<PAGE> 1
--------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED BY A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential For Use of the
Commission Only (as Permit-
ted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
ENVIRONMENTAL SAFEGUARDS, INC.
(Name of Registrant as Specified in Its Charter)
--------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee: (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act
Rule 14a-6(I)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------
<PAGE> 2
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------
(5) Total fee paid:
- --------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of the filing.
(1) Amount Previously Paid:
- --------------------------------------
(2) For, Schedule or Registration Statement No.:
- --------------------------------------
(3) Filing Party:
- --------------------------------------
(4) Date Filed:
- --------------------------------------
<PAGE> 3
ENVIRONMENTAL SAFEGUARDS, INC.
2600 SOUTH LOOP WEST, SUITE 645
HOUSTON, TEXAS 77054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1998
The Annual Meeting of Stockholders (the "Annual Meeting") of Environmental
Safeguards, Inc. (the "Company") will be held in the Oak-Maple Room of the
Holiday Inn Astrodome, 8111 Kirby Drive, Houston, Texas on September 14, 1998
at 10:00 AM (CST) for the following purposes:
(1) To elect four (4) directors.
(2) To ratify the selection of Ernst & Young LLP as the Company's
independent auditor for the fiscal year ending December 31, 1998.
(3) To act upon such other business as may properly come before the
Annual Meeting.
Only holders of common stock of record at the close of business on August 13,
1998 will be entitled to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you plan
to attend the Annual Meeting, please sign, date and return your proxy to us
promptly. Your cooperation in signing and returning the proxy will help avoid
further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James S. Percell
Chairman of the Board,
CEO and President
August 14, 1998
Houston, Texas
<PAGE> 4
ENVIRONMENTAL SAFEGUARDS, INC.
2600 SOUTH LOOP WEST, SUITE 645
HOUSTON, TEXAS 77054
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1998
This proxy statement (the "Proxy Statement") is being furnished to
stockholders (the "Stockholders") in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Environmental Safeguards,
Inc., a Nevada corporation (the "Company") for their use at the Annual Meeting
(the "Annual Meeting") of Stockholders of the Company to be held in the
Oak-Maple Room of the Holiday Inn Astrodome, 8111 Kirby Drive, Houston, Texas
on September 14, 1998 at 10:00 AM (CST), and at any adjournments thereof, for
the purpose of considering and voting upon the matters set forth in the
accompanying Notice of Annual Meeting of Stockholders (the "Notice"). This
Proxy Statement and the accompanying form of proxy (the "Proxy") are first
being mailed to Stockholders on or about August 14, 1998. The cost of
solicitation of proxies is being borne by the Company.
The close of business on August 13, 1998, has been fixed as the record
date for the determination of Stockholders entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. As of record date, there were
9,526,444 shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"), issued and outstanding. The presence, in person or by proxy,
of at least one-third of the outstanding shares of Common Stock on the record
date is necessary to constitute a quorum at the Annual Meeting. Each share is
entitled to one vote on all issues requiring a Stockholder vote at the Annual
Meeting. Each nominee for Director named in Number 1 in the accompanying Notice
must receive a majority of the votes cast in person or by proxy in order to be
elected. Stockholders may not cumulate their votes for the election of
Directors. The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at the Annual Meeting is
required for the approval of Number 2 set forth in the accompanying Notice.
All shares represented by properly executed proxies, unless such
proxies previously have been revoked, will be voted at the Annual Meeting in
accordance with the directions on the proxies. If no direction is indicated,
the shares will be voted (i) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, AND
(ii) FOR THE RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998. The Board of Directors is
not aware of any other matters to be presented for action at the Annual
Meeting. However, if any other matter is properly presented at the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment on such matters.
1
<PAGE> 5
The enclosed Proxy, even though executed and returned, may be revoked
at any time prior to the voting of the Proxy (a) by execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company, or (c)
by voting in person at the Annual Meeting.
---------------------------------------------------------
(1) TO ELECT FOUR (4) DIRECTORS FOR THE ENSUING YEAR
---------------------------------------------------------
NOMINEES FOR DIRECTORS
The persons named in the enclosed Proxy have been selected by the
Board of Directors to serve as proxies (the "Proxies") and will vote the shares
represented by valid proxies at the Annual Meeting of Stockholders and
adjournments thereof. They have indicated that, unless otherwise specified in
the Proxy, they intend to elect as Directors the nominees listed below. All the
nominees are presently members of the Board of Directors. Each duly elected
Director will hold office until his successor shall have been elected and
qualified.
