintain its
-----------------------------------------------
corporate or company existence in good standing, and its qualification to do
business in good standing in every state and foreign jurisdiction in which such
qualification may be necessary by reason of the nature or location of its assets
or operations, and comply with its charter documents and by-laws, or other
constituent documents, as the case may be, all contractual requirements by which
it or any of its properties may be bound and all applicable laws, rules and
regulations (including without limitation, ERISA and those relating to
environmental protection and health and safety).
1.45. Issuance of Additional Warrants. Authorize, issue and deliver
-------------------------------------
additional warrants (the "Additional Warrants"), substantially in the form of
the Warrant attached hereto as Exhibit C upon the earlier of (i) an Event of
Default or (ii) February 17,2000; provided, however, that if Borrowers have
-------- -------
repaid the Loans in part, then EVSF shall issue warrants for a pro rata number
of shares based upon the amount of the Loans that remain unpaid as of February
17, 2000, or if EVSF shall have repaid in full prior to February 17, 2000, EVSF
will not be obligated to issue any Additional Warrants under this Agreement.
34
<PAGE>
1.46. Key Man Insurance. After the Closing Date, Borrower will use its
-----------------------
best efforts to obtain and, if obtained, will maintain life insurance upon the
life of James S. Percell in the amount of no less than $5 million, with the
proceeds payable to Agent.
1.47. Visits and Inspections. Borrower will permit representatives of
----------------------------
Agent (including without limitation its counsel, accountants and agents), from
time to time, as often as may reasonably requested, but only during normal
business hours, to visit and inspect the offices and properties of Borrower and
its Subsidiaries, inspect, audit and make extracts from its books and records,
and discuss with officers, its employees and its independent accountants,
Borrower's and its Subsidiaries' business, assets, liabilities, financial
condition, business prospects and results of operations.
1.48. ERISA Compliance. Borrower will make, and, if reasonably within
----------------------
its control, will cause each ERISA Affiliate to make, all payments or
contributions to the Employee Benefit Plans and Multiemployer Plans required
under the terms thereof and in accordance with the funding requirements
applicable to such plans under ERISA and the Code and applicable collective
bargaining agreements. Borrower will cause all Employee Benefit Plans that it
sponsors, and, if reasonably within its control, will cause each ERISA Affiliate
to cause all Employee Benefit Plans that such ERISA Affiliate sponsors, to be
maintained in substantial compliance with ERISA and the Code and, if applicable,
to maintain the qualified status of each Employee Benefit Plan under the Code.
Borrower will not engage, and, if reasonably within its control, will not permit
or suffer any ERISA Affiliate or fiduciary of any Employee Benefit Plan to
engage, in any Prohibited Transaction for which an exemption is not available
and that is likely to give rise to material liability to Borrower or any ERISA
Affiliates. Borrower will not permit any Termination Event to occur where, 30
days after notice thereof shall have been given to Borrower, such Termination
Event shall still exist and the liability of Borrower or any ERISA Affiliate
relating thereto is material to the financial condition of Borrower or any ERISA
Affiliate.
(1) Borrower will notify Agent promptly of any Reportable Event or
Termination Event or any partial or complete withdrawal from any Multiemployer
Plan that may result in any Withdrawal Liability of Borrower or any ERISA
Affiliate or upon learning of any insolvency, reorganization status, or
termination of a Multiemployer Plan that may result in material liability of
Borrower or any ERISA Affiliate, together with the actions proposed to be taken
by Borrower or its ERISA Affiliate. Borrower will furnish to Lender a copy of
any request for waiver of the minimum funding standards required by ERISA or the
Code
35
<PAGE>
promptly after submission thereof to a governmental authority.
(2) Borrower covenants and agrees with Lenders that, so long as this
Agreement shall remain in effect, unless Agent otherwise consents in writing,
which consent shall not be unreasonably withheld, Borrower will not:
(1) Cause any Employee Benefit Plan to become subject to Title IV
or Section 302 of ERISA or Section 412 of the Code, except those plans to which
those sections apply as of the date of this Agreement;
(2) Adopt any new plan, fund, or other arrangement that would be
subject to Title IV or Section 302 of ERISA or Section 412 of the Code; or
(3) Adopt or incur any new obligation to contribute to any
Multiemployer Plan.
SECTION 8
THE AGENT
---------
1.49. Appointment.
-----------------
Each Lender hereby designates and appoints Cahill, Warnock Strategic
Partners Fund, L.P. as its agent under this Agreement and the Loan Documents,
and each Lender hereby irrevocably authorizes the Agent to take such action or
to refrain from taking such action on its behalf under the provisions of this
Agreement and the Loan Documents and to exercise such powers as are set forth
herein or therein, together with such other powers as are reasonably incidental
thereto. The Agent agrees to act as such on the express conditions contained in
this Section 8. The provisions of this Section 8 are solely for the benefit of
the Agent and the Lenders and neither Borrower nor any Person shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as an administrative representative of the Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Lenders, the Borrowers or any Person. The Agent
may perform any of its duties hereunder, or under the Loan Documents, by or
through its agents or employees.
1.50. Nature of Duties.
----------------------
(1) In General
-------------
36
<PAGE>
The Agent shall have no duties, obligations or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents. The
duties of the Agent shall be mechanical and administrative in nature. The Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender. Each Lender shall make its own independent investigation of the
financial condition and affairs of the Borrowers in connection with the
extension of credit hereunder and shall make its own appraisal of the credit
worthiness of the Borrowers, and the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the Closing Date or at any time or times thereafter. If the Agent seeks
the consent or approval of any of the Lenders to the taking or refraining from
taking of any action hereunder, then the Agent shall send notice thereof to each
Lender. The Agent shall promptly notify each Lender any time that the applicable
percentage of the Lenders have instructed the Agent to act or refrain from
acting pursuant hereto.
(2) Express Authorization
------------------------
The Agent is hereby expressly and irrevocably authorized by each of
the Lenders, as agent on behalf of itself and the other Lenders:
(1) To receive all documents and items to be furnished to the Lenders
under the Loan Documents (nothing contained herein shall relieve Borrower
of any obligation to deliver any item directly to the Lenders to the extent
expressly required by the provisions of this Agreement);
(2) To act or refrain from acting in this Agreement and in the other
Loan Documents with respect to those matters so designated for the Agent;
(3) Agreement and the other Loan Documents;
(4) made available to Borrower;
(5) this Agreement, all written information, requests, notices,
payments, prepayments, documents and other items received from Borrower or other
Person;
(6) other Loan Documents on behalf of the Lenders subject to the
requirement that certain of the Lenders' consent be obtained in certain
instances as provided in Section 14.10;
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(7) To deliver to Borrower and other Persons, all requests, demands,
approvals, notices, and consents received from any of the Lenders;
(8) To exercise on behalf of each Lender all rights and remedies of
the Lenders upon the occurrence of any Event of Default and/or default specified
in this Agreement and/or in any of the other Loan Documents or applicable laws;
(9) To execute any of the Loan Documents and any other documents on
behalf of the Lenders as the secured party for the benefit of the Agent and the
Lenders; and
(10) To take such other actions as may be requested by the Requisite
Lenders.
1.51. Rights, Exculpation, Etc.
-------------------------------
Neither the Agent nor any of its officers, directors, employees or
agents shall be liable to any Lender for any action taken or omitted by them
hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that the Agent shall be obligated on the terms set forth
herein for performance of its express obligations hereunder, and except that the
Agent shall be liable with respect to its own gross negligence or willful
misconduct. The Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). The Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectible, or sufficiency of this Agreement or any of the Loan
Documents or the transactions contemplated thereby, or for the financial
condition of any Person. The Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Person, or the existence or possible existence of any Event of
Default. The Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Loan Documents the Agent is permitted or required to take or to
grant, and the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action
38
<PAGE>
or withholding any approval under any of the Loan Documents until it shall have
received such instructions from the applicable percentage of the Lenders.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of the applicable percentage of the Lenders and
notwithstanding the instructions of the Lenders, the Agent shall have no
obligation to take any action if it, in good faith believes that such action
exposes the Agent to any liability.
1.52. Reliance.
--------------
The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. The Agent may deem and treat
the original Lenders as the owners of the respective Notes for all purposes
until receipt by the Agent of a written notice of assignment, negotiation or
transfer of any interest therein by the Lenders in accordance with the terms of
this Agreement. Any interest, authority or consent of any holder of any of the
Notes shall be conclusive and binding on any subsequent holder, transferee, or
assignee of such Notes. The Agent shall be entitled to rely upon the advice of
legal counsel, independent accountants, and other experts selected by the Agent
in its sole discretion.
1.53. Indemnification.
---------------------
Each Lender, severally, agrees to reimburse and indemnify the Agent
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
including, without limitation, all costs and expenses (including attorneys'
fees) incurred in connection with the Collection of any Loan and/or enforcement
of any Loan Document, of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the Loan Documents or any action taken or omitted by
the Agent under this Agreement for any of the Loan Documents, in proportion to
each Lender's Pro Rata Share, all of the foregoing as they may arise, be
asserted or be imposed from time to time; provided, however, that no Lender
-------- -------
shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements resulting from the Agent's gross
39
<PAGE>
negligence or willful misconduct. The obligations of the Lenders under this
Section 8.5 shall survive the payment in full of the Obligations and the
termination of this Agreement.
1.54. Cahill, Warnock Strategic Partners Fund, L.P., as Agent
-------------------------------------------------------------
Individually.
- ------------
With respect to its Commitments and the Loans made by it, and the
Notes issued to it, Cahill, Warnock Strategic Partners Fund, L.P. shall have and
may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "the Lenders" or "Requisite Lenders" or any similar terms
shall, unless the context clearly otherwise indicates, include Cahill, Warnock
Strategic Partners Fund, L.P. in its individual capacity as a Lender or one of
the Requisite Lenders. Cahill, Warnock Strategic Partners Fund, L.P. and its
Affiliates may engage in any kind of business with Borrower, any Affiliate of
any Borrower, or any other Person or any of their officers, directors and
employees and Cahill, Warnock Strategic Partners Fund, L.P. may accept fees and
other consideration from Borrower, any Affiliate of Borrower or any of their
officers, directors and employees for services without having to account for or
share the same with the Lenders.
1.55. Successor Agent.
---------------------
(1) Resignation.
--------------
The Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least sixty (60) Business Days' prior
written notice to Borrower and the Lenders. Such resignation shall take effect
upon the acceptance by a successor Agent of appointment pursuant to Section
8.7(b) below or as otherwise provided below.
(2) Appointment of Successor.
---------------------------
Upon any such notice of resignation pursuant to Section 8.7(a) above,
the Requisite Lenders shall appoint a successor to the Agent. If a successor to
the Agent shall not have been so appointed within said sixty (60) Business Day
period, the Agent retiring, upon notice to Borrower, shall then appoint a
successor Agent who shall serve as the Agent until such time, as the Requisite
Lenders appoint a successor the Agent as provided above.
(3) Successor Agent.
------------------
40
<PAGE>
Upon the acceptance of any appointment as the Agent under the Loan
Documents by a successor Agent, such successor to the Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the Agent retiring, and the Agent retiring shall be discharged from its
duties and obligations under the Loan Documents. After any Agent's resignation
as the Agent under the Loan Documents, the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Agent under the Loan Documents.
1.56. Collateral Matters.
------------------------
(1) Release of Collateral.
------------------------
The Lenders hereby irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent upon any
property covered by this Agreement or the Loan Documents:
(1) upon termination of the Commitments and payment and satisfaction
of all Obligations;
(2) constituting property being sold or disposed of if Borrower
certifier to the Agent that the sale or disposition is made in compliance with
the provisions of this Agreement (and the Agent may rely in good faith
conclusively on any such certificate, without further inquiry);
(3) constituting property leased to Borrower under a lease which has
expired or been terminated in a transaction permitted under this Agreement or is
about to expire and which has not been, and is not intended by Borrower to be,
renewed or extended; or
(4) constituting property covered by Permitted Liens with lien
priority superior to those Liens in favor or for the benefit of the Lenders.
(2) Confirmation of Authority, Execution of Releases.
----------------------------------------------------
Without in any manner limiting the Agent's authority to act without
any specific or further authorization or consent by the Lenders as set forth in
Section 8.8(a), each Lender agrees to confirm in writing, upon request by the
Borrowers, the authority to release any property covered by this Agreement or
the Loan Documents conferred upon the Agent under Section 8.8(a). So long as no
Event of Default is then continuing, upon receipt by the
41
<PAGE>
Agent of confirmation from the requisite percentage of the Lenders, of its
authority to release any particular item or types of property covered by this
Agreement or the Loan Documents, and upon at least five (5) Business Days prior
written request by Borrower, the Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the Liens granted to the Agent for the benefit of the
Lenders herein or pursuant hereto upon such Collateral; provided, however, that
-------- -------
(i) the Agent shall not be required to execute any such document on terms which,
in the Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
any Person, in respect of), all interests retained by any Person, including,
without limitation, the proceeds of any sale, all of which shall continue to
constitute part of the property covered by this Agreement or the Loan Documents.
(3) Absence of Duty.
------------------
The Agent shall have no obligation whatsoever to any Lender, Borrower
or any other Person to assure that the property covered by this Agreement or the
Loan Documents exists or is owned by Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to the Agent on behalf
of the Lenders herein or pursuant hereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Agent in this Section
8.8(c) or in any of the Loan Documents, it being understood and agreed that in
respect of the property covered by this Agreement or the Loan Documents or any
act, omission or event related thereto, the Agent may act in any manner it may
deem appropriate, in its discretion, given the Agent's own interest in property
covered by this Agreement or the Loan Documents as one of the Lenders and that
the Agent shall have no duty or liability whatsoever to any of the other the
Lenders.
1.57. Agency for Perfection.
---------------------------
Each Lender hereby appoints the Agent and each other Lender as agent
for the purpose of perfecting the Lenders' Liens in Collateral which, in
accordance with Article 9 of the Uniform Commercial Code in any applicable
jurisdiction or otherwise, can be perfected only by possession. Should any
Lender (other than the Agent) obtain possession of any such Collateral, such
Lender shall notify the Agent thereof, and, promptly upon the Agent's
42
<PAGE>
request therefor, shall deliver such Collateral to the Agent or in accordance
with the Agent's instructions.
1.58. Exercise of Remedies.
--------------------------
Each Lender agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Loan Document or to realize
upon any collateral security for the Loan, it being understood and agreed that
such rights and remedies may be exercised only by the Agent.
1.59. Consents.
--------------
(1) In the event the Agent requests the consent of a Lender and does
not receive a written denial thereof, or a written notice from a Lender that due
course consideration of the request requires additional time, in each case,
within ten (10) Business Days after such Lender's receipt of such request, then
such Lender will be deemed to have given such consent.
(2) In the event the Agent requests the consent of a Lender and such
consent is denied, then Cahill, Warnock Strategic Partners Fund, L.P. may, at
its option, require such Lender to assign its interest in the Loan to Cahill,
Warnock Strategic Partners Fund, L.P. for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest, fees and costs and
expenses due such Lender under the Loan Documents, which principal, interest,
fees and costs and expenses will be paid on the date of such assignment. In the
event that Cahill, Warnock Strategic Partners Fund, L.P. elects to require any
Lender to assign its interest to Cahill, Warnock Strategic Partners Fund, L.P.,
will so notify such Lender in writing within thirty (30) days following such
Lender's denial, and such Lender will assign its interest to Cahill, Warnock
Strategic Partners Fund, L.P no later than five (5) days following receipt of
such notice.
1.60. Dissemination of Information.
----------------------------------
The Agent will provide the Lenders with any information received by
the Agent from Borrower which is required to be provided to the Agent or to the
Lenders hereunder; provided, however, that the Agent shall not be liable to any
-------- -------
one or more the Lenders for any failure to do so, except to the extent that such
failure is attributable to the Agent's gross negligence or willful misconduct.
43
<PAGE>
SECTION 9
BORROWER'S NEGATIVE COVENANTS
-----------------------------
For so long as a Borrower shall have any obligation to Agent and/or a
Lender under this Agreement, each Borrower covenants that it will not:
1.61. Disposition of Collateral. Except as part of a financing
-------------------------------
transaction in the form of a sale-leaseback of Indirect Thermal Desportion
("ITD") units, sell, assign, exchange or otherwise dispose of any of the
Collateral (other than Inventory consisting of (i) scrap, waste, defective
goods and the like; (ii) obsolete goods or obsolete, unused or surplus
Equipment; (iii) sales of other Equipment provided such Equipment is
promptly replaced with Equipment of equal or greater value and utility to
the Borrower; and (iv) finished goods sold in the ordinary course of
businesses) or any interest therein to any other Person;
1.62. Indebtedness. Create, incur, assume or allow to exist any
------------------
Indebtedness, except: (i) Indebtedness evidenced by this Agreement and the Notes
owing to or held by Agent and/or Lenders and arising under any of the Loan
Documents; (ii) unsecured Current Liabilities (not the result of borrowing)
incurred in the ordinary course of business which are not evidenced by notes or
instruments and which are not more than sixty (60) days overdue from the
original due dates thereof unless contracted in good faith; (iii) subordinated
Indebtedness; (iv) Indebtedness incurred after the date hereof with the prior
written consent of Agent, and (v) any financing transaction in the form of a
sale-leaseback of ITD units (collectively referred to as "Permitted
Indebtedness").
1.63. Liens. Create, permit to be created or suffer to exist any Lien
-----------
upon any of the Collateral or any other property of Borrower, now owned or
hereafter acquired, except: (i) Liens existing on the date hereof as set forth
in Schedule 9.3, which the Borrower will use its best efforts to release; (ii)
------------
subordinated Liens; (iii) landlords' carriers', warehousemen's, mechanics' and
other similar Liens arising by operation of law in the ordinary course of
Borrower's business; (iv) Liens arising out of pledge or deposits under
workmen's compensation, unemployment insurance, old age pension, social
security, retirement benefits or other similar legislation; (v) Liens in favor
of Agent on behalf of Lenders; (vi) Liens for taxes (excluding any Lien imposed
pursuant to any provision of ERISA) not yet due or which are being contested in
good faith by
44
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appropriate proceedings and Borrower maintains appropriate reserves in respect
thereto provided that in Agent's judgment such Lien does not adversely affect
Agent's and/or Lenders' rights or the priority of Agent's Lien in the
Collateral; (vii) easements, rights of way, restrictions and other similar
charges or Liens relating to real property and not interfering in a material way
with the ordinary conduct of Borrower's business; (viii) Liens arising after the
date hereof with the prior written consent of Agent, and (ix) any financing
transaction in the form of a sale-leaseback of ITD units (collectively,
"Permitted Liens").
