EXHIBIT 10.12
RINECO RECYCLING, LLC
629 Vulcan Road
Haskell, Arkansas 72015
Telephone: (501) 778-9089 / Facsimile: (501) 778-8505
March 6, 2003
OnSite Technology LLC
Attention: James S. Percell, President
2600 South Loop West, Suite 645
Houston, TX 77054
Re: $1,500,000.00 business loan
Dear James:
We are pleased to advise you that Rineco Recycling, LLC ("Lender") has
approved your loan request for the above-mentioned business loan upon and
subject to the following terms and conditions:
BORROWER(S): Environmental Safeguards, Inc., a Nevada corporation with
its chief executive office in Houston, Texas, National Fuel
& Energy, Inc., a Wyoming corporation with its chief
executive office in Houston, Texas, and OnSite Technology
LLC, an Oklahoma limited liability company with its chief
executive office in Houston, Texas (collectively "BORROWERS"
and individually, a "BORROWER")
LIABILITY
PROVISION: Joint and Several
AMOUNT: $1,500,000.00 (the "Loan") to be disbursed in three (3)
separate advances of $500,000.00 each on March 15, 2003, May
15, 2003 and July 15, 2003, provided no event of default or
other event which, with the giving of notice or the passage
of time, or both, would constitute an event of default under
any Loan Document has occurred and is continuing.
PURPOSE: Working capital
COLLATERAL: Three (3) separate Indirect Thermal Desorption Units
("ITDS"), together with any and all substitutions,
replacements, accessions,
permits, licenses, proceeds and awards of whatever kind in
respect of the foregoing. One ITD is now and will at all
times be located in Haskell, Arkansas (unless the Contract
between Borrower OnSite Technology LLC and Rineco Chemical
Industries, Inc. referred to below shall have been
terminated, in which event said unit may be moved, but
without affecting or canceling Lender's security interest
therein); the location of the remaining ITDs will at all
times be disclosed to Lender, Borrowers shall identify each
ITD by make and model number, serial number and any other
descriptive information available to Borrowers.
RATE: Twelve percent (12.0%) per annum
REPAYMENT: In twenty (20) quarterly installments of principal in the
amount of $75,000.00 each, plus accrued and unpaid interest
on the unpaid principal balance of the Loan, such equal
quarterly installments of principal, plus accrued and unpaid
interest, to be due and payable beginning August 31, 2003,
and on the last day of each November, February, May and
August thereafter until Maturity, at which time, the entire
unpaid principal of, together with all accrued and unpaid
interest on, the Loan shall be due and payable in full.
Borrowers shall have the right to prepay all or any part of
the Loan at any time without premium or penalty; provided
specifically, however, no partial prepayment shall operate
to postpone, delay, cancel or diminish any regularly
scheduled principal installment.
ORIGINATION FEE: Eight percent (8.0%) for each $500,000.00 principal advance
MATURITY: May 31, 2008
COMMITMENT
ACCEPTANCE: This commitment is to be accepted and returned to Lender no
later than March 7, 2003, after which Lender in its sole
discretion may determine the commitment to be null and void.
CLOSING DATE: The Loan is to close on or before March 20, 2003, after
which this commitment may be determined null and void by the
Lender.
CONDITIONS: This Commitment and the consummation of the Loan transaction
are conditioned upon (a) the completion by Lender and
Lender's counsel of such due diligence investigations with
respect to each Borrower, its principals and the Collateral
security for the Loan as Lender and/or Lender's counsel
shall deem appropriate, (b) the execution and delivery by
each Borrower of definitive documentation relating to the
Loan, (c) the absence of any development which could
adversely affect the proposed Loan, and (d) Lender's receipt
of assurances
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acceptable to Lender that Lender will receive Warrants to
purchase 1,500,000 shares of the common stock of Borrower
Environmental Safeguards, Inc. for $0.01 each, together with
assurances acceptable to Lender that the issuance of said
Warrants and all stock which may be purchased pursuant
thereto will not violate any federal or state securities
laws. All such documents, investigations and conditions must
be satisfied in a manner acceptable to Lender. Lender's due
diligence investigations shall include, but not be limited
to, the receipt and review of the following items, each of
which will be obtained at the expense of Borrowers and
submitted to Lender in sufficient time for Lender to
adequately evaluate its acceptability, and each of which
shall be in form and substance satisfactory to Lender.
