[IMPERIAL BANK LETTERHEAD]
Member FDIC
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on December
2, 1998, by and between Eco Soil Systems, Inc., a Nebraska Corporation, Aspen
Consulting Companies, Inc., a Colorado Corporation, Turf Specialty, Inc., a
Delaware Corporation, Eco Turf Products, Inc., a Delaware Corporation,
Mitigation Services, Inc., a Delaware Corporation, Agricultural Supply, Inc., a
Delaware Corporation, ▇▇▇▇▇▇ Chemical Corporation, a Michigan Corporation, Turf
Acquisition Sub, Inc., a Delaware Corporation, and Yuma Acquisition Sub, Inc., a
Delaware Corporation (collectively, "Borrower") and Imperial Bank, a California
banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security
agreement(s) executed by Borrower in favor of Bank, any note(s) executed by
Borrower in favor of Bank, or any other agreements executed in conjunction
therewith (collectively, the "Loan Documents"), Bank shall make the loans and or
advances (individually a "Loan" and collectively "Loans") referred to below to
Borrower.
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a). REVOLVING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, provided that no Event of Default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for general corporate purposes, including, without
limitation, acquisitions, capital expenditures, construction of proprietary
systems, repayment of existing debt, financing working capital and payments with
respect to capital stock, in an amount not to exceed $10,000,000 (the "Revolving
Line of Credit") until April 28, 2000 (the "Revolving Line of Credit Maturity
Date"). Revolving Loans may be repaid and re-borrowed, subject to the
provisions of the LIBOR Addendum attached to the promissory note evidencing the
Revolving Line of Credit, provided that all outstanding principal and accrued
interest on the Revolving Loans shall be payable in full on the Revolving Line
of Credit Maturity Date.
(b) REVOLVING LOANS INTEREST. Borrower shall pay to Bank from the
date of the initial Revolving Loan until all Revolving Loans are paid in full,
on or before the 5th day of each month, commencing with the month following the
month in which funds are first disbursed, interest on the average daily unpaid
balance of the Revolving Loans during the immediately preceding month at a
variable rate of interest equal to one half of one percent (.50%) in excess of
the Prime Rate as defined below or, at Borrower's option, at an annual rate
equal to the LIBOR Rate plus three percent (3.00%) as specified in the LIBOR
Addendum annexed to the promissory note evidencing the Revolving Line of Credit.
(c) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability
under the Revolving Line of Credit, at any time and from time to time from the
date hereof through the banking day immediately prior to the Revolving Line of
Credit Maturity Date, Bank shall issue for the account of Borrower such standby
and commercial letters of credit ("Letters of Credit") as Borrower may request,
which requests shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $5,000,000 ("Letter of Credit Sublimit") and (ii) shall be
deemed to constitute Revolving Loans for the purpose of calculating availability
under the Revolving Line of Credit. Unless Borrower shall have deposited with
Bank cash collateral in an amount sufficient to cover all undrawn amounts under
each such Letter of Credit and Bank shall have agreed in writing, no Letter of
Credit shall have an expiration date that is later than the Revolving Line of
Credit Maturity Date. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form application and letter of credit agreement. Borrower
will pay all usual issuance and other fees that Bank notifies Borrower will be
charged for issuing and processing Letters of Credit for Borrower.
(d) FORWARD CONTRACTS. Subject to availability under the Revolving
Line of Credit, at any time and from time to time from the date hereof through
the Revolving Credit Maturity Date, Bank will allocate up to $50,000 for
exposure on foreign exchange contracts ("Forward Contracts") on terms acceptable
to Bank, provided that the aggregate amount of Forward Contracts at any one time
shall not exceed five hundred thousand dollars ($500,000).
1.02. INTEREST CALCULATIONS. The term "Prime Rate" shall mean the
rate that the Bank has announced as its prime lending rate, which shall vary
concurrently with any change in the Prime Rate. The term "LIBOR Rate" shall
mean the LIBOR rate as specified in the LIBOR Addendum annexed to any
promissory note. Interest based on the Prime Rate shall vary concurrently
with any change in the Prime
ECO SOIL SYSTEMS, INC. CREDIT AGREEMENT
Rate. All interest shall be computed at the rate specified in any note on the
basis of the actual number of days during which the principal balance of the
corresponding Loans are outstanding divided by 360, which shall for interest
computation purposes be considered one (1) year.
1.03 LOAN FEE. In addition to any other amounts due, or to become
due, concurrent with the execution hereof, in connection with the Revolving Line
of Credit, Borrower shall pay to Bank a loan fee of thirty-three thousand
dollars ($33,000).
