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EXHIBIT 10.2
EXECUTION COPY
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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
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
AND
NEWPARK RESOURCES, INC.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇,
AS LENDERS
AND
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.,
AS AGENT FOR EACH LENDER
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TABLE OF CONTENTS
Page
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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
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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
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
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(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
8.5. Indemnification................................................................................38
8.6. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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
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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
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
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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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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
▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual whose address is c/o Stone Energy, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (each a "Lender" and collectively,
the "Lenders") and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Drilling Investment Company
("▇▇▇▇▇▇") in OnSite and repay in full the outstanding balance owed by EVSF to
Casuarina, Ltd. ("Casuarina"), a Bermuda corporation and wholly-owned
subsidiary of ▇▇▇▇▇▇ 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 "▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇.
"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 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
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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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"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.
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"Dollars" and "$" means lawful money of the United States.
Any reference to 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. ss. 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. ss. 6901 et seq. ("RCRA"), (iii) the Clean
Air Act, 42 U.S.C. ss. 7401 et seq., (iv) the Federal Water Pollution Control
Act, 33 U.S.C. ss. 1251 et seq., (v) the Toxic Substances Control Act, 15
U.S.C. ss. 2601 et seq., (vi) the Federal Safe Drinking Water Act, 42 U.S.C.
▇▇.▇▇. 300f to 300j-11, (vii) the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. ss. 1101 et seq., (viii) the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 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
ss.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.
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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 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 ss.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.
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"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.
"Instruments" and "Documents" means all "instruments,"
"documents," "deposit accounts," and "chattel paper," as defined in ss.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.
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"Maturity Date" means December 17, 2002.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA
"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.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ 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.
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"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.
"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
ss.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.
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"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.
"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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Strategic Partners Fund, L.P., Strategic Associates, L.P., Newpark Resources,
Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇, 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
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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.
"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.
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"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 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
2.1. Commitment for the Loan.
(a) 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
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic $2,740,982.14 45.683%
Partners Fund, L.P.
Strategic Associates, L.P. $ 151,875 2.531%
Newpark Resources, Inc. $3,000,000 50%
▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 107,142.86 1.786%
Initial Committed Amount $6,000,000 100%
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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.
(b) The Loan shall be evidenced by and payable in accordance
with a term note (the "Note" and collectively, the "Notes") in the form of
Exhibit A hereto and shall be in the principal amount of such Lender's
Committed Amount.
(c) 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.
2.2. Interest on the Loan.
(a) 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.
(b) 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,
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with the entire remaining principal balance of the Loan and all interest
accrued thereon due and payable on the Maturity Date.
2.3. Payments.
(a) Principal and interest shall be payable in lawful 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).
(b) The payments shall be made to the addresses and accounts
as set forth in Schedule 2.3.
2.4. 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.
2.5. Prepayment; No Revolver.
(a) 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.
(b) 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).
(c) Amounts paid or prepaid on account of the Loans may not
be reborrowed.
(d) 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.
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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 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:
(i) all Real Estate;
(ii) all Accounts;
(iii) all Inventory;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Instruments and Documents;
(vii) all Leases;
(viii) 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;
(ix) all Related Collateral;
(x) all accessions to and additions to,
substitutions for, replacements, products and Proceeds to any and all of the
foregoing; and
(xi) all patents, copyrights, intellectual
property, trademarks, and all other properties requiring additional steps to
perfect.
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The term "Collateral" shall also refer to any other property in which
Agent is granted a Lien to secure any of the Obligations 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).
3.2. 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.
3.3. 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
4.1. Loan. EVSF shall apply the proceeds of the Loan for (i) the
purchase of the 50% interest of ▇▇▇▇▇▇ in OnSite and repayment in full of the
outstanding balance owed by EVSF to Casuarina, a wholly-owned subsidiary of
▇▇▇▇▇▇, 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:
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5.1. 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.
5.2. 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.
5.3. 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.
5.4. 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 aggregate, result
in any
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material adverse effect on the prospects, results of operation, properties,
liabilities, assets, financial condition or business of Borrower.
5.5. 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.
5.6. 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.
5.7. 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.
5.8. 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.
5.9. 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:
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(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
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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
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;
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(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 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.
5.10. 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.
5.11. 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.
5.12. 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.
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5.13. Compliance with Environmental, Health and Safety Laws.
Except as set forth on Schedule 5.13:
(a) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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);
(f) 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;
(g) 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
(h) 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.
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5.14. Solvency. Borrower is, and after giving effect to the
transactions contemplated hereby will be, solvent.
5.15. 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.
5.16. 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.
5.17. No Event of Default. No Event of Default has occurred and No
Event of Default is continuing.
5.18. 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.
5.19. 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.
5.20. 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 pursuant hereto or in any of the Loan Documents contains
or will contain any untrue statement or a material fact or omits or will
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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.
