EXHIBIT 10.4
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TERM LOAN AND SECURITY AGREEMENT
by and between
ECO SOIL SYSTEMS, INC.,
a Nebraska corporation
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
Dated as of July ____, 1999
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COAST BUSINESS CREDIT TERM LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS....................................1
Affiliate.............................1
Audit.................................1
Borrower..............................1
Borrower's Address....................1
Business Day..........................1
Change of Control.....................1
Closing Date..........................1
Coast.................................1
Code..................................1
Collateral............................1
Debt..................................1
Debt Service Coverage Ratio...........2
Default...............................2
Deposit Account.......................2
Dollars or $..........................2
Earn Out Obligations..................2
EBITDA................................2
Equipment.............................2
Event of Default......................2
Excess Cash Flow......................
GAAP..................................2
General Intangibles...................2
Guarantor.............................2
Inventory.............................2
Loan Amount...........................3
Loan and Security Agreement...........3
Loan Documents........................3
Material Adverse Effect...............3
Maturity Date.........................3
Net Worth.............................3
Obligations...........................3
Other Terms...........................3
Permitted Liens.......................3
Person................................4
Early Termination Fee.................4
Prime Rate............................4
Receivables...........................4
Revolving Loan........................4
Solvent...............................4
Term Loan.............................4
Year 2000 Problem.....................4
2. CREDIT FACILITIES..............................4
2.1 Term Loan.............................4
3. INTEREST AND FEES..............................4
3.1 Interest..............................5
3.2 Fees..................................5
4. SECURITY INTEREST..............................5
5. CONDITIONS PRECEDENT...........................5
5.1 Status of Accounts at Closing.........5
5.2 Landlord Waivers......................5
5.3 Executed Agreement....................5
5.4 Opinion of Borrower's and
Guarantor's Counsel...................5
5.5 Priority of Coast's Liens.............5
5.6 Insurance.............................6
5.7 Borrower's Existence..................6
5.8 Organizational Documents..............6
5.9 Taxes.................................6
5.10 Year 2000 Problem Assessment
Certificate...........................6
5.11 Subordination of Long Term Debt.......6
5.12 Management Background Checks..........6
5.13 Minimum Net Worth.....................6
5.14 Common Stock Warrant..................6
5.15 Continuing Guaranty From Guarantor....6
5.16 Intercreditor Agreement...............6
5.17 Assignment of Leases/Licenses.........7
5.18 Due Diligence.........................7
5.19 Other Documents and Agreements........7
6. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE BORROWER......................7
6.1 Existence and Authority...............7
6.2 Name; Trade Names and Styles..........7
6.3 Place of Business; Location of
Collateral............................7
6.4 Title to Collateral; Permitted Liens..7
6.5 Maintenance of Collateral.............8
6.6 Books and Records.....................8
6.7 Financial Condition, Statements and
Reports...............................8
6.8 Tax Returns and Payments; Pension
Contributions.........................8
6.9 Compliance with Law...................8
6.10 Litigation............................8
6.11 Use of Proceeds.......................8
6.12 Year 2000 Compliance..................8
6.13 Merger of Accounting Systems..........8
6.14 Assignment of Licenses................9
6.15 Copyright.............................9
7. ADDITIONAL DUTIES OF THE BORROWER..............9
7.1 Financial and Other Covenants.........9
7.2 Insurance.............................9
7.3 Reports...............................9
7.4 Access to Collateral, Books and
Records...............................9
7.5 Negative Covenants...................10
7.6 Litigation Cooperation...............11
7.7 Further Assurances...................11
8. TERM..........................................11
8.1 Maturity Date........................11
8.2 Early Termination....................11
8.3 Payment of Obligations...............11
9. EVENTS OF DEFAULT AND REMEDIES................11
9.1 Events of Default....................11
9.2 Remedies.............................12
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COAST BUSINESS CREDIT TERM LOAN AND SECURITY AGREEMENT
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9.3 Standards for Determining
Commercial Reasonableness............13
9.4 Power of Attorney....................14
9.5 Application of Proceeds..............15
9.6 REMEDIES CUMULATIVE..................15
10. GENERAL PROVISIONS............................15
10.1 Interest Computation.................15
10.2 Application of Payments..............15
10.3 Charges to Accounts..................16
10.4 Monthly Accountings..................16
10.5 Notices..............................16
10.6 Severability.........................16
10.7 Integration..........................16
10.8 Waivers..............................16
10.9 No Liability for Ordinary Negligence.16
10.10 Amendment............................16
10.11 Time of Essence......................16
10.12 Attorneys Fees, Costs and Charges....16
10.13 Benefit of Agreement.................17
10.14 Publicity............................17
10.15 Paragraph Headings; Construction.....17
10.16 Governing Law; Jurisdiction; Venue...17
10.17 Mutual Waiver of Jury Trial..........17
10.18 Confidentiality......................18
10.19 Sales of Equity by Borrower..........18
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COAST
TERM LOAN AND SECURITY AGREEMENT
BORROWER: ECO SOIL SYSTEMS, INC.,
A NEBRASKA CORPORATION
ADDRESS: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: JULY ______, 1999
THIS TERM LOAN AND SECURITY AGREEMENT is entered into on the above date
between COAST BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"),
a California corporation, with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the borrower named above (the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 1 below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"AUDIT" means to inspect, audit and copy Borrower's books and records
and the Collateral.
"BORROWER" has the meaning set forth in the introduction to this
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the introduction to
this Agreement.
"BUSINESS DAY" means a day on which Coast is open for business.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than forty percent
(40%) of the total voting power of all classes of stock or other ownership
interests then outstanding of any Borrower normally entitled to vote in the
election of directors or analogous governing body.
"CLOSING DATE" means the date of the funding of the Term Loan under
this Agreement.
"COAST" has the meaning set forth in the introduction to this Agreement.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 4 hereof.