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed Proxy will be voted for the election of the nominees listed below.
Although the Board of Directors of the Company does not contemplate that any of
the nominees will be unable to serve, if such a situation arises prior to the
Annual Meeting, the persons named in the enclosed Proxy will vote for the
election of such other person(s) as may be nominated by the Board of Directors.
The Board of Directors unanimously recommends a vote FOR the election
of each of the nominees listed below.
JAMES S. PERCELL, age 55, serves as Chairman, President and CEO of the
Company and also serves as President of the Company's subsidiary, NFE. Mr.
Percell became a director of the Company and President, Chief Executive Officer
and a director of NFE in November, 1995. Mr. Percell became President and CEO
of the Company in January, 1996. Mr. Percell also serves as President of
Percell & Associates, a project developer of facilities in the hydrocarbon
industry. From 1985-1993, Mr. Percell served as Vice-President of Belmont
Constructors, Inc., a heavy industrial contractor. From 1982-1984, he served as
President of Capital Services Unlimited, an international supply company for
refining, petrochemical and oil field compressor stations, modular refineries
and modular oilfield components. From 1977-1980, Mr. Percell served as
President of Percell & Lowder, Inc., an oilfield fabricator of onshore and
offshore facilities, and from 1960- 1977, he served as project manager for
various onshore and offshore projects. He attended Amarillo College in
Amarillo, Texas.
2
<PAGE> 6
BRYAN SHARP, age 54, has served as a director of the Company since
November, 1995. Mr. Sharp is a member of the Company's independent audit
committee. Mr. Sharp currently serves as Principal-in-Charge and Director of
Espey, Huston & Associates, Inc. ("EH&A"), an environmental consulting company,
and from 1990-1993, he served as President of EH&A. Mr. Sharp has also been
employed by North Texas State University, the Department of the Interior, and
the University of Texas. Mr. Sharp has a B.S. degree in Education from North
Texas State University, a M.S. degree in Biology from North Texas State
University and studied for his Ph.D. in Zoology from the University of Texas at
Austin.
ALBERT M. WOLFORD, age 76, has served as director of the Company since
August 1997. Mr. Wolford is a member of the Company's independent compensation
committee. Mr. Wolford is also the Company's Secretary. Mr. Wolford has been an
independent business consultant since 1988. From 1970 to 1988, Mr. Wolford
served with Texas United Corporation as a director, a member of the executive
committee, senior vice-president, and as the chairman of executive development
and compensation committee. As a senior vice-president of Texas United
Corporation, Mr. Wolford served its subsidiaries as president and CEO of Texas
United Chemical Corporation, as the chairman, president and CEO of United Salt
Corporation, and as the president of American Borate Corporation. He has also
served the Texas Chemical Council, an industry trade group, as a director, a
member of its executive committee, and as secretary-treasurer. Mr. Wolford
served as a member of the executive committee of the Salt Institute, an
industry trade group. Mr. Wolford is a graduate of the University of Texas.
DAVID L. WARNOCK, age 40, was appointed as Director of the Company in
December, 1997 in connection with the December, 1997 financing. Mr. Warnock is
member of the Company's independent audit and compensation committees. Mr.
Warnock is a founding partner of Cahill, Warnock & Company, L.L.C., an asset
management firm established in 1995 to invest in small public companies. From
1983 to 1995, Mr. Warnock was with T. Rowe Price Associates in senior
management positions including President of the corporate general partner of T.
Rowe Price Strategic Partners I and T. Rowe Price Strategic Partners II, and as
the Executive Vice President of T. Rowe Price New Horizons Fund. Mr. Warnock
also serves on the Boards of Directors of other companies including Children's
Comprehensive Services, Inc., SRB Corporation, and ALLIANCE National
Incorporated. Mr. Warnock received a Bachelor of Arts Degree, History, from the
University of Delaware and a Masters Degree, Finance, from the University of
Wisconsin.