5.21. 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.
5.22. Capitalization.
(a) 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 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
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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.
(b) 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.
(c) At Closing, all of the authorized capital of OnSite
shall be owned by the EVSF.
5.23. 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.
5.24. 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.
5.25. 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
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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
6.1. Time and Place of Closing. The closing of the Initial Loan will
take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ 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.
6.2. 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).
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(a) Notes. Borrower shall have duly executed and delivered
the Notes to Agent.
(b) Warrants. EVSF shall have duly executed and delivered the
Warrants and Warrant Agreements attached hereto as Exhibit C to Agent.
(c) Stock Purchase Agreement. EVSF shall have duly executed
and delivered the Stock Purchase Agreement of even date herewith.
(d) 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.
(e) Legal Opinions. On the Closing Date, Agent shall have
received from ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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.
(f) ▇▇▇▇▇▇ Transaction. Concurrent with the Closing
hereunder, EVSF shall purchase the 50% interest of ▇▇▇▇▇▇ in OnSite and repay
in full the outstanding balance owed by EVSF to Casuarina, a wholly-owned
subsidiary of ▇▇▇▇▇▇, 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).
(g) Certificates. Concurrent with the Closing hereunder,
Agent shall have received a certificate of a Responsible Officer of EVSF to the
effect that (i) the ▇▇▇▇▇▇ Transaction has been completed and (ii) each of the
conditions set forth in this Section 6 has been fully satisfied.
(h) 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.
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(i) Corporate/Company Documents; Secretary's Certificate. On
the Closing Date, each Borrower shall deliver to Agent:
(i) 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;
(ii) 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
(iii) 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.
(j) Insurance. Agent shall have received evidence of such
insurance coverage as Agent may reasonably request.
(k) 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.
(l) 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.
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(m) 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.
(n) 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 certified by proper corporate or company or governmental
authorities.
(o) Pledge Agreements. Agent shall have received executed
Stock Pledge Agreements and an executed Interest Pledge Agreement.
(p) 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:
7.1. 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.
7.2. Taxes and Other Charges; Accounts Payable.
(a) 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
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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 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).
(b) 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.
7.3. Conduct of Business, etc.
(a) 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.
(b) Maintenance of Properties. Borrower and its Subsidiaries:
(i) 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
(ii) 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.
7.4. 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 obtain
and keep in force any and all licenses, permits,
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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.
7.5. Information.
(a) 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.
(b) 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.
(c) 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.
(d) Immediate Notices. Borrower shall immediately provide
notice to Agent of:
(i) any Event of Default or any event which, with
notice or lapse of time or both, might become an Event of Default;
(ii) a change in the basis for valuing Inventory from
that shown in Section 5.11;
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(iii) 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;
(iv) any judgment, award, decree, order or
determination in an amount in excess of $100,000;
(v) the imposition or creation of any Lien against
any asset or property of Borrower except in favor of Agent or Permitted Liens;
(vi) 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;
(vii) any loss or destruction of Collateral or other
assets or property whether or not covered by insurance if the value thereof
exceeds $100,000;
(viii) 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;
(ix) any organized labor dispute to which
Borrower may become a party or any walkouts, strikes or other similar events
affecting Borrower.
(e) 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.
(f) 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.
(g) 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.
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7.6. 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.
7.7. 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.
7.8. 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).
7.9. 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.
7.10. 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 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the amount of no less than $5 million, with the
proceeds payable to Agent.
7.11. 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.
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7.12. 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.
(a) 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 promptly after submission thereof to a governmental authority.
(b) 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:
(i) 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;
(ii) 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
(iii)Adopt or incur any new obligation to contribute to any
Multiemployer Plan.
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SECTION 8
THE AGENT
8.1. Appointment.
Each Lender hereby designates and appoints ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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.
8.2. Nature of Duties.
(a) In General
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.
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(b) 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:
(i) 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);
(ii) 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;
(iii) To act as nominee for and on behalf of the Lenders in
and under this Agreement and the other Loan Documents;
(iv) To arrange for the means whereby the funds of the
Lenders are to be made available to Borrower;
(v) To distribute promptly to the Lenders, if required by the
terms of this Agreement, all written information, requests, notices, payments,
prepayments, documents and other items received from Borrower or other Person;
(vi) To amend, modify, or waive any provisions of this
Agreement or the 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;
(vii) To deliver to Borrower and other Persons, all requests,
demands, approvals, notices, and consents received from any of the Lenders;
(viii) 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;
(ix) 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
(x) To take such other actions as may be requested by the
Requisite Lenders.
8.3. 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
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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 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.
8.4. 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.
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8.5. 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 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.
8.6. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. in its individual capacity as a Lender or
one of the Requisite Lenders. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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.
8.7. Successor Agent.
(a) 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.
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(b) 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.
(c) Successor Agent.
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.