"DEBT" means, as of the date of determination, the sum, but without
duplication, of any and all of Borrower's: (i) indebtedness heretofore or
hereafter created, issued, incurred or assumed by such Borrower (directly or
indirectly) for or in respect of money borrowed; and (ii) obligations for the
deferred purchase
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Coast Business Credit Term Loan and Security Agreement
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price of property or services. Notwithstanding the foregoing, Debt shall not
include Earn Out Obligations.
"DEBT SERVICE COVERAGE RATIO" means the ratio, in any fiscal quarter,
whose numerator is EBITDA MINUS cash capital expenditures MINUS cash tax
expenses, and whose denominator is all principal payments on Debt PLUS all
cash interest payments on Debt PLUS all capital lease payments. This ratio
will include the consolidated cash flow of Borrower and its subsidiaries.
Notwithstanding the foregoing, Debt shall not include Earn Out Obligations.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"DOLLARS OR $" means United States dollars.
"EARN OUT OBLIGATIONS" means, any obligations of Borrower or a
subsidiary of Borrower incurred in connection with the acquisition of
businesses or assets and the amount of which is based upon post-acquisition
performance of the Borrower, a subsidiary of the Borrower or business or
assets acquired in connection with the acquisition.
"EBITDA" means, in any fiscal period, Borrower's consolidated net
income or net loss (other than extraordinary or non-recurring gains of
Borrower for such period), PLUS (i) the amount of all cash interest expense,
income tax expense, depreciation expense and amortization expense of Borrower
for such period, on a consolidated basis, and PLUS OR MINUS (as the case may
be) (ii) any other non-cash charges which have been added or subtracted, as
the case may be, in calculating Borrower's consolidated net income for such
period. Future acquisitions by Borrower or a subsidiary of Borrower of a
going concern through either an asset or stock purchase will be included in
such calculation of EBITDA on a proforma basis.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"EVENT OF DEFAULT" means any of the events set forth in Section 9.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or
other business records, Deposit Accounts, investment property, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks and
the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims
of Borrower against Coast, rights to purchase or sell real or personal
property, rights as a licensor or licensee of any kind, royalties, telephone
numbers, proprietary information, purchase orders, and all insurance policies
and claims (including without limitation life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by
or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"GUARANTOR" means, Turf Partners, Inc., a Delaware corporation.
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and
goods in transit, and including without limitation all farm products), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
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Coast Business Credit Term Loan and Security Agreement
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"INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.
"LOAN AMOUNT" means Two Million Five Hundred Thousand Dollars
($2,500,000).
"LOAN AND SECURITY AGREEMENT" means, that certain Loan and Security
Agreement between Guarantor and Coast entered into or to be entered into in
connection with the Revolving Loan.
"LOAN DOCUMENTS" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations
of Borrower or any subsidiary of Borrower on a consolidated basis but
excluding any nonsubsidiary affiliates of Borrower from such consolidated
basis, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including,
without limitation, repayment of the Obligations as they come due) or (iii)
the validity or enforceability of this Agreement or any other agreement or
document entered into by any party in connection herewith, or the rights or
remedies of Coast hereunder or thereunder.
"MATURITY DATE" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
8.1 and 8.2 hereof.
"NET WORTH" means shareholder's equity, PLUS subordinated debt
otherwise permitted hereunder, LESS goodwill. "Goodwill" will be treated on a
consolidated basis to include Borrower's subsidiaries.
"OBLIGATIONS" means all present and future loans, advances, debts,
liabilities, obligations, guaranties (other than that certain Continuing
Guaranty executed by Borrower which guaranties the Revolving Loan),
covenants, duties and indebtedness at any time owing by Borrower to Coast,
whether evidenced by this Agreement or any note or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, banker's acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment and any participation by Coast in Borrower's debts owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorneys' fees (including
attorneys' fees and expenses incurred in bankruptcy), expert witness fees,
audit fees, letter of credit fees, collateral monitoring fees, closing fees,
facility fees, termination fees, minimum interest charges and any other sums
chargeable to Borrower under this Agreement or under any other present or
future instrument or agreement between Borrower and Coast.
"OTHER TERMS." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with GAAP. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
"PERMITTED LIENS" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment, technology and
intellectual property including capital leases;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in
writing by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially
concurrently with this Agreement and liens created hereunder;
(f) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above
in clauses (a) or (b) above, provided that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien
and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; or
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Coast Business Credit Term Loan and Security Agreement
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(h) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Nothing herein shall restrict Borrower's: (i) leases of BioJects,
related equipment and related technology (including all use and possessory
rights created/permitted pursuant to the leases of BioJects), and (ii)
licenses of intellectual property rights related to the production of
microbials, in the ordinary course of its business. Coast will have the right
to require, as a condition to its consent under clause (d) above, that the
holder of the additional security interest or lien sign an intercreditor
agreement on Coast's then standard form, acknowledge that the security
interest is subordinate to the security interest in favor of Coast, and agree
not to take any action to enforce its subordinate security interest so long
as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, general
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, government, or any agency or political division
thereof, or any other entity.
"PREPAYMENT FEE" means the amount set forth on the Schedule that
Borrower must pay Coast if this Term Loan is prepaid in full by Borrower or
Coast pursuant to Section 8.2 hereof.
"PRIME RATE" means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not that rate is the
lowest interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published
in the Wall Street Journal on the first business day of the applicable month,
as the base rate on corporate loans at large U.S. money center commercial
banks.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities
accounts, security entitlements, commodity contracts, commodity accounts,
investment property and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"REVOLVING LOAN" means the revolving loan between Guarantor and Coast,
pursuant to the Loan and Security Agreement which is guaranteed by Borrower.
"SECURED TERM PROMISSORY NOTE" means that certain Secured Term
Promissory Note of even date herewith evidencing the Term Loan.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature,
and (e) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
properties and assets would constitute unreasonably small capital after
giving due consideration to the prevailing practices in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at
any time, it is intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that reasonably can be expected to become an actual or
matured liability.
"TERM LOAN" means the Loan described in Section 2.1 of the Schedule.
