EXHIBIT 4.0
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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
XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
AND
NEWPARK RESOURCES, INC.
AND
XXXXX X. XXXXX,
AS LENDERS
AND
XXXXXX, XXXXXXX 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
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
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5.20. Full Disclosure......................................... 23
5.21. Foreign Person.......................................... 24
5.22. Capitalization.......................................... 24
5.23. No Indebtedness to Shareholders, Officers, Directors or
Affiliates............................................. 25
5.24. Foreign Corrupt Practices............................... 25
5.25. Labor Agreements and Actions............................ 25
SECTION 6 THE CLOSING; CONDITIONS PRECEDENT....................... 26
6.1. Time and Place of Closing............................... 26
6.2. Conditions on Closing Date.............................. 26
6.3. Additional Conditional Precedent........................ 29
SECTION 7 BORROWER'S AFFIRMATIVE COVENANTS........................ 29
7.1. Punctual Payment and Performance........................ 29
7.2. Taxes and Other Charges; Accounts Payable............... 29
(a) Taxes and Other Charges........................ 29
(b) Accounts Payable............................... 30
7.3. Conduct of Business, etc. .............................. 30
(a) Types of Business.............................. 30
(b) Maintenance of Properties...................... 30
7.4. Compliance with Applicable Laws......................... 30
7.5. Information............................................. 31
(a) Annual Audited Financial Statements............ 31
(b) Quarterly Financial Statements................. 31
(c) Additional Information......................... 31
(d) Immediate Notices.............................. 31
(e) Taxes.......................................... 32
(f) Inventory Listing.............................. 32
(g) Annual Budget.................................. 32
7.6. Insurance............................................... 33
7.7. Inventory and Equipment Insurance....................... 33
7.8. Corporate Existence; Compliance with Laws............... 33
7.9. Issuance of Additional Warrants......................... 33
7.10. Key Man Insurance....................................... 33
7.11. Visits and Inspections.................................. 33
7.12 ERISA Compliance........................................ 34
SECTION 8 THE AGENT............................................... 35
8.1. Appointment............................................. 35
8.2. Nature of Duties........................................ 35
(a) In General..................................... 35
(b) Express Authorization.......................... 36
8.3. Rights, Exculpation, Etc. .............................. 36
8.4. Reliance................................................ 37
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8.5. Indemnification......................................... 38
8.6. Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P., as
Agent Individually..................................... 38
8.7. Successor Agent......................................... 38
(a) Resignation.................................... 38
(b) Appointment of Successor....................... 39
(c) Successor Agent................................ 39
8.8. Collateral Matters...................................... 39
(a) Release of Collateral.......................... 39
(b) Confirmation of Authority, Execution of
Releases...................................... 40
(c) Absence of Duty................................ 40
8.9. Agency for Perfection................................... 40
8.10. Exercise of Remedies.................................... 41
8.11. Consents................................................ 41
8.12. Dissemination of Information............................ 41
SECTION 9 BORROWER'S NEGATIVE COVENANTS........................... 42
9.1. Disposition of Collateral............................... 42
9.2. Indebtedness............................................ 42
9.3. Liens................................................... 42
9.4. Dividends............................................... 43
9.5. Loans................................................... 43
9.6. Guarantees.............................................. 43
9.7. Merger.................................................. 43
9.8. Affiliates.............................................. 43
9.9. Financial Covenants..................................... 43
SECTION 10 ADDITIONAL COVENANTS AND ASSURANCES..................... 44
10.1. Additional Assurances.................................. 44
10.2. Possession Following Event of Default.................. 44
10.3. Additional Collateral Actions.......................... 44
10.4. Verification of Accounts and Leases.................... 45
10.5. Inspection of Collateral............................... 45
10.6. Power of Attorney...................................... 45
10.7. Insurance Assignment................................... 45
10.8. Payments by Lender..................................... 45
10.9. Access to Records...................................... 46
10.10. License to Use Premises................................ 46
10.11. Instruments Evidencing Accounts........................ 46
10.12. Continuing Security Interest........................... 46
10.13. No Lender Liability.................................... 47
SECTION 11 EVENTS OF DEFAULT...................................... 47
11.1. Events of Default...................................... 47
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SECTION 12 AGENT'S RIGHTS AND REMEDIES UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT...................................... 49
12.1. Remedies............................................... 49
12.2. Exercise of Remedies................................... 49
12.3. Disposition of Collateral.............................. 49
12.4. Cumulative Remedies.................................... 50
12.5. Waivers................................................ 50
SECTION 13 INDEMNIFICATION, ETC................................... 50
13.1. Environmental Indemnity................................ 50
13.2. GENERAL INDEMNITY...................................... 50
13.3. Exculpation............................................ 52
13.4. Collateral Secures Indemnification..................... 52
SECTION 14 MISCELLANEOUS PROVISIONS............................... 52
14.1. Notices................................................ 52
14.2. No Waiver.............................................. 54
14.3. Assignment............................................. 54
14.4. Headings............................................... 54
14.5. Term................................................... 55
14.6. Waiver of Remedies..................................... 55
14.7. Further Assurances..................................... 55
14.8. Counterparts........................................... 55
14.9. Fees and Expenses...................................... 55
14.10. Consent of all Lenders................................. 56
14.11. Usury Laws............................................. 56
SECTION 15 GOVERNING LAW; JURISDICTION............................ 57
15.1. Governing Law.......................................... 57
15.2. SUBMISSION TO JURISDICTION............................. 57
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of December 17,
1997 is entered into by and among XXXXXX, XXXXXXX 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
XXXXX X. XXXXX, an individual whose address is c/o Stone Energy, 000 Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000 (each a "Lender" and collectively, the
"Lenders") and XXXXXX, XXXXXXX 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 Xxxxxx Drilling Investment Company ("Xxxxxx") in
OnSite and repay in full the outstanding balance owed by EVSF to Casuarina, Ltd.
("Casuarina"), a Bermuda corporation and wholly-owned subsidiary of Xxxxxx
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 "Xxxxxx
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
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1.1. Definitions.
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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 Xxxxxx, Xxxxxxx 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 Xxxxxx'x 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 Xxxxxx.
"Change of Control" means any event or series of events by which (i) any
Person or group obtains a majority (by voting or otherwise) of the securities of
EVSF ordinarily having the right to
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vote in the election of directors; (ii) during any two year period, individuals
who at the beginning of any such two year period constituted the Board of
Directors of EVSF (together with any new directors whose election by such Board
or whose nomination for election by the stockholders of EVSF was approved by a
vote of the majority of the directors then still in office who were either
directors at the beginning of such period or whose election, recommendation, or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of EVSF then in office; (iii)
the merger, consolidation, reorganization, recapitalization, dissolution or
liquidation of EVSF if as a result the current stockholders no longer own more
than 50% of the voting securities of EVSF, (iv) any sale, lease, exchange or
other transfer of all, or substantially all, of the assets of EVSF; or (v) the
adoption of a plan leading to the liquidation or dissolution of EVSF.
"Closing" shall each have the respective meaning set forth in Section 6.1.
"Closing Date" means December 17, 1997, provided that Borrower has
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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.
"Dollars" and "$" means lawful money of the United States. Any
reference to
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payment means payment in immediately available Dollar funds.
"Employee Benefit Plan" has the meaning given in Section 3(3) of
ERISA.
"Environmental Complaint" shall mean any citation, complaint, demand,
order, or notice by any person, association, entity, or governmental authority
alleging, asserting or claiming that Borrower or any of its properties: (i) is
in material violation of applicable Environmental Laws, (ii) does not comply in
all material respects with applicable Environmental Laws, or (iii) does not have
or maintain all material permits, licenses, and/or approvals required under
applicable Environmental Laws.
"Environmental Laws" shall mean any one or more of the following: (i)
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42
U.S.C. (S) 9601 et seq. ("CERCLA"), (ii) the Resource Conservation and Recovery
-- ---
Act, as amended by the Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.
(S) 6901 et seq. ("RCRA"), (iii) the Clean Air Act, 42 U.S.C. (S) 7401 et seq.,
-- --- -- ---
(iv) the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq., (v)
-- ---
the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (vi) the Federal
-- ---
Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f to 300j-11, (vii) the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. (S) 1101 et seq.,
-- ---
(viii) the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq.,
-- ---
(ix) applicable laws of the states of Nevada, Texas, Oklahoma, Utah and Wyoming,
and (x) all other foreign, federal, state, tribal and local laws (whether common
or statutory), rules, regulations, consent agreements, compliance schedules, and
orders directly and/or indirectly relating to public health and safety, air
pollution, water pollution, noise control, wetlands, oceans, waterways, and/or
the presence, use, generation, manufacture, transportation, processing,
treatment, handling, discharge, release, disposal, or recovery of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
materials and/or underground storage tanks, as each of the foregoing laws,
rules, regulations and orders may be amended, supplemented, and/or reauthorized
from time to time.
"Equipment" means all "equipment," as such term is defined in (S)9-
109(2) of the UCC, now or hereafter owned by a Borrower, and also means and
includes all personal property constituting machinery, equipment, plant,
furnishings, fixtures, and other fixed assets now owned or hereafter acquired by
a Borrower, including (without limitation) all items of machinery and equipment
of any kind, nature and description, as well as vessels, trucks and vehicles of
every description, trailers, handling and delivery equipment and office
furniture, and all additions to, substitutions for, replacements of or
accessions to any of the foregoing items and all attachments, components, parts
(including spare parts) and accessories, whether installed thereon or affixed
thereto, and all fuel for any thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder. Section references to ERISA and its regulations are
to those provisions as in effect at the date of this Agreement, together with
any subsequent provisions of ERISA that amend, supplement, or
5
replace the provisions to which reference is made.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) that, together with a Borrower, would be treated as a single employer
under Section 4001(b) of ERISA or that would be deemed to be a member of the
same "controlled group" within the meaning of Section 414(b), (c), (m), and (o)
of the Code (provided, however, that when the subject of the provision is a
Multiemployer Plan only subsections (b) and (c) of Section 414 shall be taken
into account).
"Event of Default" means any event specified in Section 11.
"Fully Registered Company Common Stock" shall mean the unrestricted
common stock, par value $.001 per share, of EVSF that has been registered with
the SEC under the Securities Act and is freely transferable without restriction.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date hereof, consistently applied.
"General Intangibles" means all "general intangibles," as such term is
defined in (S)9-106 of the UCC, and all intangible personal property not
included in Accounts, or in Instruments and Documents, now or hereafter owned or
acquired by a Borrower, and also means and includes all right, title and
interest of a Borrower now or hereafter owned or acquired in intellectual
property, patents, patent applications, goodwill, trademarks, trademark
applications, trade names, service marks, copyrights, permits, licenses,
federal, state, or local tax refunds, claims under insurance policies (whether
or not Proceeds), other rights (if any) to payment, rights of set off, chooses
in action, rights under judgments, computer programs and software, customer
lists, and all contracts and agreements to, or of which a Borrower is a party or
beneficiary, and all leasehold interests of a Borrower in real estate to the
extent considered personal property under applicable law.
"Hazardous Materials" shall mean any one or more of the following
substances, wastes and materials:
(a) Any substance, waste or material defined as a "hazardous
substance," "hazardous material," "hazardous waste," "pollutant,"
"contaminant," "toxic material," or "toxic substance," in any of the
applicable Environmental Laws, or in the standards, criteria, rules and/or
regulations promulgated pursuant to any of said Environmental Laws; and
(b) Any substance, waste or material, the presence of which
requires investigation or remediation under any Environmental Laws.
"Interest Pledge Agreement" means the Limited Liability Company
Interest Assignment and Agreement by and among EVSF, NFE and the Agent, dated as
of December 17, 1997.
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"Instruments" and "Documents" means all "instruments," "documents,"
"deposit accounts," and "chattel paper," as defined in (S)9-105 of the UCC, all
securities, and includes (without limitation) all warehouse receipts and other
documents of title, policies and certificates of insurance, checking, savings,
and other bank accounts, certificates of deposit, checks, notes and drafts, now
or hereafter acquired, to the extent not included in Accounts.
"Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished under contracts
of service, finished goods, work in process, raw materials, materials used or
consumed by a Borrower, parts, supplies, all wrapping, packaging, advertising,
labeling, and shipping materials, devices, names and marks, all contracts,
rights and documents relating to any of the foregoing, whether any of the
foregoing be now existing or hereafter arising, wherever located, now owned or
hereafter acquired by Borrower.
"Knowledge" or derivations thereof shall mean the knowledge of the
officers of a Borrower and each Subsidiary, and, with respect to ERISA, each
person who conducts human resource and employee benefits management functions
for or any Subsidiary, whether or not an officer of a Borrower or such
Subsidiary.
"Leases" means all leases from time to time outstanding between a
Borrower and other Persons for the lease of personal property, including without
limitation all computer hardware, peripheral equipment and software, all of
which are pledged to Lender to secure payment of the Loans and other Obligations
hereunder.
"Lien" means any mortgage, pledge, assignment, lien, charge,
encumbrance or security interest of any kind whatsoever, or the interest of a
vendor or lessor under a conditional sale, title retention or capital lease
Agreement.
"Loan" means a term loan made to Borrowers pursuant to Section 2.1.
"Loans" means the term loans, collectively, made to Borrowers pursuant
to Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Collateral
Disclosure List, the Stock Pledge Agreements, the Interest Pledge Agreement, the
Patent Security Agreement and the Trademark Security Agreement and any and all
other agreements, instruments and documents now existing or hereafter entered
into, relating to, evidencing or securing the Obligations.
"Maturity Date" means December 17, 2002.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA
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"Net Earnings" means net income of a Person from continuing operations
(or deficit) excluding all extraordinary and nonrecurring items, as determined
in accordance with GAAP.
"Note" means the term note evidencing the Loan, in the form of the
term note attached hereto as Exhibit A, as amended or modified, from time to
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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.
"Xxxxxx" means Xxxxxx Drilling Company, an Oklahoma corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA or other applicable
federal law.
"Permits" shall mean all governmental licenses, permits, certificates,
orders, concessions, grants, franchises, approvals and authorizations necessary
for the conduct of the business of a Borrower.
"Permitted Indebtedness" has the meaning given to such term in Section
9.2.
"Permitted Liens" has the meaning given such term in Section 9.3.
"Person" means any individual, partnership, firm, association,
business enterprise, trust, estate, company, joint venture, governmental
authority, corporation or other entity.
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"Plan" means any employee plan subject to Title IV of ERISA maintained
for employees of Borrower, any subsidiary of Borrower or any other trade or
business under common control with Borrower within the meaning of (S)414(c) of
the Internal Revenue Code or the regulations thereunder.