EXECUTIVE OFFICERS
In addition to Mr. Percell and Mr. Wolford who are executive officers
of the Company, Douglas A. Schonacher serves as the vice-president and Chief
Operating Officer of the company, and Ronald L. Bianco serves as Chief
Financial Officer, Treasurer and Vice-Secretary of the Company.
DOUGLAS A. SCHONACHER, JR., age 42, joined the Company in March 1997
and is the Company's Vice President and Chief Operating Officer. Mr. Schonacher
has 23 years of experience in the fields of drilling fluids control and
drilling waste management. From 1992 until 1997, Mr. Schonacher
3
<PAGE> 7
was with Tubescope/Vetco International in the solids control
division, serving as manager of Latin American operations. Mr. Schonacher also
served as the manager of technical services for the solids control division of
Tubescope/Vetco International. From 1987 until 1992, Mr. Schonacher was with
Sun Drilling Products Corp. serving as vice president of Sun Environmental
Services, Inc. and Gulf Coast operations manager. Mr. Schonacher was
responsible for sales engineering and all product applications. Mr. Schonacher
also was with Sun Drilling Products Corp. 1979 until 1983 where he was
responsible for hiring drilling fluid engineers and for application of drilling
fluids specialty products in offshore Gulf Coast regions. From 1974 until 1979,
and again from 1983 until 1987, Mr. Schonacher was a drilling fluids
consultant. Mr. Schonacher attended Nichols State University and Louisiana
State University.
RONALD L. BIANCO, age 52, joined the Company in April 1997 as its Chief
Financial Officer. In addition to serving as Chief Financial Officer, Mr.
Bianco was appointed Treasurer and Vice-Secretary in August, 1997. From 1994
through 1996, Mr. Bianco served as Chief Financial Officer of SWECO Oilfield
Services. From 1992 through 1993, Mr. Bianco was an independent business
consultant. From 1975 through 1991, Mr. Bianco was with Dresser Industries
where he served as controller of Dresser Rand Power in Norway, as the
controller for North America Operations of Dresser Masonelian Valve and in
other headquarter and division assignments. Mr. Bianco received his B.B.A. in
accounting in 1970 from St. Bonaventure University in Olean, New York, and his
M.B.A. in 1983 from Southern Methodist University in Dallas, Texas.
RELATED TRANSACTIONS
The Board of Directors of the Company has adopted a policy that
Company affairs will be conducted in all respects by standards applicable to
publicly-held corporations and that the Company will not enter into any
transactions and/or loans between the Company and its officers, directors and
5% stockholders unless the terms are no less favorable than could be obtained
from independent, third parties and will be approved by a majority of the
independent, disinterested directors of the Company.
In December, 1997, the Company sold $8,000,000 of new Series B
Convertible Preferred Stock and Series C Preferred Stock to an investor group
consisting of Cahill, Warnock Strategic Partners Fund, L.P., Strategic
Associates, L.P., Newpark Resources, Inc. and James H. Stone, who is the
Chairman of Stone Energy Corporation, and the Company obtained a loan of
$6,000,000 from the same investor group. Pursuant to this financing, David L.
Warnock, a member of Cahill, Warnock & Co., which is the general partner of
Cahill, Warnock Strategic Partners Fund, L.P., was appointed a Director of the
Company. Subsequently, in June, 1998, the Company obtained an additional loan
of $5,000,000 from the same investor group.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
James S. Percell and Albert M. Wolford are the only directors of the
Company who are also officers of the Company. During December 1997, the Board
of Directors established an independent compensation committee whose members
are David L. Warnock, Albert Wolford and Robin Pate
4
<PAGE> 8
(who is not standing for re-election). Also in December 1997, the Board of
Directors established an independent audit committee whose members are Bryan
Sharp and David L. Warnock. The independent audit and compensation committees
did not meet until 1998.
The Company held seven meetings of the Board of Directors during the
period covered by the fiscal year ended December 31, 1997. All Directors were
present for at least 75% of the Board meetings.
The Company believes that all reports required by Section 16(a) of the
Exchange Act for the most recent fiscal year have been timely filed.
5
<PAGE> 9
EXECUTIVE COMPENSATION
Mr. James Percell, became President and Chief Executive Officer of the
Company in January, 1996. The Company entered into a three year employment
agreement with Mr. Percell in April, 1997. The employment agreement
automatically extends, unless terminated by the Company or Mr. Percell, for
additional successive one year periods after the initial three year term. Mr.