1.04 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $250 and all other
costs and expenses incurred by the Bank in the preparation of this Agreement,
the other Loan Documents and the perfection of any security interest granted to
Bank by Borrower.
1.05 LATE CHARGE. If any installment payment, interest payment,
principal payment or principal balance due hereunder or due under any note or
obligation issued pursuant to this Agreement is delinquent ten (10) or more
days, Borrower agrees to pay Bank a late charge in the amount of five percent
(5%) of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the Bank
to accept payment of any payment past due or less than the total unpaid
principal balance after maturity. All payments, at Bank's sole discretion,
shall be applied first to any late charges owing, then to interest and the
remainder, if any, to principal.
1.06 DEFAULT RATE. If an Event of Default occurs hereunder, then
during the continuance thereof at the Bank's option, the interest rate shall be
five percent (5%) per year in excess of the rate otherwise applicable.
1.07 COLLATERAL. Borrower shall grant or cause to be granted to Bank
a first priority lien on any and all personal property assets of Borrower which
is assigned or hereafter is assigned to Bank as security or in which Bank now
has or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized
and existing and in good standing under the laws of the state of their
incorporation, without limit as to the duration of its existence. Borrower is
authorized and in good standing to do business in the state of its
incorporation; Borrower has the appropriate powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary except where the failure to be so qualified
could not reasonably be expected to have a material adverse effect on the
consolidated financial condition of Borrower; and Borrower has the power and
adequate authority to make and carry out this Agreement. Borrower has no
investment in any other business entity unless specified in writing to Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's charter/articles of incorporation or similar document as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 NO CONFLICT. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 LITIGATION. Except as disclosed in writing to bank by Borrower,
there is no litigation or other proceeding pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower which if determined
adversely to Borrower or its interest would have a material adverse effect on
the consolidated financial condition of Borrower, and Borrower is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority.
2.05 FINANCIAL CONDITION. The consolidated balance sheet of Borrower
as of September 30, 1998, and the related profit and loss statement for the
twelve months ended as of that date, a copy of which has heretofore been
delivered to Bank by Borrower, and all other statements and data submitted in
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writing by Borrower to Bank in connection with this request for credit are true
and correct, and said balance sheet truly presents the consolidated financial
condition of Borrower as of the date thereof, and has been prepared in
accordance with generally accepted accounting principles on a basis consistently
maintained. Since such date there have been no material adverse changes in the
consolidated financial condition or business of Borrower. Borrower has no
knowledge of any liabilities, contingent or otherwise, at such date not
reflected in said balance sheet, and Borrower has not entered into any special
commitments or substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its business, which may
have a materially adverse effect upon its consolidated financial condition,
operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses
all necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the
Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA in all material respects, and no Reportable Event or Prohibited
Transaction as defined in ERISA has occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as
applicable, have reviewed the areas within their operations and business which
could be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Problem and have made related
appropriate inquiry of material suppliers and vendors, and based on such review
and program, the Year 2000 Problem will not have a material adverse effect upon
its consolidated financial condition, operations or business as now conducted.
"Year 2000 Problem" means the possibility that any computer applications or
equipment used by Borrower may be unable to recognize and properly perform date
sensitive functions involving certain dates prior to and any dates on or after
December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:
3.01 PROMISSORY NOTE(S). Original, executed promissory note(s).
3.02 INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to Section 4.03 in form, substance,
amounts, covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
3.03 ORGANIZATIONAL DOCUMENTS. Copies of the charter/articles of
incorporation, or similar document as the case may be, of the Borrower.
3.04 AUTHORIZATIONS. Certified copies of all action taken by the
Borrower and each grantor of a security interest to authorize the execution,
delivery and performance of the Loan Documents.
3.05 GOOD STANDING. Good standing certificates from the appropriate
secretary of state of the state in which the Borrower is required to be
qualified to do business unless failure to so qualify could not reasonably be
expected to have a material adverse effect on the consolidated financial
condition of Borrower.
3.06 ADDITIONAL DOCUMENTS. Such other documents as Bank may
reasonably deem necessary to obtain a first priority interest in and to any
collateral securing any Loan.
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4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, or so long as Bank has any obligation to
extend credit to Borrower it will, unless Bank shall otherwise consent in
writing (such consent not to be unreasonably withheld):
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair
(unless such property, equipment or facilities are obsolete or failure to
maintain such property, equipment or facility could not reasonably be expected
to have a material adverse effect on the consolidated financial condition of
Borrower); conduct its business in an orderly manner without voluntary
interruption and, if a corporation or partnership, maintain and preserve its
existence.