"Proceeds" has the meaning given such term under the UCC and, in any
event, includes (but is not limited to) (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable from time to time with
respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any Person acting under
color of governmental authority), or (c) whatever is received upon any
collection, exchange, sale, lease or other disposition of any of the Collateral
and any property into which any of the Collateral is converted, whether cash or
non-cash proceeds, and (d) any and all other products of, or any rents, profits
or other amounts from time to time paid or payable under, or in connection with,
any of the Collateral.
"Preferred Stock" means the Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock, par value $.001 per share.
"Prohibited Transaction" shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Qualified Plan" means any Employee Benefit Plan that meets, purports
to meet, or is intended to meet the requirements of Section 401(a) of the Code.
"Real Estate" means all real property now or hereafter owned, leased
or acquired by any Person and all rights thereto, including all appurtenances,
fixtures and ascensions thereto, and all substitutions on replacements
therefore, now owner or hereafter acquired by any Person or to which any Person
now has or hereafter acquires any rights or interests.
"Related Collateral" means all goodwill; cash; deposit accounts;
claims under insurance policies (whether or not proceeds of other Collateral);
rights of set off; rights under judgments; tort claims and chooses in action;
computer programs and software; books and records (including without limitation
all electronically recorded data); contract rights; and all contracts and
agreements to or of which it is a party or beneficiary, whether any of the
foregoing be now existing or hereafter arising, now or hereafter received by or
belonging to any Person.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the indoor
or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor
9
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 Xxxxxx, Xxxxxxx Strategic
Partners Fund, L.P., Strategic Associates, L.P., Newpark Resources, Inc. and
Xxxxx X. Xxxxx, as the purchasers.
"Subsidiaries" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof voting power to elect a majority of the board of directors or other
persons performing similar functions of such corporation, partnership, limited
liability company or entity is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such person, and shall include (without
limitation) OnSite, OnSite Colombia, Environmental Technology Services, Inc., a
Cayman Island corporation and Environmental Leasing Company, a Cayman Island
Corporation.
10
"Termination Event" shall mean (i) a Reportable Event; (ii) the
withdrawal of a Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a "substantial employer," as such term is
defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by
Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination
of a Multiple Employer Plan; (iii) submission to a governmental authority of a
request for a waiver of minimum funding standards required by ERISA or the Code,
with respect to any Employee Benefit Plan; (iv) the existence or likely creation
of a lien under ERISA or the Code on Borrower or any ERISA Affiliate on account
of any Employee Benefit Plan; (v) the disclosure to affected parties of a notice
of intent to terminate an Employee Benefit Plan under Section 4041 of ERISA
other than in a "standard termination" within the meaning of Section 4041 of
ERISA; (vi) the institution of proceedings by the PBGC to terminate an Employee
Benefit Plan under Section 4042 of ERISA; (vii) any other event or condition
that might reasonably constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Employee
Benefit Plan; (viii) the commencement or, to the knowledge of Borrower, likely
commencement of a proceeding against Borrower or any ERISA Affiliate under
Section 515 of ERISA to collect a delinquent contribution to a Multiemployer
Plan; or (ix) any other event or condition reasonably indicating that Borrower
or any ERISA Affiliate will or may incur any material liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from an Employee Benefit Plan or Multiemployer Plan under Section
4062, 4063, 4064, 4201, or 4204 of ERISA.
"Trademark Security Agreement" means the Trademark Security Agreement,
dated as of December 17, 1997 by and between the Borrowers and the Agent.
"UCC" means the Uniform Commercial Code, as adopted in the states of
Nevada, Texas, Oklahoma, Utah and Wyoming, and, unless the context otherwise
requires, the following terms shall have the same meanings given therein:
"account," "account debtor," "chattel paper" and "good faith."
"Unfunded Current Liability" of any Employee Benefit Plan shall mean
the amount, if any, by which the present value of the accrued benefits under the
plan as of the close of its most recent plan year exceeds the value, determined
in accordance with Section 412 of the Code, of the plan's assets.
"U.S. Foreign Corrupt Practices Act" means the U.S. Foreign Corrupt
Practices Act of 1977, Pub. L. No. 95-213, Sections 101-104, as amended, and any
other U.S. law, regulation, order, decree or directive having the force of law
and relating to bribes, kick-backs or similar business practices.
"Withdrawal Liability" shall have the meaning given such term under
Part 1 of Subtitle E of Title VI of ERISA.
All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Borrowers, Agent
and Lenders pursuant to the
11
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
--------
1.2. Commitment for the Loan.
----------------------------
(1) Subject to and upon the provisions of this Agreement, each Lender
severally agrees to make an initial loan (the "Initial Loan"; and collectively
with the Supplemental Loan (as defined below), the "Loans") to the Borrowers on
the Closing Date in the principal amount set forth below opposite such Lender's
name (herein called such Lender's "Initial Committed Amount"). The
proportionate share set forth below opposite each Lender's name is herein called
such Lender's "Pro Rata Share"
--------------------------------------------------------------------------------
Lender Initial Committed Amount Pro Rata Share
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Strategic
Partners Fund, L.P. $2,740,982.14 45.683%
--------------------------------------------------------------------------------
Strategic Associates, L.P. $151,875 2.531%
--------------------------------------------------------------------------------
Newpark Resources, Inc. $3,000,000 50%
--------------------------------------------------------------------------------
Xxxxx X. Xxxxx $107,142.86 1.786%
--------------------------------------------------------------------------------
Initial Committed Amount $6,000,000 100%
--------------------------------------------------------------------------------
The obligation of each Lender to make the Initial Loan is several and
is limited to its Committed Amount, and such obligation of each Lender is herein
called its "Loan Commitment". The Loan Commitment of each of the Lenders are
herein collectively referred to as the "Loan Commitments". The Agent shall not
be responsible for the Commitment of any Lender; and similarly, none of the
Lenders shall be responsible for the Commitment of any of the other Lenders; the
failure, however, of any Lender to perform its Commitment shall not relieve any
of the other Lenders from the performance of their respective Commitments.
(2) The Loan shall be evidenced by and payable in accordance with a
term note (the "Note" and collectively, the
12
"Notes") in the form of Exhibit A hereto and shall be in the principal amount
---------
of such Lender's Committed Amount.
(3) Subject to and upon the provisions of this Agreement, each Lender
severally agrees to make a supplemental loan (a "Supplemental Loan") to the
Borrowers on sixty (60) days' prior written notice from the Borrowers to each of
the Lenders, with a copy to the Agent, in the principal amount of Five Million
Dollars ($5,000,000). Borrowers hereby acknowledge and agree that they are
prohibited from obtaining the Supplemental Loan in the event that they are in
default on the Initial Loan. The obligation of each Lender to make a
Supplemental Loan is several and shall be determined by agreement among the
Lenders, and if no agreement can be reached among Lenders, then the obligation
of each Lender to make a Supplemental Loan shall be consistent with its
respective Pro Rata Share on the Initial Loan. The Agent shall not be
responsible for a Commitment of any Lender; and similarly, none of the Lenders
shall be responsible for the Commitment of any of the other Lenders; the
failure, however, of any Lender to perform its Commitment under the Supplemental
Loan shall not relieve any of the other Lenders from the performance of their
respective Commitments. The terms of the Supplemental Loan with respect to
Maturity Date, interest, payments, late charges, Events of Default, etc. shall
be the same for the Supplemental Loan as it is for the Initial Loan.
1.3. Interest on the Loan.
--------------------------
(1) Each Loan shall bear interest calculated on the basis of actual
days elapsed and a 360-day year, at the prime rate, as reported in the Wall
Street Journal five (5) Business Days prior to the end of each calendar month or
if not reported on such date then the closest Business Day thereto, plus one and
five-tenths percent (1.5%). Interest shall accrue daily on the aggregate
outstanding principal balance of the Loan for the period commencing on the date
the Loan is made until the Loan is paid in full.
(2) If not earlier paid, or if not accelerated for payment, each Loan
shall be payable to each Lender (for its Pro Rata Share), with notice of such
payment to the Agent, quarterly in arrears in substantially equal periodic
installments consisting of principal plus interest accrued at the rate set forth
in the Note, on the fifth (5th) day of each March, June, September and December
(each an "Interest Payment Date"), commencing on March 5, 1998, with the entire
remaining principal balance of the Loan and all interest accrued thereon due and
payable on the Maturity Date.
1.4. Payments.
-------------
(1) Principal and interest shall be payable in lawful
13
money of the United States of America without set-off, deduction or counterclaim
to each of the Lenders (for its Pro Rata Share) at each Lender's principal
business office not later than 10:00 a.m. local time for each Lender on the date
on which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day).
(2) The payments shall be made to the addresses and accounts as set
forth in Schedule 2.3.
1.5. Late Charges. Any principal or interest payment due under any
-----------------
Note not paid within five (5) days from the date such payment is due, by
acceleration, conversion or otherwise, shall, to the extent permitted by law, be
subject to an additional interest charge equal to five percent (5%) above the
then prevailing interest rate under the Note. The charging or collection of any
late charge shall not be deemed a waiver of any of Agent's and/or Lenders'
rights arising thereby or hereunder, including Agent's right to declare an
"Event of Default" hereunder.
1.6. Prepayment; No Revolver.
---------------------------
(1) Borrowers may prepay all of the Loans with accrued interest
thereon, or any part of the Loans with accrued interest thereon in increments of
One Million Dollars ($1,000,000), at any time (except as provided in Section
2.5(d)) by payment in cash of the Pro Rata Share to each of the Lenders, with a
notice of such payment to the Agent, without premium or penalty. Such payment
shall be made by 12:00 noon local time of each Lender on any Business Day.
(2) Borrowers shall give Agent notice of prepayment hereunder not less
than thirty (30) days prior to the date of the prepayment. Such notice shall
specify the Loans to be prepaid and the amount of the Loans to be prepaid and
the date of prepayment (which shall be a Business Day).
(3) Amounts paid or prepaid on account of the Loans may not be
reborrowed.
(4) Borrowers hereby agree that they shall not make any prepayments on
the Loans unless and until EVSF shall have redeemed any and all of the shares of
Series C Preferred Stock as may be outstanding from time to time.
2.6 Additional Warrant if No Prepayment by December 12, 2001. In the
-------------------------------------------------------------
event that the Borrowers have not paid in full all Obligations, including
without limitation all unpaid principal and accrued interest thereon by December
17, 2001, EVSF shall
14
authorize, issue and deliver an additional warrant for 188,571 shares of common
stock, substantially in the form of Exhibit B.
SECTION 3
COLLATERAL
----------
3.1. Grant of Security Interest. As security for the prompt
--------------------------------
performance, observance and payment in full of all Obligations, each Borrower
hereby grants to Agent for the ratable benefit of the Lenders and for the
benefit of the Agent a continuing first priority security interest in and lien
on, and assigns, transfers, sets over and pledges to Agent all property of such
Borrower whether now owned by such Borrower or hereafter acquired or existing,
and wherever located (collectively, the "Collateral"), including without
limitation:
(1) all Real Estate;
(2) all Accounts;
(3) all Inventory;
(4) all Equipment;
(5) all General Intangibles;
(6) all Instruments and Documents;
(7) all Leases;
(8) all stock of NFE owned by EVSF, all interests in OnSite held by NFE
and/or EVSF and all stock in OnSite Colombia, OnSite Venezuela, Environmental
Leasing Company and Environmental Technology Services, Inc. held by OnSite, NFE
and/or EVSF;
(9) all Related Collateral;
(10) all accessions to and additions to, substitutions for, replacements,
products and Proceeds to any and all of the foregoing; and
(11) all patents, copyrights, intellectual property, trademarks, and all
other properties requiring additional steps to perfect.
The term "Collateral" shall also refer to any other property in which Agent
is granted a Lien to secure any of the Obligations
15
pursuant to an Agreement supplemental hereto or otherwise (whether or not such
Agreement makes reference to this Agreement or the Obligations of a Borrower
hereunder).
1.7. Obligations Secured. The security interest granted by each
------------------------
Borrower and created hereby secures the payment and performance of all of the
Obligations under this Agreement and the other Loan Documents, however
evidenced, whether now existing or hereafter arising, direct or indirect,
absolute or contingent, including all costs and reasonable attorneys' fees
incurred by Agent in enforcing this Agreement and the other Loan Documents
and/or collecting or attempting to collect on the Notes. The Obligations of each
Borrower under the Notes and all other Obligations of Borrowers to Agent and/or
Lenders are also secured by the security interest created pursuant to the Patent
Security Agreement, the Trademark Security Agreement, Stock Pledge Agreements
with respect to NFE and Interest Pledge Agreement with respect to OnSite.
1.8. Collateral Disclosure List. On or prior to the Closing Date, the
-------------------------------
Borrowers shall deliver to the Agent a list (the "Collateral Disclosure List")
which shall contain such information with respect to each Borrower's business
and real and personal property as the Agent may require and shall be certified
by a Responsible Officer of each of the Borrowers, all in the form provided to
the Borrowers by the Agent. Promptly after demand by the Agent, the Borrowers,
as appropriate, shall furnish to the Agent an update of the information
contained in the Collateral Disclosure List at any time and from time to time as
may be requested by the Agent.
SECTION 4
APPLICATION OF PROCEEDS
-----------------------
1.9. Loan. EVSF shall apply the proceeds of the Loan for (i) the
---------
purchase of the 50% interest of Xxxxxx in OnSite and repayment in full of the
outstanding balance owed by EVSF to Casuarina, a wholly-owned subsidiary of
Xxxxxx, pursuant to a loan agreement and term note dated as of December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of EVSF's common stock issued pursuant to that loan agreement), (ii) payment of
fees and expenses, and (iii) working capital.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF BORROWERS
-------------------------------------------
Each Borrower represents and warrants to Lender on the issuance of the
Initial Loan and of the Supplemental Loan that:
16
1.10. Organization; Charter and Bylaws. Borrower is validly existing
--------------------------------------
and in good standing under the laws of its state of incorporation or
organization and has the requisite power to own, lease and operate its
properties and to carry on its business as now being conducted. Borrower is duly
qualified to do business and is in good standing in each jurisdiction in which
the character or location of the properties owned or leased by Borrower or the
nature of the business conducted by Borrower makes such qualification necessary
or advisable, except where the failure to do so would not be material to the
Company.