Percell's employment agreement provides that he receive annual compensation
from the Company in the amount of $125,000. However on November 17, 1997, the
Company's Board of Directors increased Mr. Percell's annual compensation to
$250,000. No other executive officer of the Company received compensation which
exceeded $100,000 during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------
SECURITIES PAYOUTS
ANNUAL COMPENSATION RESTRICTED UNDERLYING ------- ALL
NAME AND -------------------------- STOCK OPTIONS/ LTIPS OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDS SARS PAYOUTS COMPENSATION
- ------------------ ---- -------- ----- ----- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James S. Percell 1997 $168,750 --0-- --0-- --0-- --0-- --0-- --0--
CHIEF EXECUTIVE 1996 --0-- --0-- --0-- --0-- --0-- --0-- --0--
OFFICER 1995 --0-- --0-- --0-- --0-- --0-- --0-- --0--
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------
Percent of Potential Realizable Value At
Number of Total Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation For
Underlying Granted To Exercise Option Term
Options/SARs Employees Or Base
Granted In Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
James S. Percell 301,267 19% $3.00 12-17-07 $568,490 $1,440,658
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number Of
Securities Value Of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs At Options/SARs At
Fiscal Year-End Fiscal Year-End
Shares Value (#) ($)
Acquired On Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
James S. Percell (*) (*) 1,101,267 / -0- $2,057,659 / -0-
</TABLE>
(*) Did not exercise any options.
6
<PAGE> 10
DIRECTOR COMPENSATION
The Company does not currently pay any cash director's fees, but it
pays the expenses, if any, of its directors in attending board meetings. In
November, 1995, the Company issued to each of James S. Percell, Bryan Sharp and
Robin Pate (who is presently a director, but who is not standing for
re-election to the Board of Directors) an option to purchase 800,000 shares of
Common Stock of the Company at $0.60 per share. The options are fully vested
and may be exercised at any time until the termination of the option which is
November, 2005. Of these option, during 1997, Mr. Pate exercised options to
acquire 100,000 shares. In addition, in December, 1997, the Company issued to
each of Messrs. Percell, Pate and Sharp an option to purchase 301,267 shares of
Common Stock of the Company at $3.00 per share. The options are fully vested
and may be exercised at any time until the termination of the option which is
December, 2007. In November, 1997, the Company issued to Mr. Wolford an option
to purchase 25,000 shares of Common Stock of the Company at $3.75 per share.
The options are fully vested and may be exercised at any time until the
termination of the option which is November, 2007. Further, in December, 1997,
the Company issued to Mr. Wolford an option to purchase 9,415 shares of Common
Stock of the Company at $3.00 per share. The options are fully vested and may
be exercised at any time until the termination of the option which is December,
2007.
EMPLOYEE STOCK OPTION PLAN
While the Company has been successful in attracting and retaining
qualified personnel, the Company believes that its future success will depend
in part on its continued ability to attract and retain highly qualified
personnel. The Company pays wages and salaries which it believes are
competitive. The Company also believes that equity ownership is an important
factor in its ability to attract and retain skilled personnel, and the Board of
Directors of the Company intends to adopt an employee stock option program.