"YEAR 2000 PROBLEM" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
2. CREDIT FACILITIES.
2.1 TERM LOAN. Coast will make a term loan to Borrower in the Loan
Amount (the "Term Loan").
3. INTEREST AND FEES.
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Coast Business Credit Term Loan and Security Agreement
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3.1 INTEREST. The Term Loan and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement. Interest shall be payable monthly,
on the last day of the month.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
deemed fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and
wherever located: All Receivables, Inventory, Equipment, Investment Property,
and General Intangibles, including, without limitation, all of Borrower's
Deposit Accounts, and all money, and all property now or at any time in the
future in Coast's possession (including claims and credit balances), and
Borrower's interests in those two certain Equipment Leases both dated June
30, 1999 concerning Borrower's lease of assets and license of technology to
Guarantor and Agricultural Supply, Inc., a Delaware corporation,
respectively, and all proceeds of any of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds, and claims against third
parties), all products of any of the foregoing, and all books and records
related to any of the foregoing (all of the foregoing, together with all
other property in which Coast may now or in the future be granted a lien or
security interest, is referred to herein, collectively, as the "Collateral").
Notwithstanding the foregoing provisions of this Section 4, such grant of a
security interest shall not extend to, and the term "Collateral" shall not
include the capital stock held by Borrower in Agricultural Supply, Inc. and
Guarantor, and shall not include the following (collectively, the
"Non-Assignable General Intangibles"): any rights in any General Intangibles
representing rights under agreements between the Borrower and any other party
(other than agreements between the Borrower and Guarantor), which are now or
hereafter held by the Borrower as lessee, licensee or otherwise, to the
extent that (i) such General Intangibles are not assignable or capable of
being encumbered as a matter of law or under the terms of the agreement
applicable thereto (but solely to the extent that any such restriction shall
be enforceable under applicable law), without the consent of the other party
thereto and (ii) such consent has not been obtained; PROVIDED, HOWEVER, that
the Non-Assignable General Intangibles shall not, in any event, include the
following and the foregoing grant of security interest shall extend to, and
the term Collateral shall include the following: (a) all of Borrower's rights
under present and future agreements with Guarantor, and (b) any and all
proceeds of Non-Assignable General Intangibles to the extent that the
assignment or encumbering of such proceeds is not so restricted and (c) upon
any such other applicable party's consent with respect to any such
Non-Assignable General Intangibles being obtained, thereafter such General
Intangibles as well as any and all proceeds thereof that might theretofore
have been excluded from such grant of a security interest and the term
Collateral. In the event that an Event of Default shall have occurred and be
continuing, the Borrower shall use all reasonable efforts to obtain the
consents of any such other party as may be required from time to time by
Coast in writing.
5. CONDITIONS PRECEDENT
The obligation of Coast to make the Term Loan is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the Closing
Date, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due
and unpaid one hundred and twenty (120) days past its invoice date unless
approved by Coast in its sole discretion.
5.2 LANDLORD WAIVERS. Coast shall have received duly executed
landlord waivers and access agreements in form and substance satisfactory to
Coast, in Coast's sole and absolute discretion, and, when deemed appropriate
by Coast, in form for recording in the appropriate recording office, with
respect to all leased locations where Borrower maintains any equipment. In
the event that such waivers and subordinations specified by Coast have not
been obtained from such third parties, Coast will have a continuing right to
institute a reserve for payment of rent and other sums owing to any such
third parties.
5.3 EXECUTED AGREEMENT. Coast shall have received this Agreement and
the Secured Term Promissory Note duly executed and in form and substance
satisfactory to Coast in its sole and absolute discretion.
5.4 OPINION OF BORROWER'S AND GUARANTOR'S COUNSEL. Coast shall have
received an opinion of Borrower's and Guarantor's counsel, in form and
substance satisfactory to Coast in its sole and absolute discretion.
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5.5 PRIORITY OF COAST'S LIENS. Coast shall have received the results
of "of record" searches satisfactory to Coast in its sole and absolute
discretion, reflecting its Uniform Commercial Code filings against Borrower
indicating that Coast has a perfected, first priority lien in and upon all of
the Collateral, subject only to Permitted Liens.
5.6 INSURANCE. Coast shall have received copies of the insurance
binders or certificates evidencing Borrower's compliance with Section 7.2
hereof, including lender's loss payee endorsements.
5.7 BORROWER'S EXISTENCE. Coast shall have received copies of
Borrower's articles of incorporation and all amendments thereto, and a
Certificate of Good Standing, each certified by the Secretary of State of the
state of Borrower's organization, and dated a recent date prior to the
Closing Date, and Coast shall have received Certificates of Foreign
Qualification for Borrower from the Secretary of State of each state wherein
the failure to be so qualified could have a Material Adverse Effect.
5.8 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing
the execution and delivery of this Agreement and the other documents
contemplated hereby, and authorizing the transactions contemplated hereunder
and thereunder, and authorizing specific officers of Borrower to execute the
same on behalf of Borrower, in each case certified by the Secretary or other
acceptable officer of Borrower as of the Closing Date.
5.9 TAXES. Coast shall have received evidence from Borrower that
Borrower has complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.10 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have
received a certificate from the relevant officer of Borrower to the effect
that, as the result of a comprehensive assessment undertaken by Borrower of
Borrower's computer systems, software and applications and after due inquiry
made to Borrower's material suppliers, vendors and customers, Borrower knows
of no facts that would cause Borrower to reasonably believe that the Year
2000 Problem will cause a Material Adverse Effect.
5.11 SUBORDINATION OF LONG TERM DEBT. Coast shall have received an
amendment to that certain Senior Subordinated Note and Warrant Purchase
Agreement (the "Note Purchase Agreement") dated June 30, 1999, between Albion
Alliance Mezzanine Fund and Paribas Capital Funding LLC (the "Purchasers")
and Eco Soil Systems, Inc. wherein the Purchasers agree to subordinate all
obligations under the Note Purchase Agreement owed to them by Borrower and
Guarantor in favor of the Obligation owing by Borrower and Guarantor to Coast
with said Amendment to be in form and substance acceptable to Coast in its
sole and absolute discretion. Borrower will be allowed to make quarterly
interest payments pursuant to the terms of the Note Purchase Agreement so
long as: (i) an Event of Default has not occurred and is continuing, and (ii)
Borrower is in compliance with all terms, conditions and obligations owing to
Coast pursuant to the Loan Documents. Except as provided in Section 10.19, no
payments of principal will be allowed on said debt.