1.11. Power and Authority. Borrower has the requisite power to
-------------------------
execute, deliver and perform the Loan Documents, and to consummate the
transactions contemplated thereby. The execution and delivery of the Loan
Documents by Borrower and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate or company action
on the part of Borrower. Each of the Loan Documents has been duly executed and
delivered by Borrower and constitutes a legal, valid and binding obligation of
Borrower and is enforceable against Borrower in accordance with its terms except
(i) that such enforcement may be subject to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights and (ii) that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought. No consent or approval of any Person
(including, without limitation, any stockholder or member approval), no consent
or approval of any landlord or mortgagee and no waiver of any Lien is required
in connection with execution, delivery or performance by Borrower, or the
validity, enforcement or priority, of the Loan Documents or any Lien created and
granted thereunder.
1.12. No Violation. The execution and delivery of the Loan Documents
------------------
by Borrower do not, and the performance of the Loan Documents will not, (i)
conflict with or result in a breach of the certificate or articles of
incorporation or bylaws or other formation documents of Borrower, or (ii)
violate, or conflict with, or constitute a default under, or (except for Liens
created pursuant to the Loan Documents) result in the creation or imposition of
any security interest, mortgage, pledge, lien, encumbrance, claim, restriction,
or other charge upon any property or assets of Borrower under any mortgage,
indenture or agreement to which Borrower is a party or by which the property or
assets of Borrower is bound, or (iii) violate any Requirement of Law, the effect
of which violation would be material and adverse to the business, assets or
financial condition of Borrower, or (iv) violate any permit, concession, grant,
franchise, license, or other governmental authorization or approval necessary
for the appropriate conduct of the business of Borrower, the effect of which
violation would be material and adverse to the business, assets or financial
condition of Borrower.
1.13. Litigation. Except as provided in Schedule 5.4 hereto, there are
----------------
no actions, suits, proceedings or governmental investigations or inquiries
pending, or to the knowledge of Borrower threatened against Borrower or any of
its Affiliates or their respective properties, assets, operations or businesses
(i) that might prevent or interfere with the consummation of the transactions
contemplated hereunder or (ii) that might, singly or in the
17
aggregate, result in any material adverse effect on the prospects, results of
operation, properties, liabilities, assets, financial condition or business of
Borrower.
1.14. Financial Statements. The financial statements of Borrower
--------------------------
heretofore delivered to Agent by Borrower (the "Financial Statements") fairly
represent the financial condition of Borrower as of the date thereof and for the
periods reflected therein. Since the date of such Financial Statements, there
has been no material adverse change in the assets, business, financial condition
or prospects of Borrower.
1.15. Compliance with Licenses and Laws. Except as disclosed in
---------------------------------------
writing to Agent by Borrower, Borrower possesses all Permits, and Borrower is in
compliance with the Permits and all Requirements of Law except where the failure
to possess any Permits or the failure to be in compliance with the Permits or
Requirements of Law would not, singly or in the aggregate, have a material
adverse effect on the business, assets, financial condition or operations of
Borrower. There are no proceedings pending or, to the knowledge of Borrower,
threatened that may result in the revocation, cancellation, or suspension or any
materially adverse modification of any of the aforementioned Permits. Borrower
has not received any written notice to the effect that, or otherwise been
advised that, it is not in compliance with any Permit or Requirement of Law.
Except as set forth in Schedule 5.6 hereto, no consent, approval or
------------
authorization of, or declaration, filing or registration with, any United States
federal, state, or local governmental or regulatory authority, or any foreign
government or governmental authority, is required to be made or obtained by
Borrower in connection with the execution, delivery and performance of any Loan
Document or the consummation by Borrower of the transactions contemplated
thereunder.
1.16. Investments and Guaranties. Except as listed in Schedule 5.7 at
--------------------------------
the date of this Agreement, Borrower has not made investments in, advances to or
guaranties of the obligations of any Person not otherwise disclosed on the
Financial Statements.
1.17. Title to Properties; Liens. Borrower owns all of its assets and
--------------------------------
properties and such assets and properties together with any other assets and
properties acquired since such date, including, without limitation, the
Collateral, are subject to no Liens except Permitted Liens. The Liens granted to
Lender under the Loan Documents constitute valid perfected first Liens on the
Collateral, subject to no prior or equal Lien, except for Permitted Liens.
1.18. ERISA. (a) Schedule 5.9(a) contains a complete and accurate
----------- ---------------
list of all Company Plans and Company Benefit Arrangements. Schedule 5.9(a)
---------------
specifically identifies all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements:
18
(i) true, correct, and complete copies of all of the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to the Lenders: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including, but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or 5500
C/R and any financial statements attached thereto for the prior three years; (C)
the most recent Internal Revenue Service (the "IRS") determination letter and
---
the latest IRS determination letter that covered the qualification of the entire
Company Plan (if different), and copies of the materials submitted by the
Company to obtain those letters; (D) the most recent summary plan descriptions;
(E) the most recent written descriptions of all non-written agreements relating
to any such plan or arrangement (if such documents or writings exist), (F) all
reports submitted within the four years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all notices that were given to the Company
within the three years preceding the date of this Agreement by the IRS,
Department of Labor, or any other governmental agency or entity with respect to
any plan or arrangement; and (H) employee manuals or handbooks containing
personnel or employee relations policies;
(ii) Neither the Company nor any Subsidiary has ever maintained,
contributed to, or been obligated to contribute to any Qualified Plan.
(iii) the Company and the Subsidiaries have never sponsored or
maintained, had any obligation to sponsor or maintain, or had any liability
(whether actual or contingent, with respect to any of its assets or otherwise)
with respect to any Employee Benefit Plan subject to Section 302 of ERISA or
Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Company Plan and each Company Benefit Arrangement has been
operated with its constituent documents and with all applicable provisions of
the Code, ERISA and other laws, including federal and state securities laws;
(v) There are no pending claims or lawsuits by, against, or relating
to any Employee Benefit Plans or Benefit Arrangements that are Company Plans or
Company Benefit Arrangements that would, if successful, result in liability of
the Company or any Stockholder, and no claims or lawsuits have been asserted,
instituted or to the Company's Knowledge threatened by, against, or relating to
any Company Plan or Company Benefit Arrangement, against the assets of any trust
or other funding arrangement under any such Company Plan, by or against the
Company or the Subsidiaries with respect to any Company Plan or Company Benefit
Arrangement, or by or against the plan administrator or any fiduciary of any
Company Plan or Company Benefit Arrangement, and the Company and the
Subsidiaries do not have knowledge of any fact that could form the basis for any
such claim or lawsuit. The Company Plans and Company Benefit Arrangements are
not presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, Department of
19
Labor, or any other governmental agency or entity;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred no non-
exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for the Company or any Stockholder, officer, director,
or employee of the Company;
(viii) all reporting, disclosure, and notice requirements of ERISA
and the Code have been fully and completely satisfied with respect to each
Company Plan and each Company Benefit Arrangement;
(ix) all amendments and actions required to bring the Company Benefit
Plans into conformity with the applicable provisions of ERISA, the Code, and
other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on Schedule 5.9(b)(ix);
-------------------
(x) payment has been made of all amounts that the Company and each
Subsidiary is required to pay as contributions to the Company Benefit Plans as
of the last day of the most recent fiscal year of each of the plans ended before
the date of this Agreement; all benefits accrued under any unfunded Company Plan
or Company Benefit Arrangement will have been paid, accrued, or otherwise
adequately reserved in accordance with GAAP as of the Balance Sheet Date; and
all monies withheld from employee paychecks with respect to Company Plans have
been transferred to the appropriate plan within 30 days of such withholding;
(xi) except as disclosed on Schedule 5.9(b)(xi), the Company and the
-------------------
Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust,
reserve, premium stabilization, or similar account, nor do they provide benefits
through a voluntary employee beneficiary association as defined in Section
501(c)(9);
(xii) no statement, either written or oral, has been made by the
Company or the Subsidiaries to any Person with regard to any Company Plan or
Company Benefit Arrangement that was not in accordance with the Company Plan or
Company Benefit Arrangement and that could have an adverse economic consequence
to the Company or the Subsidiaries;
(xiii) the Company and the Subsidiaries have no liability (whether
actual, contingent, with respect to any of its assets or otherwise) with respect
to any Employee Benefit
20
Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with
respect to any Employee Benefit Plan sponsored or maintained (or which has been
or should have been sponsored or maintained) by any ERISA Affiliate;
(xiv) all group health plans of the Company and its ERISA Affiliates
have been operated in material compliance with the requirements of Sections
4980B (and its predecessor) and 5000 of the Code; and
(xv) no employee or former employee of the Company or beneficiary of
any such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits, including, without
limitation, death or medical benefits (whether or not insured) beyond retirement
or other termination of employment as described in Statement of Financial
Accounting Standards No. 106, other than (i) death or retirement benefits under
a Qualified Plan, (ii) deferred compensation benefits accrued as liabilities on
the Closing Statement or (iii) continuation coverage mandated under Section
4980B of the Code or other applicable law.
(c) Schedule 5.9(c) hereto sets forth an accurate list, as of the date
---------------
hereof, of all officers, directors, and key employees of the Company and lists
all employment agreements with such officers, directors, and key employees and
the rate of compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such Person as of (a)
December 31, 1996 and (b) the date hereof.
(d) Except as set forth on Schedule 5.9(d), the Company has not
---------------
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement.
1.19. Chief Executive Office. Borrower's chief executive office and
----------------------------
the office where it keeps its records concerning its Accounts, General
Intangibles and other assets is that shown in Section 14.1 of this Agreement.
Except as set forth in Schedule 5.10 it has no other place of business where
-------------
such records are located.
1.20. Inventory. Borrower's Inventory is (and has been since the date
---------------
of this Agreement) valued (i) for annual financial reporting purposes, at the
lower of cost or market, using the specific identification method consistent
with the basis applied for prior financial periods by Borrower.
1.21. Indebtedness. Borrower has no Indebtedness of any type except as
------------------
set forth on Schedule 5.12 and Indebtedness incurred with Lenders pursuant to
-------------
this Agreement and other than up to $500,000 incurred in the ordinary course of
business.
1.22. Compliance with Environmental, Health and Safety Laws. Except as
set
21
forth on Schedule 5.13:
-------------
(1) To the Company's best Knowledge, the operations of each of
Borrower and its Subsidiaries are in compliance with all applicable
Environmental Laws and all Permits issued pursuant to Environmental Laws or
otherwise;
(2) Each of Borrower and its Subsidiaries has obtained all Permits
required under all applicable Environmental Laws necessary to operate its
business to the Company's best Knowledge;
(3) None of Borrower or any of its Subsidiaries is the subject of any
outstanding written order, agreement or arrangement with any governmental
authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;
(4) None of Borrower or any of its Subsidiaries has received any
written communication alleging either or both that Borrower or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(5) None of Borrower or any of its Subsidiaries has to the Company's
best Knowledge any current contingent liability in connection with any Release
of any Hazardous Materials into the indoor or outdoor environment (whether on-
site or off-site);
(6) There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of Borrower or any of
its Subsidiaries pending or to the Company's best Knowledge threatened that
could lead to the imposition of any liability pursuant to Environmental Law;
(7) There is not located at any of the properties owned at any of the
properties leased or operated by Borrower or any of its Subsidiaries any (i)
underground storage tanks, (ii) asbestos-containing material, (iii) equipment
containing polychlorinated biphenyls, any (iv) Hazardous Materials located at
any Borrower Property (other than for Hazardous Materials used or stored by the
Borrower or any Subsidiary in the ordinary course of business and in material
compliance with applicable Environmental Laws and Permits); and
(8) Borrower has provided to Agent all environmentally related audits,
studies, reports, analyses and results of investigations, if any, that have been
performed with respect to the currently or previously owned, leased or operated
properties of Borrower or any of its Subsidiaries.
22
1.23. Solvency. Borrower is, and after giving effect to the
--------------
transactions contemplated hereby will be, solvent.
1.24. Security Interests. Upon filing of all Uniform Commercial Code
------------------------
Financing Statements and any other documents of title or financing statements of
applicable governmental agencies or by applicable law, Lenders will have a first
priority perfected security interest in all of the Collateral, except to the
extent the relevant Uniform Commercial Code provides that a security interest
will be perfected by some other method.
1.25. Taxes. Borrower has filed or caused to be filed within the times
-----------
and within the manner prescribed by law, all federal, state, local and foreign
tax returns and tax reports that are required to be filed by, or with respect
to, Borrower. Such returns and reports reflect accurately all liability for
taxes of Borrower for the periods covered thereby, and all federal, state, local
and foreign income, profits, franchise, sales, use, occupancy, excise and other
taxes and assessments (including interest and penalties) payable by, or due
from, Borrower have been fully paid or adequately disclosed and fully provided
for in the books and Financial Statements of Borrower to the extent required by
generally accepted accounting principles. No examination of any tax return of
Borrower is currently in progress, and there are no unpaid taxes in any material
amount claimed to be overdue by the taxing authority of any jurisdiction. There
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of Borrower.
1.26. No Event of Default. No Event of Default has occurred and No
-------------------------
Event of Default is continuing.
1.27. Investment Company Act. Borrower is not an "investment company"
----------------------------
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
1.28. Public Utility Holding Company Act. Borrower is not a "holding
----------------------------------------
company,"or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
1.29. Full Disclosure. All written agreements, lists, schedules
---------------------
(including without limitation each Collateral Disclosure List), instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to the Agent and/or Lenders pursuant hereto or in connection with the
Loan Documents or this Agreement or the transactions contemplated hereby, are
and will be complete and accurate in all material respects. No representation or
warranty by Borrower contained in this Agreement, in the schedules attached
hereto (including without limitation each Collateral Disclosure List) or in any
certificate furnished or to be furnished by Borrower to Agent and/or Lenders in
connection herewith or
23
pursuant hereto or in any of the Loan Documents contains or will contain any
untrue statement or a material fact or omits or will omit to state any material
fact necessary in order to make any statement contained herein or therein not
misleading. There is no fact known to the officers and directors of Borrower
that has specific application to Borrower (other than general economic or
industry conditions) and that materially adversely affects or, as far as such
officers and directors can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of Borrower
that has not been set forth in this Agreement, the Loan Documents or any
schedule hereto (including without limitation each Collateral Disclosure List)
or thereto. No information, schedule, exhibit or report furnished to Agent by
Borrower in connection with the negotiation of this Agreement or the Loan
Documents (including without limitation each Collateral Disclosure List)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statement contained therein not misleading.