1.64. Dividends. Except for dividends payable in connection with the
---------------
Series C Preferred Stock, pay or make any Dividends at any time any amount is
unpaid with respect to the Loan (whether for principal, interest, or other
charges), except if Borrower has elected S corporation status under the Code
Borrower may pay Dividends on a quarterly basis to stockholders to the extent of
taxable income of its stockholders attributable to the stockholders' portion of
the Net Earnings of Borrower provided that no default or Event of Default has
occurred or is continuing.
1.65. Loans. Make any loans or advances to any Person, including
-----------
without limitation any of Borrower's directors, officers and employees, except
for advances in the ordinary course of business in an amount not to exceed
$10,000.
1.66. Guarantees. Except as set forth in Schedule 9.6 assume,
----------------
guaranty, endorse or otherwise become directly or contingently liable in respect
of (including without limitation by way of agreement, contingent or otherwise,
to purchase, provide funds to or otherwise invest in a debtor or otherwise to
assure a creditor against loss), any Indebtedness of any Person (except
guarantees by endorsement of instruments for deposit or collection in the
ordinary course of business and guarantees in favor of Agent and/or Lenders).
1.67. Merger. Merge or consolidate with any Person, or sell, lease,
------------
transfer or otherwise dispose of any substantial part of its assets (whether in
one or more transactions).
1.68. Affiliates. Directly or indirectly, transfer, sell, lease,
----------------
assign or otherwise dispose of any assets to an Affiliate; purchase or acquire
any assets from an Affiliate; enter into any management agreement, service
agreement or consulting agreement with an Affiliate or make any payment thereon;
or enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, guarantees or
assumptions of obligations of an Affiliate), except with the prior written
consent of Agent.
45
<PAGE>
1.69. Financial Covenants. Have or maintain,
-------------------------
(1) on a consolidated basis, one year after the execution of this
Agreement, a minimum ratio of two-to-one of EBITDAE (Earnings Before Interest
Taxes Depreciation Amortization and Extraordinary Items) to interest expense;
(2) at all times, positive working capital of at least $2 million
($2,000,000);
(3) at all times, positive net worth.
SECTION 10
ADDITIONAL COVENANTS AND ASSURANCES
-----------------------------------
1.70. Additional Assurances. Each Borrower at its expense will
---------------------------
promptly and duly execute and deliver such documents and assurances and take
such actions as may be necessary or desirable or as Agent may request in order
to correct any defect, error or omission which may at any time be discovered or
to more effectively carry out the intent and purpose of this Agreement and to
establish, perfect and protect Agent's and/or Lenders' security interest, rights
and remedies created or intended to be created hereunder. Without limiting the
generality of the above, Borrower will join with Agent in executing financing
and continuation statements pursuant to the Uniform Commercial Code or other
notices appropriate under applicable foreign, Federal or State law in form
satisfactory to Agent and filing the same in all public offices and
jurisdictions wherever and whenever requested by Agent (including, without
limitation, upon the occurrence of any event referred to in Section 10.4.
Moreover, Borrower appoints Agent or its agent and designee, as Borrower's
attorney-in-fact, to execute in Borrower's name and behalf any UCC financing
statements or amendments thereto for any of the foregoing purposes, which power
is coupled with an interest, and irrevocable, until all Obligations have been
paid in full. Borrower releases Agent and its officers, employees, agents,
stockholders, members and designees from any liability arising from any act or
acts in connection with such action(s) or in furtherance thereof, whether of
admission or omission and whether based on any error of judgment or mistake or
flaw or fact.
1.71. Possession Following Event of Default. Agent will at any time
-------------------------------------------
46
<PAGE>
following the occurrence of an Event of Default and during the continuation
thereof have the right to take physical possession of the Collateral and to
maintain such possession on Borrower's premises or to remove the Collateral or
any part thereof to such other places as Agent may desire. If Agent exercises
such right, Borrower shall at its sole expense upon Agent's request assemble the
same and make it available to Lender at a place reasonably convenient to Agent.
If any Inventory is in the possession or control of any of Borrower's agents or
processors, Borrower shall, at Agent's request (before or after the occurrence
of an Event of Default), notify them of Agent's security interest therein and,
at Agent's request, instruct them to hold the same for Agent's account and
subject to Agent's instructions. At any time following the occurrence of an
Event of Default and during the continuation thereof, Agent shall have full
power, in its own name or that of such Borrower, to collect, endorse,
compromise, settle, sell or otherwise deal with any or all of the Collateral or
proceeds thereof.
1.72. Additional Collateral Actions. Each Borrower shall perform any
-----------------------------------
and all further steps requested by Agent to perfect Agent's security interest in
Inventory, such as leasing warehouses to Agent or its designee, placing and
maintaining signs, appointing custodians, maintaining stock records and
transferring Inventory to warehouses. A physical listing of all Inventory,
wherever located, shall be taken by such Borrower whenever requested by Agent.
Upon execution and delivery of any Lease by lessee and such Borrower, such
Borrower shall cause the sole original thereof and/or schedule thereto to be
delivered and pledged to Agent.
1.73. Verification of Accounts and Leases. In an Event of Default,
-----------------------------------------
Agent may (i) in its own name or in the name of others communicate
with account debtors and lessors in order to verify with them to Agent's
satisfaction the existence, amount and terms of any Accounts and/or leases and
the absence of any reductions, discounts, defenses or offsets with respect
thereto or (ii) upon the occurrence of an Event of Default and simultaneous
notice to Borrower, notify account debtors that Collateral has been assign's
request, Borrower will notify any or all such debtors and lessors of such
assignment, give instructions and/or indicate on billings to such debtors that
their Accounts and Leases shall be paid to Agent and/or supply such debtors with
a copy of this Agreement.
1.74. Inspection of Collateral. Agent may at all times during normal
------------------------------
business hours and at all times after reasonable prior notice have access to,
examine and inspect the Collateral.
47
<PAGE>
1.75. Power of Attorney. Each Borrower does hereby make, constitute
-----------------------
and appoint Agent as Borrower's true and lawful attorney-in-fact, with power of
substitution, to endorse the name of Borrower or any of its officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment
(including under any policy of insurance on Collateral) or Collateral that may
come into possession of Agent in full or part payment of any amounts owing to
Agent and/or Lenders; to sign and endorse the name of Borrower or any of its
officers or agents upon any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instruments or
documents relating thereto or to Borrower's rights therein; upon the occurrence
of an Event of Default, to give written notice to such offices and officials of
the United States Postal Service to effect such change or changes of address so
that all mail addressed to Borrower may be delivered directly to Agent, to take
any and all other actions necessary or appropriate to collect, compromise,
settle, sell or otherwise deal with any or all of the Collateral or proceeds
thereof; and to obtain, adjust, settle and cancel any insurance hereby granting
to each said attorney-in-fact or his substitute full power to do any and all
things necessary or appropriate to be done in and about the premises as fully
and effectively as Borrower might or could do, and hereby ratifying all that any
said attorney-in-fact or his substitute shall lawfully do or cause to be done by
virtue hereof.
1.76. Insurance Assignment. In the Event of Default, each Borrower
---------------------------
hereby assigns to Agent all sums, including without limitation return of
premiums, which may become payable under any and all of such Borrower's policies
of insurance and directs each insurance company issuing any such policy to make
payment thereof directly to Agent.
1.77. Payments by Lender. In its sole discretion, Agent may: (i)
------------------------
discharge taxes that Borrower fails to pay (except taxes being contested in good
faith and by appropriate proceedings, for which Borrower has established and is
maintaining appropriate reserves, and as to which no Lien having priority over
Lender's Lien arises) and Liens levied or placed on Collateral; (ii) pay for
insurance of Borrower that Borrower fails to pay or the maintenance and
preservation thereof; or (iii) if Borrower shall fail to make deposits in
respect of F.I.C.A. and withholding or similar taxes, make such deposits or pay
such taxes, in whole or in part, or set up such reserves as Lenders shall in its
sole discretion deem necessary in respect of such Borrower's liability therefor.
Any amount so paid, deposited or reserved for shall constitute a Loan for all
purposes hereunder. Nothing herein shall be deemed to obligate Agent or Lender
to do any of the foregoing and the making of any one or more such payments,
deposits or reserves shall not
48
<PAGE>
constitute an Agreement by Agent or Lender to take any further or similar action
or a waiver of any right of Agent or Lender hereunder.
1.78. Access to Records. Borrowers will at all times keep accurate
-----------------------
records of the Collateral and will permit Agent or its agents or representatives
at any reasonable time from time to time to visit Borrower's place(s) of
business, without hindrance or delay, to inspect Inventory and examine, check,
audit and make copies and abstracts from Borrower's records and books of account
(including without limitation corporate or company minutes, and records,
journals, orders, receipts and correspondence relating to Collateral, account
debtors, transactions unrelated to collateral and Borrower's general financial
condition, business and affairs); and to discuss with any of Borrower's
appropriate directors, officers, employees, accountants and other agents or
representatives the Collateral and Borrower's general financial condition,
business and affairs.
1.79. License to Use Premises. Each Borrower hereby grants to Agent,
-----------------------------
for a term commencing on the Closing Date and continuing so long as any of the
Obligations remain outstanding, at a rental of $1.00 for such entire term, the
right to the use of all premises or places of business which Borrower now or
hereafter may have and where any Collateral may be located; provided that Agent
agrees not to exercise such right unless and until an Event of Default occurs
and is continuing and Agent determines to exercise its rights against Collateral
hereunder.
1.80. Instruments Evidencing Accounts. If any Accounts are at any time
-------------------------------------
evidenced by promissory notes, trade acceptances or other instruments for the
payment of money, Borrowers will immediately deliver the same to Agent
appropriately endorsed to Lender's order and, regardless of the form of such
endorsement, each Borrower hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and all other notices with respect thereto.
1.81. Continuing Security Interest. In the event of the sale, exchange
----------------------------------
or disposition of any of the Collateral or any interest therein (and no such
sale, exchange or other disposition is hereby authorized or consented to, except
as permitted and provided in Section 9.1), Agent's and/or Lenders' security
interest shall nevertheless continue in such Collateral (including without
limitation all proceeds, cash and non-cash) notwithstanding such sale, exchange
or other disposition; all of said proceeds shall remain Collateral hereunder and
shall be transferred and paid over to Agent immediately, and shall be applied at
Agent's option to the payment of Obligations; and Agent's receipt of any such
Proceeds
49
<PAGE>
shall not be deemed or construed to be an authorization of or consent to any
such sale, exchange or other disposition.
1.82. No Lender Liability. Notwithstanding anything to the contrary
-------------------------
set forth herein, neither Lenders nor Agent shall have any obligation or
liability under any Accounts, Leases or other Collateral arising out of this
Agreement or Agent's or Lenders' exercise of its rights and remedies or
Borrower's performance of its obligations hereunder, nor shall Agent or Lenders
have any obligation to make any inquiry as to the nature or sufficiency of any
payment received by it, or to file any claim or take any action to enforce the
payment or performance of any portion of the Collateral. Beyond the safe custody
thereof, Agent and/or Lenders shall have no duty as to any Collateral in it or
its nominee's possession or any income thereon, or as to the preservation of
rights against other parties or otherwise.
SECTION 11
EVENTS OF DEFAULT
-----------------
1.83. Events of Default. At the option of Agent, the occurrence of any
-----------------------
of the following shall constitute an Event of Default:
(1) failure by a Borrower to pay any principal, interest or other
amount when due on account of the Loan, which failure shall continue for a
period of three (3) days after notice thereof has been made by Agent to
Borrower;
(2) failure by a Borrower to pay any other Obligation within five (5)
days of notice by Agent that such other Obligation is due;
(3) breach or non-compliance by a Borrower of any covenant under this
Agreement or any of the other Loan Document, or any representation or warranty
by Borrower under this Agreement or any of the other Loan Documents is found to
have been false or misleading in any respect as of the time when made;
(4) loss, theft, damage, or destruction of any part of the Collateral;
provided, that Agent will not declare a default if the loss is insured against
- --------
in full or if substitute Collateral is pledged within thirty (30) days thereof;
(5) the Collateral directly or indirectly becomes the subject matter
of any executable judgment (which is not covered by insurance) that could, in
the reasonable opinion of the Agent, based upon written advice from counsel
selected by the Agent,
50
<PAGE>
result in (i) impairment of, or loss of, the security interests intended to be
provided by this Agreement, or (ii) forfeiture of any of the Collateral to the
Federal Government, any state government or agency thereof, or any foreign
government which shall remain undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed;
(6) occurrence of any event of default as defined in any other
instrument evidencing or governing Indebtedness of a Borrower now or hereafter
outstanding;
(7) a Borrower's liquidation, termination, dissolution or cessation of
a substantial part of its current business;
(8) commencement by a Borrower of a voluntary proceeding seeking
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law, or seeking appointment of a trustee, receiver, liquidator or
other similar official for it or any substantial part of its assets; or its
consent to any of the foregoing in an involuntary proceeding against it; or a
Borrower shall generally not be paying its debts as they become due or admit in
writing its inability to do so; or an assignment for the benefit of, or the
offering to or entering into by a Borrower of any composition, extension,
reorganization or other Agreement or arrangement with, its creditors;
(9) commencement of an involuntary proceeding against a Borrower
seeking relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law, or seeking appointment of a trustee, receiver, liquidator
or other similar official for it or any substantial part of its assets, which
proceeding is not dismissed or stayed within sixty (60) days;
(10) service upon Agent of a writ of levy or attachment or naming Agent
as trustee for Borrower, or of any other similar process or attachment in an
amount of $100,000 or more and if less than $100,000, if such levy, attachment
or process is not discharged in 30 days;
(11) entry of any executable judgment(s) against Borrowers in an
aggregate amount greater than $100,000 which is not covered by insurance (and
for this purpose a judgment shall be deemed "covered by insurance" only if the
insurance company has formally advised Borrowers that the judgment in its
entirety is covered by insurance and no action is being taken to execute such
judgment against a Borrower's assets) and shall remain undischarged or unvacated
for a period in excess of thirty (30) days or execution shall at any time not be
effectively stayed;
(12) attachment of any Lien in excess of $100,000 (other than a
Permitted Lien) upon property of a Borrower not in favor
51
<PAGE>
of Agent without Agent's prior written consent which Lien is not discharged in
thirty (30) days;
(13) entry of any court order which enjoins, restrains, or in any way
prevents a Borrower from conducting all or any substantial part of its business;
(14) reclamation or repossession of any asset(s) of a Borrower valued
in excess of $100,000, unless contracted in good faith; or
(15) there shall occur and be continuing any Reportable Event which
constitutes grounds for termination of or for appointment by a United States
district court of a trustee to administer any Plan; the PBGC shall institute
----
proceedings to terminate or to appoint a trustee to administer any Plan; a
United States district court shall appoint a trustee to administer any Plan; or
any Plan shall be terminated in circumstances giving rise to liabilities having
a material adverse effect on a Borrower's financial condition.
Each Borrower acknowledges and agrees that each and every Event of
Default described above shall be of equal weight and significance, and equally
and fully shall allow Agent to exercise its rights and remedies hereunder. Each
Borrower acknowledges and agrees that each such Event of Default has been a
material inducement for Agent and/Lenders or to enter into its Agreement and
that Agent and/or Lenders would be irreparably harmed if Agent and/or Lenders,
in any way, were unable to exercise their rights and remedies on the basis that
certain Event of Default (for example, Events of Default not relating to
payment) were of less weight or significance than certain other Events of
Default (for example, Events of Default relating to payment).
SECTION 12
AGENT'S RIGHTS AND REMEDIES UPON THE OCCURRENCE
-----------------------------------------------
OF AN EVENT OF DEFAULT
----------------------
Following the occurrence and during the continuance of an Event of
Default, Agent may, at its option:
1.84. Remedies. Agent may declare any and all of the Obligations to be
--------------
immediately due and payable; and, in addition to that right, and in addition to
exercising all other rights or remedies, Agent may proceed to exercise with
respect to the Collateral all rights, options and remedies of a secured party
upon default as provided for under the UCC.
1.85. Exercise of Remedies. Agent may by notice to Borrower terminate
--------------------------
52
<PAGE>
the commitment to make the Loans under Section 2 and/or accelerate the payment
of all Obligations (provided that no such notice shall be required if the Event
of Default is under Sections 11.1(i) or 11.1(j)); Agent may proceed to enforce
payment of any of the Obligations and shall have and may exercise any and all
rights under the Uniform Commercial Code or which are afforded to Agent herein
or otherwise; and all Obligations (including without limitation principal,
accrued interest, amounts payable under Section 13.1 or upon entry of any
judgment) shall bear interest payable on demand at the rate per annum five
percent (5%) in excess of the applicable rate of interest provided in Section 2
(the "Default Rate").
1.86. Disposition of Collateral. Agent may sell, lease or otherwise
-------------------------------
dispose of and deliver any or all Collateral at public or private sale, for
cash, upon credit or otherwise, at such prices and upon such terms as Agent
deems advisable in its sole discretion. Any requirements of reasonable notice
shall be met if such notice is mailed postage prepaid to Borrowers at its
address set forth herein at least ten (10) business days before the time of sale
or other disposition. Agent or a Lender may be the purchaser at any such sale,
if it is public, and in such event Agent and/or Lender shall have all rights of
a good faith, bona fide purchaser for value from a secured party after default.