5.12 MANAGEMENT BACKGROUND CHECKS. Coast shall have received the
results of management background checks, including without limitation, TRWs,
tax lien and litigation searches, LEXIS/NEXUS searches and such other due
diligence as Coast may deem necessary on key officers of Borrower with said
background checks to be satisfactory to Coast in its sole and absolute
discretion.
5.13 MINIMUM NET WORTH. Borrower's Net Worth shall be no less than
Fifteen Million Dollars ($15,000,000) on the Closing Date.
5.14 COMMON STOCK WARRANT. Coast shall have received a duly executed
Common Stock Warrant from Borrower, for the purchase of Borrower's stock, in
form and substance acceptable to Coast in its sole and absolute discretion.
5.15 CONTINUING GUARANTY FROM GUARANTOR. Coast shall have received the
Continuing Guaranty of Guarantor.
5.16 INTERCREDITOR AGREEMENT. Coast shall have received an
Intercreditor Agreement from First National Bank of San Diego ("First
National") wherein, among other things, First National agrees that Borrower
may enter into this Agreement and obtain the Term Loan and First National and
Coast agree that Borrower's guaranties of the obligations owing from
Agricultural Supply, Inc. ("Ag Supply") to First National and from Guarantor
to Coast, respectively, shall be on a pari passu unsecured basis with the
exceptions that: (i) Borrower's guaranty of Ag Supply's obligations to First
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Coast Business Credit Term Loan and Security Agreement
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National shall be secured by Borrower's pledge of its stock in Ag Supply, and
(ii) Borrower's guaranty of Guarantor's obligations to Coast shall be secured
by Borrower's pledge of 100% of the stock of Guarantor. The form and content
of said Intercreditor Agreement shall be acceptable to Coast in its sole and
absolute discretion.
5.17 ASSIGNMENT OF LEASES/LICENSES. Coast shall have received
assignments of Borrower's interest in those two certain Equipment Leases
dated June 30, 1999 between Borrower and Guarantor and Borrower and
Agricultural Supply, Inc., which will include assignment of all proceeds of
said leases, with the form and content of said assignments to be acceptable
to Coast in its sole and absolute discretion.
5.18 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower.
5.19 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such
other agreements, instruments and documents as Coast may require in
connection with the transactions contemplated hereby, all in form and
substance satisfactory to Coast in Coast's sole and absolute discretion, and
in form for filing in the appropriate filing office, including, but not
limited to, those documents listed in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make the
Term Loan, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and
that Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a Material Adverse Effect. The execution,
delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (a) have been duly and validly authorized, (b)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (c) do not violate Borrower's articles of
incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (d) do not
constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give Coast thirty (30) days' prior written notice
before changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule. Borrower will give Coast at least
thirty (30) days' prior written notice before opening any additional place of
business, changing its chief executive office, or moving any of the
Collateral except for the movement of BioJects in the ordinary course of
business to a location other than Borrower's Address or one of the locations
set forth on the Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except
for items of Equipment, technology and intellectual property which are
leased/licensed by Borrower. The Collateral now is and will remain free and
clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Coast now has, and will continue
to have, a first-priority perfected and enforceable security interest in all
of the Collateral, subject only to the Permitted Liens, and Borrower will at
all times defend Coast and the Collateral against all claims of others. None
of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture. Borrower is not and will
not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lienholder,
landlord, warehouseman or
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Coast Business Credit Term Loan and Security Agreement
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otherwise), Borrower shall, whenever requested by Coast, use its best efforts
to cause such third party to execute and deliver to Coast, in form acceptable
to Coast, such waivers and subordinations as Coast shall specify, so as to
ensure that Coast's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. In the event that such
waivers and subordinations specified by Coast have not been obtained from
such third parties, Coast will have a continuing right to institute a reserve
for payment of rent and other sums owing to any such third parties. Borrower
will keep in full force and effect, and will comply with all the terms of,
any lease of real property where any of the Collateral now or in the future
may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Coast have been, and will be,
prepared in conformity with GAAP (except, in the case of unaudited financial
statements, for the absence of footnotes and subject to normal year-end
adjustments) and now and in the future will fairly reflect the financial
condition of Borrower, at the times and for the periods therein stated.
Between the last date covered by any such statement provided to Coast and the
date hereof, there has been no Material Adverse Effect. Borrower is now and
will continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by Borrower. Borrower
may, however, defer payment of any contested taxes, provided that Borrower
(i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Coast in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other
steps required to keep the contested taxes from becoming a lien upon any of
the Collateral. As of the date hereof, Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result
in additional taxes becoming due and payable by Borrower. Borrower has paid,
and shall continue to pay all amounts necessary to fund all present and
future pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental
agency. Borrower shall, at all times, utilize the services of an outside
payroll service providing for the automatic deposit of all payroll taxes
payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in
all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not
limited to, the Fair Labor Standards Act, and those relating to Borrower's
ownership of real or personal property, the conduct and licensing of
Borrower's business, and environmental matters.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in a
Material Adverse Effect. Borrower will promptly inform Coast in writing of
any claim, proceeding, litigation or investigation in the future threatened
or instituted by or against Borrower involving an amount set forth on the
Schedule.