1.30. Foreign Person. Borrower is not a non-resident alien, foreign
--------------------
corporation, foreign partnership, foreign trust, foreign estate or foreign
person within the meaning of Sections 1445 or 7701 of the Internal Revenue Code
of 1986, as amended, or the regulations thereto.
1.31. Capitalization.
--------------------
(1) The authorized capital stock of EVSF is 60,000,000 shares,
consisting of 50,000,000 shares of common stock, par value $.001 per share
("Common Stock") of which 9,282,265 shares are issued and outstanding and no
----------------
shares are held in treasury, and 10,000,000 shares of preferred stock, par value
$.001 per share ("Preferred Stock"), none of which are issued and outstanding.
-------------------
There are no outstanding shares of Series A Preferred Stock. Schedule 5.22 lists
-------------
the options, rights and warrants of EVSF issued and outstanding prior to
Closing. EVSF has reserved for issuance 4,391,221 shares of Common Stock upon
exercise or conversion of currently outstanding shares of convertible preferred
stock and rights, options, warrants and other convertible securities. EVSF has
no employee stock purchase plans, stock option plans or other Employee Benefit
Plans. EVSF has reserved for issuance 6,354,334 shares of Common Stock upon
conversion of the authorized shares of Convertible Preferred Stock and the Loan
Warrants and management options. Except as listed on Schedule 5.22(a), there are
----------------
outstanding (a) no shares of capital stock or other voting stock of EVSF, (b) no
securities of EVSF or any Person convertible into or exchangeable for shares of
capital stock or voting securities of EVSF, (c) no options, warrants or other
rights to acquire from EVSF (including any rights issuable or issued under any
shareholder rights plan or similar arrangement), and no obligations, contingent
or otherwise, of EVSF to issue any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of EVSF, (d) no equity equivalent in the earnings or ownership of
EVSF or any person or any similar rights
24
to share earnings or ownership, and (e) no outstanding obligations of EVSF to
repurchase, redeem or otherwise acquire any of its securities or to make any
investment (by loan, capital contribution or otherwise) in any entity or person.
All outstanding options, rights and warrants have been duly and validly issued
and are in full force and effect. All shares of capital stock subject to
issuance upon exercise of any options, rights or warrants or otherwise, upon
issuance pursuant to the instruments under which they are issuable, shall be
duly authorized, validly issued, fully paid for and non-assessable and free of
all preemptive rights. No outstanding options, warrants or other securities
exercisable for or convertible into shares of capital stock of EVSF require
anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
(2) The authorized capital of NFE consists of 10,000,000 shares,
consisting of 10,000,000 shares of common stock, no par value, of which
9,640,000 shares are issued and outstanding and no shares are held in treasury,
and no shares of preferred stock are issued and outstanding. NFE has reserved
for issuance no shares of common stock upon exercise or conversion of currently
outstanding shares of convertible preferred stock and rights, options, warrants
and other convertible securities. NFE has no employee stock purchase plans,
stock option plans or other Employee Benefit Plans. There are outstanding (a) no
securities of NFE or any Person convertible into or exchangeable for shares of
capital stock or voting securities of NFE, (b) no options, warrants or other
rights to acquire from NFE (including any rights issuable or issued under any
shareholder rights plan or similar arrangement), and no obligations, contingent
or otherwise, of NFE to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of NFE,
(c) no equity equivalent in the earnings or ownership of NFE or any person or
any similar rights to share earnings or ownership, and (d) no outstanding
obligations of NFE to repurchase, redeem or otherwise acquire any of its
securities or to make any investment (by loan, capital contribution or
otherwise) in any entity or person. All outstanding options, rights and
warrants have been duly and validly issued and are in full force and effect.
All shares of capital stock subject to issuance upon exercise of any options,
rights or warrants or otherwise, upon issuance pursuant to the instruments under
which they are issuable, shall be duly authorized, validly issued, fully paid
for and non-assessable and free of all preemptive rights. No outstanding
options, warrants or other securities exercisable for or convertible into shares
of capital stock of NFE require anti-dilution adjustments by reason of the
consummation of the transactions contemplated hereby.
(3) At Closing, all of the authorized capital of OnSite shall be owned
by the EVSF.
25
1.32. No Indebtedness to Shareholders, Officers, Directors or
-------------------------------------------------------------
Affiliates. Except as set forth in Schedule 5.23 Borrower owes no Indebtedness
----------
to any Affiliate of Borrower, or any shareholder, officer, or director or
Affiliate of such person.
1.33. Foreign Corrupt Practices. Neither the Borrower nor any
-------------------------------
Subsidiary has made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action that would cause the Borrower or any
Subsidiary to be in violation of the U.S. Foreign Corrupt Practices Act or any
law of similar effect.
1.34. Labor Agreements and Actions. With respect to employees of and
----------------------------------
service providers to Borrower and the Subsidiaries: (a) Borrower and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice; (b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against Borrower or any Subsidiary
pending or, to Borrower's or any Subsidiary's Knowledge, threatened before the
National Labor Relations Board or any other comparable authority; (c) there is
not now, nor within the past three years has there been, any labor strike,
slowdown or stoppage actually pending or, to Borrower's or any Subsidiary's
Knowledge, threatened against or directly affecting Borrower or any Subsidiary;
(d) to Borrower's or any Subsidiary's Knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three years; (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to Borrower's or any
Subsidiary's Knowledge, no claims therefor exist or have been threatened; (f)
the employees of Borrower and the Subsidiaries are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against Borrower or any Subsidiary or currently being
negotiated by Borrower or any Subsidiary; and (g) to Borrower's Knowledge, all
Persons classified by Borrower or its Subsidiaries as independent contractors do
satisfy and have satisfied the requirements of law to be so classified, and
Borrower and its Subsidiaries have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
SECTION 6
THE CLOSING; CONDITIONS PRECEDENT
---------------------------------
1.35. Time and Place of Closing. The closing of the Initial Loan will
-------------------------------
take place at the
26
offices of Xxxxxxx, Xxxxx & Xxxxxxxxx, 0000 Xxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000 or such other place as may be mutually agreed upon by the Borrowers
and the Agent (the "Closing"), on December 17, 1997, provided that each Borrower
has satisfied all of the conditions precedent in Section 6, or such other time
as may be specified by Agent in its sole discretion (the "Closing Date"). The
closing of the Supplemental Loan will take place at such location and on such
date as may be mutually agreed upon by the Borrowers and the Agent; provided
that each Borrower has satisfied all of the conditions precedent in Section 6.
1.36. Conditions on Closing Date. The obligations of Agent and/or
--------------------------------
Lenders to make the Initial Loan and the Supplemental Loan pursuant to Section 2
shall be subject to the satisfaction, on or before each Closing Date, of the
conditions set forth in this Section 6.2, including without limitation, that no
Event of Default has occurred or is occurring. If the conditions set forth in
this Section 6.2 are not met on or prior to each of the Closing Dates, the
Lender shall have no obligation to make any extensions of credit hereunder;
provided, however, that the conditions set forth in Sections 6.2 (b), (c), (f),
-------- -------
(g), (i), (p) and (q) shall not be required for a closing under the Supplemental
Loan).
(1) Notes. Borrower shall have duly executed and delivered the Notes
---------
to Agent.
(2) Warrants. EVSF shall have duly executed and delivered the Warrants
------------
and Warrant Agreements attached hereto as Exhibit C to Agent.
---------
(3) Stock Purchase Agreement. EVSF shall have duly executed and
----------------------------
delivered the Stock Purchase Agreement of even date herewith.
(4) Perfection of Security. Borrower shall have duly authorized,
--------------------------
executed, acknowledged, delivered, filed, registered and recorded such security
agreements, notices, financing statements and other instruments as Agent may
have requested in order to perfect the Liens purported or required to be created
pursuant to the Loan Documents.
(5) Legal Opinions. On the Closing Date, Agent shall have received
------------------
from Xxxxxxx, Xxxxx & Xxxxxxxxx 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 Xxxxxx and Calder with respect
to the transactions contemplated by the Loan Documents under Cayman Island law.
Borrowers authorize and directs its counsel to furnish the foregoing opinions.
27
(6) Xxxxxx Transaction. Concurrent with the Closing hereunder, EVSF
----------------------
shall purchase the 50% interest of Xxxxxx in OnSite and repay in full the
outstanding balance owed by EVSF to Casuarina, a wholly-owned subsidiary of
Xxxxxx, pursuant to a loan agreement and term not dated December 19, 1996
(including without limitation repurchasing warrants to purchase 300,000 shares
of EVSF's Common Stock issued pursuant to that loan agreement).
(7) Certificates. Concurrent with the Closing hereunder, Agent shall
----------------
have received a certificate of a Responsible Officer of EVSF to the effect that
(i) the Xxxxxx Transaction has been completed and (ii) each of the conditions
set forth in this Section 6 has been fully satisfied.
(8) Officer's/Member's Certificate. The representations and warranties
----------------------------------
contained in Section 5 shall be true and correct on and as of such Closing Date
with the same force and effect as though made on and as of such date (except as
to any representation or warranty which refers to a specific earlier date and
except to the extent Schedules referred to in Section 5 have been supplemented
in accordance with this Agreement); Borrowers shall be in compliance with each
covenant under the Loan Documents; no Event of Default shall exist on such
Closing Date prior to or immediately after giving effect to the requested
extension of credit; no material adverse change shall have occurred, as
determined by Agent in its sole discretion, in the financial condition, results
of operations, assets or business of Borrowers. Borrowers shall have furnished
to Agent a certificate to these effects.
(9) Corporate/Company Documents; Secretary's Certificate. On the
--------------------------------------------------------
Closing Date, each Borrower shall deliver to Agent:
(1) a certificate of the Secretary of State of Borrower's state of
incorporation or formation, dated not earlier than forty (40) days preceding the
Closing Date, to the effect that Borrower is a corporation validly existing and
in good standing under the laws of such state as of such date;
(2) a certificate of the Secretary of State of each state where
Borrower is required to qualify to do business (including without limitation,
the states where the Collateral is located), dated not earlier than forty (40)
days preceding the applicable Closing Date, to the effect that Borrower is a
corporation duly licensed or qualified to do business in such state and is in
good standing as a foreign corporation under the laws of such state as of such
date; and
28
(3) certificates of the Secretary or Assistant Secretary of Borrower
including (A) copies of the Articles of Incorporation and By-laws of Borrower as
then in effect or a certification that there has been no change in such
instruments since the last such certification delivered to Agent pursuant to
this Agreement, (B) duly enacted resolutions of Borrower's Board of Directors in
form and substance satisfactory to Agent approving the Loan Documents and
authorizing officers of Borrower to execute and deliver instruments required to
be delivered hereunder as a condition precedent to the Closing, or a
certification that there has been no amendment or revocation of such resolutions
since the last such certification delivered to Agent pursuant to this Agreement,
and (C) specimen signatures of the officers of Borrower authorized to sign such
instruments to the extent such specimen signatures have not previously been
delivered to Lender.
(10) Insurance. Agent shall have received evidence of such insurance
--------------
coverage as Agent may reasonably request.
(11) Other Indebtedness. Agent shall have received written reports in
-----------------------
form and substance satisfactory to it that a search of the public records of the
jurisdiction in which Collateral is located evidence satisfactory to Agent in
its sole discretion that, except for Permitted Indebtedness and the Loans, all
Indebtedness of Borrower has been repaid and discharged in full, and all
security interests relating thereto have been released.
(12) Proper Proceedings. This Agreement, each other Loan Document and
-----------------------
the transactions contemplated hereby and thereby shall have been authorized by
all necessary corporate or company action, or other proceedings. All necessary
consents, approvals and authorizations of any of the transactions contemplated
hereby or by any other Loan Document shall have been obtained and shall be in
full force and effect.
(13) Legality, etc. The transactions contemplated by this Agreement
------------------
shall not (i) subject Agent and/or Lenders to any penalty or special tax or (ii)
be prohibited by any law, rule or regulation of any governmental authority.
(14) General. All legal and corporate or company proceedings in
------------
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to Agent and Agent shall have received copies
of all documents, including certified copies of the Charter and By-Laws of
Borrower, records of corporate or company proceedings, certificates as to
signatures and incumbency of officers, and opinions of counsel, which Agent may
have reasonably requested in connection therewith, such documents where
appropriate to be
29
certified by proper corporate or company or governmental authorities.
(15) Pledge Agreements. Agent shall have received executed Stock
----------------------
Pledge Agreements and an executed Interest Pledge Agreement.
(16) Intellectual Property Security Agreement. Agent shall have
---------------------------------------------
received executed security agreements for patents, copyrights, and other
intellectual property.
6.3. Additional Conditional Precedent. The obligations of Agent and/or
--------------------------------
Lenders to make the Supplemental Loan on or after February 12, 2000 shall be
subject to the condition that the Borrowers shall have delivered the executed
Additional Warrant (as defined in Section 7.9).
SECTION 7
BORROWER'S AFFIRMATIVE COVENANTS
--------------------------------
For so long as any Borrower shall have any Obligations to Lenders under
this Agreement, each Borrower covenants as follows:
1.37. Punctual Payment and Performance. Borrower shall duly and
--------------------------------------
punctually pay the principal and interest on the Loans and all other amounts
provided for in this Agreement, or any other Loan Document, and shall perform
its obligations and covenants under all Loan Documents.
1.38. Taxes and Other Charges; Accounts Payable.
-----------------------------------------------
(1) Taxes and Other Charges. Borrower and its Subsidiaries shall duly
---------------------------
pay and discharge, or cause to be paid and discharged, before the same becomes
in arrears, all taxes, assessments and other governmental charges imposed upon
such Person and its properties, sales or activities, or upon the income or
profits therefrom, as well as all claims for labor, materials or supplies which
if unpaid might be law become a Lien upon any of its property; provided,
--------
however, that any such tax, assessment, charge or claim need not be paid if the
-------
validity or amount thereof shall at the time be contested in good faith by
appropriate proceedings and if such Person shall, in accordance with GAAP, have
set aside on its books adequate reserves with respect thereto; and provided,
--------
further, that Borrower and its Subsidiaries shall pay or bond, or cause to be
-------
paid or bonded, all such taxes, assessments, charges or other
30
governmental claims immediately upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor (except to the
extent such proceedings have been dismissed or stayed).
(2) Accounts Payable. Borrower and its Subsidiaries shall promptly pay
--------------------
when due, or in conformity with customary trade terms, all other Indebtedness
incident to the operations of such Person not referred to in Section 7.2;
provided, however, that any such Indebtedness need not be paid if the validity
-------- -------
or amount thereof shall at the time be contested in good faith and if such
Person shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto.