The proceeds of any sale may be applied (in whatever order and manner Agent
elects in its sole discretion) to all costs and expenses of sale (including
without limitation reasonable attorneys' fees and disbursements) and to the
payment of Obligations, and any remaining proceeds shall be applied in
accordance with Article 9, Part 5, of the UCC. Borrower shall remain liable to
Agent for any deficiency.
1.87. Cumulative Remedies. The rights and remedies of the Agent and/or
-------------------------
Lender shall be deemed to be cumulative, and any exercise of any right or remedy
shall not be deemed to be an election of that right or remedy to the exclusion
of any other right or remedy.
1.88. Waivers. Each Borrower acknowledges that this Agreement involves
-------------
the grant of multiple security interests, and such Borrower hereby waives, to
the extent permitted by applicable law, (i) any requirement of marshaling assets
or proceeding against persons or assets in any particular order, and (ii) any
and all notices of every kind and description that may be required to be given
by any statute or rule of law and any defense of any kind based on any such
notice, except any notices required under the Note.
53
<PAGE>
SECTION 13
INDEMNIFICATION, ETC.
---------------------
1.89. Environmental Indemnity. Each Borrower shall indemnify, defend,
-----------------------------
and hold harmless Agent, each Lender, its Affiliates, and their respective
directors, officers, shareholders, partners, employees, consultants and agents
(herein individually called an "Indemnified Party," and collectively called
"Indemnified Parties") from and against, and shall reimburse and pay Indemnified
Parties with respect to, any and all claims, demands, liabilities, losses,
damages (including without limitation actual, consequential, exemplary and
punitive damages), causes of action, judgments, penalties, fees, costs and
expenses (including without limitation attorneys' fees, court costs and legal
expenses and consultant's and expert's fees and expenses) of any and every kind
or character, known or unknown, fixed or contingent, that may be imposed upon,
asserted against, or incurred or paid by or on behalf of any Indemnified Party
on account of, in connection with, or arising out of (a) the breach of any
representation or warranty of a Borrower relating to Environmental Laws or
Hazardous Materials, or (b) the failure of a Borrower to perform any agreement,
covenant or obligation required to be performed by a Borrower relating to
Environmental Laws or Hazardous Materials, (c) any violation of or failure to
comply with any Environmental Law now existing or hereafter occurring, (d) the
removal of Hazardous Materials from a Borrower's properties (or if removal is
prohibited by law, the taking of whatever action is required by law), (e) any
act, omission, event or circumstance existing or occurring or resulting from or
in connection with the ownership, construction, occupancy, operation, use or
maintenance of the properties, regardless of whether the act, omission, event or
circumstance constituted a violation of or failure to comply with any
Environmental Law at the time of its existence or occurrence, and (f) any and
all claims or proceedings (whether brought by private party or governmental
agency) for bodily injury, property damage, abatement or remediation,
environmental damage, or impairment or any other injury or damage resulting from
or relating to any Hazardous Material located upon or migrating into, on, from
or through the properties (whether or not any or all of the foregoing was caused
by a Borrower, a prior owner of the properties, an operator or prior operator of
the properties, their respective tenants or subtenants, or any third party and
whether or not the alleged liability is attributable to the handling, storage,
use, treatment, processing, distribution, manufacture, generation, discharge,
transportation or disposal of such Hazardous Material or the mere presence of
such Hazardous Material on the properties). Without limiting the generality of
the foregoing, it is the intention of each Borrower and each Borrower agrees
that the foregoing indemnities shall apply to each Indemnified Party with
respect to claims, demands, liabilities, losses, damages (including without
limitation actual, consequential, exemplary and punitive damages), causes of
action, judgments, penalties, fees, costs, court costs and legal expenses and
consultant's and expert's fees and expenses, of any kind or character, known or
unknown, fixed or contingent, that in whole or in part are caused by or arise
out of the negligence of such Indemnified Party; however, such indemnities shall
-------
not apply to any Indemnified Party to the extent the subject of the
indemnification is caused by or arises out of the gross negligence or willful
misconduct of such Indemnified Party. The foregoing indemnities shall be
perpetual and shall survive the payment or satisfaction of the Loans and the
release, foreclosure or other termination of the Loan Document. Any amount to be
paid hereunder by Borrower to Agent and/or Lenders or for which Borrower has
indemnified an Indemnified Party shall be a demand obligation owing by Borrower
to Agent
54
<PAGE>
and/or Lenders and shall bear interest at the Default Rate until paid, and shall
constitute a part of the obligations of Borrower under this Agreement and shall
be indebtedness evidenced by this Agreement and secured by the Loan Documents.
1.90. GENERAL INDEMNITY. EACH BORROWER AGREES TO INDEMNIFY AGENT
-----------------------
AND/OR LENDERS UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, PENALTIES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES
OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS
AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY
CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER GROWING OUT OF, RESULTING
FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN
DOCUMENTS, OR THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE
THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN. THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY AGENT AND/OR LENDER PROVIDED ONLY THAT A LENDER SHALL
NOT BE ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION FOR THAT PORTION,
IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL
JUDGMENT. IF ANY PERSON (INCLUDING A BORROWER OR ANY OF ITS AFFILIATES) EVER
ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY A LENDER OR THE AGENT,
THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL NONETHELESS BE PAID UPON
DEMAND, SUBJECT TO LATER ADJUSTMENT OR REIMBURSEMENT, UNTIL SUCH TIME AS A COURT
OF COMPETENT JURISDICTION ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF
THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY AMOUNT TO BE PAID
HEREUNDER BY BORROWER TO AGENT AND/OR LENDERS, OR FOR WHICH BORROWER HAS
INDEMNIFIED AN INDEMNIFIED PARTY, SHALL BE A DEMAND OBLIGATION OWING BY BORROWER
TO AGENT AND/OR LENDER AND SHALL BEAR INTEREST AT THE DEFAULT RATE UNTIL PAID,
AND SHALL CONSTITUTE A PART OF THE OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT
AND SHALL BE INDEBTEDNESS EVIDENCED BY THIS AGREEMENT AND SECURED BY THE LOAN
DOCUMENTS. AS USED IN THIS SECTION THE TERM "LENDER" SHALL REFER NOT ONLY TO THE
PERSON DESIGNATED AS SUCH IN THIS SECTION BUT ALSO TO EACH DIRECTOR, OFFICER,
PARTNER, AGENT, ATTORNEY, EMPLOYEE, REPRESENTATIVE AND AFFILIATE OF SUCH PERSON.
1.91. Exculpation. In the absence of willful misconduct taken or
-----------------
omitted in bad faith, or gross negligence,
55
<PAGE>
neither a Lender, Agent nor any attorney-in-fact pursuant to Section 10.__ shall
be liable to a Borrower or any other Person for any act or omission, any mistake
of fact or any error of judgment in exercising any right or remedy granted
herein.
1.92. Collateral Secures Indemnification. Agent shall be entitled to
----------------------------------------
retain Collateral or require substitution therefor to the extent required to
assure Agents of satisfaction of Borrower's Obligations under this Section 13.
SECTION 14
MISCELLANEOUS PROVISIONS
------------------------
1.93. Notices. Any notices or other communications required or
-------------
permitted hereunder shall be sufficiently given if in writing and delivered in
Person, transmitted by facsimile transmission (fax) or sent by registered or
certified mail (return receipt requested) or recognized overnight delivery
service, postage pre-paid, addressed as follows, or to such other address has
such party may notify to the other parties in writing:
(1) if to Borrowers:
Environmental Safeguards, Inc.
2600 South Loop West, Suite 645
Houston, TX 77054
Attn: James S. Percell
Telephone No.: 713-641-3838
Facsimile No.: 713-641-0756
with a copy (which will not constitute notice) to:
Axelrod, Smith & Kirshbaum
5300 Memorial
Houston, TX 77007
Attn: Robert D. Axelrod, Esq.
Telephone No.: 713-861-1996
Facsimile No.: 713-552-0202
(2) if to Agent and/or Lenders:
Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David L. Warnock
Telephone No.: 410-895-3800
Facsimile No.: 410-895-3805
56
<PAGE>
and
Newpark Resources, Inc.
3850 N. Causeway
Suite 1770
Metairie, LA 70002-1756
Telephone No.: 504-838-8222
Facsimile No.: 504-833-9506
Attn: James Cole
and
James H. Stone
Stone Energy
909 Poydras Street, Suite 2650
New Orleans, LA 70112
with a copy (which will not constitute notice) to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: George P. Stamas, Esq.
Telephone No.: 410-986-2800
Facsimile No.: 410-986-2828
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
1.94. No Waiver. No failure to exercise and no delay in exercising, on
---------------
the part of Agent and/or a Lender, any right or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right or
remedy. Waiver by Agent and/or a Lender of any right or remedy on any one
occasion shall not be construed as a bar to or waiver thereof or of any other
right or remedy on any future occasion. Without limiting the generality of the
foregoing, the Borrowers expressly agree that no failure by a Agent and/or
Lenders to detect or to communicate with a Borrower or take action in response
to any failure by a Borrower to perform or observe any Obligation shall operate
as a waiver of any right or remedy of Agent and/or Lenders. Any waivers by Agent
and/or Lenders must be in writing. Agent's and/or Lender's rights and remedies
hereunder, under any Agreement or instrument supplemental hereto or under any
other Agreement or instrument shall be cumulative, may be exercised singly or
concurrently and are not exclusive of
57
<PAGE>
any rights or remedies provided by law.
1.95. Assignment. This Agreement shall be binding upon and shall
----------------
inure to the benefit of each Borrower, Agents and Lenders and their respective
successors and assigns; provided that Borrowers may not assign or transfer any
rights or Obligations hereunder without Agent's prior written consent.
1.96. Headings. The headings contained herein are for convenience only
--------------
and shall not affect the construction hereof. If one or more provisions of this
Agreement (or the application thereof) shall be invalid, illegal or
unenforceable in any respect in any jurisdiction, the same shall not, to the
fullest extent permitted by applicable law, invalidate or render illegal or
unenforceable such provision (or its application) in any other jurisdiction or
any other provision of this Agreement (or its application). This Agreement is
the entire Agreement of the parties with respect to the subject matter hereof
and supersedes any prior written or verbal communications or instruments
relating thereof.
1.97. Term. This Agreement shall continue in full force and effect so
----------
long as any of the Obligations remains outstanding or has not been fully and
finally paid, performed or satisfied. All agreements, representations,
warranties and covenants made herein shall survive delivery of this Agreement
and the Note.
1.98. Waiver of Remedies. Each Borrower acknowledges that the
------------------------
transactions contemplated hereby are commercial transactions and waives, to the
fullest extent it may do so under applicable law, such rights as it may have or
hereafter have to notices and/or hearings under applicable federal or state laws
relating to exercise of any of Agent's and/or Lenders' rights, including without
limitation the right to deprive a Borrower of or affect its use, possession or
enjoyment of property prior to rendition of a final judgment against Borrower.
1.99. Further Assurances. Each Borrower shall execute and deliver to
------------------------
Agent such further assurances and take such other further actions as Agent may
from time to time request to further the intent and purpose of this Agreement
and to maintain and protect the rights and remedies intended in favor of Agent
and/or Lenders under this Agreement. Borrowers shall execute and deliver to
Agent any financing statement or other notice document requested, or procure any
other document requested, and record such financing statements or other notice
documents to perfect the Liens, and the first priority of the Liens, created
under this Agreement. If the Collateral is of a type as to which it is necessary
or desirable for Agent to take possession of the Collateral in order to
58
<PAGE>
perfect, or maintain the priority of, Agent's Liens, then upon Agent's request,
such Borrower shall deliver such Collateral to Agent.
1.100. Counterparts. This Agreement may be signed in any number of
-------------------
counterparts with the same effect as if the signature thereto and hereto were
upon the same instrument.
1.101. Fees and Expenses. Borrower shall pay to Agent all reasonable
------------------------
costs, filing fees, expenses, losses, claims, damages, liabilities, penalties,
suits, judgments or disbursements of any nature (including without limitation
reasonable attorneys' fees and disbursements and appraisal costs) which may be
incurred by, imposed on or asserted against Lender in connection with: this
Agreement and any of the other Loan Documents; all other amendments,
modifications or waivers hereof or thereof; taxes and other governmental charges
payable by reason of this Agreement, documents and filings relating hereto and
Collateral (excluding income and franchise taxes payable by Agent); any exercise
of Agent's and/or Lenders' rights and remedies, including the right of
acceleration; any enforcement, collection or other proceedings with respect to
the Obligations or from any negotiations or other measures to preserve Agent's
and/or Lenders' rights hereunder; any investigative, administrative or judicial
proceeding (whether or not Lender is designated as a party thereto) relating to
or arising out of this Agreement; or any bankruptcy, insolvency or other similar
proceedings relating to a Borrower. Notwithstanding anything in this section to
the contrary, the parties hereto agree that each party shall pay its own
respective fees and disbursements for legal counsel incurred in connection with
the Loan Documents.
1.102. Consent of all Lenders. Notwithstanding anything to the
-----------------------------
contrary contained herein, no amendment, modification, change or waiver shall be
effective without the consent of all of the Lenders to:
(1) extend the maturity of the principal of, or interest on, any Note
or of any of the other Obligations;
(2) reduce the principal amount of any Note or of any of the other
Obligations, the rate of interest thereon due to the Lenders, except as
expressly permitted herein or therein;
------
(3) change the aggregate Commitments;
(4) change the date of payment of principal of, or interest on, any
Note or of any of the other Obligations;
(5) change the method of calculation utilized in connection with the
computation of interest;
59
<PAGE>
(6) change the manner of pro rata application by the Agent of payments
made by the Borrowers, or any other payments required hereunder or under the
other Loan Documents;
(7) modify this Section, Section 8.8 or Section 8.12;
(8) release or agree to subordinate any material portion of any
Collateral or Financing Document (except to the extent provided herein or
therein); or
(9) waive the performance, observance or compliance with or amend and
financial covenants.
Additionally, no change may be made to the amount of a Lender's Commitment
without the prior written consent of that Lender.
14.11 Usury Laws. It is the intention of the parties hereto to comply
----------------
with all applicable usury laws; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this Agreement or any other Loan Documents, in
no event shall such Loan Documents require the payment or permit the collection
of interest (which term, for purposes hereof, shall include any amount which,
under applicable law, is deemed to be interest, whether or not such amount is
characterized by the parties as interest) in excess of the maximum amount
permitted by such laws. If any excess of interest is unintentionally contracted
for, charged or received under this Agreement or under the terms of any other
Loan Documents, or in the event the maturity of the indebtedness evidenced by
the Notes is accelerated in whole or in part, or in the event that all or part
of the principal or interest of the Notes shall be prepaid, so that the amount
of interest contracted for, charged or received under this Agreement or under
any of the other Loan Documents, on the amount of principal actually outstanding
from time to time under this Agreement shall exceed the maximum amount of
interest permitted by the applicable usury laws, then in any such event (i) the
provisions of this paragraph shall govern and control, (ii) neither Borrowers
nor any other person or entity now or hereafter liable for the payment thereof,
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the maximum amount of interest permitted by such applicable usury
laws, (iii) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount thereof or refunded
to Borrowers at Lender's option, and (iv) the effective rate of interest shall
be automatically reduced to the maximum lawful rate of interest allowed under
the applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under the Notes or under such other Loan Documents which are made for
the purpose of determining whether such rate exceeds the maximum lawful rate of
interest, shall be made, to the extent permitted by applicable laws, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of the Loans evidenced thereby, all interest at any time
contracted for, charged or received from Borrowers or otherwise by Lenders in
connection with such Loans.
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SECTION 15
GOVERNING LAW; JURISDICTION
---------------------------
15.1. Governing Law. This Agreement shall take effect as a sealed
--------------------
instrument and shall be governed by and construed in accordance with the laws of
the State of Maryland (without giving effect to its conflict of laws rules).
15.2. SUBMISSION TO JURISDICTION. EACH BORROWER, TO THE FULL EXTENT
---------------------------------
PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE
STATE OF MARYLAND OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM
OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN THE CITY OF BALTIMORE, MARYLAND, (C) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND, (D) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY FORUM OTHER
THAN THE CITY OF BALTIMORE, MARYLAND (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT
OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). EACH
BORROWER FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR
NOTICES DESCRIBED HEREIN ) HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING
HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER
MANNER PERMITTED BY LAW).
[remainder of page intentionally left blank]
61
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LOAN AND SECURITY AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed effective as of the date first above written.
BORROWERS: ENVIRONMENTAL SAFEGUARDS, INC.
By: /s/ James S. Percell
------------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
NATIONAL FUEL & ENERGY, INC.
By: /s/ James S. Percell
-----------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
ONSITE TECHNOLOGY, L.L.C.
By: /s/ James S. Percell
-----------------------------
Name: James S. Percell
Title: Managing Member
LENDERS: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ David L. Warnock
-----------------------------
Name: David L. Warnock
Title: a General Partner
62
<PAGE>
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
General Partner
By: /s/ David L. Warnock
-----------------------------
Name: David L. Warnock
Title: Managing Member
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
-------------------------------
Name: James D. Cole
Title: Chairman of the Board,
President and
Chief Executive Officer
JAMES H. STONE
/s/ James H. Stone
-----------------------------------
63
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EXHIBIT A
FORM OF NOTE
64
<PAGE>
EXHIBIT B
ADDITIONAL WARRANT FOR 188,571
65
<PAGE>
EXHIBIT C
WARRANT AND WARRANT AGREEMENTS
66
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EXHIBIT 5.0
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
ENVIRONMENTAL SAFEGUARDS, INC.
Environmental Safeguards, Inc. (hereinafter referred to as the
"Corporation" or "Company"), a corporation organized and existing under the laws
of the State of Nevada,
DOES HEREBY CERTIFY:
That, the Articles of Incorporation of the Corporation authorizes the
issuance of 10,000,000 shares of Preferred Stock, $.001 par value per share, and
expressly vests in the Board of Directors of the Corporation the authority to
issue any or all of said shares in one or more series and by resolution or
resolutions to establish the designation, number, full or limited voting powers,
or the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions and other distinguishing characteristics of each series to be
issued:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation, the Series B Convertible Preferred
Stock, par value $.001 with a stated value of $5,000.00 ("Preferred Stock"), is
hereby authorized and created, said series to consist of up to 5,000,000 shares.
The voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall be as follows:
1. DIVIDENDS ON PREFERRED STOCK
----------------------------
(a) The holders of Preferred Stock shall be entitled to receive out of
funds legally available therefor, dividends at the same rate as dividends
(other than dividends paid in additional shares of Common Stock) are paid
with respect to the outstanding shares of the Company's Common Stock, $.001
par value per share ("Common Stock"), (treating each share of Preferred
Stock as being equal to the number of shares of Common Stock into which
each such share of Preferred Stock could be converted pursuant to the
provisions of Section 2 hereof with such number determined as of the record
date for the determination of holders of Common Stock entitled to receive
such dividend).
(b) Dividends in Kind. In the event the Company shall make or issue,
-----------------
or shall fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution with respect to the
Common Stock payable in (i) securities of the Company other than shares of
Common Stock or (ii) assets, then and in each such event the holders of
Preferred Stock shall receive, at the same time such distribution is made
with respect to Common Stock, the number of securities or such other assets
of the Company which they would have received had their Preferred Stock
been converted into Common Stock immediately prior to the record date for
determining holders of Common
<PAGE>
Stock entitled to receive such distribution.
2. CONVERSION OF PREFERRED STOCK INTO COMMON STOCK
-----------------------------------------------
(a) Each holder of shares of Preferred Stock may, at his option and at
any time and from time to time, convert any or all such shares, plus all
dividends accrued and unpaid on such Preferred Stock up to the conversion
date, on the terms and conditions set forth in this Section 2, into fully
paid and non-assessable shares of the Corporation's Common Stock except
that with respect to any shares of Preferred Stock called for redemption,
the conversion right shall terminate at the close of business on the
business day prior to the Redemption Date, unless default is made in the
payment of the Redemption Price. The number of shares of Common Stock into
which each share of Preferred Stock may be converted shall be determined by
multiplying the number of shares of Preferred Stock to be converted by
$1.06 and dividing the result by the Conversion Price (as defined herein)
in effect at the time of conversion. The "Conversion Price" per share at
which shares of Common Stock shall be issuable upon conversion of any
shares of Preferred Stock shall initially be $1.06, subject to adjustment
provided below.
(b) To exercise his conversion privilege, the holder of any shares of
Preferred Stock shall surrender to the Corporation during regular business
hours at the principal executive offices of the Corporation or the offices
of the transfer agent for the Preferred Stock or at such other place as may
be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed for transfer to the Corporation (if
required by it), accompanied by written notice stating that the holder
irrevocably elects to convert such shares. Conversion shall be deemed to
have been effected on the date when such delivery is made, and such date is
referred to herein as the "Conversion Date." Within five (5) business days
after the date on which such delivery is made, the Corporation shall issue
and send (with receipt to be acknowledged) to the holder thereof or the
holder's designee, at the address designated by such holder, a certificate
or certificates for the number of full shares of Common Stock to which the
holder is entitled as a result of such conversion, and cash with respect to
any fractional interest of a share of Common Stock as provided in paragraph
(c) of this Section 2. The holder shall be deemed to have become a
stockholder of record of the number of shares of Common Stock into which
the shares of Preferred Stock have been converted on the applicable
Conversion Date unless the transfer books of the Corporation are closed on
that date, in which event he shall be deemed to have become a stockholder
of record of such shares on the next succeeding date on which the transfer
books are open, but the Conversion Price shall be that in effect on the
Conversion Date. Upon conversion of only a portion of the number of shares
of Preferred Stock represented by a certificate or certificates surrendered
for conversion, the Corporation shall within three (3) business days after
the date on which such delivery is made, issue and send (with receipt to be
acknowledged) to the holder thereof or the holder's designee, at the
address designated by such holder, a new certificate covering the number of
shares of Preferred Stock representing the unconverted
2
<PAGE>
portion of the certificate or certificates so surrendered.
(c) No fractional shares of Common Stock or scrip shall be issued upon
conversion of shares of Preferred Stock. If more than one share of
Preferred Stock shall be surrendered for conversion at any one time by the
same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number
of shares of Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
any shares of Preferred Stock, the Corporation shall make an adjustment in
respect of such fractional interest equal to the fair market value of such
fractional interest, to the nearest 1/100th of a share of Common Stock, in
cash at the Current Market Price (as defined below) on the business day
preceding the effective date of the conversion. The "Current Market Price"
of publicly traded shares of Common Stock of the Corporation for any day
shall be deemed to be the average of the daily "Closing Prices" for the 10
consecutive trading days preceding the Conversion Date. The "Closing
Price" shall mean the last reported sales price on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers Automated
Quotations System, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotations System, the average
of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to
time by the Corporation for that purpose.
(d) The Corporation shall at all times reserve for issuance and
maintain available, out of its authorized but unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Stock, the
full number of shares of Common Stock deliverable upon the conversion of
all Preferred Stock from time to time outstanding. The Corporation shall
from time to time (subject to obtaining necessary director and stockholder
action), in accordance with the laws of the State of Nevada, increase the
authorized number of shares of its Common Stock if at any time the
authorized number of shares of its Common Stock remaining unissued shall
not be sufficient to permit the conversion of all of the shares of
Preferred Stock at the time outstanding.
(e) If any shares of Common Stock to be reserved for the purpose of
conversion of shares of Preferred Stock require registration or listing
with, or approval of, any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise,
including registration under the Securities Act of 1933, as amended, and
appropriate state securities laws, before such shares may be validly issued
or delivered upon conversion, the Corporation will in good faith and as
expeditiously as possible meet such registration, listing or approval, as
the case may be.
(f) All shares of Common Stock which may be issued upon conversion of
3
<PAGE>
the shares of Preferred Stock will upon issuance by the Corporation be
validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issuance thereof.
(g) The Conversion Price in effect shall be subject to adjustment from
time to time as follows:
(i) Stock Splits, Dividends and Combinations. In the event that
the Corporation shall at any time subdivide the outstanding shares of
Common Stock, or shall pay or make a dividend or distribution on any
class of capital stock of the Corporation in Common Stock, the
Conversion Price in effect immediately prior to such subdivision or
the issuance of such dividend shall be proportionately decreased, and
in case the Corporation shall at any time combine the outstanding
shares of Common Stock, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision,
dividend or combination, as the case may be.
(ii) Non-Cash Dividends, Stock Purchase Rights, Capital
Reorganization and Dissolutions. In the event:
(A) that the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive
a dividend, or any other distribution, payable otherwise than in
cash; or
(B) that the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to
subscribe for or purchase any shares of stock of any class or
other securities, or to receive any other rights; or
(C) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other
than a subdivision or combination of its outstanding shares of
Common Stock), consolidation or merger of the Corporation with or
into another corporation, share exchange for all outstanding
shares of Common Stock under a plan of exchange to which the
Corporation is a party, or conveyance of all or substantially all
of the assets of the Corporation to another corporation; or
(D) of the voluntary or involuntary dissolution, liquidation
or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed
to the holders of record of the outstanding Preferred Stock, at least
10 days prior to the date
4
<PAGE>
hereinafter specified, a notice stating the date on which (x) a record
is to be taken for the purpose of such dividend, distribution or
rights, or (y) such reclassification, reorganization, consolidation,
merger, share exchange, conveyance, dissolution, liquidation or
winding up is to take place and the date, if any is to be fixed, as of
which holders of Corporation securities of record shall be entitled to
exchange their shares of Corporation securities for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, share exchange, conveyance, dissolution,
liquidation or winding up.
(iii) Issuances at Less than the Conversion Price. Upon the
issuance by the Corporation of Common Stock, or any right, warrant or
option to purchase Common Stock or any security convertible into or
exchangeable for Common Stock, or any obligation or any share of stock
convertible into or exchangeable for Common Stock for a consideration
per share less than the Conversion Price of the Preferred Stock in
effect immediately prior to the time of such issue or sale other than
an issuance of stock or securities pursuant to paragraph (i) of this
Section 2(g), the issuance of shares of Common Stock upon exercise of
options and warrants granted prior to the date of initial issuance of
the Preferred Stock, shares of Common Stock issued upon the exercise
of stock options granted pursuant to the Corporation's employee stock
option plan in effect from time to time (and as amended if approved by
the stockholders of the Corporation), or shares of Common Stock issued
in bona fide acquisitions (stock or asset) approved by the Board of
Directors or stockholders of the Corporation, then forthwith upon such
issue or sale, the Conversion Price of the Preferred Stock shall be
reduced to a price (calculated to the nearest cent) determined by
dividing:
(A) an amount equal to the sum of (x) the number of shares
of Common Stock outstanding immediately prior to such issue or
sale multiplied by the then existing Conversion Price of the
Preferred Stock, (y) the number of shares of Common Stock
issuable upon conversion or exchange of any obligations or of any
shares of stock of the Corporation outstanding immediately prior
to such issue or sale multiplied by the then existing Conversion
Price of the Preferred Stock, and (z) an amount equal to the
aggregate "consideration actually received" by the Corporation
upon such issue or sale; by
(B) the sum of the number of shares of Common Stock
outstanding immediately after such issue or sale and the number
of shares of Common Stock issuable upon conversion or exchange of
any obligations or of any share of stock of the Corporation
outstanding immediately after such issue or sale.
For purposes of this paragraph 2(g)(iii), the following
provisions will be applicable:
5
<PAGE>
(A) In the case of an issue or sale for cash of shares of
Common Stock, the "consideration actually received" by the
Corporation therefor shall be deemed to be the amount of cash
received, before deducting therefrom any commissions or expenses
paid by the Corporation.
(B) In case of the issuance (otherwise than upon conversion
or exchange of obligations or shares of stock of the Corporation)
of additional shares of Common Stock for a consideration other
than cash or a consideration partly other than cash, the amount
of the consideration other than cash received by the Corporation
for such shares shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of
Directors.
(C) In case of the issuance by the Corporation in any manner
of any rights to subscribe for or to purchase shares of Common
Stock, or any options for the purchase of shares of Common Stock
or stock convertible into Common Stock, all shares of Common
Stock or stock convertible into Common Stock to which the holders
of such rights or options shall be entitled to subscribe for or
purchase pursuant to such rights or options shall be deemed to be
"outstanding" as of the date of the offering of such rights or
the granting of such options, as the case may be, and the
aggregate consideration named in such rights or options for the
shares of Common Stock or stock convertible into Common Stock
covered thereby, plus the consideration, if any, received by the
Corporation for such rights or options, shall be deemed to be the
"consideration actually received" by the Corporation (as of the
date of the offering of such rights or the granting of such
options, as the case may be) for the issuance of such shares.
(D) In case of the issuance or issuances by the Corporation
in any manner of any obligations or of any shares of stock of the
Corporation that shall be convertible into or exchangeable for
Common Stock, all shares of Common Stock issuable upon the
conversion or exchange of such obligations or shares shall be
deemed to be issued as of the date such obligations or shares are
issued, and the amount of the "consideration actually received"
by the Corporation for such additional shares of Common Stock
shall be deemed to be the total of (x) the amount of
consideration received by the Corporation upon the issuance of
such obligations or shares, as the case may be, plus (y) the
aggregate consideration, if any, other than such obligations or
shares, receivable by the Corporation upon such conversion or
exchange, except in adjustment of dividends.
6
<PAGE>
(E) The amount of the "consideration actually received" by
the Corporation upon the issuance of any rights or options
referred to in subparagraph (C) above or upon the issuance of any
obligations or shares which are convertible or exchangeable as
described in subparagraph (D) above, and the amount of the
consideration, if any, other than such obligations or shares so
convertible or exchangeable, receivable by the Corporation upon
the exercise, conversion or exchange thereof shall be determined
in the same manner provided in subparagraphs (A) and (B) above
with respect to the consideration received by the Corporation in
case of the issuance of additional shares of Common Stock. Upon
the expiration of any rights or options referred to in
subparagraph (C), or the termination of any right of conversion
or exchange referred to in subparagraph (D), or any change in the
number of shares of Common Stock deliverable upon exercise of
such options or rights or upon conversion of or exchange of such
convertible or exchangeable securities, the Conversion Prices
then in effect shall forthwith be readjusted to such Conversion
Prices as would have obtained had the adjustments made upon the
issuance of such options, rights or convertible or exchangeable
securities been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered or to be
delivered upon the exercise of such rights or options or upon the
conversion or exchange of such securities.
(h) Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to paragraph 2(g), the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with
the terms hereof, and prepare and furnish to each holder of Preferred Stock
a certificate signed by an officer of the Corporation setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of such holder's shares.
(i) In case any shares of Preferred Stock shall be converted pursuant
to Section 2(f) hereof, or purchased or otherwise acquired by the
Corporation, the shares so converted, purchased or acquired shall be
restored to the status of authorized but unissued shares of preferred
stock, without designation as to class or series, and may thereafter be
reissued, but not as shares of Preferred Stock.
(j) Effective upon the closing of a Qualified Public Offering (as
hereinunder defined) all of the then outstanding Preferred Stock shall
automatically be converted into Common Stock at the applicable Conversion
Price then in effect. For purposes hereof, the term "Qualified Public
Offering" shall mean the closing of a firm commitment underwritten public
offering pursuant to a registration statement filed and declared effective
7
<PAGE>
under the Securities Act of 1933, as amended, (the "Act") covering the
offer and sale of Common Stock to the public in which the aggregate
proceeds to the Company equal or exceed $25,000,000 and in which the price
per share of Common Stock is at least $5.00 per share. All holders of
record of shares of Preferred Stock will be given at least 10 days' prior
written notice of the date fixed and the place designated for mandatory
conversion of all such shares of Preferred Stock pursuant to this Section
2(j). On or before the date fixed for conversion, each holder of shares of
Preferred Stock shall surrender his or its certificate or certificates for
all such shares to the Company at the place designated in such notice, and
shall thereafter receive certificates for the number of shares of Common
Stock to which such holder is entitled pursuant to this Section 2(j).
Within five (5) business days after the date of such mandatory conversion
and the surrender of the certificate or certificates for Preferred Stock,
the Company shall cause to be issued and delivered to such holder a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and
cash as provided in Section 2(c) in respect of any fraction of a share of
Common Stock otherwise issuable upon such conversion.
3. VOTING
------
(a) Except for election of directors, as otherwise required by law or
set forth herein, the shares of Preferred Stock shall be entitled to vote,
together with the shares of the Corporation's Common Stock, on all matters
presented at any annual or special meeting of stockholders of the
Corporation, or may act by written consent in the same manner as the
holders of the Corporation's Common Stock, upon the following basis: each
holder of Preferred Stock shall be entitled to cast such number of votes
for each share of Preferred Stock held by such holder on the record date
fixed for such meeting, or on the effective date of such written consent,
as shall be equal to the number of shares of the Corporation's Common Stock
into which each of such holder's shares of Preferred Stock is convertible
immediately after the close of business on the record date fixed for such
meeting or the effective date of such written consent. The Preferred Stock
and any other stock having voting rights shall vote together as one class,
except as provided by law and in paragraph 5 hereof.
(b) Without limiting the foregoing, so long as the Preferred Stock is
outstanding and unconverted to Common Stock, the holders of the Preferred
Stock, voting separately as a class, shall be entitled to elect one member
of the Board of Directors.
4. LIQUIDATION RIGHTS
------------------
8
<PAGE>
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Preferred Stock then outstanding shall be entitled to receive out of assets
of the Corporation available for distribution to stockholders, before any
distribution of assets is made to holders of any other class of capital
stock of the Corporation, an amount equal to $1.06 per share, plus
accumulated and unpaid dividends thereon to the date fixed for distribution
("Liquidation Amount").
(b) A consolidation or merger of the Corporation (in the event that
the Corporation is not the surviving entity) or sale of all or
substantially all of the Corporation's assets shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company within
the meaning of this Section 4. In the event of such a liquidation as
contemplated by this Section 4(b), the holders of Preferred Stock shall be
entitled to receive an amount equal to the greater of the Liquidation
Amount or that which such holders would have received if they had converted
their Preferred Stock into Common Stock immediately prior to such
liquidation or winding up (without giving effect to the liquidation
preference of or any dividends on any other capital stock ranking prior to
the Common Stock).
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which involves the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of Preferred Stock and
the holders of shares of Common Stock. The Corporation shall, upon receipt
of such appraiser's valuation, give prompt written notice to each holder of
shares of Preferred Stock of the appraiser's valuation.
5. LIMITATIONS
-----------
(a) So long as twenty-five percent (25%) of the shares of Preferred
Stock are outstanding, the Corporation shall not:
(i) create, authorize or issue shares of any class or series of
stock, or any security convertible into such class or series ranking
senior to or on parity with the Preferred Stock either as to payment
of dividends or as distributions in the event of a liquidation,
dissolution or winding up of the Corporation; or
(ii) amend, alter or repeal any provision of the Articles of
Incorporation or Bylaws of the Corporation so as to affect adversely
the relative rights, preferences, qualifications, limitations or
restrictions (including, without limitation, expanding the number of
members on the Board of Directors) of the Preferred Stock; or
(iii) declare or pay any dividend on its Common Stock if any
9
<PAGE>
dividends are unpaid on the Preferred Stock; or
(iv) redeem for cash any other securities issued by the Company;
or
(v) directly or indirectly, enter into any merger, consolidation
or other reorganization in which the Company shall no be the surviving
corporation, unless the surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume
the obligations of the Company under the Certificate of Designation.
(b) The provisions of this paragraph 5 shall not in any way limit the
right and power of the Corporation to issue bonds, notes, mortgages,
debentures, common stock, preferred stock ranking junior to the terms of
the Preferred Stock and other obligations, and to incur indebtedness to
banks and to other lenders.
IN WITNESS WHEREOF, ENVIRONMENTAL SAFEGUARDS, INC. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by JAMES S.
PERCELL, its president, and RONALD BIANCO, its assistant secretary, this 17th
day of December, 1997.
ENVIRONMENTAL SAFEGUARDS, INC.