6.11 USE OF PROCEEDS. All proceeds of the Term Loan shall be used
solely for lawful business purposes. Borrower is not purchasing or carrying
any "margin stock" (as defined in Regulation U of the Board of Governors of
the Federal Reserve System) and no part of the proceeds of the Term Loan will
be used to purchase or carry any "margin stock" or to extend credit to others
for the purpose of purchasing or carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. As the result of a comprehensive review and
assessment undertaken by Borrower of Borrower's computer systems, software
and applications and after due inquiry made of
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Coast Business Credit Term Loan and Security Agreement
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Borrower's material suppliers, vendors and customers Borrower represents and
warrants that the Year 2000 problem will not result in a Material Adverse
Effect.
6.13 MERGER OF ACCOUNTING SYSTEMS. Borrower and Guarantor shall have
completed the merger of their accounting systems by September 1, 1999.
6.14 ASSIGNMENT OF LICENSES. Within six (6) months of the Closing
Date, Borrower shall provide Coast with duly executed agreements from third
parties wherein such third parties agree to the assignment of Borrower's
license rights to Coast of certain intellectual property used in conjunction
with Borrower's equipment. Coast in its sole and absolute discretion will
determine which rights in intellectual property are to be assigned and the
form and substance of said assignments are to be acceptable to Coast in its
sole and absolute discretion.
6.15 COPYRIGHTS. Within 60 days of the Closing Date and, if not
achievable within said time period, within a reasonable time period utilizing
Borrower's best efforts, Coast shall have received satisfactory evidence that
Borrower has registered its copyrights with the United States Copyright
Office and Coast shall have been provided with a duly executed security
agreement with respect to such copyrights, with said security agreement to be
in form and substance acceptable to Coast in its sole and absolute discretion.
7. ADDITIONAL DUTIES OF THE BORROWER
7.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
7.2 INSURANCE. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business
insurance, with insurers reasonably acceptable to Coast, in such form and
amounts as Coast may reasonably require, and Borrower shall provide evidence
of such insurance to Coast, so that Coast is satisfied that such insurance
is, at all times, in full force and effect. All liability insurance policies
of Borrower shall name Coast as an additional insured, and shall provide
coverage for environmental related claims and issues, with said coverage to
be acceptable to Coast in its sole and absolute discretion, and all property
casualty and related insurance policies of Borrower shall name Coast as a
loss payee thereon and Borrower shall cause a lender's loss payee endorsement
in form reasonably acceptable to Coast. Upon receipt of the proceeds of any
such insurance, Coast shall apply such proceeds in reduction of the
Obligations as Coast shall determine in its sole discretion, except that,
provided no Default or Event of Default has occurred and is continuing, Coast
shall release to Borrower insurance proceeds with respect to Equipment
totaling less than the amount set forth in Section 8 of the Schedule, which
shall be utilized by Borrower for the replacement of the Equipment with
respect to which the insurance proceeds were paid. Coast may require
reasonable assurance that the insurance proceeds so released will be so used.
If Borrower fails to provide or pay for any insurance, Coast may, but is not
obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
7.3 REPORTS. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other
written reports with respect to Borrower (including budgets, sales
projections, operating plans and other financial documentation), as Coast
shall from time to time reasonably specify.
7.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but
not less frequently than quarterly and on one (1) Business Day's notice,
Coast, or its agents, shall have the right to perform Audits. Coast shall
take reasonable steps to keep confidential all confidential information
obtained in any Audit, but Coast shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant
to any subpoena or other legal process. The Audits shall be at Borrower's
expense and the charge for the Audits shall be Seven Hundred Fifty Dollars
($750) per person per day (or such higher amount as shall represent Coast's
then current standard charge for the same), plus reasonable out-of-pocket
expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at
any location other than Borrower's Address, without first notifying Coast of
the same and obtaining the written agreement from such accounting firm,
service bureau or other third party to give Coast the same rights with
respect to access to books and records and related rights as Coast has under
this Loan Agreement. Borrower shall also take all necessary steps to assure
that its material accounting and software, systems and applications, and
those of its accounting firm, service bureau or any other third party vendor
or supplier, will, on a timely basis, adequately and completely address the
Year 2000 Problem in all material respects.
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Coast Business Credit Term Loan and Security Agreement
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7.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior
written consent, do any of the following:
(a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty
percent (50%) of the ownership interest in the surviving entity immediately
after such merger or consolidation, and (ii) the Borrower is the surviving
entity;
(b) other than the presently pending acquisition of assets by
Borrower from AgraBio, acquire any assets, except (i) in the ordinary course
of business, or (ii) in a transaction or a series of transactions not
involving the payment of an aggregate amount in excess of the amount set
forth in Section 7 of the Schedule except that payments in the form of stock
of Borrower will not be subject to the limitations of this paragraph so long
as such payments in the form of stock of Borrower do not cause a Change of
Control;
(c) enter into any other transaction not permitted hereunder
outside the ordinary course of business provided, however, that Borrower's
use and exploitation of the BioJects and related equipment/technology as
permitted pursuant to the BioJect leases will be deemed to be in the ordinary
course of Borrower's business;
(d) sell or transfer any Collateral, except for: (i) the sale
of obsolete or unneeded Equipment in the ordinary course of business; (ii)
other sales or transfers the aggregate market value of such Collateral sold
or otherwise disposed of in any year not to exceed Three Hundred Thousand
Dollars ($300,000) and the consideration received for such Collateral being
at least equal to the fair market value of such Collateral provided: (y) such
sales could not reasonably be expected to have a Material Adverse Effect, and
(z) no Event of Default has occurred and is continuing or will result from
such sales or transfers; and (iii) the sale of BioJects for a minimum sale
price of Twelve Thousand Five Hundred Dollars ($12,500) for "in-service"
BioJects and Seven Thousand Five Hundred Dollars ($7,500) for "in-storage"
BioJects, so long as an amount equal to the minimum sale price for any such
sale is applied as a prepayment to the Term Loan pursuant to Section 8.2
below. Any amounts in excess of the minimum sale price can be retained by
Borrower;
(e) store any Inventory or other Collateral with any
warehouseman or other third party provided, however, that Borrower's use and
exploitation of the BioJects and related equipment/technology as permitted
pursuant to the BioJect leases will not be restricted;
(f) other than that certain existing loan between Borrower and
Agricultural Supply, Inc. in the amount of $7,700,000 plus any additional
amounts relating to the transfer of BioJects, make any loans of any money or
other assets, except (i) advances to customers or suppliers in the ordinary
course of business, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, and (iii)
loans to employees, officers and directors for the purpose of purchasing
equity securities of the Borrower;
(g) incur any debts not permitted hereunder, outside the
ordinary course of business, which would have a Material Adverse Effect;
(h) guarantee or otherwise become liable with respect to the
obligations of another party or entity other than the guaranty of the
Revolving Loan and guaranty of the obligations owing from Ag Supply to First
National as discussed herein;
(i) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for dividends or distributions
payable solely in stock form of ownerships interests in Borrower);
(j) receive an upstream of funds from Guarantor in an amount
exceeding 75% of the net income per month of Guarantor; PROVIDED, HOWEVER,
that the total of said upstreaming cannot exceed (y) 75% of period-to-date
net income, and (z) 75% of fiscal year end net income of Guarantor. Said
calculation of period-to-date net income will commence with the month of
July, 1999. Notwithstanding the foregoing, any amounts paid by Guarantor to
Borrower as part of the initial funding of the Revolving Loan will not be
subject to the limitations of this paragraph;
(k) make any change in Borrower's capital structure which would
have a Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default is continuing or
would occur as a result of such transaction.