1.39. Conduct of Business, etc.
------------------------------
(1) Types of Business. Borrower and its Subsidiaries shall engage only
---------------------
in the business of development, production and sale of environmental
reclamation/remediation technologies and services.
(2) Maintenance of Properties. Borrower and its Subsidiaries:
-----------------------------
(1) shall keep their properties in such repair, working order and
condition, and shall from time to time make such repairs, replacements,
additions and improvements thereto as are necessary for the efficient operation
of its businesses and shall comply at all times in all material respects with
all material franchises, licenses and leases to which it is party so as to
prevent any loss or forfeiture thereof or thereunder, except where (i)
compliance is at the time being contested in good faith by appropriate
proceedings and (ii) failure to comply with the provisions being contested have
not resulted, or do not create a material risk of resulting, in the aggregate in
any material adverse effect on the business, on operations or properties of
Borrower (financial or otherwise); and
(2) shall do all things necessary to preserve, renew and keep in full
force and effect and in good standing its legal existence and authority
necessary to continue its business.
1.40. Compliance with Applicable Laws. Borrower and its Subsidiaries
-------------------------------------
shall comply, and Borrower shall cause its Subsidiaries to comply, in all
material respects with all valid and applicable statutes, laws, ordinances,
zoning and building codes and other rules and regulations, including
environmental regulations, of the United States of America, of the states and
territories thereof and their counties, municipalities and other subdivisions
and of any foreign jurisdiction in which any Collateral is located and
31
obtain and keep in force any and all licenses, permits, franchises or other
governmental authorizations which it is required to obtain which are necessary
or beneficial to the ownership or use of its properties or to the operation of
its business.
1.41. Information.
-----------------
(1) Annual Audited Financial Statements. Annually, as soon as
---------------------------------------
available but in any event within ninety (90) days after the close of each
fiscal year of Borrower, a balance sheet of Borrower as at the end of such year
and statements of income and retained earnings and of cash flow of Borrower
prepared in accordance with GAAP consistently applied, reflecting the results of
its operations during such year, prepared by Borrower's independent accounting
firm, together with the audit report of such independent accounting, which
financial statements shall be true, correct and accurate and fairly present the
financial position of Borrower as of the date thereof.
(2) Quarterly Financial Statements. As soon as available, but in any
----------------------------------
event not later than forty-five (45) days after the end of each quarterly fiscal
period (other than the last quarterly fiscal period in any fiscal year of the
Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form (i) the figures as of the
end of and for the comparable periods of the preceding fiscal year and (ii) the
figures reflected in the operating budget (if any) for such period as specified
in the financial plan of the Company. All such financial statements shall be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods reflected therein except as stated therein.
(3) Additional Information. Borrower shall promptly provide such
--------------------------
information concerning Borrower and its Subsidiaries, the Collateral (including
without limitation an updated Collateral Disclosure List for any Borrower or
Borrowers), the operation of its business, its financial condition, as Agent may
from time to time reasonably request, and shall also provide copies of such
governmental filings and other documentation as Agent may from time to time
reasonably request.
(4) Immediate Notices. Borrower shall immediately provide notice to
---------------------
Agent of:
(1) any Event of Default or any event which, with
32
notice or lapse of time or both, might become an Event of Default;
(2) a change in the basis for valuing Inventory from that shown in
Section 5.11;
(3) the institution or commencement of any action, suit, proceeding or
investigation against or affecting Borrower or its Subsidiaries or any of its or
their assets which, if determined adversely could result in judgment in excess
of $100,000;
(4) any judgment, award, decree, order or determination in an amount
in excess of $100,000;
(5) the imposition or creation of any Lien against any asset or
property of Borrower except in favor of Agent or Permitted Liens;
(6) any potential or known release or threat of release of hazardous
or toxic chemicals, materials or substances or oil from, on or onto any site
owned or used by Borrower or the incurrence of any expense or loss in connection
therewith or upon Borrower obtaining knowledge of any investigation, action or
the incurrence of any expense or loss by any governmental authority in
connection with the containment or removal of any hazardous or toxic chemical,
material or substance or oil for which expense or loss Borrower may be liable or
potentially responsible;
(7) any loss or destruction of Collateral or other assets or property
whether or not covered by insurance if the value thereof exceeds $100,000;
(8) the occurrence of any event or the existence of any fact which
would render any representation or warranty in this Agreement or any other Loan
Document inaccurate, incomplete or misleading in any material respect;
(9) any organized labor dispute to which Borrower may become a party
or any walkouts, strikes or other similar events affecting Borrower.
(5) Taxes. If requested by Lender, within ten (10) days after the
---------
accrual in accordance with applicable law of Borrower's obligation to make
deposits for F.I.C.A. and withholding taxes, evidence satisfactory to Agent that
such deposits have been made as required.
(6) Inventory Listing. If requested by Agent, a copy (certified by an
---------------------
authorized officer of Borrower to be true, correct and complete) of any listing
of Inventory but is no event more often than two times a year.
33
(7) Annual Budget. As soon as available, but in any event not later
-----------------
than thirty (30) days prior to the beginning of each fiscal year of Borrower,
the financial plan of Borrower for such fiscal year, including, without
limitation, a cash flow projection and operating budget, calculated quarterly,
as contained in its operating plan presented to the Borrower's Board of
Directors as well as any updates or revisions to such plan as soon as available.
1.42. Insurance. Maintain property and liability insurance with
---------------
responsible insurance companies (and with deductibles) reasonably satisfactory
to Agent in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas as Borrower operates.
1.43. Inventory and Equipment Insurance. Maintain insurance with
---------------------------------------
responsible insurance companies (and with deductibles) reasonably satisfactory
to Agent covering Borrower's Inventory and Equipment in such amounts as is
usually carried by companies engaged in similar businesses and in any event not
less than Agent may from time to time reasonably require, and deliver to Agent
copies of such insurance policies (and all renewals thereof) together with
Agent's loss payable endorsements naming Agent as a secured party executed by
the insurer(s), such policies to provide that coverage may not be modified or
terminated without prior notice to Agent.
1.44. Corporate Existence; Compliance with Laws. Maintain its
-----------------------------------------------
corporate or company existence in good standing, and its qualification to do
business in good standing in every state and foreign jurisdiction in which such
qualification may be necessary by reason of the nature or location of its assets
or operations, and comply with its charter documents and by-laws, or other
constituent documents, as the case may be, all contractual requirements by which
it or any of its properties may be bound and all applicable laws, rules and
regulations (including without limitation, ERISA and those relating to
environmental protection and health and safety).
1.45. Issuance of Additional Warrants. Authorize, issue and deliver
-------------------------------------
additional warrants (the "Additional Warrants"), substantially in the form of
the Warrant attached hereto as Exhibit C upon the earlier of (i) an Event of
Default or (ii) February 17,2000; provided, however, that if Borrowers have
-------- -------
repaid the Loans in part, then EVSF shall issue warrants for a pro rata number
of shares based upon the amount of the Loans that remain unpaid as of February
17, 2000, or if EVSF shall have repaid in full prior to February 17, 2000, EVSF
will not be obligated to issue any Additional Warrants under this Agreement.
34
1.46. Key Man Insurance. After the Closing Date, Borrower will use its
-----------------------
best efforts to obtain and, if obtained, will maintain life insurance upon the
life of Xxxxx X. Xxxxxxx in the amount of no less than $5 million, with the
proceeds payable to Agent.
1.47. Visits and Inspections. Borrower will permit representatives of
----------------------------
Agent (including without limitation its counsel, accountants and agents), from
time to time, as often as may reasonably requested, but only during normal
business hours, to visit and inspect the offices and properties of Borrower and
its Subsidiaries, inspect, audit and make extracts from its books and records,
and discuss with officers, its employees and its independent accountants,
Borrower's and its Subsidiaries' business, assets, liabilities, financial
condition, business prospects and results of operations.
1.48. ERISA Compliance. Borrower will make, and, if reasonably within
----------------------
its control, will cause each ERISA Affiliate to make, all payments or
contributions to the Employee Benefit Plans and Multiemployer Plans required
under the terms thereof and in accordance with the funding requirements
applicable to such plans under ERISA and the Code and applicable collective
bargaining agreements. Borrower will cause all Employee Benefit Plans that it
sponsors, and, if reasonably within its control, will cause each ERISA Affiliate
to cause all Employee Benefit Plans that such ERISA Affiliate sponsors, to be
maintained in substantial compliance with ERISA and the Code and, if applicable,
to maintain the qualified status of each Employee Benefit Plan under the Code.
Borrower will not engage, and, if reasonably within its control, will not permit
or suffer any ERISA Affiliate or fiduciary of any Employee Benefit Plan to
engage, in any Prohibited Transaction for which an exemption is not available
and that is likely to give rise to material liability to Borrower or any ERISA
Affiliates. Borrower will not permit any Termination Event to occur where, 30
days after notice thereof shall have been given to Borrower, such Termination
Event shall still exist and the liability of Borrower or any ERISA Affiliate
relating thereto is material to the financial condition of Borrower or any ERISA
Affiliate.
(1) Borrower will notify Agent promptly of any Reportable Event or
Termination Event or any partial or complete withdrawal from any Multiemployer
Plan that may result in any Withdrawal Liability of Borrower or any ERISA
Affiliate or upon learning of any insolvency, reorganization status, or
termination of a Multiemployer Plan that may result in material liability of
Borrower or any ERISA Affiliate, together with the actions proposed to be taken
by Borrower or its ERISA Affiliate. Borrower will furnish to Lender a copy of
any request for waiver of the minimum funding standards required by ERISA or the
Code
35
promptly after submission thereof to a governmental authority.
(2) Borrower covenants and agrees with Lenders that, so long as this
Agreement shall remain in effect, unless Agent otherwise consents in writing,
which consent shall not be unreasonably withheld, Borrower will not:
(1) Cause any Employee Benefit Plan to become subject to Title IV
or Section 302 of ERISA or Section 412 of the Code, except those plans to which
those sections apply as of the date of this Agreement;
(2) Adopt any new plan, fund, or other arrangement that would be
subject to Title IV or Section 302 of ERISA or Section 412 of the Code; or
(3) Adopt or incur any new obligation to contribute to any
Multiemployer Plan.
SECTION 8
THE AGENT
---------
1.49. Appointment.
-----------------
Each Lender hereby designates and appoints Xxxxxx, Xxxxxxx Strategic
Partners Fund, L.P. as its agent under this Agreement and the Loan Documents,
and each Lender hereby irrevocably authorizes the Agent to take such action or
to refrain from taking such action on its behalf under the provisions of this
Agreement and the Loan Documents and to exercise such powers as are set forth
herein or therein, together with such other powers as are reasonably incidental
thereto. The Agent agrees to act as such on the express conditions contained in
this Section 8. The provisions of this Section 8 are solely for the benefit of
the Agent and the Lenders and neither Borrower nor any Person shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as an administrative representative of the Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Lenders, the Borrowers or any Person. The Agent
may perform any of its duties hereunder, or under the Loan Documents, by or
through its agents or employees.
1.50. Nature of Duties.
----------------------
(1) In General
-------------
36
The Agent shall have no duties, obligations or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents. The
duties of the Agent shall be mechanical and administrative in nature. The Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender. Each Lender shall make its own independent investigation of the
financial condition and affairs of the Borrowers in connection with the
extension of credit hereunder and shall make its own appraisal of the credit
worthiness of the Borrowers, and the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the Closing Date or at any time or times thereafter. If the Agent seeks
the consent or approval of any of the Lenders to the taking or refraining from
taking of any action hereunder, then the Agent shall send notice thereof to each
Lender. The Agent shall promptly notify each Lender any time that the applicable
percentage of the Lenders have instructed the Agent to act or refrain from
acting pursuant hereto.
(2) Express Authorization
------------------------
The Agent is hereby expressly and irrevocably authorized by each of
the Lenders, as agent on behalf of itself and the other Lenders:
(1) To receive all documents and items to be furnished to the Lenders
under the Loan Documents (nothing contained herein shall relieve Borrower
of any obligation to deliver any item directly to the Lenders to the extent
expressly required by the provisions of this Agreement);
(2) To act or refrain from acting in this Agreement and in the other
Loan Documents with respect to those matters so designated for the Agent;
(3) Agreement and the other Loan Documents;
(4) made available to Borrower;
(5) this Agreement, all written information, requests, notices,
payments, prepayments, documents and other items received from Borrower or other
Person;
(6) other Loan Documents on behalf of the Lenders subject to the
requirement that certain of the Lenders' consent be obtained in certain
instances as provided in Section 14.10;
37
(7) To deliver to Borrower and other Persons, all requests, demands,
approvals, notices, and consents received from any of the Lenders;
(8) To exercise on behalf of each Lender all rights and remedies of
the Lenders upon the occurrence of any Event of Default and/or default specified
in this Agreement and/or in any of the other Loan Documents or applicable laws;
(9) To execute any of the Loan Documents and any other documents on
behalf of the Lenders as the secured party for the benefit of the Agent and the
Lenders; and
(10) To take such other actions as may be requested by the Requisite
Lenders.
1.51. Rights, Exculpation, Etc.
-------------------------------
Neither the Agent nor any of its officers, directors, employees or
agents shall be liable to any Lender for any action taken or omitted by them
hereunder or under any of the Loan Documents, or in connection herewith or
therewith, except that the Agent shall be obligated on the terms set forth
herein for performance of its express obligations hereunder, and except that the
Agent shall be liable with respect to its own gross negligence or willful
misconduct. The Agent shall not be liable for any apportionment or distribution
of payments made by it in good faith and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). The Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectible, or sufficiency of this Agreement or any of the Loan
Documents or the transactions contemplated thereby, or for the financial
condition of any Person. The Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Person, or the existence or possible existence of any Event of
Default. The Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Loan Documents the Agent is permitted or required to take or to
grant, and the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action
38
or withholding any approval under any of the Loan Documents until it shall have
received such instructions from the applicable percentage of the Lenders.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of the applicable percentage of the Lenders and
notwithstanding the instructions of the Lenders, the Agent shall have no
obligation to take any action if it, in good faith believes that such action
exposes the Agent to any liability.
1.52. Reliance.
--------------
The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message or
other communication (including any writing, telex, telecopy or telegram)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Agreement or any of the Loan Documents and its duties hereunder or
thereunder, upon advice of counsel selected by it. The Agent may deem and treat
the original Lenders as the owners of the respective Notes for all purposes
until receipt by the Agent of a written notice of assignment, negotiation or
transfer of any interest therein by the Lenders in accordance with the terms of
this Agreement. Any interest, authority or consent of any holder of any of the
Notes shall be conclusive and binding on any subsequent holder, transferee, or
assignee of such Notes. The Agent shall be entitled to rely upon the advice of
legal counsel, independent accountants, and other experts selected by the Agent
in its sole discretion.