4.02 USE OF PROCEEDS. Use the proceeds of the Loans only for purposes
specified in Section l of this Agreement.
4.03 INSURANCE. Maintain public liability, property damage and
workers' compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good business
judgment. Bank to be shown as Lenders Loss Payee on such policies.
4.04 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by
appropriate proceedings in such manner as not to cause any materially
adverse effect upon its consolidated financial condition or the loss of
any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated
to the extent required by generally accepted accounting practice) deemed
by it to be adequate with respect thereto.
4.05 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) MONTHLY FINANCIAL STATEMENT. As soon as available, and
in any event within thirty (30) days after the close of each month, a
consolidated balance sheet, profit and loss statement and reconciliation
of Borrower's capital balance accounts as of the close of such period
and covering operations for the portion of Borrower's fiscal year ending
on the last day of such period, all in reasonable detail and reasonably
acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified
by an appropriate officer of Borrower;
(b) QUARTERLY FINANCIAL STATEMENT. As soon as available, and
in any event within forty-five (45) days after the close of each
quarter, a consolidated balance sheet, profit and loss statement and
reconciliation of Borrower's capital balance accounts as of the close of
such period and covering operations for the portion of Borrower's fiscal
year ending on the last day of such period, all in reasonable detail and
reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower;
(c) ANNUAL FINANCIAL STATEMENT. As soon as available, and in
any event within ninety (90) days after and as of the close of each
fiscal year of Borrower, a consolidated report of audit of Borrower, all
in reasonable detail, prepared on an audited basis by an independent
certified public accountant selected by Borrower and reasonably
acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified
by an appropriate officer of Borrower;
(d) OFFICER'S CERTIFICATE. Within ninety (90) days after the
end of the fiscal year ended of Borrower, a certificate of the
controller or chief financial officer of Borrower, stating that Borrower
has performed and observed each and every covenant contained in this
Agreement to be performed by it and that no event has occurred and no
condition then exists which constitutes an Event of Default hereunder or
would constitute such an Event of Default upon the
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lapse of time or upon the giving of notice and the lapse of time
specified herein; or, if any such event has occurred or any such
condition exists, specifying the nature thereof;
(e) AUDIT REPORTS. Promptly after the receipt thereof by
Borrower, copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with each annual or interim work
on the accounts of Borrower made by such accountants;
(f) OTHER INFORMATION. Such other information relating to
the affairs of Borrower as the Bank reasonably may request from time to
time.
4.06 MODIFIED QUICK RATIO. Maintain at all times a consolidated
minimum ratio of total accounts receivable divided by total Trading Liabilities
(meaning the total of Revolving Loans, accounts payable and accrued liabilities)
of .85 to 1.00.
4.07 TRADING CAPITAL. Maintain at all times consolidated Trading
Capital (meaning total accounts receivable and inventory minus total Trading
Liabilities as defined in section 4.06) of not less than fifteen million dollars
($15,000,000).
4.08 EFFECTIVE TANGIBLE NET WORTH. Maintain at all times a
consolidated Effective Tangible Net Worth (defined as (a) stockholder's equity
(including without limitation preferred stock) less any value for goodwill,
trademarks, patents, copyrights, leaseholds, organization expense and other
similar intangible items, and any amounts due from stockholders, officers and
affiliates plus (b) subordinated debt including, without limitation, the
$15,000,000.00 offering of senior subordinated notes with detachable warrants
offered pursuant to the Note and Warrant Purchase Agreement and the Common Stock
Purchase Warrant, each dated as of August 25, 1998) of not less than thirty-six
million dollars ($36,000,000).
4.09 TOTAL LIABILITIES TO EFFECTIVE TANGIBLE NET WORTH. Maintain at
all times a consolidated ratio of total liabilities to Effective Tangible Net
Worth (as defined in section 4.08) of not greater than .75 to 1.00.
4.10 PROFITABILITY. Maintain on a consolidated basis, profitable
operations (meaning a net profit after taxes) of at least one dollar ($1) on an
annual (calendar year) basis.
4.11 ERISA. Cause all defined benefit pension plans, as defined in
ERISA, of Borrower to, at all times, meet the minimum funding standards of
Section 302 of ERISA in all material respects, and ensure that no Reportable
Event or Prohibited Transaction, as defined in ERISA, will occur with respect to
any such plan.