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Coast Business Credit Term Loan and Security Agreement
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7.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Coast with respect to any Collateral or relating
to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
7.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully
consummate the transactions contemplated by this Agreement.
8. TERM.
8.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date.
8.2 PREPAYMENT. Borrower may prepay the Term Loan in whole or in part
prior to the Maturity Date as follows effective three (3) Business Days after
written notice of intent to prepay is given to Coast by Borrower. Any
prepayment of the Term Loan in part but not in full will be applied to
installments on the Secured Term Promissory Note in inverse order of
maturity. At any time if the Revolving Loan is paid off and/or terminated for
any reason prior to its respective Maturity Date, the Term Loan shall become
immediately due and payable without notice, effective immediately. If the
Term Loan is prepaid by Borrower in full under this Section 8.2, at a time
when the Revolving Loan is paid off and the Loan and Security Agreement is
terminated for any reason, Borrower shall pay to Coast a Prepayment Fee in
the amount shown in Section 3 of the Schedule. The Prepayment Fee shall be
due and payable on the effective date of prepayment and thereafter shall bear
interest at a rate equal to the rate applicable to the Term Loan.
Notwithstanding the foregoing, there will be no prepayment fee if the Term
Loan and all other Obligations hereunder are prepaid in full prior to the
Maturity Date and the Revolving Loan is not prepaid and the Loan and Security
Agreement is not terminated prior to its maturity date as described in the
Loan and Security Agreement.
8.3 PAYMENT OF OBLIGATIONS. The Term Loan shall be payable in
installments as provided in the Secured Term Promissory Note. Notwithstanding
any termination of this Agreement, all of Coast's security interests in all
of the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full. No termination shall in any way affect or impair any right
or remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Coast shall promptly deliver
to Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Coast's security interests.
9. EVENTS OF DEFAULT AND REMEDIES.
9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower
shall give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or
certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading and results in a Material Adverse Effect; or
(b) Borrower shall fail to pay when due the Term Loan or any
interest thereon (which failure to pay interest is not cured within five (5)
days after the date due) or any other monetary Obligation; or
(c) Borrower shall fail to give Coast access to its books and
records or Collateral as provided in Section 7.4 above, or shall breach any
negative covenant set forth in Section 7.5 above; or
(d) Borrower shall fail to comply with the financial covenants
(if any) set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or
(e) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within thirty (30) days after the date
due; or
(f) Any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within fifteen (15) days after the occurrence
of the same; or
(g) any default or event of default occurs under any obligation
secured by a ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
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Coast Business Credit Term Loan and Security Agreement
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which is not cured within any applicable cure period or waived in writing by
the holder of the Permitted Lien and such failure could reasonably be
executed to have a Material Adverse Effect; or
(h) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a Material Adverse Effect; or
(i) Dissolution, termination of existence, insolvency or
business failure of Borrower or any guarantor of any of the Obligations; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by Borrower or any guarantor of any of the Obligations
under any reorganization, bankruptcy, insolvency, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, now
or in the future in effect which, with respect only to the commencement of
proceedings against Borrower or any Guarantor, is (i) not timely
controverted, or (ii) not cured by the dismissal thereof within forty-five
(45) days after the date commenced; or
(j) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect, which is (i)
not timely controverted, or (ii) not cured by the dismissal thereof within
forty-five (45) days after the date commenced; or
(k) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of
the foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or
(l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing, or
commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law which, with respect only to the commencement of
proceedings against such third party, is (i) not timely controverted, or (ii)
not cured by the dismissal thereof within forty-five (45) days after the date
commenced; or
(m) Borrower or any guarantor of any of the Obligations makes
any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or
(n) Except as permitted under Section 7.5(a), Borrower shall
suffer or experience any Change of Control without Coast's prior written
consent, which consent shall be in the discretion of Coast in the exercise of
its reasonable business judgment; or
(o) Borrower shall generally not pay its debts as they become
due, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(p) there shall be any Material Adverse Effect; or
(q) if an Event of Default, as defined in the Loan and Security
Agreement, has occurred.