By /s/ James S. Percell
--------------------------------------------
JAMES S. PERCELL, President
By /s/ Ronald Bianco
--------------------------------------------
RONALD BIANCO, Assistant Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BEFORE ME, the undersigned authority, on this day personally appeared James
S. Percell, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of office this 17th day of December, 1997.
10
<PAGE>
/s/ Vivian A. Tipps
--------------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BEFORE ME, the undersigned authority, on this day personally appeared
Ronald Bianco, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of office this 17th day of December, 1997.
/s/ Vivian A. Tipps
--------------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
11
<PAGE>
EXHIBIT 6
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES C PREFERRED STOCK
OF
ENVIRONMENTAL SAFEGUARDS, INC.
Environmental Safeguards, Inc. (hereinafter referred to as the
"Corporation" or "Company"), a corporation organized and existing under the laws
of the State of Nevada,
DOES HEREBY CERTIFY:
That, the Articles of Incorporation of the Corporation authorizes the
issuance of 10,000,000 shares of Preferred Stock, $.001 par value per share, and
expressly vests in the Board of Directors of the Corporation the authority to
issue any or all of said shares in one or more series and by resolution or
resolutions to establish the designation, number, full or limited voting powers,
or the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions and other distinguishing characteristics of each series to be
issued:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation, the Series C Preferred Stock, par
value $.001("Series C Preferred Stock"), is hereby authorized and created, said
series to consist of up to 400,000 shares, with a stated value of $10.00 per
share. The voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations or restrictions
thereof shall be as follows:
1. DIVIDENDS ON SERIES C PREFERRED STOCK
-------------------------------------
(a) The holders of Series C Preferred Stock shall be entitled to
receive out of funds legally available therefor, dividends in an annual
amount equal to the prime rate plus one and one-half percent (1 1/2%) as
reported by NationsBank of Maryland, N.A. on the outstanding stated value
of the Series C Preferred Stock (which initially is $4,000,000.00). The
dividends shall be calculated as of the last day of each quarter, and shall
be payable quarterly in arrears (the "Dividend Payment") with the first
quarterly payment due for the quarter ending March 31, 1998. The Dividend
Payment is due five (5) days after the close of each quarter. The initial
dividend shall accrue from the date of issuance of the Series C Preferred
Stock and shall be payable with the quarterly payment for the quarter
ending March 31, 1998.
2. NO CONVERSION OF SERIES C PREFERRED STOCK INTO COMMON STOCK
-----------------------------------------------------------
The Series C Preferred Stock is not convertible into the Corporation's
Common Stock.
<PAGE>
3. NO VOTING OF SERIES C PREFERRED STOCK
-------------------------------------
Except as required by law, each holder of Series C Preferred Stock
shall not be entitled to vote on any matters.
4. LIQUIDATION RIGHTS
------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Series C Preferred Stock then outstanding shall be entitled to receive out
of assets of the Corporation available for distribution to stockholders,
before any distribution of assets is made to holders of any other class of
capital stock of the Corporation, except Series B Convertible Preferred
Stock, an amount equal to $10.00 per share, plus accumulated and unpaid
dividends thereon to the date fixed for distribution ("Liquidation
Amount").
(b) A consolidation or merger of the Corporation (in the event that
the Corporation is not the surviving entity) or sale of all or
substantially all of the corporation's assets shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Corporation
within the meaning of this Section 4. In the event of such a liquidation as
contemplated by this Section 4(b), the holders of Series C Preferred Stock
shall be entitled to receive an amount equal to the Liquidation Amount
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which involves the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of this Series C
Preferred Stock other preferred stock, and the holders of shares of Common
Stock. The Corporation shall, upon receipt of such appraiser's valuation,
give prompt written notice to each holder of shares of Series C Preferred
Stock of the appraiser's valuation.
5. REDEMPTION AT THE DISCRETION OF THE CORPORATION
-----------------------------------------------
(a) The Corporation, at its sole discretion, may redeem any and/or all
of the shares of Series C Preferred Stock as may be outstanding from time
to time (the "Redemption Date"), upon thirty days written notice to holders
(the "Redemption Notice").
(b) The Redemption Price (the "Redemption Price") for each share of
Series C Preferred Stock shall be $10.00, plus accumulated and unpaid
dividends thereon to the date fixed for redemption.
(c) The notice required by clause 5(a) above shall be delivered by the
2
<PAGE>
Corporation to each holder of record of Series C Preferred Stock, at
such holder's address as shown on the records of the Corporation;
provided, however, that the Corporation's failure to give such
Redemption Notice shall in no way affect the Corporation's right to
redeem the Series C Preferred Stock.
(d) The Redemption Notice shall contain the following information:
(i) the Redemption Date and the Redemption Price; and
(ii) the number of shares of Series C Preferred Stock being
redeemed.
(e) Surrender of Certificates. Each holder of shares of Series C
-------------------------
Preferred Stock to be redeemed shall surrender the certificate(s)
representing such shares to the Corporation at the place designated in
the Redemption Notice, and thereupon the Redemption Price for such
shares as set forth in this Section 5 shall be paid to the order of
the person whose name appears in such certificate(s) and each
surrendered certificate shall be canceled and retired. In the event
some but not all of the shares of Series C Preferred Stock represented
by a certificate(s) surrendered by a holder are being redeemed, the
Corporation shall execute and deliver to or on the order of the
holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series C Preferred Stock which
were not redeemed.
(f) All shares of Series C Preferred Stock so redeemed shall have the
status of authorized but unissued Series C Preferred Stock, but such
shares so redeemed shall not be reissued as shares of the series of
Series C Preferred Stock created hereby.
3
<PAGE>
IN WITNESS WHEREOF, ENVIRONMENTAL SAFEGUARDS, INC. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by JAMES S.
PERCELL, its president, and RONALD BIANCO, its assistant secretary, this 17th
day of December, 1997.
ENVIRONMENTAL SAFEGUARDS, INC.
By /s/ James S. Percell
----------------------------------------
JAMES S. PERCELL, President
By /s/ Ronald Bianco
----------------------------------------
RONALD BIANCO, Assistant Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BEFORE ME, the undersigned authority, on this day personally appeared James
S. Percell, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of office this 17th day of December, 1997.
/s/ Vivian A. Tipps
-----------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BEFORE ME, the undersigned authority, on this day personally appeared
Ronald Bianco, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
4
<PAGE>
GIVEN UNDER MY HAND AND SEAL of office this 17th day of December, 1997.
/s/ Vivian A. Tipps
------------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
5
<PAGE>
EXHIBIT 7.0
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of December
17, 1997, is by and between Environmental Safeguards, Inc., a Nevada corporation
("Company"), and * (the "Holder").
------------------------
W I T N E S E T H:
- - - - - - - - -
WHEREAS, the Company has entered into a Purchase Agreement dated December
17, 1997 (the "Purchase Agreement"), pursuant to which it has offered and sold
shares of its Series B Convertible Preferred Stock (the "Preferred Stock") to
certain participants thereto; and
WHEREAS, the Company has sold shares of its Preferred Stock to the Holder
pursuant to the Purchase Agreement; and
WHEREAS, the shares of Preferred Stock purchased by Holder are convertible
into shares of the Company's common stock, $0.001 par value per share ("Common
Stock"); and
WHEREAS, in connection with Holder's purchase of the Preferred Stock, the
Company agreed to grant certain registration rights in respect of the shares of
Common Stock underlying the Preferred Stock (the "Shares").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE ONE
REGISTRATION RIGHTS
Section 1.1 Registration Rights Available. The Company agrees to provide
-----------------------------
Holder and its transferees or distributees (collectively the "Holders") with the
following registration rights with respect to the Shares and any other
securities issued or issuable at any time or from time to time in respect of the
Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company (collectively, the "Registered Shares") (a) two
rights to demand registration in a secondary offering by means of shelf
registration under Rule 415 of the Securities Act of 1933, as amended (the
"Act"), and (b) "piggyback" registration in a firm commitment underwritten
offering of Company securities, all subject to the rights and limitations of the
provisions of this Agreement (the rights to two demand and unlimited piggyback
registrations granted hereunder are referred to herein as "Registration
Rights").
Section 1.2 Demand Registration.
-------------------
(a) Subject to the restrictions of Section 1.2(b) below, upon the written
request of at least a majority of the Holders of the Preferred Stock requesting
that the Company effect a registration under the Act and specifying the intended
method of distribution thereof, the Company shall promptly use its best efforts
to file with the Securities and Exchange Commission
<PAGE>
(the "Commission") and cause to become effective as soon as practicable
thereafter, a Registration Statement on an appropriate form relating to the
offer and sale of the Registered Shares by the Holders. The Company shall
promptly give written notice of such requested registration to all Holders of
record of shares of Preferred Stock which were purchased in connection with the
Purchase Agreement. The Registration Statement will include the Registered
Shares, all other shares for which written notice was given by the Company which
are requested to be included by the Holders thereof by written notice to the
Company within 15 days of the giving of written notice by the Company and may
include shares of common stock other than the foregoing, either for the
Company's account or for the account of other selling shareholders. The Company
shall not be obligated to effect more than two registrations on behalf of the
Holders under this Section 1.2.
(b) The Company shall not be required to file any registration statement
pursuant to Section 1.1(a): (i) when the Company is engaged in discussions with
an underwriter concerning a contemplated underwritten public offering of its
securities and the managing underwriter thereof has advised Holders in writing
that such filing would have a material adverse effect on the contemplated
offering; (ii) if the Company is engaged in negotiations in respect of an
acquisition or financing transaction and, in the good faith judgment of the
Board of Directors such transaction would be adversely affected by the filing of
the Registration Statement, provided clause (i) and (ii) shall not delay the
Company's obligations under this Section beyond 90 days after completion of the
contemplated offering or financing or notice of cancellation of such
contemplated offering or financing; or (iii) if the Company is in the possession
of material nonpublic information the disclosure of which, in the good faith
judgment of the Company's board of directors, would materially adversely affect
or materially interfere with its business; provided, however, that if the
Company's obligation to file a registration statement under this Section is
tolled by reason of one of the preceding clauses (i) - (iii) and a registration
request is made hereunder during such time, the Company shall promptly notify
Holder when the Company is able to file a registration statement without
conflicting with clauses (i) - (iii) above.
Section 1.3 Piggyback Registration. With respect to Holders rights to
----------------------
piggyback registration in a firm commitment underwriting of the Company
securities pursuant to Section 1.1 (b), the parties agree as follows:
(a) Pursuant to Section 1.1(b), the Company will (i) promptly give to
Holders written notice of any registration relating to a firm commitment public
offering of the Company's securities; and (ii) include in such registration, and
in the underwriting involved therein, all the Registered Shares specified in
Holders written request delivered in accordance with Section 6.1 herein within
15 days after the date of such written notice from the Company.
(b) The right of the Holders to registration pursuant to Section 1.1(b)
shall be conditioned upon Holders participation in such underwriting, and the
inclusion of the Registered Shares in the underwriting shall be limited to the
extent provided herein. The Holders proposing to distribute its securities
through such underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company.
2
<PAGE>
Notwithstanding any other provision of this Agreement, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit some or all of
the Registered Shares that may be included in the registration and underwriting
provided, however, the Holders shall have priority rights to piggy-back
- --------- --------
registration over any and all other persons. If Holder disapproves of the terms
of any such underwriting, it may elect to withdraw therefrom by written notice
to the Company and the managing underwriter, delivered not less than seven days
before the effective date. Any Registered Shares excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
Section 1.4 Exception to Registration. The Company shall not be required
-------------------------
to effect a registration under this Article One if (i) in the written opinion of
counsel for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to Holders, such Holders may sell without registration
under the Act all Registered Shares which it requested registration under the
provisions of the Act and in the manner and in the quantity in which the
Registered Shares were proposed to be sold, or (ii) the Company shall have
obtained from the Commission a "no-action" letter to that effect.
ARTICLE TWO
REGISTRATION PROCEDURES
Section 2.1 Registration Obligations. In performing its obligations under
------------------------
Article One to register the Registered Shares, Company will, subject to the
limitations provided herein, as expeditiously as possible:
(a) prepare and file with the Commission the Registration Statement and use
its best efforts to cause such registration to become and remain effective for
the term specified herein;
(b) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective in accordance with
the terms of this Agreement and to comply with the provisions of the Act with
respect to the disposition of all Registered Shares covered by the Registration
Statement;
(c) furnish to the Holder one conformed copy of the Registration Statement
and of each such amendment and supplement thereto (in each case including all
exhibits), one copy of the Prospectus (including each preliminary prospectus and
any summary prospectus) and any other Prospectus filed under Rule 424 under the
Act, and such other documents, as the Holder may reasonably request;
(d) use its best efforts to (i) register or qualify the Registered Shares
under such other securities or blue sky laws of such jurisdictions as the Holder
shall reasonably request, (ii) keep
3
<PAGE>
such registration or qualification in effect for so long as the Registration
Statement remains in effect, and (iii) take any other action which may be
reasonably necessary or advisable to enable the Holder to consummate the
disposition of the Registered Shares in such jurisdictions, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but
for the requirements of this Section 2.1(d) be obligated to be so qualified, to
consent to general service of process in any such jurisdiction, or to take any
such action which would impose unreasonable expense on the Company;
(e) notify the Holders at any time when a Prospectus relating to the Shares
is required to be delivered under the Act, upon discovery that, or upon the
happening of any event as a result of which, the Prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and prepare and furnish to the Holders
one copy of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such Prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made;
(f) provide and cause to be maintained a transfer agent for the Common Stock
from and after a date not later than the effective date of the Registration
Statement;
(g) properly notify any securities exchange on which any of the Company's
Common Stock is listed of the registration of any of the Registered Shares, and
use its best efforts to satisfy all prerequisites and regulations of any such
exchange relating to the trading of such Registered Shares on such exchange; and
(h) make available for inspection by the Holders, and any one attorney,
accountant or other agent retained by the Holders of Registered Shares, as a
group, (the "Inspector"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement; provided that records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspector are confidential shall not be disclosed by the Inspector unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction; provided, further, the Holders agree that they will, upon learning
that disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed confidential.
Section 2.2 Registration Obligations of Holder. As a condition to the
----------------------------------
Company performing
4
<PAGE>
its obligations under Article One to register the Registered Shares, the Holder
will, as expeditiously as possible:
(a) furnish the Company in writing such information regarding the Holder, the
Registered Shares and other securities of the Company held by the Holder, and
the distribution of such Registered Shares as the Company may from time to time
reasonably request in writing. If the Holder refuses to provide the Company
with any of such information on the grounds that it is not necessary to include
such information in the Registration Statement, the Company may exclude the
Holder's Registered Shares from the Registration Statement if the Company
provides the Holder with an opinion of counsel to the effect that such
information must be included in the Registration Statement and the Holder
thereafter continues to withhold such information.
(b) agree to promptly notify the Company as and when any Registered Shares
are sold and when the Holder elects to terminate all further offers and sales of
Shares pursuant to the Registration Statement.
(c) upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 2.1(e), the Holder will forthwith discontinue
the Holder's disposition of the Registered Shares pursuant to the Registration
Statement until the Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.1(e) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
current Prospectus at the time of receipt of such notice.
Section 2.3 Expenses. All expenses incident to the Company's performance of
--------
its obligations under this Agreement, including without limitation, all
registration and filing fees, fees and expenses of compliance with securities
and Blue Sky laws, printing expenses, fees and disbursements of the Company's
counsel, independent certified public accountants, and other persons retained by
the Company (all such expenses being herein called "Registration Expenses") will
be borne by the Company. The Holders shall be responsible for all selling fees,
expenses, discounts and commissions relating to the Registered Shares and for
the fees and expenses of counsel and other persons engaged by the Holders (as
well as any costs for any interim audit if requested by the Holder pursuant to
Section 1.2(b)).
ARTICLE THREE
REPORTING REQUIREMENTS
With a view to making available to the Holders the benefits of certain rules
and regulations of the Commission which may at any time permit the sale of the
Registered Shares to the public without registration, the Company agrees to use
its best efforts to (i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act and (ii) file with
the Commission in a timely manner all reports and other documents required of
the Company under the Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and (iii) take such further action as any Holder may
reasonably request, to the extent
5
<PAGE>
required from time to time to enable such Holder to sell the Registered Shares
without registration under the Act pursuant to the exemptions provided by Rule
144 or any similar rule or regulation adopted by the Commission.
ARTICLE FOUR
LIMITATIONS ON REGISTRATION RIGHTS TO OTHER PARTIES
From and after the date of this Agreement, the Company shall not enter into
any agreement with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder (a) the right to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of its securities will not limit the number of shares sought
to be included by Holder or reduce the offering price thereof; or (b) the right
to require the Company to initiate any registration of any securities of the
Company. The foregoing limitation shall not apply to registration rights
previously granted by the Company pursuant to its Confidential Private Placement
Memorandum dated September 18, 1996.
ARTICLE FIVE
INDEMNIFICATION
Section 5.1 Indemnification by the Company. In the event of any
------------------------------
registration of the Shares under the Act, the Company agrees to indemnify and
hold harmless Holder and each other person who participates as an underwriter in
the offering or sale of such securities against any and all claims, demands,
losses, costs, expenses, obligations, liabilities, joint or several, damages,
recoveries and deficiencies, including interest, penalties and attorneys' fees
(collectively, "Claims"), to which Holder or underwriter may become subject
under the Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which Holder's Shares were
registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse Holder and each such underwriter for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such Claim (or action or proceeding in respect thereof); provided
that the Company shall not be liable in any such case to the extent that any
such Claim (or action or proceeding in respect thereof) or expense arises out of
or is based on an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance on and in conformity with written information furnished to the Company
by the Holder expressly for use in the preparation thereof, and provided,
--------
further, that the Company shall not be liable to any person who participates as
- -------
an underwriter in the offering or sale of Registered Shares or any other person,
6
<PAGE>
if any, who controls such underwriter within the meaning of the Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the Prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Registered Shares to such person if such statement or omission was
corrected in such Prospectus so long as such Prospectus, and any amendments or
supplements thereto, have been furnished to such underwriter in sufficient
numbers and in a timely manner to permit distribution thereof. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of Holder or any such underwriter and shall survive the transfer of
the Registered Shares by Holder.