4.12 LAWS. At all times comply with, or cause to be complied with,
all laws, statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over Borrower or Borrower's business,
unless such failure of compliance could not reasonably be expected to have a
material adverse effect on the consolidated financial condition of Borrower.
4.13 USE OF PROCEEDS. Use the proceeds of the Loans only for the
purposes specified in Section I herein.
4.14 GAAP. Compliance with all financial covenants shall be
calculated based on generally accepted accounting principles applied on a
consistent basis as maintained by Borrower. The term "consolidated" as used
herein refers to the Borrower and all subsidiaries required to be consolidated
with Borrower in accordance with GAAP.
4.15 YEAR 2000 COMPLIANT. Perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors whose compliance is
likely to be material to Borrower's business, become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all Borrower's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used in this paragraph, "Year 2000 Compliant" shall mean,
in regard to any entity, that all software, hardware, firmware, equipment, goods
or systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall, immediately upon request,
provide to Agent such certifications or other evidence of Borrower's compliance
with the terms of this paragraph as Bank may from time to time require.
4.16 OPERATING ACCOUNTS. Maintain all significant business deposit
accounts at Bank.
4.17 NOTICES. Promptly notify Bank in writing of (i) the occurrence
of any Event of Default hereunder or any event which upon notice and lapse of
time would be an Event of Default; (ii) all
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litigation affecting Borrower where the amount is $50,000 or more; any
substantial dispute which may exist between Borrower and any governmental
regulatory body or law enforcement authority; any change in Borrower's name or
principal place of business; or any other matter which has resulted or might
result in a material adverse change in Borrower's financial condition or
operations.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so
long as Bank has any obligation to extend credit to Borrower, it will not,
without Bank's written consent (such consent not to be unreasonably withheld):
5.01 TYPE OF BUSINESS; MANAGEMENT; CHANGE IN CONTROL. Make any substantial
change in the character of its business or make any change in its executive
management.
5.02 OUTSIDE INDEBTEDNESS. (a) Create, incur, assume or permit to exist any
indebtedness for borrowed moneys in excess of one million dollars ($1,000,000)
other than (i) Loans from the Bank, (ii) obligations now existing as shown in
the financial statement dated September 30, 1998, excluding those obligations
being refinanced by Bank, (iii) indebtedness incurred in connection with
acquisitions prior to the date of this Agreement for post-acquisition
performance of the business or assets acquired in connection with such
acquisition ("Earn Out Obligations"), (iv) indebtedness secured by liens
permitted pursuant to Section 5.03 below and (v) short term trade indebtedness,
or (b) sell or transfer, either with or without recourse, any accounts or notes
receivable or any moneys due or to become due.
5.03 LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage, pledge,
encumbrance, lien or charge of any kind upon any asset now owned or hereafter
acquired by it in excess of one million dollars ($ 1,000,000), other than liens
for taxes not delinquent, liens in Bank's favor, liens granted in the ordinary
course of business (including without limitation liens of carriers,
warehousemen, mechanics, materialmen and other liens imposed by law), liens
granted pursuant to capital leases or other equipment purchase contracts, liens
with respect to Earn Out Obligations and liens with respect to that certain
property located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "San
Diego Property") and other than liens agreed to in writing by Bank.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same in excess of $1,000,000 prior to the Revolving Line of Credit Maturity Date
but excluding the sale and lease back of the San Diego Property.
5.06 LOSSES. Incur losses in the first quarter of fiscal 1999 (ended March
31) of greater than two million five hundred thousand dollars ($2,500,000) or
incur quarterly losses in excess of one dollar ($1) in any two consecutive
calendar quarters.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events
of Default") shall, at Bank's option, terminate Bank's commitment to lend and
make all sums of principal and interest then remaining unpaid on all Borrower's
indebtedness to Bank immediately due and payable, all without demand,
presentment or notice, all of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or
of interest on any indebtedness of Borrower to Bank within five (5) days of its
due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other
term or condition of this Agreement or any Loan Document binding upon Borrower
and such failure shall continue for more than thirty (30) days after the date
which Borrower should have or shall have first become aware of such failure.
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6.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or misleading
in any material respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become
insolvent; or admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $50,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against Borrower
and, if instituted against it, shall not be dismissed within sixty (60) days
thereafter.
6.07 REVOCATION OF SUBORDINATION AGREEMENT. Any subordination
agreement required hereunder is breached or becomes ineffective; or any
subordination creditor disavows or attempts to revoke or terminate such
subordination agreement.