(i) a current UCC, judgment and lien search with
respect to each Borrower and the ITDs and other
Collateral for the Loan;
(ii) operating statements, balance sheets and tax
returns for each Borrower for each of their past
three (3) fiscal years;
(iii) copies of all organizational documents of each
Borrowers and Certificates of Good Standing from
applicable governmental authorities with respect
to each Borrower;
(iv) opinions of counsel to each Borrower with respect
to each Borrower, the Collateral security for the
Loan and the definitive loan documentation, all of
which shall be acceptable to Lender, and which
opinions shall, without limiting the foregoing
state, inter alia, (a) that the interest rate
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established by the Loan Documents, together with
any and all other charges due or payable
thereunder which are or could be construed to be
interest, do not violate the usury laws of the
State of Texas and that the Texas choice of law
designation herein and in the Loan documents would
be given effect and upheld by a federal court
located in the State of Texas or a Texas state
court, and (b) that the issuance of the Warrants
hereinabove provided for does not and will not
violate any federal or state securities laws;
(v) evidence of the absence of material (in Lender's
sole discretion) litigation affecting each
Borrower or the Collateral security for the Loan;
(vi) certificates and affidavits of each Borrower
and/or their respective principals with respect to
certain of the above items and such other items as
Lender may reasonably request; and
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(vii) an Addendum to that certain Hazardous Waste
Recycling Services Contract - U.S., dated February
15, 2003, between Borrower OnSite Technology LLC
and Rineco Chemical Industries, Inc., pursuant to
which Addendum said Contract shall have been
modified by (i) canceling the 90-day withdrawal
right contained therein in favor of OnSite
Technology LLC (the 90-day withdrawal right
therein in favor of Rineco Chemical Industries,
Inc. shall remain intact), (ii) extending the term
of said Contract to May 31, 2008, and (iii) giving
Rineco Chemical Industries, Inc. the right to
offset against any and all sums due from it under
said Contract the amount(s) which Borrowers fail
to pay under the Loan Documents.
LOAN DOCUMENTS: The definitive documentation for the Loan shall include:
(i) Promissory Note;
(ii) Security Agreement pursuant to which each Borrower
will grant and give Lender a first priority
security interest in the ITDs and other
Collateral;
(iii) such UCC financing statements and other
documentation as Lender and its counsel shall
require for filing with the Texas Secretary of
State and any other appropriate public officials
deemed necessary or appropriate by Lender or
Lender's counsel in order to perfect a security
interest in the Collateral; and
(iv) such other additional documents as Lender or its
counsel shall reasonable require.
BORROWERS'
REPRESENTATIONS: 1. Borrowers represent to Lender that there is no
action, suit or proceeding, or any governmental
investigation or any arbitration, in each case
pending or, to the knowledge of Borrowers,
threatened against Borrowers or any of the
Collateral before any governmental or
administrative body, agency or official which (i)
challenges the validity of this Commitment or the
Loan Documents or the authority of any Borrower to
enter into this Commitment or the Loan Documents
or to perform the transactions contemplated hereby
or thereby, or(ii) if adversely determined, would
have a material adverse effect on any Borrower or
its properties.
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2. On the Closing Date, each Borrower shall certify
to Lender whether and to what extent there has
been any adverse change in the business, financial
condition or results of operations of any Borrower
or the Collateral from that shown on the financial
statements and reports referred to above. Any such
adverse change must be acceptable to Lender.
3. Borrowers represent and warrant that Borrowers
OnSite Technology LLC is the owner of and has the
right to grant and give Lender a security interest
in the ITDs.
4. The Loan Documents shall contain such additional
representations and warranties of each Borrower
concerning such Borrower, its constituent
shareholder(s) and member(s), acceptable to
Lender.
AFFIRMATIVE
COVENANTS: The Loan Documents will provide that:
1. Upon the failure of any Borrower to perform any of
its obligations hereunder or to perform any of its
material obligations under any of the Loan
Documents (such material obligations to include,
but not be limited to, the prompt and punctual
payment of principal and interest, the obligation
to insure the Collateral with Lender as loss
payee, and the Borrower without prior written
notice to Lender), Rineco Chemical Industries,
Inc. shall have the right to immediately set off
against its obligations under that certain
Hazardous Waste Recycling Services Contract - U.S.
dated February 15, 2003, as amended, in the
amount(s) which any Borrower has failed to pay
Lender hereunder or under any of the Loan
Documents; and
2. Each Borrower shall agree to such additional
financial covenants as Lender or its counsel shall
reasonably require.
NEGATIVE
COVENANTS: The Loan Documents will provide that no Borrower will:
(i) create, assume or suffer to exist any liens on any
of the Collateral for the Loan;
(ii) without the express prior written covenants of
Lender, which consent will not be unreasonably
withheld, merge into or
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consolidate with any other company or change the
corporate structure of such Borrower;
(iii) dispose of all or a substantial portion of such
Borrower's assets or assets which provide a
substantial part of the earnings of such Borrower;
or
(iv) sell, or contract to sell, all or a substantial
part of the assets of such Borrower.