The purpose of the stock option program will be to further the
interest of the Company, its subsidiaries and its stockholders by providing
incentives in the form of stock options to key employees and directors who
contribute materially to the success and profitability of the Company. The
grants will recognize and reward outstanding individual performances and
contributions and will give such persons a proprietary interest in the Company,
thus enhancing their personal interest in the Company's continued success and
progress. This program will also assist the Company and its subsidiaries in
attracting and retaining key employees and directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 5,
1998 with respect to the beneficial ownership of shares of Common Stock by (i)
each person who is known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company and (iv) all executive officers and
directors
7
<PAGE> 11
of the Company as a group. Unless otherwise indicated, each stockholder has
sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF PERCENT CLASS OF
NAME SHARES OWNED(1) OF CLASS SECURITIES
---- --------------- -------- ----------
<S> <C> <C> <C>
James S. Percell ............................................... 1,346,560(2) 12.6% Common Stock
2600 South Loop West, Ste #645
Houston, Texas 77054
Robin M. Pate................................................... 1,136,960(3) 10.8% Common Stock
9333 Memorial Drive #107
Houston, Texas 77024
Bryan Sharp .................................................... 1,112,264(4) 10.5% Common Stock
3200 Wilcrest, #200
Houston, Texas 77042
Albert M. Wolford .............................................. 65,346(5) 0.7% Common Stock
2600 South Loop West, Ste #645
Houston, Texas 77054
David L. Warnock ............................................... 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Edward L. Cahill ............................................... 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Cahill, Warnock Strategic
Partners Fund, L.P. ............................................ 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Strategic Associates, L.P. ..................................... 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Cahill, Warnock & Company, L.L.C ............................... 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Cahill, Warnock Strategic Partners, L.P. ....................... 2,159,308(6)(7) 18.5% Common Stock
One South Street, Ste #2150
Baltimore, Maryland 21202
Douglas A. Schonacher, Jr ...................................... 69,516(8) 0.7% Common Stock
2600 South Loop West, Ste 645
Houston, Texas 77054
Ronald L. Bianco ............................................... 69,516(9) 0.7% Common Stock
2600 South Loop West, Ste 645
Houston, Texas 77054
Newpark Resources, Inc. ........................................ 2,239,282(7)(10) 19.0% Common Stock
3850 N. Causeway, Ste #1770
Metairie, LA 70002-1756
All officers and directors as a Group (7 persons) ............. 5,959,470 39.3% Common Stock
</TABLE>
8
<PAGE> 12
- ---------------------
(1) Under the rules of the Securities and Exchange Commission (the
"Commission"), a person who directly or indirectly has or shares
voting power or investment power with respect to a security is
considered a beneficial owner of the security. Voting power is the
power to vote or direct the voting of shares, and investment power is
the power to dispose of or direct the disposition of shares. Shares as
to which voting power or investment power may be acquired within 60
days are also considered as beneficially owned under the Commission's
rules and are, accordingly, included as shares beneficially owned.
(2) Includes an option to purchase 800,000 shares of Common Stock of the
Company at $0.60 per share, an option to purchase 301,267 shares of
Common Stock of the Company at $3.00 per share, and an option to
purchase 76,775 shares of Common Stock of the Company at $5.00 per
share. These options are fully vested and immediately exercisable.
(3) Includes an option to purchase 700,000 shares of Common Stock of the
Company at $.60 per share, an option to purchase 301,267 shares of
Common Stock of the Company at $3.00 per share, and an option to
purchase 17,930 shares of Common Stock of the Company at $5.00 per
share. These options are fully vested and immediately exercisable. Mr.
Pate is not standing for re-election to the Board of Directors.
(4) Includes an option to purchase 800,000 shares of Common Stock of the
Company at $0.60 per share, an option to purchase 301,267 shares of
Common Stock of the Company at $3.00 per share, and an option to
purchase 10,997 shares of Common Stock of the Company at $5.00 per
share. These options are fully vested and immediately exercisable.
(5) Includes an option to purchase 9,415 shares of Common Stock of the
Company at $3.00 per share, an option to purchase 25,000 shares of
Common Stock at $3.75 per share, and an option to purchase 8,931
shares of Common Stock of the Company at $5.00 per share. These
options are fully vested and immediately exercisable.
(6) Includes 1,722,900 shares of Series B Convertible Preferred Stock and
a warrant to purchase 323,044 shares of common stock of the Company at
$0.01 per share issued to Cahill, Warnock Strategic Partners Fund,
L.P. ("Cahill Warnock Fund"), whose sole general partner is Cahill,
Warnock Strategic Partners, L.P. ("Cahill Warnock Partners"). In
addition, includes 95,464 shares of Series B Convertible Preferred
Stock and a warrant to purchase 17,900 shares of common stock of the
Company at $0.01 per share issued to Strategic Associates, L.P.
("Strategic Associates"), whose sole general partner is Cahill,
Warnock & Company, L.L.C. ("Cahill Warnock"). Each share of Series B
Convertible Preferred Stock is immediately convertible into one share
of common stock of the Company, subject to adjustment under certain
conditions. The warrant is fully vested and immediately exercisable.