9.2 REMEDIES. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following:
(a) Cease extending credit to Borrower under this Agreement or
any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable and performable, notwithstanding any deferred
or installment payments allowed by any instrument evidencing or relating to
any Obligation;
(c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store or remove any of
the Collateral, and remain
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Coast Business Credit Term Loan and Security Agreement
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on the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as Coast deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; PROVIDED, HOWEVER, that should Coast seek
to take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives:
(i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and
(iii) any requirement that Coast retain possession of, and
not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral
and make it available to Coast at places designated by Coast which are
reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge. Coast is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and Borrower's rights under all licenses and all franchise
agreements shall inure to Coast's benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other
than oral announcement at the time scheduled for sale. Coast shall have the
right to conduct such disposition on Borrower's premises without charge, for
such time or times as Coast deems reasonable, or on Coast's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Coast may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any liability Borrower may have if
any Collateral is defective as to title or physical condition or otherwise at
the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's
sole discretion, to grant extensions of time to pay, compromise claims and
settle Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast (including attorneys' fees and expenses incurred in
connection with bankruptcy) with respect to the foregoing shall be due from
the Borrower to Coast on demand. Coast may charge the same to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as is
applicable to the Term Loan. Without limiting any of Coast's rights and
remedies, from and during the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an
additional three percent per annum.
9.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least seven (7)
days prior to the sale, and, in the case of a public sale, notice of the sale
is published at least seven (7) days before the sale in a
13
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
newspaper of general circulation in the county where the sale is to be
conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with
or without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00
p.m., Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check
or wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast
may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and
selling the Collateral, in its discretion, if they are commercially
reasonable.
9.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power
of attorney coupled with an interest, authorizing and permitting Coast
(acting through any of its employees, attorneys or agents) at any time, at
its option, but without obligation, with or without notice to Borrower, and
at Borrower's expense, to do any or all of the following, in Borrower's name
or otherwise, but Coast agrees to exercise the following powers in a
commercially reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast may,
in its sole discretion, deem advisable in order to perfect and maintain
Coast's security interest in the Collateral, or in order to exercise a right
of Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future
agreements;
(b) After and during the continuance of an Event of Default,
execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease
(as lessor or lessee) any real or personal property which is part of Coast's
Collateral or in which Coast has an interest;
(c) After and during the continuance of an Event of Default,
execute on behalf of Borrower, any invoices relating to any Receivable, any
draft against any account debtor and any notice to any account debtor, any
proof of claim in bankruptcy, any notice of lien, claim of mechanic's,
materialman's or other lien, or assignment or satisfaction of mechanic's,
materialman's or other lien;
(d) After and during the continuance of an Event of Default,
take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Coast's
possession;
(e) After and during the continuance of an Event of Default,
endorse all checks and other forms of remittances received by Coast;
(f) After and during the continuance of an Event of Default,
pay, contest or settle any lien, charge, encumbrance, security interest and
adverse claim in or to any of the Collateral, or any judgment based thereon,
or otherwise take any action to terminate or discharge the same;
(g) After and during the continuance of an Event of Default,
grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and
other documents in connection therewith;
(h) After and during the continuance of an Event of Default,
pay any sums required on account of Borrower's taxes or to secure the release
of any liens therefor, or both;
(i) After and during the continuance of an Event of Default,
settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has
under this Agreement; and
(k) After and during the continuance of an Event of Default,
take any action or pay any sum required of Borrower pursuant to this
Agreement and any other present or future agreements.
14
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees
and expenses incurred pursuant to bankruptcy) with respect to the foregoing
shall be added to and become part of the Obligations, and shall be payable on
demand. Coast may charge the foregoing to Borrower's loan account and the
foregoing shall thereafter bear interest at the same rate applicable to the
Term Loan. In no event shall Coast's rights under the foregoing power of
attorney or any of Coast's other rights under this Agreement be deemed to
indicate that Coast is in control of the business, management or properties
of Borrower. Borrower shall pay, indemnify, defend, and hold Coast and each
of its officers, directors, employees, counsel, agents, and attorneys-in-fact
(each, an "Indemnified Person") harmless (to the fullest extent permitted by
law) from and against any and all claims, demands, suits, actions,
investigations, proceedings, and damages, and all attorneys fees and
disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of
them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and
any other Loan Documents or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person hereunder with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
9.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral pursuant to Coast's exercise of its remedies shall
be applied by Coast first to the costs, expenses, liabilities, obligations
and attorneys' fees incurred by Coast in the exercise of its rights under
this Agreement, second to the interest due upon any of the Obligations, and
third to the principal installments on the Term Loan in inverse order of
maturity. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Coast for any deficiency.
If, Coast, in its sole discretion, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale
of Collateral, Coast shall have the option, exercisable at any time, in its
sole discretion, of either reducing the Obligations by the principal amount
of purchase price or deferring the reduction of the Obligations until the
actual receipt by Coast of the cash therefor.
9.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party in equity, under the Code, and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise
by Coast of one or more of its rights or remedies shall not be deemed an
election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been indefeasibly paid and performed.
10. GENERAL PROVISIONS
10.1 INTEREST COMPUTATION. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by Coast
(including payment of the Obligations in full) shall be deemed applied by
Coast on account of the Obligations after receipt by Coast of immediately
available funds, and, for purposes of the foregoing, any such funds received
in the bank account designated by Coast during Coast's normal business hours,
shall be deemed received on the day they are received PROVIDED, HOWEVER, if
in the future Coast's standard operating procedure should change, for a
majority of Coast's borrowers by numbers, with respect to deeming items of
payment received on the same day they are received during normal business
hours, Borrower agrees to abide by such change. Coast shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Coast in its sole discretion, and Coast may charge
Borrower's loan account for the amount of any item of payment which is
returned to Coast unpaid.
10.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in Coast's sole discretion reversed and
reapplied, to the Obligations, in such order and manner as Coast shall
determine in its sole discretion
15
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
10.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to
Borrower's Loan account, in which event they will bear interest from the date
due to the date paid at the same rate applicable to the Term Loan.
10.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
10.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in
the heading to this Agreement, or at any other address designated in writing
by one party to the other party. Notices to Coast shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, faxed (at time of
confirmation of transmission), or at the expiration of one (1) Business Day
following delivery to the private delivery service, or two (2) Business Days
following the deposit thereof in the United States mail, with postage prepaid.