TERMINATION: Lender may, at its option exercised by written notice to the
addresses of this Commitment at its address shown above,
terminate this Commitment if any of the following events
occurs prior to Closing:
(a) Any sale, transfer, pledge, encumbrance or
assignment off any Borrower's interest in the
Collateral;
(b) Any sale, transfer, pledge, encumbrance or
assignment of any legal, equitable or beneficial
interest in Borrower OnSite Technology LLC without
the express prior written consent of Lender;
(c) Any Borrower breaches any provision contained in
this Commitment;
(d) Any Borrower has made any representation or
warranty to Lender which was untrue or false when
made in a material respect or which becomes untrue
or false in a material respect;
(e) Any petition of bankruptcy, insolvency or
reorganization is filed by or against any
Borrower.
Delay in the exercise of Lender's right to terminate this
Commitment upon the occurrence of any of the above events
shall not be construed as a waiver of such right. The
failure of Lender to act in any such event shall not be
construed as a waiver of its right to act with respect to
any subsequent event of a similar nature. Upon termination
as set forth above, all of Lender's obligations pursuant to
this Commitment shall cease and be of no further force and
effect whatsoever.
MISCELLANEOUS: 1. This Commitment shall not be effective until
accepted by each Borrower in the State of Texas
and shall be governed by and construed under the
internal laws of the State of Texas and applicable
federal laws.
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2. Whenever this Commitment refers to any item or
thing having to be satisfactory or acceptable to
Lender, such item or thing must be acceptable to
Lender in all respects, in its sole and absolute
discretion.
3. All approvals of or waivers by Lender in respect
of any of the terms, conditions or requirements of
this Commitment must be in writing.
4. No waiver with respect to any condition, breach or
other matter shall extend to or be taken in any
manner whatsoever to affect any other condition,
breach or matter or affect Lender's rights
resulting therefrom.
5. Each Borrower hereby waives any right which it may
have to a trial by jury in any action brought on
this Commitment or in any way connected with or
related to the Loan. Each Borrower hereby submits
in any legal proceeding relating to this
Commitment to arbitration.
6. Any controversy or claim between or among the
parties hereto, including, buy not limited to,
those arising out of or relating to this
Commitment or any documents executed pursuant
hereto, including, without limitation, any claim
based on or arising from an alleged tort, shall be
determined by binding arbitration (subject to any
reservation or rights below) in accordance with
the Federal Arbitration Act (or, if not
applicable, the applicable state law), the Rules
of Practice and Procedure for the Arbitration of
Commercial Disputes of the American Arbitration
Association ("AAA"), and any special rules set
forth below. In the event of any inconsistency,
any such special rules shall control. Judgment
upon any arbitration award may be entered in any
court having jurisdiction. Either Lender or
Borrowers may bring an action, including a summary
or expedited proceeding, to compel arbitration of
any controversy or claim to which this Commitment
Letter applies in any court having jurisdiction
over such action. The arbitration shall be
conducted in Little Rock, Arkansas, and
administered by AAA, which will appoint an
arbitrator, if AAA is unable or legally precluded
from administering the arbitration, then the
Judicial Arbitration and Mediation Services, Inc.
will serve. All arbitration hearings will be
commenced within 90 days of the demand for
arbitration. The arbitrator shall, for the showing
of cause only, be permitted to extend the
commencement of such hearing for up to an
additional 30 days. Nothing in this
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Commitment shall be deemed to limit the right of
Lender (i) to exercise self-help remedies such as,
but not limited to, setoff; or (ii) to foreclose
against the Collateral; or (iii) to obtain from a
court provisional or ancillary remedies such as,
but not limited to, injunctive relief or the
appointment of a receiver. Lender may exercise
such self-help rights, foreclose upon such
property, or obtain such provisional or ancillary
remedies before, during or after the pendency of
any arbitration proceeding brought pursuant to
this Agreement. Neither the exercise of self-help
remedies nor the institution or maintenance of an
action of foreclosure or provisional or ancillary
remedies shall constitute a waiver of the right of
any party, including the claimant in any such
action, to arbitrate the merits of the controversy
or claim occasioning resort to such remedies.
7. This Commitment may be signed in any number of
counterparts and by the different parties hereto
on separate counterparts, each of which shall,
when so executed and delivered, be an original,
but all of which shall together constitute one and
the same instrument.
THIS COMMITMENT AND THE OTHER LOAN DOCUMENTS REFERRED TO OR CONTEMPLATED
HEREIN REPRESENT, OR WILL REPRESENT, THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE
PARTIES.
If the above terms and conditions are acceptable to you, please sign this
Commitment in the space provided below and return the same to Lender at the
address which appears on this letterhead.
Sincerely,
RINECO RECYCLING, LLC
By: Harry C. Erwin III, President
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AGREED TO AND ACCEPTED:
ENVIRONMENTAL SAFEGUARDS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
Date: _______________________________
NATIONAL FUEL & ENERGY, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
Date: _______________________________
ONSITE TECHNOLOGY LLC
By: _________________________________
Name: _______________________________
Title: ______________________________
Date: _______________________________
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