David L. Warnock and Edward L. Cahill are the sole general partners of
Cahill Warnock Partners and the sole members of Cahill Warnock. David
L. Warnock and Edward L. Cahill are control persons of Cahill Warnock
Fund, Cahill Warnock Partners, Strategic Associates, and Cahill
Warnock. David L. Warnock, Edward L. Cahill, Cahill Warnock Fund,
Cahill Warnock Partners, Strategic Associates and Cahill Warnock have
shared voting power and shared dispositive power of these shares and
each disclaim beneficial ownership of the shares and warrants, except
with respect to their pecuniary interest therein, if any.
(7) Not included herein are other warrants which could be issuable under
certain circumstances pursuant to the terms of the Loan Agreement as
follows: (i) warrants for up to a total of 707,142 shares of Common
Stock of the Company are issuable upon the earlier of an event of
default under the terms of the Loan Agreement or February 17, 2000,
provided, however, that if the loans are repaid in full prior to
February 17, 2000, then no additional warrants would be issued, and
further provided that if a portion of the loans are repaid prior to
February 17, 2000, then warrants for a number of shares of Common
Stock of the Company would be issued on a pro rata basis; and (ii)
warrants for up to a total of 188,571 shares of Common Stock of the
Company are issuable if loans made pursuant to the Loan Agreement are
not repaid in full by December 17, 2001.
9
<PAGE> 13
(8) Includes an option to purchase 50,000 shares of Common Stock of the
Company at $2.50 per share, an option to purchase 18,829 shares of
Common Stock of the Company at $3.00 per share, and an option to
purchase 687 shares of Common Stock of the Company at $5.00 per share.
These options are fully vested and immediately exercisable.
(9) Includes an option to purchase 50,000 shares of Common Stock of the
Company at $2.50 per share, an option to purchase 18,829 shares of
Common Stock of the Company at $3.00 per share, and an option to
purchase 687 shares of Common Stock of the Company at $5.00 per share.
These options are fully vested and immediately exercisable.
(10) Includes 1,885,711 shares of Series B Convertible Preferred Stock
which are immediately convertible into shares of the Company's Common
Stock. The number of shares of Common Stock into which each share of
Preferred Stock may be converted is presently one share of Common
Stock for each share of Series B Convertible Preferred Stock, subject
to adjustment under certain conditions. Also includes a warrant to
purchase 353,571 shares of Common Stock of the Company at $0.01 per
share. The warrant is fully vested and immediately exercisable.
10
<PAGE> 14
STOCK PRICE PERFORMANCE GRAPH
The below graph compares the cumulative total stockholder return of
Environmental Safeguards Inc. Common Stock from December 31, 1993 through
December 31, 1997, with Standard & Poors 500 Index (the Company's Broad Market
Index) and with Standard & Poors Oil Composite Index (the Company's Peer Group
Index). The graph assumes that the value of the investment in Environmental
Safeguards Common Stock and each index was $100 on December 31, 1993, and that
all dividends, if any, were reinvested. The comparisons in this table are not
intended to forecast or be indicative of possible future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN OF
ENVIRONMENTAL SAFEGUARDS, INC., THE S&P 500 INDEX (BROAD
MARKET INDEX), AND THE S&P OIL COMPOSITE INDEX (PEER GROUP INDEX)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Environmental Safeguards, Inc................. 100 16 16 57 60
Broad Market Index............................ 100 98 132 159 208
Peer Group Index.............................. 100 101 127 152 182
</TABLE>
[GRAPH]
11
<PAGE> 15
--------------------------------------------------------
(2) TO RATIFY THE SELECTION OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITOR
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
---------------------------------------------------------
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditor for the current fiscal year. The Board of Directors wishes
to obtain from the Stockholders a ratification of their action in appointing
Ernst & Young LLP as independent auditor of the Company for the fiscal year
ending December 31, 1998. Such ratification requires the affirmative vote of a
majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting.
In the event the appointment of Ernst & Young LLP as independent
auditor is not ratified by the Stockholders, the adverse vote will be
considered as a direction to the Board of Directors to select other independent
auditors for the fiscal year ending December 31, 1998.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if he or she so desires
and to respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR the
ratification of Ernst & Young LLP as independent auditor for fiscal year ending
December 31, 1998.