Section 5.2 Indemnification by Holder. In the event of any registration of
-------------------------
the Registered Shares under the Act, the Holder agrees to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section 5.1)
the Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company, within the meaning of the Act,
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance on and in
conformity with written information furnished to the Company by the Holder
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of the Registered Shares by Holder.
Section 5.3 Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a Claim referred to in this Article Five, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Article Five,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnifying party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such Claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a
7
<PAGE>
release from all liability in respect of such Claim.
Section 5.4 Indemnification Payments. The indemnification required by this
------------------------
Article Five shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
ARTICLE SIX
MISCELLANEOUS
Section 6.1 Notices. All notices required or permitted herein must be in
-------
writing and shall be deemed to have been duly given the first business day
following the date of service if served personally, on the first business day
following the date of actual receipt if delivered by telecopier, telex or other
similar communication to the party or parties to whom notice is to be given, on
the first business day following delivery to an air courier, if sent by
overnight air courier guaranteeing next day delivery, or on the third business
day after mailing if mailed to the party or parties to whom notice is to be
given by registered or certified mail, return receipt requested, postage
prepaid, to the parties at the addresses set forth below, or to such other
addresses as either party hereto may designate to the other by notice from time
to time for this purpose.
ENVIRONMENTAL SAFEGUARDS, INC.
2600 South Loop West, Suite 645
Houston, Texas 77054
Attn: James S. Percell, President
Telephone No. 713-641-3838
Facsimile No: 713-641-0756
With a copy to:
---------------
Axelrod, Smith & Kirshbaum
5300 Memorial Drive, Suite 700
Houston, TX 77007
Attn: Robert Axelrod
Telephone No.: 713-861-1996
Facsimile No.: 713-552-0202
HOLDER
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David L. Warnock
Telephone No.: 410-895-3800
Facsimile No.: 410-895-3805
With a copy to:
--------------
8
<PAGE>
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, Maryland 21202
Attn: George P. Stamas, Esq.
Telephone No.: 410-986-2800
Facsimile No.: 410-986-2828
Section 6.2 Term of the Agreement. This Agreement shall terminate with
---------------------
respect to Holder on the earlier to occur of (i) all of the Registered Shares
having been registered as provided in Article One or (ii) two years after the
Preferred Stock is converted in full; provided, however, that the provisions of
Article One shall not terminate if Holder makes a registration request pursuant
to this Agreement which request is currently tolled by reason of one of the
clauses (i) - (iv) in Section 1.2(b), but shall terminate 30 days after notice
of the suspension of such tolling shall have been given to Holder.
Section 6.3 Mergers, Etc. The Company shall not, directly or indirectly,
-------------
enter into any merger, consolidation, or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation, or reorganization, agree in writing
to assume the obligations of the Company under this Agreement, and for this
purpose references hereunder to "Registered Shares" shall be deemed to be
references to the securities that the Holders would be entitled to receive in
exchange for Registered Shares under any such merger, consolidation, or
reorganization.
Section 6.4 Entire Agreement. This Agreement contains and constitutes the
----------------
entire agreement between and among the parties with respect to the matters set
forth herein and supersedes all prior agreements and understandings between the
parties hereto relating to the subject matter hereof. There are no agreements,
understandings, restrictions, warranties or representations among the parties
relating to the subject matter hereof other than those set forth or referred to
herein. This instrument is not intended to have any legal effect whatsoever, or
to be a legally binding agreement or any evidence thereof, until it has been
signed by all parties hereto.
Section 6.5 Binding Effect. This Agreement shall be binding on and
--------------
enforceable by the Holder and by the Company and its successors. No transferee
of Registered Shares shall acquire any rights under this Agreement except with
the written consent of the Company, which may be withheld for any reason. In
the event the Company is a party to a merger or consolidation in a transaction
in which the Registered Shares are converted into equity securities of another
entity, then the Company shall cause such other entity to assume the Company's
obligations under this Agreement such that this Agreement shall apply to the
equity securities received by the Holder in exchange for the Registered Shares,
unless such equity securities are, upon receipt and without further action by
the Holder, readily salable without registration under the Act.
Section 6.6 Construction. This Agreement shall be construed, enforced and
------------
governed in accordance with the laws of the State of Texas. All pronouns and
any variations thereof shall be
9
<PAGE>
deemed to refer to the masculine, feminine or neuter gender thereof or to the
plurals of each, as the identity of the person or persons or the context may
require. The descriptive headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision contained herein.
Section 6.7 Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless agreed to in
writing by both the Company and the Holder.
Section 6.8 Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 6.9 Successors and Assigns. Except as otherwise provided herein,
----------------------
the provisions shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. No party hereto may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other parties hereto.
Section 6.10 Counterparts. This Agreement may be executed in any number of
------------
Counterparts and by the parties hereto in separate Counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
shown below.
HOLDER:
*
- ----------------------------------
*
------------------------------------------
Date
COMPANY: ENVIRONMENTAL SAFEGUARDS, INC.
By: *
------------------------------------------
James S. Percell, President
10
<PAGE>
*
__________________________________________
Date
* executed registration rights agreement will be
provided upon request.
11
<PAGE>
EXHIBIT 8.0
TERM NOTE
---------
$2,740,982.14 Baltimore, Maryland
December 17, 1997
FOR VALUE RECEIVED and intending to be legally bound the undersigned,
ENVIRONMENTAL SAFEGUARDS, INC., a corporation organized under the laws of the
State of Nevada, NATIONAL FUEL & ENERGY, INC., a corporation organized under the
laws of the State of Wyoming, and ONSITE TECHNOLOGY, L.L.C., a limited liability
company organized under the laws of the State of Oklahoma (individually, a
"Borrower" and collectively, the "Borrowers") jointly and severally, promise to
pay to the order of CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited
partnership organized under the laws of the State of Delaware (the "Lender"),
the principal sum of TWO MILLION SEVEN HUNDRED FORTY THOUSAND NINE HUNDRED
EIGHTY-TWO DOLLARS AND FOURTEEN CENTS ($2,740,982.14) (the "Principal Sum"), or
so much thereof as has been or may be advanced to or for the account of the
Borrowers pursuant to the terms and conditions of the Loan Agreement (as
hereinafter defined), together with interest thereon at the rate or rates
provided in the Loan Agreement. All capitalized terms used, but not
specifically defined herein, shall have the meanings given such terms in the
Loan Agreement.
1. Interest.
--------
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
prime rate, as reported in the Wall Street Journal five (5) Business Days prior
to the end of each calendar month or if not reported on such date then the
closest Business Day thereto, plus one and five-tenths percent (1.5%). The rate
of interest charged under this Note shall change immediately and
contemporaneously with any change in the applicable interest rate. All interest
payable under the terms of this Note shall be calculated on the basis of a 360-
day year and the actual number of days elapsed. Interest shall accrue daily on
the unpaid Principal Sum for the period commencing on the date hereof and
continuing until repayment if full of all sums due hereunder.
2. Payments and Maturity.
---------------------
Unless sooner paid or accelerated for prepayment, the unpaid Principal Sum,
together with interest thereon at the rate or rates provided above, shall be
payable as follows:
(a) The unpaid Principal Sum plus interest accrued at the rate set
forth herein shall be due and payable quarterly in arrears in substantially
equal periodic installments on the fifth (5th) day of each March, June,
September and December, commencing on March 5, 1998.
<PAGE>
(b) The unpaid Principal Sum, together with interest accrued and
unpaid thereon, shall be due and payable in full on December 17, 2002.
3. Default Interest.
----------------
Upon the occurrence of an Event of Default (as hereinafter defined), the
unpaid Principal Sum and any other unpaid Obligations (including without
limitation accrued interest and amounts payable under the Loan Agreement) shall
bear interest payable on demand at the rate per annum five percent (5%) above
the then prevailing rate of interest under this Note. Such interest shall
accrue daily commencing upon the occurrence of an Event of Default and until
such Event of Default is cured or waived.
4. Late Charges.
------------
If the Borrowers shall fail to make any payment of principal or interest
under the terms of this Note within five (5) days after the date such payment is
due, by acceleration, conversion or otherwise, the Borrowers shall, to the
extent permitted by law, pay to the Lender on demand a late charge equal to
five percent (5%) above the then-prevailing interest rate under this Note. The
charging or collection of any late charge shall not be deemed a waiver of any of
Lender's rights.
5. Application and Place of Payments.
---------------------------------
All payments, made on account of this Note shall be applied first to the
payment of any late charge then due hereunder, second to the payment of accrued
and unpaid interest then due hereunder, and the remainder, if any, shall be
applied to the unpaid Principal Sum. All payments on account of this Note shall
be paid to the Lender, with notice of such payment to Cahill, Warnock Strategic
Partners Fund, L.P. in its capacity as agent for the Lender (the "Agent"), in
lawful money of the United States of America in immediately available funds
during regular business hours of the Lender at the Lender's office in
[Baltimore, Maryland] or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrowers.
6. Prepayment.
----------
(a) The Borrowers may prepay the Principal Sum in whole or in
increments of no less than One Million Dollars ($1,000,000) upon thirty (30)
days prior written notice to the Lender, with a copy to the Agent, without
premium or penalty.
7. Loan Agreement and Other Loan Documents.
---------------------------------------
This Note is a "term note" described in a Security and Loan Agreement of
even date herewith (as amended, modified, restated, substituted, extended and
renewed at any time and from time to time, the "Loan Agreement") by and among
the Borrowers, the Agent, the Lender
2
<PAGE>
and the other Lenders under the Loan Agreement. The indebtedness evidenced by
this Note is included within the meaning of the term "Obligations". The term
"Loan Documents" as used in this Note shall mean collectively this Note, the
Loan Agreement and any other instrument, agreement, or document previously,
simultaneously, or hereafter executed and delivered by the Borrowers, or any of
them, and/or any other person, singularly or jointly with any other person,
evidencing, securing, guaranteeing, or in connection with the Principal Sum,
this Note and/or the Loan Agreement.
8. Security.
--------
This Note is secured as provided in the Loan Agreement.
9. Events of Default.
-----------------
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
(a) The occurrence of an event of default (as defined therein) under
the terms and conditions of any of the other Loan Documents.
10. Remedies.
--------
Upon the occurrence of an Event of Default, subject to the provisions of
the Loan Agreement, all amounts payable by the Borrowers to the Lender under the
terms of this Note (including all Obligations) shall immediately become due and
payable by the Borrowers to the Lender. Agent shall provide Borrowers with
notice of acceleration unless not required under the Loan Agreement and the
Agent on behalf of the Lender shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Loan Documents and all
applicable laws. The Borrowers and all endorsers and guarantors hereby
severally waives presentment, protest and demand, notice of protest, notice of
demand and of dishonor and non-payment of this Note and expressly agree that
this Note or any payment hereunder may be extended from time to time without in
any way affecting the liability of the Borrowers, guarantors and endorsers.
The Lender agrees with the Agent and the other Lenders that the decisions
and determinations of the Requisite Lenders in enforcing this Note and in
guiding the Agent in this matter shall be binding upon the Lender, including,
without limitation, authorizing the Agent at the pro rata expense of the Lenders
(to the extent not reimbursed by the Borrowers) to retain attorneys to seek
judgment on this Note. The Lender similarly agrees with the Agent and the other
Lenders and covenants with the Borrowers that it will not seek to separately
institute any legal action on this Note. All rights of action under this Note
may be enforced by the Agent only and any suit or proceeding instituted by the
Agent in furtherance of such enforcement may be
3
<PAGE>
brought in its name as Agent without the necessity of joining as plaintiffs or
defendants the Lender, and the recovery of any judgment shall be for the benefit
of the Agent and the Lenders, subject to the expenses of the Agent.
11. Expenses.
--------
The Borrowers, jointly and severally, promise to pay to the Lender or
Agent, as applicable, on demand by the Lender or Agent all costs and expenses
incurred by the Lender and/or Agent in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys'
fees and expenses and all court costs.
12. Notices.
-------
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 14.1 of the Loan Agreement; provided, however, that such notice shall
-------- -------
also be provided simultaneously to the Agent and notice of any payment, request
or demand shall also be provided simultaneously to the Agent.
13. Miscellaneous.
-------------
Each right, power, and remedy of the Lender and/or Agent as provided for in
this Note or any of the other Loan Documents, or now or hereafter existing under
any applicable law or otherwise shall be cumulative and concurrent and shall be
in addition to every other right, power, or remedy provided for in this Note or
any of the other Loan Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender
and/or Agent of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by the Lender and/or Agent of any or
all such other rights, powers, or remedies. No failure or delay by the Lender
and/or Agent to insist upon the strict performance of any term, condition,
covenant, or agreement of this Note or any of the other Loan Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender and/or Agent from exercising any such
right, power, or remedy at a later time or times. By accepting payment after the
due date of any amount payable under the terms of this Note, the Lender and/or
Agent shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under the terms; of this Note or to
declare an Event of Default for the failure to effect such prompt payment of any
such other amount. No course of dealing or conduct shall be effective to amend,
modify, waive, release, or change any provisions of this Note.
14. Partial Invalidity.
------------------
4
<PAGE>
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
15. Captions.
--------
The captions herein set forth are for convenience only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.
16. Applicable Law.
--------------
The Borrowers acknowledge and agree that this Note shall be governed by the
laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
17. Consent to Jurisdiction.
-----------------------
Each of the Borrowers irrevocably submits to the jurisdiction of any state
or federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Loan
Documents. Each of the Borrowers irrevocably waives, to the fullest extent
permitted by law, any objection that the Borrowers may now or hereafter have to
the laying of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any
such suit, action, or proceeding brought in any such court shall be conclusive
and binding upon the Borrowers and may be enforced in any court in which any of
the Borrowers is subject to jurisdiction by a suit upon such judgment, provided
that service of process is effected upon the Borrowers as provided in this Note
or as otherwise permitted by applicable law.
18. Service of Process.
------------------
Each of the Borrowers hereby irrevocably designates and appoints James S.
Percell, as the Borrower's authorized agent to receive on the Borrower's behalf
service of any and all process that may be served in any suit, action, or
proceeding instituted in connection with this Note in any state or federal court
sitting in the State of Maryland. If such agent shall cease so to act, the
Borrower shall irrevocably designate and appoint without delay another such
agent in the State of Maryland satisfactory to the Lender and shall promptly
deliver to the Lender and Agent evidence in writing of such agent's acceptance
of such appointment and its agreement that such appointment shall be
irrevocable.
5
<PAGE>
Each of the Borrowers hereby consents to process being served in any suit,
action, or proceeding instituted in connection with this Note by (a) the mailing
of a copy thereof by certified mail, postage prepaid, return receipt requested,
to the Borrower and (b) serving a copy thereof upon the agent hereinabove
designated and appointed by the Borrower as the Borrower's agent for service of
process. Each of the Borrowers irrevocably agrees that such service shall be
deemed in every respect effective service of process upon the Borrower in any
such suit, action or proceeding, and shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon the Borrower. Nothing
in this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise to
bring proceedings against the Borrowers in the courts of any jurisdiction or
jurisdictions.
19. Usury Savings Clause.
--------------------
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provisions to the
contrary in this Note, the Loan Agreement or any other Loan Documents, in no
event shall such Loan Documents require the payment or permit the collection of
interest (which term, for purposes hereof, shall include any amount which, under
applicable law, is deemed to be interest, whether or not such amount is
characterized by the parties as interest) in excess of the maximum amount
permitted by such laws. If any excess of interest is unintentionally contracted
for, charged or received under the Note or under the terms of any other Loan
Documents, or in the event the maturity of the indebtedness evidenced by the
Note is accelerated in whole or in part, or in the event that all or part of the
principal or interest of the Note shall be prepaid, so that the amount of
interest contracted for, charged or received under the Note or under any of the
other Loan Documents, on the amount of principal actually outstanding from time
to time under the Note shall exceed the maximum amount of interest permitted by
the applicable usury laws, then in any such event (i) the provisions of this
paragraph shall govern and control, (ii) neither Borrowers nor any other person
or entity now or hereafter liable for the payment thereof, shall be obligated to
pay the amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by such applicable usury laws, (iii) any
such excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount thereof or refunded to Borrowers at
Lender's option, and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful rate of interest allowed under the applicable
usury laws as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
the Note or under such other Loan Documents which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate of interest, shall
be made, to the extent permitted by applicable laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the Loan evidenced thereby, all interest at any time contracted for,
charged or received from Borrowers or otherwise by Lender in connection with
such Loan.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under
6
<PAGE>
seal by their duly authorized officers as of the date first written above.
WITNESS OR ATTEST: ENVIRONMENTAL SAFEGUARDS, INC.
/s/ Vivian A. Tipps By: /s/James S. Percell (SEAL)
- ---------------------------- ------------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
WITNESS OR ATTEST: NATIONAL FUEL & ENERGY, INC.
/s/ Vivian A. Tipps By: /s/James S. Percell (SEAL)
- ---------------------------- ------------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
WITNESS OR ATTEST: ONSITE TECHNOLOGY, L.L.C.
/s/ Vivian A. Tipps By: /s/James S. Percell (SEAL)
- ---------------------------- ------------------------------
Name: James S. Percell
Title: Managing Member
7
<PAGE>
EXHIBIT 9.0
TERM NOTE
---------
$151,875.00 Baltimore, Maryland
December 17, 1997
FOR VALUE RECEIVED and intending to be legally bound the undersigned,
ENVIRONMENTAL SAFEGUARDS, INC., a corporation organized under the laws of the
State of Nevada, NATIONAL FUEL & ENERGY, INC., a corporation organized under the
laws of the State of Wyoming, and ONSITE TECHNOLOGY, L.L.C., a limited liability
company organized under the laws of the State of Oklahoma (individually, a
"Borrower" and collectively, the "Borrowers") jointly and severally, promise to
pay to the order of STRATEGIC ASSOCIATES, L.P., a limited partnership organized
under the laws of the State of Delaware (the "Lender"), the principal sum of ONE
HUNDRED FIFTY-ONE THOUSAND EIGHT HUNDRED SEVENTY-FIVE DOLLARS AND 00/100
($151,875.00) (the "Principal Sum"), or so much thereof as has been or may be
advanced to or for the account of the Borrowers pursuant to the terms and
conditions of the Loan Agreement (as hereinafter defined), together with
interest thereon at the rate or rates provided in the Loan Agreement. All
capitalized terms used, but not specifically defined herein, shall have the
meanings given such terms in the Loan Agreement.