1.53. Indemnification.
---------------------
Each Lender, severally, agrees to reimburse and indemnify the Agent
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
including, without limitation, all costs and expenses (including attorneys'
fees) incurred in connection with the Collection of any Loan and/or enforcement
of any Loan Document, of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the Loan Documents or any action taken or omitted by
the Agent under this Agreement for any of the Loan Documents, in proportion to
each Lender's Pro Rata Share, all of the foregoing as they may arise, be
asserted or be imposed from time to time; provided, however, that no Lender
-------- -------
shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements resulting from the Agent's gross
39
negligence or willful misconduct. The obligations of the Lenders under this
Section 8.5 shall survive the payment in full of the Obligations and the
termination of this Agreement.
1.54. Xxxxxx, Xxxxxxx 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, Xxxxxx, Xxxxxxx 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 Xxxxxx, Xxxxxxx
Strategic Partners Fund, L.P. in its individual capacity as a Lender or one of
the Requisite Lenders. Xxxxxx, Xxxxxxx 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 Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P. may accept fees and
other consideration from Borrower, any Affiliate of Borrower or any of their
officers, directors and employees for services without having to account for or
share the same with the Lenders.
1.55. Successor Agent.
---------------------
(1) Resignation.
--------------
The Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least sixty (60) Business Days' prior
written notice to Borrower and the Lenders. Such resignation shall take effect
upon the acceptance by a successor Agent of appointment pursuant to Section
8.7(b) below or as otherwise provided below.
(2) Appointment of Successor.
---------------------------
Upon any such notice of resignation pursuant to Section 8.7(a) above,
the Requisite Lenders shall appoint a successor to the Agent. If a successor to
the Agent shall not have been so appointed within said sixty (60) Business Day
period, the Agent retiring, upon notice to Borrower, shall then appoint a
successor Agent who shall serve as the Agent until such time, as the Requisite
Lenders appoint a successor the Agent as provided above.
(3) Successor Agent.
------------------
40
Upon the acceptance of any appointment as the Agent under the Loan
Documents by a successor Agent, such successor to the Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the Agent retiring, and the Agent retiring shall be discharged from its
duties and obligations under the Loan Documents. After any Agent's resignation
as the Agent under the Loan Documents, the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was the Agent under the Loan Documents.
1.56. Collateral Matters.
------------------------
(1) Release of Collateral.
------------------------
The Lenders hereby irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent upon any
property covered by this Agreement or the Loan Documents:
(1) upon termination of the Commitments and payment and satisfaction
of all Obligations;
(2) constituting property being sold or disposed of if Borrower
certifier to the Agent that the sale or disposition is made in compliance with
the provisions of this Agreement (and the Agent may rely in good faith
conclusively on any such certificate, without further inquiry);
(3) constituting property leased to Borrower under a lease which has
expired or been terminated in a transaction permitted under this Agreement or is
about to expire and which has not been, and is not intended by Borrower to be,
renewed or extended; or
(4) constituting property covered by Permitted Liens with lien
priority superior to those Liens in favor or for the benefit of the Lenders.
(2) Confirmation of Authority, Execution of Releases.
----------------------------------------------------
Without in any manner limiting the Agent's authority to act without
any specific or further authorization or consent by the Lenders as set forth in
Section 8.8(a), each Lender agrees to confirm in writing, upon request by the
Borrowers, the authority to release any property covered by this Agreement or
the Loan Documents conferred upon the Agent under Section 8.8(a). So long as no
Event of Default is then continuing, upon receipt by the
41
Agent of confirmation from the requisite percentage of the Lenders, of its
authority to release any particular item or types of property covered by this
Agreement or the Loan Documents, and upon at least five (5) Business Days prior
written request by Borrower, the Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the Liens granted to the Agent for the benefit of the
Lenders herein or pursuant hereto upon such Collateral; provided, however, that
-------- -------
(i) the Agent shall not be required to execute any such document on terms which,
in the Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
any Person, in respect of), all interests retained by any Person, including,
without limitation, the proceeds of any sale, all of which shall continue to
constitute part of the property covered by this Agreement or the Loan Documents.
(3) Absence of Duty.
------------------
The Agent shall have no obligation whatsoever to any Lender, Borrower
or any other Person to assure that the property covered by this Agreement or the
Loan Documents exists or is owned by Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to the Agent on behalf
of the Lenders herein or pursuant hereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Agent in this Section
8.8(c) or in any of the Loan Documents, it being understood and agreed that in
respect of the property covered by this Agreement or the Loan Documents or any
act, omission or event related thereto, the Agent may act in any manner it may
deem appropriate, in its discretion, given the Agent's own interest in property
covered by this Agreement or the Loan Documents as one of the Lenders and that
the Agent shall have no duty or liability whatsoever to any of the other the
Lenders.
1.57. Agency for Perfection.
---------------------------
Each Lender hereby appoints the Agent and each other Lender as agent
for the purpose of perfecting the Lenders' Liens in Collateral which, in
accordance with Article 9 of the Uniform Commercial Code in any applicable
jurisdiction or otherwise, can be perfected only by possession. Should any
Lender (other than the Agent) obtain possession of any such Collateral, such
Lender shall notify the Agent thereof, and, promptly upon the Agent's
42
request therefor, shall deliver such Collateral to the Agent or in accordance
with the Agent's instructions.
1.58. Exercise of Remedies.
--------------------------
Each Lender agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Loan Document or to realize
upon any collateral security for the Loan, it being understood and agreed that
such rights and remedies may be exercised only by the Agent.
1.59. Consents.
--------------
(1) In the event the Agent requests the consent of a Lender and does
not receive a written denial thereof, or a written notice from a Lender that due
course consideration of the request requires additional time, in each case,
within ten (10) Business Days after such Lender's receipt of such request, then
such Lender will be deemed to have given such consent.
(2) In the event the Agent requests the consent of a Lender and such
consent is denied, then Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P. may, at
its option, require such Lender to assign its interest in the Loan to Xxxxxx,
Xxxxxxx 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 Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P. elects to require any
Lender to assign its interest to Xxxxxx, Xxxxxxx 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 Xxxxxx, Xxxxxxx
Strategic Partners Fund, L.P no later than five (5) days following receipt of
such notice.
1.60. Dissemination of Information.
----------------------------------
The Agent will provide the Lenders with any information received by
the Agent from Borrower which is required to be provided to the Agent or to the
Lenders hereunder; provided, however, that the Agent shall not be liable to any
-------- -------
one or more the Lenders for any failure to do so, except to the extent that such
failure is attributable to the Agent's gross negligence or willful misconduct.
43
SECTION 9
BORROWER'S NEGATIVE COVENANTS
-----------------------------
For so long as a Borrower shall have any obligation to Agent and/or a
Lender under this Agreement, each Borrower covenants that it will not:
1.61. Disposition of Collateral. Except as part of a financing
-------------------------------
transaction in the form of a sale-leaseback of Indirect Thermal Desportion
("ITD") units, sell, assign, exchange or otherwise dispose of any of the
Collateral (other than Inventory consisting of (i) scrap, waste, defective
goods and the like; (ii) obsolete goods or obsolete, unused or surplus
Equipment; (iii) sales of other Equipment provided such Equipment is
promptly replaced with Equipment of equal or greater value and utility to
the Borrower; and (iv) finished goods sold in the ordinary course of
businesses) or any interest therein to any other Person;
1.62. Indebtedness. Create, incur, assume or allow to exist any
------------------
Indebtedness, except: (i) Indebtedness evidenced by this Agreement and the Notes
owing to or held by Agent and/or Lenders and arising under any of the Loan
Documents; (ii) unsecured Current Liabilities (not the result of borrowing)
incurred in the ordinary course of business which are not evidenced by notes or
instruments and which are not more than sixty (60) days overdue from the
original due dates thereof unless contracted in good faith; (iii) subordinated
Indebtedness; (iv) Indebtedness incurred after the date hereof with the prior
written consent of Agent, and (v) any financing transaction in the form of a
sale-leaseback of ITD units (collectively referred to as "Permitted
Indebtedness").
1.63. Liens. Create, permit to be created or suffer to exist any Lien
-----------
upon any of the Collateral or any other property of Borrower, now owned or
hereafter acquired, except: (i) Liens existing on the date hereof as set forth
in Schedule 9.3, which the Borrower will use its best efforts to release; (ii)
------------
subordinated Liens; (iii) landlords' carriers', warehousemen's, mechanics' and
other similar Liens arising by operation of law in the ordinary course of
Borrower's business; (iv) Liens arising out of pledge or deposits under
workmen's compensation, unemployment insurance, old age pension, social
security, retirement benefits or other similar legislation; (v) Liens in favor
of Agent on behalf of Lenders; (vi) Liens for taxes (excluding any Lien imposed
pursuant to any provision of ERISA) not yet due or which are being contested in
good faith by
44
appropriate proceedings and Borrower maintains appropriate reserves in respect
thereto provided that in Agent's judgment such Lien does not adversely affect
Agent's and/or Lenders' rights or the priority of Agent's Lien in the
Collateral; (vii) easements, rights of way, restrictions and other similar
charges or Liens relating to real property and not interfering in a material way
with the ordinary conduct of Borrower's business; (viii) Liens arising after the
date hereof with the prior written consent of Agent, and (ix) any financing
transaction in the form of a sale-leaseback of ITD units (collectively,
"Permitted Liens").
1.64. Dividends. Except for dividends payable in connection with the
---------------
Series C Preferred Stock, pay or make any Dividends at any time any amount is
unpaid with respect to the Loan (whether for principal, interest, or other
charges), except if Borrower has elected S corporation status under the Code
Borrower may pay Dividends on a quarterly basis to stockholders to the extent of
taxable income of its stockholders attributable to the stockholders' portion of
the Net Earnings of Borrower provided that no default or Event of Default has
occurred or is continuing.
1.65. Loans. Make any loans or advances to any Person, including
-----------
without limitation any of Borrower's directors, officers and employees, except
for advances in the ordinary course of business in an amount not to exceed
$10,000.
1.66. Guarantees. Except as set forth in Schedule 9.6 assume,
----------------
guaranty, endorse or otherwise become directly or contingently liable in respect
of (including without limitation by way of agreement, contingent or otherwise,
to purchase, provide funds to or otherwise invest in a debtor or otherwise to
assure a creditor against loss), any Indebtedness of any Person (except
guarantees by endorsement of instruments for deposit or collection in the
ordinary course of business and guarantees in favor of Agent and/or Lenders).
1.67. Merger. Merge or consolidate with any Person, or sell, lease,
------------
transfer or otherwise dispose of any substantial part of its assets (whether in
one or more transactions).
1.68. Affiliates. Directly or indirectly, transfer, sell, lease,
----------------
assign or otherwise dispose of any assets to an Affiliate; purchase or acquire
any assets from an Affiliate; enter into any management agreement, service
agreement or consulting agreement with an Affiliate or make any payment thereon;
or enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, guarantees or
assumptions of obligations of an Affiliate), except with the prior written
consent of Agent.
45
1.69. Financial Covenants. Have or maintain,
-------------------------
(1) on a consolidated basis, one year after the execution of this
Agreement, a minimum ratio of two-to-one of EBITDAE (Earnings Before Interest
Taxes Depreciation Amortization and Extraordinary Items) to interest expense;
(2) at all times, positive working capital of at least $2 million
($2,000,000);
(3) at all times, positive net worth.
SECTION 10
ADDITIONAL COVENANTS AND ASSURANCES
-----------------------------------
1.70. Additional Assurances. Each Borrower at its expense will
---------------------------
promptly and duly execute and deliver such documents and assurances and take
such actions as may be necessary or desirable or as Agent may request in order
to correct any defect, error or omission which may at any time be discovered or
to more effectively carry out the intent and purpose of this Agreement and to
establish, perfect and protect Agent's and/or Lenders' security interest, rights
and remedies created or intended to be created hereunder. Without limiting the
generality of the above, Borrower will join with Agent in executing financing
and continuation statements pursuant to the Uniform Commercial Code or other
notices appropriate under applicable foreign, Federal or State law in form
satisfactory to Agent and filing the same in all public offices and
jurisdictions wherever and whenever requested by Agent (including, without
limitation, upon the occurrence of any event referred to in Section 10.4.
Moreover, Borrower appoints Agent or its agent and designee, as Borrower's
attorney-in-fact, to execute in Borrower's name and behalf any UCC financing
statements or amendments thereto for any of the foregoing purposes, which power
is coupled with an interest, and irrevocable, until all Obligations have been
paid in full. Borrower releases Agent and its officers, employees, agents,
stockholders, members and designees from any liability arising from any act or
acts in connection with such action(s) or in furtherance thereof, whether of
admission or omission and whether based on any error of judgment or mistake or
flaw or fact.
1.71. Possession Following Event of Default. Agent will at any time
-------------------------------------------
46
following the occurrence of an Event of Default and during the continuation
thereof have the right to take physical possession of the Collateral and to
maintain such possession on Borrower's premises or to remove the Collateral or
any part thereof to such other places as Agent may desire. If Agent exercises
such right, Borrower shall at its sole expense upon Agent's request assemble the
same and make it available to Lender at a place reasonably convenient to Agent.
If any Inventory is in the possession or control of any of Borrower's agents or
processors, Borrower shall, at Agent's request (before or after the occurrence
of an Event of Default), notify them of Agent's security interest therein and,
at Agent's request, instruct them to hold the same for Agent's account and
subject to Agent's instructions. At any time following the occurrence of an
Event of Default and during the continuation thereof, Agent shall have full
power, in its own name or that of such Borrower, to collect, endorse,
compromise, settle, sell or otherwise deal with any or all of the Collateral or
proceeds thereof.
1.72. Additional Collateral Actions. Each Borrower shall perform any
-----------------------------------
and all further steps requested by Agent to perfect Agent's security interest in
Inventory, such as leasing warehouses to Agent or its designee, placing and
maintaining signs, appointing custodians, maintaining stock records and
transferring Inventory to warehouses. A physical listing of all Inventory,
wherever located, shall be taken by such Borrower whenever requested by Agent.
Upon execution and delivery of any Lease by lessee and such Borrower, such
Borrower shall cause the sole original thereof and/or schedule thereto to be
delivered and pledged to Agent.