8.8. Collateral Matters.
(a) 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:
(i) upon termination of the Commitments and payment and
satisfaction of all Obligations;
(ii) 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);
(iii) 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
(iv) constituting property covered by Permitted Liens with
lien priority superior to those Liens in favor or for the benefit of the
Lenders.
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(b) 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 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.
(c) 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.
8.9. 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,
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such Lender shall notify the Agent thereof, and. promptly upon the Agent's
request therefor, shall deliver such Collateral to the Agent or in accordance
with the Agent's instructions.
8.10. 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.
8.11. Consents.
(a) 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.
(b) In the event the Agent requests the consent of a Lender and such
consent is denied, then ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. may, at
its option, require such Lender to assign its interest in the Loan to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. elects to require any
Lender to assign its interest to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Strategic Partners Fund, L.P no later than five (5) days following receipt of
such notice.
8.12. 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.
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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:
9.1. 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;
9.2. 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").
9.3. 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 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").
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9.4. 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.
9.5. 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.
9.6. 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).
9.7. 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).
9.8. 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.
9.9. Financial Covenants. Have or maintain,
(a) 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;
(b) at all times, positive working capital of at least $2 million
($2,000,000);
(c) at all times, positive net worth.
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SECTION 10
ADDITIONAL COVENANTS AND ASSURANCES
10.1. 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.
10.2. Possession Following Event of Default. Agent will at any time
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.
10.3. 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.
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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.
10.4. 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 ▇▇▇▇▇▇▇▇ to such debtors that their Accounts
and Leases shall be paid to Agent and/or supply such debtors with a copy of
this Agreement.
10.5. 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.
10.6. 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 ▇▇▇▇, ▇▇▇▇ 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.
10.7. 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.
10.8. 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
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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 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.
10.9. 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.
10.10. 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.
10.11. 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.
10.12. 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 shall not be deemed or construed to be an
authorization of or consent to any such sale, exchange or other disposition.
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10.13. 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
11.1. Events of Default. At the option of Agent, the occurrence of any of
the following shall constitute an Event of Default:
(a) 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;
(b) failure by a Borrower to pay any other Obligation within five (5)
days of notice by Agent that such other Obligation is due;
(c) 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;
(d) 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;
(e) 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, 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;
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(f) occurrence of any event of default as defined in any other
instrument evidencing or governing Indebtedness of a Borrower now or hereafter
outstanding;
(g) a Borrower's liquidation, termination, dissolution or cessation of
a substantial part of its current business;
(h) 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;
(i) 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;
(j) 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;
(k) 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;
(l) attachment of any Lien in excess of $100,000 (other than a
Permitted Lien) upon property of a Borrower not in favor of Agent without
Agent's prior written consent which Lien is not discharged in thirty (30) days;
(m) 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;
(n) reclamation or repossession of any asset(s) of a Borrower valued
in excess of $100,000, unless contracted in good faith; or
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(o) 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:
12.1. 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.
12.2. Exercise of Remedies. Agent may by notice to Borrower terminate 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").
12.3. 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
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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.
12.4. 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.
12.5. 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.
SECTION 13
INDEMNIFICATION, ETC.
13.1. 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
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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 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.
13.2. 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
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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.
13.3. Exculpation. In the absence of willful misconduct taken or omitted
in bad faith, or gross negligence, 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.
13.4. 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
14.1. 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
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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 Borrowers:
Environmental Safeguards, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to Agent and/or Lenders:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
and
Newpark Resources, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇
and
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▇▇▇▇▇ ▇. ▇▇▇▇▇
Stone Energy
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy (which will not constitute notice) to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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.
14.2. 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 any rights or remedies provided
by law.
14.3. 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.
14.4. 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
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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.
14.5. 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.
14.6. 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.
14.7. 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 perfect, or maintain the priority of, Agent's Liens, then upon Agent's
request, such Borrower shall deliver such Collateral to Agent.
14.8. 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.
14.9. 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
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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.
14.10. 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:
(a) extend the maturity of the principal of, or interest on,
any Note or of any of the other Obligations;
(b) 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;
(c) change the aggregate Commitments;
(d) change the date of payment of principal of, or interest
on, any Note or of any of the other Obligations;
(e) change the method of calculation utilized in connection
with the computation of interest;
(f) 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;
(g) modify this Section, Section 8.8 or Section 8.12;
(h) release or agree to subordinate any material portion of
any Collateral or Financing Document (except to the extent provided herein or
therein); or
(i) 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
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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.
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
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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]
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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/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and Chief Executive Officer
NATIONAL FUEL & ENERGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and Chief Executive Officer
ONSITE TECHNOLOGY, L.L.C.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:
Title: Managing Member
LENDERS: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: a General Partner
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STRATEGIC ASSOCIATES, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & COMPANY, LLC, its
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
NEWPARK RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman of the Board, President
and Chief Executive Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