6.08 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
6.09 ADVERSE CHANGE. Any change which, has a materially adverse
effect to the consolidated financial condition of Borrower.
6.10 OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's
obligations to Bank, shall commit or do or fail to commit or do any act or thing
which would constitute an event of default (after expiration of applicable
notice and cure periods) under any of the terms of any other agreement, document
or instrument executed or to be executed by it concerning the obligation to pay
money in excess of one hundred thousand dollars ($ 100,000).
6.11 ADVANCES. Notwithstanding anything to the contrary contained
herein, Bank shall have no duty to make advances while any Event of Default
exists notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of Bank or any holder of notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without
demand after notice, with interest thereon from the date of expenditure at the
rate applicable to the Loan, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising the Loan after
the occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
7
7.06 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of the Loan may have under applicable law, Bank
or other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 SEVERABILITY. Should any one or more provisions of the Agreement
be determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
7.10 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Credit Agreement, any security agreement executed by Borrower
in favor of Bank or any note executed by Borrower in favor of Bank or any other
agreement or instrument issued in favor of Bank by Borrower (collectively in
this Section, the "Agreement") which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "CLAIM DATE" (defined as
the date on which a party subject to this Agreement gives written notice to all
other parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 ET SEQ. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the real property, if any, is
located or San Diego County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP Section 644 in any court in the state of California having jurisdiction.
Any party may apply for a reference proceeding at any time after thirty (30)
days following notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial. All
discovery permitted by this Agreement shall be completed no later than fifteen
(15) days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provided herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter except
that when any party so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
8
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the state of
California. The rules of evidence applicable to proceedings at law in the state
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 SURETYSHIP WAIVERS AND CONSENTS. Each Borrower agrees that it is
jointly and severally, directly, and primarily liable to Bank for payment in
full of all obligations under the Loan Documents ("Obligations") and that such
liability is independent of the duties, obligations and liabilities of the other
Borrower. The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. Each Borrower acknowledges that the obligations of such
Borrower undertaken herein might be construed to consist, at least in part, of
the guaranty of obligations of persons or entities other than such Borrower
(including any other Borrower party hereto) and, in full recognition of that
fact, each Borrower consents and agrees that the Bank may, at any time and from
time to time, without notice or demand, whether before or after any actual or
purported termination, repudiation, or revocation of this Agreement by any one
or more Borrowers, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower: (a) supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate, or otherwise change the
time for payment or the terms of the Obligations or any part thereof, including
any increase or decrease of the rate(s) of interest thereon; (b) supplement,
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval, or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or guaranties,
or any condition covenant, default, remedy, right, representation or term
thereof or thereunder; (c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof-, (d) accept partial payments on the
Obligations; (e) receive and hold additional security or guaranties for the
Obligations or any part thereof; (f) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer, or
enforce any security or guaranties, and apply any security and direct the order
or manner of sale thereof as the Bank in its sole and absolute discretion may
determine; (g) release any Person from any personal liability with respect to
the Obligations or any part thereof; (h) settle, release on terms satisfactory
to the Bank or by operation of applicable laws, or otherwise liquidate or
enforce any Obligations and any security therefor or guaranty thereof in any
manner, consent to the transfer of any security and bid and purchase at any
sale; or (i) consent to the merger, change, or any other restructuring or
termination of the corporate or partnership existence of any Borrower or any
other Person, and correspondingly restructure the Obligations, and any such
merger, change, restructuring, or termination shall not affect the liability of
any Borrower or the continuing effectiveness hereof, or the enforceability
hereof with respect to all or any part of the Obligations.
Upon the occurrence and during the continuance of any Event of
Default, the Bank may enforce this Agreement independently as to each
Borrower and independently of any other remedy or security the Bank at any
time may have or hold in connection with the Obligations, and it shall not be
necessary for the Bank to marshal assets in favor of any Borrower or any
other Person or to proceed upon or against or exhaust any security or remedy
before proceeding to enforce this Agreement. Each Borrower expressly waives
any right to require the Bank to marshal assets in favor of any Borrower or
any other Person or to proceed against any other Borrower or any Collateral
provided by any Person, and agrees that the Bank may proceed against
Borrowers or any Collateral in such order as it shall determine in its sole
and absolute discretion.
The Bank may file a separate action or actions against any Borrower,
whether action is brought or prosecuted with respect to any security or against
any other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that the Bank and any Borrower and any affiliate
of any Borrower may deal with each other in connection with the Obligations or
otherwise, or
9
alter any contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting the
continuing efficacy of this Agreement.