1. Interest.
--------
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
prime rate, as reported in the Wall Street Journal five (5) Business Days prior
to the end of each calendar month or if not reported on such date then the
closest Business Day thereto, plus one and five-tenths percent (1.5%). The rate
of interest charged under this Note shall change immediately and
contemporaneously with any change in the applicable interest rate. All interest
payable under the terms of this Note shall be calculated on the basis of a 360-
day year and the actual number of days elapsed. Interest shall accrue daily on
the unpaid Principal Sum for the period commencing on the date hereof and
continuing until repayment if full of all sums due hereunder.
2. Payments and Maturity.
---------------------
Unless sooner paid or accelerated for prepayment, the unpaid Principal Sum,
together with interest thereon at the rate or rates provided above, shall be
payable as follows:
(a) The unpaid Principal Sum plus interest accrued at the rate set
forth herein shall be due and payable quarterly in arrears in substantially
equal periodic installments on the fifth (5th) day of each March, June,
September and December, commencing on March 5, 1998.
(b) The unpaid Principal Sum, together with interest accrued and
unpaid
<PAGE>
thereon, shall be due and payable in full on December 17, 2002.
3. Default Interest.
----------------
Upon the occurrence of an Event of Default (as hereinafter defined), the
unpaid Principal Sum and any other unpaid Obligations (including without
limitation accrued interest and amounts payable under the Loan Agreement) shall
bear interest payable on demand at the rate per annum five percent (5%) above
the then prevailing rate of interest under this Note. Such interest shall
accrue daily commencing upon the occurrence of an Event of Default and until
such Event of Default is cured or waived.
4. Late Charges.
------------
If the Borrowers shall fail to make any payment of principal or interest
under the terms of this Note within five (5) days after the date such payment is
due, by acceleration, conversion or otherwise, the Borrowers shall, to the
extent permitted by law, pay to the Lender on demand a late charge equal to
five percent (5%) above the then-prevailing interest rate under this Note. The
charging or collection of any late charge shall not be deemed a waiver of any of
Lender's rights.
5. Application and Place of Payments.
---------------------------------
All payments, made on account of this Note shall be applied first to the
payment of any late charge then due hereunder, second to the payment of accrued
and unpaid interest then due hereunder, and the remainder, if any, shall be
applied to the unpaid Principal Sum. All payments on account of this Note shall
be paid to the Lender, with notice of such payment to Cahill, Warnock Strategic
Partners Fund, L.P. in its capacity as agent for the Lender (the "Agent"), in
lawful money of the United States of America in immediately available funds
during regular business hours of the Lender at the Lender's office in
[Baltimore, Maryland] or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrowers.
6. Prepayment.
----------
(a) The Borrowers may prepay the Principal Sum in whole or in
increments of no less than One Million Dollars ($1,000,000) upon thirty (30)
days prior written notice to the Lender, with a copy to the Agent, without
premium or penalty.
7. Loan Agreement and Other Loan Documents.
---------------------------------------
This Note is a "term note" described in a Security and Loan Agreement of
even date herewith (as amended, modified, restated, substituted, extended and
renewed at any time and from time to time, the "Loan Agreement") by and among
the Borrowers, the Agent, the Lender
2
<PAGE>
and the other Lenders under the Loan Agreement. The indebtedness evidenced by
this Note is included within the meaning of the term "Obligations". The term
"Loan Documents" as used in this Note shall mean collectively this Note, the
Loan Agreement and any other instrument, agreement, or document previously,
simultaneously, or hereafter executed and delivered by the Borrowers, or any of
them, and/or any other person, singularly or jointly with any other person,
evidencing, securing, guaranteeing, or in connection with the Principal Sum,
this Note and/or the Loan Agreement.
8. Security.
--------
This Note is secured as provided in the Loan Agreement.
9. Events of Default.
-----------------
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
(a) The occurrence of an event of default (as defined therein) under
the terms and conditions of any of the other Loan Documents.
10. Remedies.
--------
Upon the occurrence of an Event of Default, subject to the provisions of
the Loan Agreement, all amounts payable by the Borrowers to the Lender under the
terms of this Note (including all Obligations) shall immediately become due and
payable by the Borrowers to the Lender. Agent shall provide Borrowers with
notice of acceleration unless not required under the Loan Agreement and the
Agent on behalf of the Lender shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Loan Documents and all
applicable laws. The Borrowers and all endorsers and guarantors hereby
severally waives presentment, protest and demand, notice of protest, notice of
demand and of dishonor and non-payment of this Note and expressly agree that
this Note or any payment hereunder may be extended from time to time without in
any way affecting the liability of the Borrowers, guarantors and endorsers.
The Lender agrees with the Agent and the other Lenders that the decisions
and determinations of the Requisite Lenders in enforcing this Note and in
guiding the Agent in this matter shall be binding upon the Lender, including,
without limitation, authorizing the Agent at the pro rata expense of the Lenders
(to the extent not reimbursed by the Borrowers) to retain attorneys to seek
judgment on this Note. The Lender similarly agrees with the Agent and the other
Lenders and covenants with the Borrowers that it will not seek to separately
institute any legal action on this Note. All rights of action under this Note
may be enforced by the Agent only and any suit or proceeding instituted by the
Agent in furtherance of such enforcement may be
3
<PAGE>
brought in its name as Agent without the necessity of joining as plaintiffs or
defendants the Lender, and the recovery of any judgment shall be for the benefit
of the Agent and the Lenders, subject to the expenses of the Agent.
11. Expenses.
--------
The Borrowers, jointly and severally, promise to pay to the Lender or
Agent, as applicable, on demand by the Lender or Agent all costs and expenses
incurred by the Lender and/or Agent in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys'
fees and expenses and all court costs.
12. Notices.
-------
Any notice, request, or demand to or upon the Borrowers or the Lender shall
be deemed to have been properly given or made when delivered in accordance with
Section 14.1 of the Loan Agreement; provided, however, that such notice shall
-------- -------
also be provided simultaneously to the Agent and notice of any payment, request
or demand shall also be provided simultaneously to the Agent.
13. Miscellaneous.
-------------
Each right, power, and remedy of the Lender and/or Agent as provided for in
this Note or any of the other Loan Documents, or now or hereafter existing under
any applicable law or otherwise shall be cumulative and concurrent and shall be
in addition to every other right, power, or remedy provided for in this Note or
any of the other Loan Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender
and/or Agent of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by the Lender and/or Agent of any or
all such other rights, powers, or remedies. No failure or delay by the Lender
and/or Agent to insist upon the strict performance of any term, condition,
covenant, or agreement of this Note or any of the other Loan Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender and/or Agent from exercising any such
right, power, or remedy at a later time or times. By accepting payment after the
due date of any amount payable under the terms of this Note, the Lender and/or
Agent shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under the terms; of this Note or to
declare an Event of Default for the failure to effect such prompt payment of any
such other amount. No course of dealing or conduct shall be effective to amend,
modify, waive, release, or change any provisions of this Note.
14. Partial Invalidity.
------------------
4
<PAGE>
In the event any provision of this Note (or any part of any provision) is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be construed as if such invalid,
illegal, or unenforceable provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.
15. Captions.
--------
The captions herein set forth are for convenience only and shall not be
deemed to define,
limit, or describe the scope or intent of this Note.
16. Applicable Law.
--------------
The Borrowers acknowledge and agree that this Note shall be governed by the
laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
17. Consent to Jurisdiction.
-----------------------
Each of the Borrowers irrevocably submits to the jurisdiction of any state
or federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Note or any of the other Loan
Documents. Each of the Borrowers irrevocably waives, to the fullest extent
permitted by law, any objection that the Borrowers may now or hereafter have to
the laying of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any
such suit, action, or proceeding brought in any such court shall be conclusive
and binding upon the Borrowers and may be enforced in any court in which any of
the Borrowers is subject to jurisdiction by a suit upon such judgment, provided
that service of process is effected upon the Borrowers as provided in this Note
or as otherwise permitted by applicable law.
18. Service of Process.
------------------
Each of the Borrowers hereby irrevocably designates and appoints James S.
Percell, as the Borrower's authorized agent to receive on the Borrower's behalf
service of any and all process that may be served in any suit, action, or
proceeding instituted in connection with this Note in any state or federal court
sitting in the State of Maryland. If such agent shall cease so to act, the
Borrower shall irrevocably designate and appoint without delay another such
agent in the State of Maryland satisfactory to the Lender and shall promptly
deliver to the Lender and Agent evidence in writing of such agent's acceptance
of such appointment and its agreement that such appointment shall be
irrevocable.
5
<PAGE>
Each of the Borrowers hereby consents to process being served in any suit,
action, or proceeding instituted in connection with this Note by (a) the mailing
of a copy thereof by certified mail, postage prepaid, return receipt requested,
to the Borrower and (b) serving a copy thereof upon the agent hereinabove
designated and appointed by the Borrower as the Borrower's agent for service of
process. Each of the Borrowers irrevocably agrees that such service shall be
deemed in every respect effective service of process upon the Borrower in any
such suit, action or proceeding, and shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon the Borrower. Nothing
in this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise to
bring proceedings against the Borrowers in the courts of any jurisdiction or
jurisdictions.
19. Usury Savings Clause.
--------------------
It is the intention of the parties hereto to comply with all applicable
usury laws; accordingly, it is agreed that notwithstanding any provisions to the
contrary in this Note, the Loan Agreement or any other Loan Documents, in no
event shall such Loan Documents require the payment or permit the collection of
interest (which term, for purposes hereof, shall include any amount which, under
applicable law, is deemed to be interest, whether or not such amount is
characterized by the parties as interest) in excess of the maximum amount
permitted by such laws. If any excess of interest is unintentionally contracted
for, charged or received under the Note or under the terms of any other Loan
Documents, or in the event the maturity of the indebtedness evidenced by the
Note is accelerated in whole or in part, or in the event that all or part of the
principal or interest of the Note shall be prepaid, so that the amount of
interest contracted for, charged or received under the Note or under any of the
other Loan Documents, on the amount of principal actually outstanding from time
to time under the Note shall exceed the maximum amount of interest permitted by
the applicable usury laws, then in any such event (i) the provisions of this
paragraph shall govern and control, (ii) neither Borrowers nor any other person
or entity now or hereafter liable for the payment thereof, shall be obligated to
pay the amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by such applicable usury laws, (iii) any
such excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount thereof or refunded to Borrowers at
Lender's option, and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful rate of interest allowed under the applicable
usury laws as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
the Note or under such other Loan Documents which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate of interest, shall
be made, to the extent permitted by applicable laws, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the Loan evidenced thereby, all interest at any time contracted for,
charged or received from Borrowers or otherwise by Lender in connection with
such Loan.
6
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by their duly authorized officers as of the date first written above.
WITNESS OR ATTEST: ENVIRONMENTAL SAFEGUARDS, INC.
/s/ Vivian A. Tipps By: /s/ James S. Percell (SEAL)
- --------------------------- -----------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
WITNESS OR ATTEST: NATIONAL FUEL & ENERGY, INC.
/s/ Vivian A. Tipps By: /s/ James S. Percell (SEAL)
- --------------------------- -----------------------------
Name: James S. Percell
Title: Chairman, President and
Chief Executive Officer
WITNESS OR ATTEST: ONSITE TECHNOLOGY, L.L.C.
/s/ Vivian A. Tipps By: /s/ James S. Percell (SEAL)
- --------------------------- -----------------------------
Name: James S. Percell
Title: Managing Member
7
<PAGE>
EXHIBIT 10.0
ENVIRONMENTAL SAFEGUARDS, INC.
WARRANT AGREEMENT
-----------------
December 17, 1997
To the persons whose names appear
on the signature page of this Agreement
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Gentlemen:
In consideration of entering into a transaction composed of a Purchase
Agreement for the sale of Series B Convertible Preferred Stock and Series C
Preferred Stock ("Purchase Agreement") and that certain Loan and Security
Agreement ("Loan Agreement") with Environmental Safeguards, Inc. (the
"Company"), the Company hereby agrees to issue non-redeemable stock purchase
warrants ("Warrants") to the persons whose names appear on Exhibit A of this
---------
Agreement entitling them to purchase an aggregate of 707,142 shares of Company
common stock, $0.001 par value per share ("Common Stock"). The Warrants are
evidenced by warrant certificates in the form attached hereto as Exhibit B
---------
("Warrant Certificate"). The number of shares of Common Stock purchasable upon
exercise of the Warrants is subject to adjustment as provided in Section 4
below. The Warrants will be exercisable by you or any other Warrant holder (as
defined in Section 2(a) below) as to all or any lesser number of shares of
Common Stock covered thereby, at the Purchase Price of $0.01 per share
("Exercise Price"), at any time and from time to time during the period
beginning December 17, 1997 and ending at 5:00 p.m., Houston, Texas time, on
December 16, 2007. The term "Warrant holder" refers to the person whose name
appears on the signature page of this Warrant Agreement and any transferee or
transferees of it permitted by Section 3(a) below. Such term, when used in this
Warrant Agreement in reference to or in the context of a person who holds or
owns shares of Common Stock issued upon exercise of a Warrant, refers where
appropriate to such person who holds or owns such shares of Common Stock.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to each Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority and has taken all necessary corporate action, to authorize, execute,
deliver and perform this Warrant Agreement, to execute, issue, sell and deliver
the Warrants and Warrant certificates evidencing the Warrants, to authorize and
reserve for issue and, upon payment from time to time of the Exercise Price, to
issue, sell and deliver, the shares of the Common Stock issuable upon exercise
of the Warrants ("Shares"), and to perform all of its obligations under this
Warrant Agreement and the Warrants. This Warrant Agreement and, when issued,
<PAGE>
each Warrant issued pursuant hereto, has been or will be duly executed and
delivered by the Company and is or will be a legal, valid and binding agreement
of the Company, enforceable in accordance with its terms. No authorization,
approval, consent or other order of any governmental entity, regulatory
authority or other third party is required for such authorization, execution,
delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Articles of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is a party or by which it is or may be bound.
2. Exercise of Warrants.
--------------------
The Warrants may be exercised by the Warrant holder in whole, or in part,
by surrender of the Warrant Certificate at the office of the Company (or such
other office or agency of the Company as may be designated by notice in writing
to the Warrant holder at the address of such Warrant holder appearing on the
books of the Company) with the subscription form attached hereto duly completed,
at any time within the period beginning on the date hereof and expiring at 5:00
p.m. Houston, Texas time, on December 16, 2007 (the "Exercise Period") and by
payment to the Company by certified check or bank draft of the Exercise Price
for such shares. The Company agrees that the shares of Common Stock so
purchased shall be and are deemed to be issued to the Warrant holder as the
record owner of such shares of Common Stock as of the close of business on the
date on which the Warrant Certificate shall have been surrendered and payment
made for such shares of Common Stock. Certificates representing the shares of
Common Stock so purchased, together with any cash for fractional shares of
Common Stock paid pursuant to Section 4(f), shall be delivered to the Warrant
holder promptly, and, unless the Warrants have expired, a new Warrant
Certificate representing the number of Warrants represented by the surrendered
Warrant Certificate, if any, that shall not have been exercised also shall be
delivered to the Warrant holder within such time.
3. Transfer.
--------
(a) Transferability of Warrants and Shares. The Warrant holder agrees that
--------------------------------------
the Warrants are being acquired as an investment and not with a view to
distribution thereof (except for partners, limited partners or affiliates of the
Warrant holder) and that the Warrants and the underlying Shares issued on
exercise of the Warrants, may not be transferred, sold, assigned or otherwise
disposed of without registration under the Securities Act of 1933, as amended
(the "Act"), or any exemption therefrom and for which the Company is provided
with an opinion of counsel to the Warrant holder, reasonably satisfactory to the
Company, to the effect that such transfer is not in violation of any of said
securities laws. Any Warrants issued upon the transfer of
<PAGE>
a Warrant shall be registered in a Warrant Register as they are issued. The
Company shall be entitled to treat the registered holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other person. Warrants may be exchanged, at the option of the
Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor or representing in the aggregate the right to
purchase a like number of shares of Common Stock, upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause the Warrants to be transferred on its books to any
person if, in the opinion of counsel to the Company, this transfer does not
comply with the provisions of the Act, and the rules and regulations thereunder.
(b) Registration of Shares. You agree not to make any sale or other
----------------------
disposition of the Shares except pursuant to a registration statement which has
become effective under the Act, setting forth the terms of such offering, the
underwriting discount and commissions and any other pertinent data with respect
thereto, unless the Warrant holder has provided the Company with an opinion of
counsel reasonably acceptable to the Company that such registration is not
required. Notwithstanding the foregoing, the Warrant holder further agrees that
it will not sell, transfer, assign or otherwise dispose of the Shares prior to
December 17,1998, without the prior written consent of the Company.
Certificates representing the Shares shall bear an appropriate legend reflecting
these restriction and shall be subject to a "stop-transfer" order.