1.73. Verification of Accounts and Leases. In an Event of Default,
-----------------------------------------
Agent may (i) in its own name or in the name of others communicate
with account debtors and lessors in order to verify with them to Agent's
satisfaction the existence, amount and terms of any Accounts and/or leases and
the absence of any reductions, discounts, defenses or offsets with respect
thereto or (ii) upon the occurrence of an Event of Default and simultaneous
notice to Borrower, notify account debtors that Collateral has been assign's
request, Borrower will notify any or all such debtors and lessors of such
assignment, give instructions and/or indicate on xxxxxxxx to such debtors that
their Accounts and Leases shall be paid to Agent and/or supply such debtors with
a copy of this Agreement.
1.74. Inspection of Collateral. Agent may at all times during normal
------------------------------
business hours and at all times after reasonable prior notice have access to,
examine and inspect the Collateral.
47
1.75. Power of Attorney. Each Borrower does hereby make, constitute
-----------------------
and appoint Agent as Borrower's true and lawful attorney-in-fact, with power of
substitution, to endorse the name of Borrower or any of its officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment
(including under any policy of insurance on Collateral) or Collateral that may
come into possession of Agent in full or part payment of any amounts owing to
Agent and/or Lenders; to sign and endorse the name of Borrower or any of its
officers or agents upon any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instruments or
documents relating thereto or to Borrower's rights therein; upon the occurrence
of an Event of Default, to give written notice to such offices and officials of
the United States Postal Service to effect such change or changes of address so
that all mail addressed to Borrower may be delivered directly to Agent, to take
any and all other actions necessary or appropriate to collect, compromise,
settle, sell or otherwise deal with any or all of the Collateral or proceeds
thereof; and to obtain, adjust, settle and cancel any insurance hereby granting
to each said attorney-in-fact or his substitute full power to do any and all
things necessary or appropriate to be done in and about the premises as fully
and effectively as Borrower might or could do, and hereby ratifying all that any
said attorney-in-fact or his substitute shall lawfully do or cause to be done by
virtue hereof.
1.76. Insurance Assignment. In the Event of Default, each Borrower
---------------------------
hereby assigns to Agent all sums, including without limitation return of
premiums, which may become payable under any and all of such Borrower's policies
of insurance and directs each insurance company issuing any such policy to make
payment thereof directly to Agent.
1.77. Payments by Lender. In its sole discretion, Agent may: (i)
------------------------
discharge taxes that Borrower fails to pay (except taxes being contested in good
faith and by appropriate proceedings, for which Borrower has established and is
maintaining appropriate reserves, and as to which no Lien having priority over
Lender's Lien arises) and Liens levied or placed on Collateral; (ii) pay for
insurance of Borrower that Borrower fails to pay or the maintenance and
preservation thereof; or (iii) if Borrower shall fail to make deposits in
respect of F.I.C.A. and withholding or similar taxes, make such deposits or pay
such taxes, in whole or in part, or set up such reserves as Lenders shall in its
sole discretion deem necessary in respect of such Borrower's liability therefor.
Any amount so paid, deposited or reserved for shall constitute a Loan for all
purposes hereunder. Nothing herein shall be deemed to obligate Agent or Lender
to do any of the foregoing and the making of any one or more such payments,
deposits or reserves shall not
48
constitute an Agreement by Agent or Lender to take any further or similar action
or a waiver of any right of Agent or Lender hereunder.
1.78. Access to Records. Borrowers will at all times keep accurate
-----------------------
records of the Collateral and will permit Agent or its agents or representatives
at any reasonable time from time to time to visit Borrower's place(s) of
business, without hindrance or delay, to inspect Inventory and examine, check,
audit and make copies and abstracts from Borrower's records and books of account
(including without limitation corporate or company minutes, and records,
journals, orders, receipts and correspondence relating to Collateral, account
debtors, transactions unrelated to collateral and Borrower's general financial
condition, business and affairs); and to discuss with any of Borrower's
appropriate directors, officers, employees, accountants and other agents or
representatives the Collateral and Borrower's general financial condition,
business and affairs.
1.79. License to Use Premises. Each Borrower hereby grants to Agent,
-----------------------------
for a term commencing on the Closing Date and continuing so long as any of the
Obligations remain outstanding, at a rental of $1.00 for such entire term, the
right to the use of all premises or places of business which Borrower now or
hereafter may have and where any Collateral may be located; provided that Agent
agrees not to exercise such right unless and until an Event of Default occurs
and is continuing and Agent determines to exercise its rights against Collateral
hereunder.
1.80. Instruments Evidencing Accounts. If any Accounts are at any time
-------------------------------------
evidenced by promissory notes, trade acceptances or other instruments for the
payment of money, Borrowers will immediately deliver the same to Agent
appropriately endorsed to Lender's order and, regardless of the form of such
endorsement, each Borrower hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and all other notices with respect thereto.
1.81. Continuing Security Interest. In the event of the sale, exchange
----------------------------------
or disposition of any of the Collateral or any interest therein (and no such
sale, exchange or other disposition is hereby authorized or consented to, except
as permitted and provided in Section 9.1), Agent's and/or Lenders' security
interest shall nevertheless continue in such Collateral (including without
limitation all proceeds, cash and non-cash) notwithstanding such sale, exchange
or other disposition; all of said proceeds shall remain Collateral hereunder and
shall be transferred and paid over to Agent immediately, and shall be applied at
Agent's option to the payment of Obligations; and Agent's receipt of any such
Proceeds
49
shall not be deemed or construed to be an authorization of or consent to any
such sale, exchange or other disposition.
1.82. No Lender Liability. Notwithstanding anything to the contrary
-------------------------
set forth herein, neither Lenders nor Agent shall have any obligation or
liability under any Accounts, Leases or other Collateral arising out of this
Agreement or Agent's or Lenders' exercise of its rights and remedies or
Borrower's performance of its obligations hereunder, nor shall Agent or Lenders
have any obligation to make any inquiry as to the nature or sufficiency of any
payment received by it, or to file any claim or take any action to enforce the
payment or performance of any portion of the Collateral. Beyond the safe custody
thereof, Agent and/or Lenders shall have no duty as to any Collateral in it or
its nominee's possession or any income thereon, or as to the preservation of
rights against other parties or otherwise.
SECTION 11
EVENTS OF DEFAULT
-----------------
1.83. Events of Default. At the option of Agent, the occurrence of any
-----------------------
of the following shall constitute an Event of Default:
(1) failure by a Borrower to pay any principal, interest or other
amount when due on account of the Loan, which failure shall continue for a
period of three (3) days after notice thereof has been made by Agent to
Borrower;
(2) failure by a Borrower to pay any other Obligation within five (5)
days of notice by Agent that such other Obligation is due;
(3) breach or non-compliance by a Borrower of any covenant under this
Agreement or any of the other Loan Document, or any representation or warranty
by Borrower under this Agreement or any of the other Loan Documents is found to
have been false or misleading in any respect as of the time when made;
(4) loss, theft, damage, or destruction of any part of the Collateral;
provided, that Agent will not declare a default if the loss is insured against
--------
in full or if substitute Collateral is pledged within thirty (30) days thereof;
(5) the Collateral directly or indirectly becomes the subject matter
of any executable judgment (which is not covered by insurance) that could, in
the reasonable opinion of the Agent, based upon written advice from counsel
selected by the Agent,
50
result in (i) impairment of, or loss of, the security interests intended to be
provided by this Agreement, or (ii) forfeiture of any of the Collateral to the
Federal Government, any state government or agency thereof, or any foreign
government which shall remain undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed;
(6) occurrence of any event of default as defined in any other
instrument evidencing or governing Indebtedness of a Borrower now or hereafter
outstanding;
(7) a Borrower's liquidation, termination, dissolution or cessation of
a substantial part of its current business;
(8) commencement by a Borrower of a voluntary proceeding seeking
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law, or seeking appointment of a trustee, receiver, liquidator or
other similar official for it or any substantial part of its assets; or its
consent to any of the foregoing in an involuntary proceeding against it; or a
Borrower shall generally not be paying its debts as they become due or admit in
writing its inability to do so; or an assignment for the benefit of, or the
offering to or entering into by a Borrower of any composition, extension,
reorganization or other Agreement or arrangement with, its creditors;
(9) commencement of an involuntary proceeding against a Borrower
seeking relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law, or seeking appointment of a trustee, receiver, liquidator
or other similar official for it or any substantial part of its assets, which
proceeding is not dismissed or stayed within sixty (60) days;
(10) service upon Agent of a writ of levy or attachment or naming Agent
as trustee for Borrower, or of any other similar process or attachment in an
amount of $100,000 or more and if less than $100,000, if such levy, attachment
or process is not discharged in 30 days;
(11) entry of any executable judgment(s) against Borrowers in an
aggregate amount greater than $100,000 which is not covered by insurance (and
for this purpose a judgment shall be deemed "covered by insurance" only if the
insurance company has formally advised Borrowers that the judgment in its
entirety is covered by insurance and no action is being taken to execute such
judgment against a Borrower's assets) and shall remain undischarged or unvacated
for a period in excess of thirty (30) days or execution shall at any time not be
effectively stayed;
(12) attachment of any Lien in excess of $100,000 (other than a
Permitted Lien) upon property of a Borrower not in favor
51
of Agent without Agent's prior written consent which Lien is not discharged in
thirty (30) days;
(13) entry of any court order which enjoins, restrains, or in any way
prevents a Borrower from conducting all or any substantial part of its business;
(14) reclamation or repossession of any asset(s) of a Borrower valued
in excess of $100,000, unless contracted in good faith; or
(15) there shall occur and be continuing any Reportable Event which
constitutes grounds for termination of or for appointment by a United States
district court of a trustee to administer any Plan; the PBGC shall institute
----
proceedings to terminate or to appoint a trustee to administer any Plan; a
United States district court shall appoint a trustee to administer any Plan; or
any Plan shall be terminated in circumstances giving rise to liabilities having
a material adverse effect on a Borrower's financial condition.
Each Borrower acknowledges and agrees that each and every Event of
Default described above shall be of equal weight and significance, and equally
and fully shall allow Agent to exercise its rights and remedies hereunder. Each
Borrower acknowledges and agrees that each such Event of Default has been a
material inducement for Agent and/Lenders or to enter into its Agreement and
that Agent and/or Lenders would be irreparably harmed if Agent and/or Lenders,
in any way, were unable to exercise their rights and remedies on the basis that
certain Event of Default (for example, Events of Default not relating to
payment) were of less weight or significance than certain other Events of
Default (for example, Events of Default relating to payment).
SECTION 12
AGENT'S RIGHTS AND REMEDIES UPON THE OCCURRENCE
-----------------------------------------------
OF AN EVENT OF DEFAULT
----------------------
Following the occurrence and during the continuance of an Event of
Default, Agent may, at its option:
1.84. Remedies. Agent may declare any and all of the Obligations to be
--------------
immediately due and payable; and, in addition to that right, and in addition to
exercising all other rights or remedies, Agent may proceed to exercise with
respect to the Collateral all rights, options and remedies of a secured party
upon default as provided for under the UCC.
1.85. Exercise of Remedies. Agent may by notice to Borrower terminate
--------------------------
52
the commitment to make the Loans under Section 2 and/or accelerate the payment
of all Obligations (provided that no such notice shall be required if the Event
of Default is under Sections 11.1(i) or 11.1(j)); Agent may proceed to enforce
payment of any of the Obligations and shall have and may exercise any and all
rights under the Uniform Commercial Code or which are afforded to Agent herein
or otherwise; and all Obligations (including without limitation principal,
accrued interest, amounts payable under Section 13.1 or upon entry of any
judgment) shall bear interest payable on demand at the rate per annum five
percent (5%) in excess of the applicable rate of interest provided in Section 2
(the "Default Rate").
1.86. Disposition of Collateral. Agent may sell, lease or otherwise
-------------------------------
dispose of and deliver any or all Collateral at public or private sale, for
cash, upon credit or otherwise, at such prices and upon such terms as Agent
deems advisable in its sole discretion. Any requirements of reasonable notice
shall be met if such notice is mailed postage prepaid to Borrowers at its
address set forth herein at least ten (10) business days before the time of sale
or other disposition. Agent or a Lender may be the purchaser at any such sale,
if it is public, and in such event Agent and/or Lender shall have all rights of
a good faith, bona fide purchaser for value from a secured party after default.
The proceeds of any sale may be applied (in whatever order and manner Agent
elects in its sole discretion) to all costs and expenses of sale (including
without limitation reasonable attorneys' fees and disbursements) and to the
payment of Obligations, and any remaining proceeds shall be applied in
accordance with Article 9, Part 5, of the UCC. Borrower shall remain liable to
Agent for any deficiency.
1.87. Cumulative Remedies. The rights and remedies of the Agent and/or
-------------------------
Lender shall be deemed to be cumulative, and any exercise of any right or remedy
shall not be deemed to be an election of that right or remedy to the exclusion
of any other right or remedy.
1.88. Waivers. Each Borrower acknowledges that this Agreement involves
-------------
the grant of multiple security interests, and such Borrower hereby waives, to
the extent permitted by applicable law, (i) any requirement of marshaling assets
or proceeding against persons or assets in any particular order, and (ii) any
and all notices of every kind and description that may be required to be given
by any statute or rule of law and any defense of any kind based on any such
notice, except any notices required under the Note.
53
SECTION 13
INDEMNIFICATION, ETC.