The Banks hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by the Bank, all as though such amount had not been
paid. The rights of the Bank created or granted herein and the enforceability
of this Agreement at all times shall remain effective to cover the full amount
of all the Obligations even though the Obligations, including any part thereof
or any other security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable as against any Borrower and whether or not
any other Borrower shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law and to the extent that
a Borrower is deemed a guarantor, each Borrower expressly waives any and all
defenses now or hereafter arising or asserted by reason of (a) any disability or
other defense of any other Borrower with respect to the Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Obligations
or lack of perfection or continuing perfection or failure of priority of any
security for the Obligations, (c) the cessation for any cause whatsoever of the
liability of any other Borrower (other than by reason of the full payment and
performance of all Obligations), (d) any failure of the marshal assets in favor
Bank of any Borrower or any other person, (e) any failure of the Bank to give
notice of sale or other disposition of collateral to any Borrower or any other
Person or any defect in any notice that may be given in connection with any sale
or disposition of collateral, (f) any failure of the Bank to comply with
applicable law in connection with the sale or other disposition of any
collateral or other security for any Obligation, including any failure of the
Bank to conduct a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation, (g) any act or omission of the
Bank or others that directly or indirectly results in or aids the discharge or
release of any Borrower or the Obligations or any security or guaranty therefor
by operation of law or otherwise, (h) any law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (i) any
failure of the Bank to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person, (j) the election by the Bank of the
application or non-application of Section 111l(b)(2) of the United States
Bankruptcy code, (k) any extension of credit or the grant of any lien under
▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy code, (1) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of
the Bank for any reason, or (o) any action taken by the Bank that is authorized
by this section or any other provision of any Loan Document. Until such time as
all of the Obligations have been fully, finally, and indefeasibly paid in full
in cash: (i) each Borrower hereby waives and postpones any right of subrogation
it has or may have as against any other Borrower with respect to the
Obligations; and (ii) in addition, each borrower also hereby waives and
postpones any right to proceed or to seek recourse against or with respect to
any property or asset of any other Borrower. Each borrower expressly waives all
setoffs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Obligations, and all notices of acceptance
of this Agreement or of the existence, creation or incurring of new or
additional Obligations.
In the event that all or any part of the Obligations at any time
are secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Borrower
authorizes the Bank, upon the occurrence of and during the continuance of any
Event of Default, at its sole option, without notice or demand and without
affecting the obligations of any Borrower, the enforceability of this Agreement,
or the validity or enforceability of any Liens of the Bank, to foreclose any or
all of such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale.
To the fullest extent permitted by applicable law, to the extent that
a Borrower is deemed a guarantor, each Borrower expressly waives any defenses
to the enforcement of this Agreement or any rights of the Bank created or
granted hereby or to the recovery by the Bank against any Borrower or any
other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Borrowers and may preclude Borrowers from
obtaining reimbursement or contribution from other Borrowers. To the fullest
extent permitted by applicable law, each Borrower expressly waives any
suretyship defenses or benefits that it otherwise might or would have under
applicable law. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS SECTION, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF
AN ELECTION OF REMEDIES BY THE BANK, EVEN THOUGH THAT ELECTION OF REMEDIES,
SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR THE
OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF SUBROGATION AND
10
REIMBURSEMENT AGAINST THE OTHER BORROWERS BY THE OPERATION OF LAW, INCLUDING
BUT NOT LIMITED TO SECTION 580d OF THE CODE OF CIVIL PROCEDURE, OR OTHERWISE.
Borrower and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrower otherwise
may have against any other Borrower, the Bank or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
7.13 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
ECO SOIL SYSTEMS, INC. IMPERIAL BANK
("BORROWER") ("BANK")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/
---------------------------- ----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: CEO Its:
---------------------------- ----------------------------
Date: 12/8/98 Date:
--------------------------- ---------------------------
ASPEN CONSULTING COMPANIES, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its:
----------------------------
Date: 12/8/98
---------------------------
TURF SPECIALTY, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
ECO TURF PRODUCTS, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
11
MITIGATION SERVICES, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
AGRICULTURAL SUPPLY, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
▇▇▇▇▇▇ CHEMICAL CORPORATION
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
---------------------------
Date: 12/8/98
---------------------------
TURF ACQUISITION SUB, INC.
("BORROWER")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
YUMA ACQUISITION SUB, INC.
("Borrower")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
12