(c) Investment Representations. Each of the Warrant holders, severally,
--------------------------
represent and warrant to the Company as follows:
(i) Each Warrant holder which is a corporation, partnership or trust
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite power and authority and has
taken all necessary action required for the due authorization, execution,
delivery and performance of this Warrant Agreement, and any other agreements or
instruments executed in connection herewith or therewith and the consummation of
the transactions contemplated herein or therein, and has not been organized,
reorganized or recapitalized specifically for the purposes of investing in the
Company;
(ii) Assuming due execution and delivery by the Company of this
Warrant Agreement, this Warrant Agreement to which such Warrant holder is a
party constitutes the legal, valid and binding obligation of such Warrant
holder, enforceable against such Warrant holder in accordance with its terms;
(iii) Such Warrant holder has been advised and understands that neither
the Warrants nor the underlying shares of Common Stock have been registered
under the Act, on the basis that no public offering of the Warrants or
underlying shares of Common Stock is to be effected, except in compliance with
applicable securities laws and regulations or pursuant to an exemption
therefrom, and that, in this connection, the Company is relying in part on the
representations of such Warrant holders set forth in this Section 3(c);
<PAGE>
(iv) Such Warrant holder is purchasing the Warrant for investment
purposes, for its own account and not with a view to, or for sale in violation
of Federal or state securities laws; and
(v) Such Warrant holder is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated under the Act and, by reason of its
business or financial experience, such Warrant holder has the capacity to
protect its own interest in connection with the transactions contemplated
hereunder.
4. Adjustment of Number of Shares Purchasable.
------------------------------------------
The number of Shares to be issued upon exercise of the Warrant is subject
to adjustment from time to time as set forth in this Section 4.
(a) Stock Dividend; Stock Splits; Reverse Stock Splits; Reclassifications.
---------------------------------------------------------------------
In case the Company shall at any time after the date of this Agreement (i)
declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the number of Shares
of Common Stock for which this Warrant is exercisable shall be adjusted so that
the holder hereof after such time shall be entitled to receive the aggregate
number and kind of Shares which, if such Warrant had been exercised immediately
prior to such time, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. An adjustment made pursuant to this subsection (a) shall
become effective on the date of the dividend payment, subdivision, combination
or issuance retroactive to the record date with respect thereto, if any, for
such event. Such adjustment shall be made successively whenever any event listed
above shall occur. In the event that at any time, as a result of an adjustment
made pursuant to this subsection (a), the holder hereof shall become entitled to
purchase any securities other than shares of Common Stock, thereafter the number
of such other securities so purchasable upon exercise of such Warrant and the
exercise price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions of
this Section 4 with respect to the shares of Common Stock for which this Warrant
shall be exercisable.
(b) Adjustment of Exercise Price. Whenever the number of shares of Common
----------------------------
Stock purchasable upon the exercise of each Warrant is adjusted pursuant to
Section 4(a), the Exercise Price for each share of Common Stock payable upon
exercise of each Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator of which shall
be the number of shares of Common Stock purchasable upon the exercise of each
Warrant immediately prior to such adjustment, and the denominator of which shall
be the number of shares of Common Stock so purchasable immediately thereafter.
(c) De Minimis Adjustments. No adjustment in the number of shares of
----------------------
Common
<PAGE>
Stock for which this Warrant is exercisable shall be required unless such
adjustment would require an increase or decrease of at least 1% in the number of
shares of Common Stock for which this Warrant is exercisable; provided, however,
that any adjustments which by reason of this subsection (c) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest
one-hundredth of a share.
(d) Notice of Adjustment. Whenever the number of shares of Common Stock
--------------------
purchasable upon the exercise of each Warrant or the Exercise Price is adjusted,
as herein provided, the Company shall promptly notify the Warrant holder in
writing (such writing referred to as an "Adjustment Notice") of such adjustment
or adjustments and shall deliver to such Warrant holder a statement setting
forth the number of shares of Common Stock purchasable upon the exercise of each
Warrant and the Exercise Price after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
(e) Statement on Warrant Certificates. The form of the Warrant Certificate
---------------------------------
need not be changed because of any change in the Exercise Price or in the number
or kind of shares purchasable upon the exercise of a Warrant. However, the
Company may at any time in its sole discretion make any change in the form of
the Warrant Certificate that it may deem appropriate and that does not affect
the substance thereof and any Warrant Certificate thereafter issued, whether in
exchange or substitution for any outstanding Warrant Certificate or otherwise,
may be in the form so changed.
(f) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to such fraction multiplied by the fair value of a share of Common Stock on the
date of such exercise as determined by the board of directors of the Company.
(g) Capital Reorganization. In case of any capital reorganization of the
----------------------
Company, or of any reclassification of the Common Stock (other than a
reclassification of the Common Stock referred to in subsection (a) of this
Section 4), or in the case of the consolidation of the Company with or the
merger of the Company into any other Company which does not result in a change
of control, each Warrant shall after such capital reorganization,
reclassification of the Common Stock, consolidation or merger be exercisable,
upon the terms and conditions specified in this Agreement, for the number of
shares of stock or other securities, assets, or cash to which a holder of the
number of shares of Common Stock purchasable (at the time of such capital
reorganization, reclassification of shares, consolidation or merger) upon
exercise of such Warrant would have been entitled upon such capital
reorganization, reclassification of the Common Stock, consolidation or merger;
and in any such case, if necessary, the provisions set forth in this Section 4
with respect to the rights and interests thereafter of the holders of the
Warrants shall be appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any shares of stock or other securities, assets, or cash
thereafter deliverable upon the exercise of the Warrants.
<PAGE>
The subdivision or combination of the Common Stock at any time outstanding into
a greater or lesser number of shares shall not be deemed to be a
reclassification of the Common Stock for the purposes of this paragraph. The
Company shall not effect any such consolidation or merger unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing or receiving such assets or other appropriate corporation
or entity shall assume the obligation to deliver to the Warrant holder such
shares of stock, securities, or assets as, in accordance with the foregoing
provisions, such holders may be entitled to purchase, and to perform the other
obligations of the Company under this Warrant Agreement.
5. Covenants of the Company.
------------------------
(a) Reservation and Authorization of Common Stock. The Company covenants
---------------------------------------------
and agrees (i) that all shares of Common Stock which may be issued upon the
exercise of the Warrants represented by the Warrant Certificate, upon issuance
and when fully paid for, will be validly issued, fully paid and nonassessable
and free of all taxes, liens, charges, encumbrances and security interests other
than those attaching by or through the Warrant holder, (ii) that during the
Exercise Period, the Company will at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the Warrants evidenced by the
Warrant Certificate, sufficient shares of Common Stock to provide for the
exercise of the Warrants represented by the Warrant Certificate and (iii) that
the Company will take all such action as may be necessary to ensure that the
shares of Common Stock issuable upon the exercise of the Warrants may be so
issued without violation of any applicable law or regulation, or any requirement
of any securities exchange upon which any capital stock of the Company may be
listed.
(b) Replacement of Warrant Certificates. Upon receipt of evidence
-----------------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant Certificate and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant Certificate, the Company, at the
expense of the Warrant holder, will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor.
(c) Reporting by the Company. The Company agrees that during the term of
------------------------
the Warrants it will use its best efforts to keep current in the filing of all
forms and other materials, if any, which it may be required to file with the
appropriate regulatory authority pursuant to the Securities Exchange Act of
1934, as amended ("Exchange Act"), and all other forms and reports required to
be filed with any regulatory authority having jurisdiction over the Company.
6. No Rights of Stockholder.
------------------------
The Warrant holder shall not be entitled to vote or to receive dividends or
shall otherwise be deemed to be the holder of shares of Common Stock for any
purpose, nor shall
<PAGE>
anything contained herein or in any Warrant Certificate be construed to confer
upon the Warrant holder, as such, any of the rights of a stockholder of the
Company or any right to vote upon or give or withhold consent to any action of
the Company (whether upon any reorganization, issuance of securities,
reclassification or conversion of Common Stock, consolidation, merger, sale,
lease, conveyance, or otherwise), receive notice of meetings or other action
affecting stockholders (except for notices expressly provided for herein) or
receive dividends or subscription rights, until the Warrant Certificate shall
have been surrendered for exercise accompanied by full and proper payment of the
Exercise Price as provided herein and shares of Common Stock hereunder shall
have become issuable and until the Warrant holder shall have been deemed to have
become a holder of record of such shares. The Warrant holder shall not, upon the
exercise of Warrants, be entitled to any dividends if the record date with
respect to payment of such dividends shall be a date prior to the date such
shares of Common Stock became issuable upon the exercise of such Warrants.
Notwithstanding the foregoing, this Section 6 shall not affect a Warrant
holder's rights as a stockholder pursuant to his or its ownership of Common
Stock or Preferred Stock of the Company.
7. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to any Warrant holder shall be delivered personally, by prepaid
overnight courier, by facsimile transmission or by certified mail, return
receipt requested, addressed to the Warrant Holder at its address as it appears
on the books of the Company. This Warrant Agreement and any of the terms hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of
Maryland. The headings in this Warrant Agreement are for purposes of reference
only and shall not limit or otherwise affect any of the terms hereof. This
Warrant Agreement, together with the forms of instruments annexed hereto as
exhibits, constitutes the full and complete agreement of the parties hereto with
respect to the subject matter hereof. This Warrant Agreement may be executed in
counterparts.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 17th day of December, 1997, in Houston, Texas, by its
proper corporate officers, thereunto duly authorized.
ENVIRONMENTAL SAFEGUARDS, INC.
<PAGE>
By: /s/ James S. Percell
----------------------------------------
JAMES S. PERCELL, President
The above Warrant Agreement is confirmed and
agreed to as of this 17th day of December, 1997.
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ David L. Warnock
--------------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, L.L.C.,
its General Partner
By: /s/ David L. Warnock
--------------------------------------------
Name: David L. Warnock
Title: Managing Member
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
--------------------------------------------
Name: James D. Cole
Title: Chairman of the Board, President and
Chief Executive Officer
JAMES H. STONE
/s/ James H. Stone
- ---------------------------------------------------
EXHIBIT A
NAME TOTAL NUMBER OF WARRANTS
- ---- ------------------------
<PAGE>
Newpark Resources, Inc. ........................................ 353,571
Cahill, Warnock Strategic Partners Fund, L.P. .................. 323,044
Strategic Associates, L.P. ...................................... 17,900
James H. Stone................................................... 12,628
A-2
<PAGE>
EXHIBIT B
WARRANT CERTIFICATE
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR AN OPINION OF COUNSEL TO
THE COMPANY IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION. THIS WARRANT AND ITS
TRANSFERABLILITY IS FURTHER SUBJECT TO THAT CERTAIN WARRANT AGREEMENT DATED
DECEMBER 17,1997, A COPY OF WHICH IS ON FILE AT THE OFFICES OF ENVIRONMENTAL
SAFEGUARDS, INC.
Warrant No. W-103 To Purchase
12,628 Shares of
Common Stock
ENVIRONMENTAL SAFEGUARDS, INC.
Incorporated Under the Laws of Nevada
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares subject to adjustment set
forth above of the common stock ("Common Stock"), of Environmental Safeguards,
Inc. ("Corporation") from the Corporation at the purchase price per share
hereafter set forth, on delivery of this Warrant to the Corporation with the
form of subscription duly executed and payment of the purchase price pursuant to
Section 2 of that certain Warrant Agreement between the parties thereto dated as
of December 17, 1997. This Warrant is subject to the terms of the Warrant
Agreement between the parties, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: JAMES H. STONE Date: December 17, 1997
Purchase Price
Per Share: $.01
Expiration Date: Subject to Section 2 of the Warrant Agreement, 5:00 p.m.
Houston, Texas time on December 16, 2007.
WITNESS the signature of the Corporation's authorized officer:
ENVIRONMENTAL SAFEGUARDS, INC.
By /s/ James S. Percell
----------------------------------------
JAMES S. PERCELL, President
B-3
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Environmental Safeguards, Inc.
The undersigned, the holder of the enclosed Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________* shares of Common Stock of Environmental
Safeguards, Inc. and herewith makes payment of $_______________ therefor, and
requests that the certificate or certificates for such shares be issued in the
name of and delivered to the undersigned.
Dated:______________
___________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the enclosed Warrant)
____________________________________________
(Address)
___________________________
(*) Insert here the number of shares called for on the face of the Warrant or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised, in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant Agreement pursuant to which the Warrant was granted, may be
delivered upon exercise.
B-4
<PAGE>
EXHIBIT 11
-----------------------------------------------------------------------
CO-SALE AGREEMENT
DATED AS OF DECEMBER 17, 1997
-----------------------------------------------------------------------
<PAGE>
CO-SALE AGREEMENT
CO-SALE AGREEMENT dated as of December 17, 1997 (this "Agreement'), by and
among James Percell ("Percell") and each of the persons listed on the signature
page hereto under the caption "Purchasers" (collectively, the "Purchasers").
W I T N E S S E T H
WHEREAS, Environmental Safeguards, Inc. (the "Company") and the Purchasers
have entered into that certain Series B Convertible Preferred Stock Purchase
Agreement, dated as of November 17, 1997 (the "Purchase Agreement'), pursuant to
which the Company has agreed to sell, and the Purchasers have agreed to purchase
shares of Series B Convertible Preferred Stock ("Preferred Stock"), which shall
be convertible into shares of the Company's common stock, par value of $0.001
per share (the "Common Stock") (as converted from Preferred Stock the
("Conversion Shares").
WHEREAS, Percell is the President of the Company and a major shareholder of
the Company; and
WHEREAS, as a condition to the obligations set forth in the Purchase
Agreement, each of the parties hereto has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Percell and the Purchasers agree as
follows:
SECTION 1
TAG-ALONG RIGHTS
1.1 Right to Sell Proportionate Number of Shares of Common Stock. Percell
------------------------------------------------------------
and each of the Purchasers agree that, if he or it shall receive and determine
to accept any bona fide written offer (a "Notice of Offer") from a Buyer to
---- ----
purchaser or otherwise acquire for value, in one transaction or a series of
related transactions, shares of Common Stock (the "Offer Shares") beneficially
owned by him or it and representing 35% or more of all of the then issued and
outstanding Common Stock of the Company beneficially owned by each of them, each
of the other parties to this Agreement shall have the right to participate in
such transaction in the manner set forth in this Agreement. The term "Buyer,"
as used herein, means a person or entity, other than one or the parties to this
Agreement or any person or entity directly or indirectly controlling, controlled
by or under direct or indirect common control or, in the case of the Purchasers,
a partner, of each of the parties to this Agreement, that has offered to
purchase or otherwise acquire for value shares of Common Stock of the Company
(other than in connection with a registered public offering).
<PAGE>
-2-
1.2 Notifications. Each of the parties shall, promptly after receipt of a
-------------
Notice of Offer (and in any event not later than 10 days after such receipt),
send a copy thereof to each of the other parties to this Agreement. The
delivery of such Notice of Offer shall be effected not less than 30 days prior
to the closing of such proposed sale or other acquisition. Upon receipt of a
Notice of Offer, each of the other parties shall have 15 days to deliver a
written notice of its election to participate in such sale or other acquisition
and of the number of its shares to be included in such sale or other acquisition
and which shares shall be converted into Conversion Shares (if applicable),
subject to and effective upon the closing of such sale or other acquisition. If
such written notice of election is not received from the other parties within
the 15-day period specified above, then the party who received the Notice of
Offer shall have the right to sell or otherwise transfer the aforesaid Common
stock to the Buyer without any participation by such other parties, but only (a)
on the terms and conditions stated in the Notice of Offer and (b) if the sale or
other transfer is consummated not later than 30 days after the end of the
aforesaid 30-day period.
1.3 Selling a Proportionate Number of Shares of Common Stock. In the
--------------------------------------------------------
event the number of shares for which a party elects to sell pursuant to a Notice
of Offer exceeds the number of shares which the Buyer is willing to purchase,
the number of shares to be sold or transferred to the Buyer by each transferor
shall be reduced so that each transferor is entitled to sell or transfer the
same percentage of its shares as each other transferor.
1.4 Purchase Price. The purchase price and the terms of the purchase or
--------------
other acquisition for each transferor shall be the same as the purchase price
and terms set forth in such Notice of Offer.
1.5 Closing of Sale. Each party in respect of a Notice of Offer shall
----------------
delivery to the Buyer in respect of such Notice of Offer, against payment of the
total purchase price, on the closing date specified in such Notice of Offer, a
certificate or certificates representing the number of such shares which he or
it has elected to sell pursuant to this Agreement, together with appropriate
instruments of transfer duly endorsed in blank.
SECTION 2
ENTIRE AGREEMENT
This Agreement and the other documents referenced herein contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede any and all prior agreements and understandings, both written and
oral, with respect thereto.
SECTION 3
SEVERABILITY
It is the desire and intent of the parties that the provisions of this
Agreement been enforced to the fullest extent possible under the law and public
policies applied in each
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jurisdiction in which enforcement is sought. Accordingly, in the event that any
provision of this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining provision
of this Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 4
GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of Maryland, without giving effect to the principles of
conflicts of laws thereof.
SECTION 5
TERM
This Agreement shall terminate 365 days after the closing of the Purchase
Agreement.
SECTION 7
COUNTERPARTS
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereof and
hereto were upon the same instrument.
SECTION 8
NOTICE
Any notices or other communications required or permitted hereunder shall
be sufficient given if in writing and delivered in person, transmitted or
facsimile transmission (fax) or sent by registered or certified mail (return
receipt requested) or recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address has such party may notify tot he
other parties in writing:
(a) if to James Percell:
Environmental Safeguards, Inc.
2600 South Loop West, Suite 645
Houston, TX 77007
Attn: James S. Percell
Telephone No.: 713-641-3838
Facsimile No.: 713-641-0756
with a copy to:
Axelrod, Smith & Kirshbaum
5300 Memorial
Houston, TX 77054
Attn: Robert D. Axelrod, Esq.
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Telephone No.: 713-861-1996
Facsimile No.: 713-552-0202
(b) if to the Purchasers:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David L. Warnock
Telephone No.: 410-895-3800
Facsimile No.: 410-895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: George P. Stamas, Esq.
Telephone No.: 410-986-2800
Facsimile No.: 410-986-2828
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
day after dispatch.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
JAMES PERCELL
/s/ James Percell
---------------------------------------------
PURCHASERS:
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ David L. Warnock
------------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
General Partner
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By: /s/ David L. Warnock
------------------------------------------
Name: David L. Warnock
Title: Managing Member
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
------------------------------------------
Name: James D. Cole
Title: Chairman of the Board, President
and Chief Executive Officer
JAMES H. STONE
/s/ James H. Stone
---------------------------------------------