---------------------
1.89. Environmental Indemnity. Each Borrower shall indemnify, defend,
-----------------------------
and hold harmless Agent, each Lender, its Affiliates, and their respective
directors, officers, shareholders, partners, employees, consultants and agents
(herein individually called an "Indemnified Party," and collectively called
"Indemnified Parties") from and against, and shall reimburse and pay Indemnified
Parties with respect to, any and all claims, demands, liabilities, losses,
damages (including without limitation actual, consequential, exemplary and
punitive damages), causes of action, judgments, penalties, fees, costs and
expenses (including without limitation attorneys' fees, court costs and legal
expenses and consultant's and expert's fees and expenses) of any and every kind
or character, known or unknown, fixed or contingent, that may be imposed upon,
asserted against, or incurred or paid by or on behalf of any Indemnified Party
on account of, in connection with, or arising out of (a) the breach of any
representation or warranty of a Borrower relating to Environmental Laws or
Hazardous Materials, or (b) the failure of a Borrower to perform any agreement,
covenant or obligation required to be performed by a Borrower relating to
Environmental Laws or Hazardous Materials, (c) any violation of or failure to
comply with any Environmental Law now existing or hereafter occurring, (d) the
removal of Hazardous Materials from a Borrower's properties (or if removal is
prohibited by law, the taking of whatever action is required by law), (e) any
act, omission, event or circumstance existing or occurring or resulting from or
in connection with the ownership, construction, occupancy, operation, use or
maintenance of the properties, regardless of whether the act, omission, event or
circumstance constituted a violation of or failure to comply with any
Environmental Law at the time of its existence or occurrence, and (f) any and
all claims or proceedings (whether brought by private party or governmental
agency) for bodily injury, property damage, abatement or remediation,
environmental damage, or impairment or any other injury or damage resulting from
or relating to any Hazardous Material located upon or migrating into, on, from
or through the properties (whether or not any or all of the foregoing was caused
by a Borrower, a prior owner of the properties, an operator or prior operator of
the properties, their respective tenants or subtenants, or any third party and
whether or not the alleged liability is attributable to the handling, storage,
use, treatment, processing, distribution, manufacture, generation, discharge,
transportation or disposal of such Hazardous Material or the mere presence of
such Hazardous Material on the properties). Without limiting the generality of
the foregoing, it is the intention of each Borrower and each Borrower agrees
that the foregoing indemnities shall apply to each Indemnified Party with
respect to claims, demands, liabilities, losses, damages (including without
limitation actual, consequential, exemplary and punitive damages), causes of
action, judgments, penalties, fees, costs, court costs and legal expenses and
consultant's and expert's fees and expenses, of any kind or character, known or
unknown, fixed or contingent, that in whole or in part are caused by or arise
out of the negligence of such Indemnified Party; however, such indemnities shall
-------
not apply to any Indemnified Party to the extent the subject of the
indemnification is caused by or arises out of the gross negligence or willful
misconduct of such Indemnified Party. The foregoing indemnities shall be
perpetual and shall survive the payment or satisfaction of the Loans and the
release, foreclosure or other termination of the Loan Document. Any amount to be
paid hereunder by Borrower to Agent and/or Lenders or for which Borrower has
indemnified an Indemnified Party shall be a demand obligation owing by Borrower
to Agent
54
and/or Lenders and shall bear interest at the Default Rate until paid, and shall
constitute a part of the obligations of Borrower under this Agreement and shall
be indebtedness evidenced by this Agreement and secured by the Loan Documents.
1.90. GENERAL INDEMNITY. EACH BORROWER AGREES TO INDEMNIFY AGENT
-----------------------
AND/OR LENDERS UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, PENALTIES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES
OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS
AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY
CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER GROWING OUT OF, RESULTING
FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN
DOCUMENTS, OR THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE
THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN. THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY AGENT AND/OR LENDER PROVIDED ONLY THAT A LENDER SHALL
NOT BE ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION FOR THAT PORTION,
IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL
JUDGMENT. IF ANY PERSON (INCLUDING A BORROWER OR ANY OF ITS AFFILIATES) EVER
ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY A LENDER OR THE AGENT,
THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL NONETHELESS BE PAID UPON
DEMAND, SUBJECT TO LATER ADJUSTMENT OR REIMBURSEMENT, UNTIL SUCH TIME AS A COURT
OF COMPETENT JURISDICTION ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND EFFECT OF
THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY AMOUNT TO BE PAID
HEREUNDER BY BORROWER TO AGENT AND/OR LENDERS, OR FOR WHICH BORROWER HAS
INDEMNIFIED AN INDEMNIFIED PARTY, SHALL BE A DEMAND OBLIGATION OWING BY BORROWER
TO AGENT AND/OR LENDER AND SHALL BEAR INTEREST AT THE DEFAULT RATE UNTIL PAID,
AND SHALL CONSTITUTE A PART OF THE OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT
AND SHALL BE INDEBTEDNESS EVIDENCED BY THIS AGREEMENT AND SECURED BY THE LOAN
DOCUMENTS. AS USED IN THIS SECTION THE TERM "LENDER" SHALL REFER NOT ONLY TO THE
PERSON DESIGNATED AS SUCH IN THIS SECTION BUT ALSO TO EACH DIRECTOR, OFFICER,
PARTNER, AGENT, ATTORNEY, EMPLOYEE, REPRESENTATIVE AND AFFILIATE OF SUCH PERSON.
1.91. Exculpation. In the absence of willful misconduct taken or
-----------------
omitted in bad faith, or gross negligence,
55
neither a Lender, Agent nor any attorney-in-fact pursuant to Section 10.__ shall
be liable to a Borrower or any other Person for any act or omission, any mistake
of fact or any error of judgment in exercising any right or remedy granted
herein.
1.92. Collateral Secures Indemnification. Agent shall be entitled to
----------------------------------------
retain Collateral or require substitution therefor to the extent required to
assure Agents of satisfaction of Borrower's Obligations under this Section 13.
SECTION 14
MISCELLANEOUS PROVISIONS
------------------------
1.93. Notices. Any notices or other communications required or
-------------
permitted hereunder shall be sufficiently given if in writing and delivered in
Person, transmitted by facsimile transmission (fax) or sent by registered or
certified mail (return receipt requested) or recognized overnight delivery
service, postage pre-paid, addressed as follows, or to such other address has
such party may notify to the other parties in writing:
(1) if to Borrowers:
Environmental Safeguards, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy (which will not constitute notice) to:
Xxxxxxx, Xxxxx & Xxxxxxxxx
0000 Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
(2) if to Agent and/or Lenders:
Xxxxxx, Xxxxxxx & Company
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
56
and
Newpark Resources, Inc.
0000 X. Xxxxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Attn: Xxxxx Xxxx
and
Xxxxx X. Xxxxx
Stone Energy
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
with a copy (which will not constitute notice) to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
1.94. No Waiver. No failure to exercise and no delay in exercising, on
---------------
the part of Agent and/or a Lender, any right or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right or
remedy. Waiver by Agent and/or a Lender of any right or remedy on any one
occasion shall not be construed as a bar to or waiver thereof or of any other
right or remedy on any future occasion. Without limiting the generality of the
foregoing, the Borrowers expressly agree that no failure by a Agent and/or
Lenders to detect or to communicate with a Borrower or take action in response
to any failure by a Borrower to perform or observe any Obligation shall operate
as a waiver of any right or remedy of Agent and/or Lenders. Any waivers by Agent
and/or Lenders must be in writing. Agent's and/or Lender's rights and remedies
hereunder, under any Agreement or instrument supplemental hereto or under any
other Agreement or instrument shall be cumulative, may be exercised singly or
concurrently and are not exclusive of
57
any rights or remedies provided by law.
1.95. Assignment. This Agreement shall be binding upon and shall
----------------
inure to the benefit of each Borrower, Agents and Lenders and their respective
successors and assigns; provided that Borrowers may not assign or transfer any
rights or Obligations hereunder without Agent's prior written consent.
1.96. Headings. The headings contained herein are for convenience only
--------------
and shall not affect the construction hereof. If one or more provisions of this
Agreement (or the application thereof) shall be invalid, illegal or
unenforceable in any respect in any jurisdiction, the same shall not, to the
fullest extent permitted by applicable law, invalidate or render illegal or
unenforceable such provision (or its application) in any other jurisdiction or
any other provision of this Agreement (or its application). This Agreement is
the entire Agreement of the parties with respect to the subject matter hereof
and supersedes any prior written or verbal communications or instruments
relating thereof.
1.97. Term. This Agreement shall continue in full force and effect so
----------
long as any of the Obligations remains outstanding or has not been fully and
finally paid, performed or satisfied. All agreements, representations,
warranties and covenants made herein shall survive delivery of this Agreement
and the Note.
1.98. Waiver of Remedies. Each Borrower acknowledges that the
------------------------
transactions contemplated hereby are commercial transactions and waives, to the
fullest extent it may do so under applicable law, such rights as it may have or
hereafter have to notices and/or hearings under applicable federal or state laws
relating to exercise of any of Agent's and/or Lenders' rights, including without
limitation the right to deprive a Borrower of or affect its use, possession or
enjoyment of property prior to rendition of a final judgment against Borrower.
1.99. Further Assurances. Each Borrower shall execute and deliver to
------------------------
Agent such further assurances and take such other further actions as Agent may
from time to time request to further the intent and purpose of this Agreement
and to maintain and protect the rights and remedies intended in favor of Agent
and/or Lenders under this Agreement. Borrowers shall execute and deliver to
Agent any financing statement or other notice document requested, or procure any
other document requested, and record such financing statements or other notice
documents to perfect the Liens, and the first priority of the Liens, created
under this Agreement. If the Collateral is of a type as to which it is necessary
or desirable for Agent to take possession of the Collateral in order to
58
perfect, or maintain the priority of, Agent's Liens, then upon Agent's request,
such Borrower shall deliver such Collateral to Agent.
1.100. Counterparts. This Agreement may be signed in any number of
-------------------
counterparts with the same effect as if the signature thereto and hereto were
upon the same instrument.
1.101. Fees and Expenses. Borrower shall pay to Agent all reasonable
------------------------
costs, filing fees, expenses, losses, claims, damages, liabilities, penalties,
suits, judgments or disbursements of any nature (including without limitation
reasonable attorneys' fees and disbursements and appraisal costs) which may be
incurred by, imposed on or asserted against Lender in connection with: this
Agreement and any of the other Loan Documents; all other amendments,
modifications or waivers hereof or thereof; taxes and other governmental charges
payable by reason of this Agreement, documents and filings relating hereto and
Collateral (excluding income and franchise taxes payable by Agent); any exercise
of Agent's and/or Lenders' rights and remedies, including the right of
acceleration; any enforcement, collection or other proceedings with respect to
the Obligations or from any negotiations or other measures to preserve Agent's
and/or Lenders' rights hereunder; any investigative, administrative or judicial
proceeding (whether or not Lender is designated as a party thereto) relating to
or arising out of this Agreement; or any bankruptcy, insolvency or other similar
proceedings relating to a Borrower. Notwithstanding anything in this section to
the contrary, the parties hereto agree that each party shall pay its own
respective fees and disbursements for legal counsel incurred in connection with
the Loan Documents.
1.102. Consent of all Lenders. Notwithstanding anything to the
-----------------------------
contrary contained herein, no amendment, modification, change or waiver shall be
effective without the consent of all of the Lenders to:
(1) extend the maturity of the principal of, or interest on, any Note
or of any of the other Obligations;
(2) reduce the principal amount of any Note or of any of the other
Obligations, the rate of interest thereon due to the Lenders, except as
expressly permitted herein or therein;
------
(3) change the aggregate Commitments;
(4) change the date of payment of principal of, or interest on, any
Note or of any of the other Obligations;
(5) change the method of calculation utilized in connection with the
computation of interest;
59
(6) change the manner of pro rata application by the Agent of payments
made by the Borrowers, or any other payments required hereunder or under the
other Loan Documents;
(7) modify this Section, Section 8.8 or Section 8.12;
(8) release or agree to subordinate any material portion of any
Collateral or Financing Document (except to the extent provided herein or
therein); or
(9) waive the performance, observance or compliance with or amend and
financial covenants.
Additionally, no change may be made to the amount of a Lender's Commitment
without the prior written consent of that Lender.
14.11 Usury Laws. It is the intention of the parties hereto to comply
----------------
with all applicable usury laws; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this Agreement or any other Loan Documents, in
no event shall such Loan Documents require the payment or permit the collection
of interest (which term, for purposes hereof, shall include any amount which,
under applicable law, is deemed to be interest, whether or not such amount is
characterized by the parties as interest) in excess of the maximum amount
permitted by such laws. If any excess of interest is unintentionally contracted
for, charged or received under this Agreement or under the terms of any other
Loan Documents, or in the event the maturity of the indebtedness evidenced by
the Notes is accelerated in whole or in part, or in the event that all or part
of the principal or interest of the Notes shall be prepaid, so that the amount
of interest contracted for, charged or received under this Agreement or under
any of the other Loan Documents, on the amount of principal actually outstanding
from time to time under this Agreement shall exceed the maximum amount of
interest permitted by the applicable usury laws, then in any such event (i) the
provisions of this paragraph shall govern and control, (ii) neither Borrowers
nor any other person or entity now or hereafter liable for the payment thereof,
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the maximum amount of interest permitted by such applicable usury
laws, (iii) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount thereof or refunded
to Borrowers at Lender's option, and (iv) the effective rate of interest shall
be automatically reduced to the maximum lawful rate of interest allowed under
the applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under the Notes or under such other Loan Documents which are made for
the purpose of determining whether such rate exceeds the maximum lawful rate of
interest, shall be made, to the extent permitted by applicable laws, by
amortizing, prorating, allocating and spreading in equal parts during the period
of the full stated term of the Loans evidenced thereby, all interest at any time
contracted for, charged or received from Borrowers or otherwise by Lenders in
connection with such Loans.
60
SECTION 15
GOVERNING LAW; JURISDICTION
---------------------------
15.1. Governing Law. This Agreement shall take effect as a sealed
--------------------
instrument and shall be governed by and construed in accordance with the laws of
the State of Maryland (without giving effect to its conflict of laws rules).
15.2. SUBMISSION TO JURISDICTION. EACH BORROWER, TO THE FULL EXTENT
---------------------------------
PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE
STATE OF MARYLAND OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM
OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN THE CITY OF BALTIMORE, MARYLAND, (C) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND, (D) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY FORUM OTHER
THAN THE CITY OF BALTIMORE, MARYLAND (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT
OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). EACH
BORROWER FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR
NOTICES DESCRIBED HEREIN ) HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING
HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER
MANNER PERMITTED BY LAW).
[remainder of page intentionally left blank]
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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/ Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman, President and
Chief Executive Officer
NATIONAL FUEL & ENERGY, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman, President and
Chief Executive Officer
ONSITE TECHNOLOGY, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
LENDERS: XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P.
By: XXXXXX, XXXXXXX STRATEGIC PARTNERS, L.P.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: a General Partner
62
STRATEGIC ASSOCIATES, L.P.
By: XXXXXX, XXXXXXX & COMPANY, LLC, its
General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
NEWPARK RESOURCES, INC.
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman of the Board,
President and
Chief Executive Officer
XXXXX X. XXXXX
/s/ Xxxxx X. Xxxxx
-----------------------------------
63
EXHIBIT A
FORM OF NOTE
64
EXHIBIT B
ADDITIONAL WARRANT FOR 188,571
65
EXHIBIT C
WARRANT AND WARRANT AGREEMENTS
66