Ham, Langston & Brezina, LLP ("Ham, Langston & Brezina") audited the
financial statements of the Company for the years ended December 31, 1995 and
1996, and were replaced by Ernst & Young LLP ("Ernst & Young), Certified Public
Accountants on September 17, 1997.
There were no disagreements between the Company and Ham, Langston &
Brezina whether resolved or not resolved, on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved, would have caused them to make reference to
the subject matter of the disagreement in connection with their report.
The report of Ham, Langston & Brezina for the past two fiscal years
did not contain any adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to change principal accountants was not submitted for
approval to the Board of Directors. The change was made by the Company's
President, James S. Percell, in order to provide for the Company's growing need
for global expertise in accounting and other business matters.
12
<PAGE> 16
Also, during the Company's two most recent fiscal years, and since
then, Ham, Langston & Brezina has not advised the Company that any of the
following exist or are applicable:
(1) That the internal controls necessary for the Company to
develop reliable financial statements do not exist, that information
has come to their attention that has lead them to no longer be able to
rely on management's representations, or that has made them unwilling
to be associated with the financial statements prepared by management;
(2) That the Company needs to expand significantly the scope
of its audit, or that information has come to their attention that if
further investigated may materially impact the fairness or reliability
of a previously issued audit report or the underlying financial
statements or any other financial presentation, or cause him to be
unwilling to rely on management's representations or be associated
with the Company's financial statements for the foregoing reasons or
any other reason; or
(3) That they have advised the Company that information has
come to their attention that they have concluded materially impacts
the fairness or reliability of either a previously issued audit report
or the underlying financial statements for the foregoing reasons or
any other reason.
Prior to the engagement of Ernst & Young as independent auditors, the
Company had not consulted Ernst & Young regarding the application of accounting
principles to a specified transaction, either completed or proposed; or the
type of audit opinion that might be rendered on the Company's financial
statements or any other financial presentation whatsoever.
Ham, Langston & Brezina has provided the Securities and Exchange
Commission with a letter agreeing to the disclosure contained herein.
13
<PAGE> 17
---------------------------------------------------------
(3) OTHER MATTERS
---------------------------------------------------------
The Board of Directors is not aware of any other matters to be
presented for action at the Annual Meeting. However, if any other matter is
properly presented at the Annual Meeting, it is the intention of the persons
named in the enclosed proxy to vote in accordance with their best judgement on
such matters.
FUTURE PROPOSALS OF STOCKHOLDERS
The deadline for stockholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 1999 Annual Meeting of
Stockholders is December 31, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James S. Percell
Chairman of the Board,
CEO and President
August 14, 1998
Houston, Texas
14
<PAGE> 18
- --------------------------------------------------------------------------------
PROXY
ENVIRONMENTAL SAFEGUARDS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1998.
The undersigned hereby appoints James S. Percell and Ronald L. Bianco, and
each of them as the true and lawful attorneys, agents and proxies of the
undersigned, with full power of substitution, to represent and to vote all
shares of Common Stock of Environmental Safeguards, Inc. held of record by the
undersigned on August 13, 1998 at the Annual Meeting of Stockholders to be held
on September 14, 1998 at 10:00 AM in the Oak-Maple Room of the Holiday Inn
Astrodome, 8111 Kirby Drive, Houston, Texas, and at any adjournments thereof.
Any and all proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE NOMINEES
LISTED IN NUMBER 1 AND FOR THE RATIFICATION IN NUMBER 2.
1. Election of Directors of the Company. (INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR OTHERWISE STRIKE,
THAT NOMINEE'S NAME IN THE LIST BELOW.)
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD authority to vote
except as marked to the contrary for all nominees below
</TABLE>
James S. Percell Bryan Sharp David L. Warnock Albert M. Wolford
2. Proposal to ratify the selection of Ernst & Young LLP as the Company's
Independent Auditor for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- --------------------------------------------------------------------------------
<PAGE> 19
- --------------------------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon such other
business that may properly come before the annual meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
- ---------------------------------
Number of Shares Owned
-----------------------------------
Signature
-----------------------------------
(Typed or Printed Name)
-----------------------------------
Signature if held jointly
-----------------------------------
(Typed or Printed Name)
DATED:
-----------------------------------
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
- --------------------------------------------------------------------------------