10.6 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
10.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement with respect to the Term Loan between
Coast and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in
this Agreement. THERE ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR
AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR
IN OTHER WRITTEN AGREEMENTS SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
10.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any Default shall not waive or affect any
other Default, whether prior or subsequent, and whether or not similar. None
of the provisions of this Agreement or any other agreement now or in the
future executed by Borrower and delivered to Coast shall be deemed to have
been waived by any act or knowledge of Coast or its agents or employees, but
only by a specific written waiver signed by an authorized officer of Coast
and delivered to Borrower. Borrower waives demand, protest, notice of protest
and notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time
held by Coast on which Borrower is or may in any way be liable, and notice of
any action taken by Coast, unless expressly required by this Agreement.
10.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party through the ordinary negligence of
Coast, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Coast, but nothing herein shall
relieve Coast from liability for its own gross negligence or willful
misconduct.
10.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
10.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower and Coast of each and every obligation under this Agreement.
10.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast
for all attorneys' fees (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and all filing, recording, search, title insurance,
appraisal, audit, and other costs incurred by Coast, pursuant to, or in
connection with, or relating
16
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
to this Agreement (whether or not a lawsuit is filed), including, but not
limited to, any attorneys' fees and costs (including attorneys' fees and
expenses incurred pursuant to bankruptcy) Coast incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect
any of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Coast's security
interest in, the Collateral; and otherwise represent Coast in any litigation
relating to Borrower. If either Coast or Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party in
such action shall be entitled to recover its costs and attorneys' fees
(including attorneys' fees and expenses incurred pursuant to bankruptcy),
including (but not limited to) attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. Borrower shall also pay Coast's standard charges for returned
checks and for wire transfers, in effect from time to time. All attorneys'
fees, costs and charges (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and other fees, costs and charges to which Coast may
be entitled pursuant to this Agreement may be charged by Coast to Borrower's
loan account and shall thereafter bear interest at the same rate as the Term
Loan.
10.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights
and delegate its duties hereunder without the consent of Borrower. Coast
reserves the right to syndicate all or a portion of the transaction created
herein or sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Coast's rights and benefits hereunder. In
connection with any such syndication, assignment or participation, Coast may
disclose all documents and information which Coast now or hereafter may have
relating to Borrower or Borrower's business. To the extent that Coast assigns
its rights and obligations hereunder to a third Person, Coast thereafter
shall be released from such assigned obligations to Borrower.
10.14 PUBLICITY. Coast and Borrower are hereby authorized, at their own
expense, to issue appropriate press releases and to cause a tombstone to be
published announcing the consummation of this transaction and the aggregate
amount thereof.
10.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and Coast acknowledge that
the headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any
rule of construction or otherwise.
10.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the internal laws of the State of California,
without regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Los Angeles County; (b)
consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or
any other method permitted by law; and (c) waives any and all rights Borrower
may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding.
10.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF
17
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH COAST OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
10.18 CONFIDENTIALITY. Coast will maintain the confidentiality of any
non-public information marked as confidential and relating to the business
operations and methodology of Borrower and financial performance of Borrower
("Borrower Information") provided to Coast solely by the Borrower as required
under the terms of this Agreement, and will not disclose Borrower Information
to any person, other than employees, agents, attorneys or accountants of
Coast. Coast will not disclose Borrower information to any other party
unless, prior to such disclosure, Coast obtains an executed acknowledgment
binding such party to maintain the confidentiality of the information,
prohibiting its disclosure except for the purposes permitted under this
Agreement, and agreeing that the information may not be used to compete with
the Borrower in any way. In the event Coast receives a subpoena or other
process for any Borrower Information, it will immediately give notice in
writing of the subpoena or other process, including a copy thereof, to
Borrower.
10.19 SALES OF EQUITY BY BORROWER. The proceeds from any sales of
equity by Borrower (other than pursuant to (A) the exercise of (i) warrants
outstanding as of the date hereof, (ii) stock options issued pursuant to the
Borrower's 1992 Stock Option Plan, the Borrower's 1996 Director's Stock
Option Plan, the Borrower's 1998 Stock Option Plan, or the Borrower's 1999
Equity Participation Plan and (iii) other stock options outstanding as of the
date hereof or (B) Earn Out Obligations), at the option of Coast, will be
used to prepay the obligations owing to Coast by Borrower prior to the
prepayment of any obligations owing to any subordinated lenders, including
without limitation, the obligations owing by Borrower to the Purchasers under
the Note Purchase Agreement.
BORROWER:
ECO SOIL SYSTEMS, INC.,
A Nebraska corporation
By______________________________________
President or Vice President
By______________________________________
Secretary or Ass't Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By_______________________________________
Title:___________________________________
18
_____________________________________________________________________________
COAST
SCHEDULE TO
TERM LOAN AND SECURITY AGREEMENT
BORROWER: ECO SOIL SYSTEMS, INC.,
A NEBRASKA CORPORATION
ADDRESS: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: JULY ____, 1999
This Schedule forms an integral part of the Term Loan and Security Agreement
between Coast Business Credit, a division of Southern Pacific Bank, a
California corporation, and the above-borrower of even date.
=============================================================================
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - TERM LOAN: A Term Loan in the total amount of
Two Million Five Hundred Thousand
Dollars ($2,500,000) (the "Term
Loan"). During the first year
following the Closing Date, the Term
Loan will be payable $69,444.44
principal per month plus accrued
interest and, during the second year
following the Closing Date, the Term
Loan will be payable $138,888.88
principal per month plus accrued
interest.
=============================================================================
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus
2.25% per annum, calculated on the
basis of a 360-day year for the
actual number of days elapsed. The
interest rate applicable to the Term
Loan shall be adjusted monthly as of
the first day of each month, and the
interest to be charged for each
month shall be based on the highest
Prime Rate in effect during the
prior month, but in no event shall
the rate of interest charged on the
Term Loan in any month be less than
8% per annum.
SECTION 3.2 - LOAN FEE: One-half percent (.50%) of the Loan
Amount payable on the Closing Date
with an additional one-quarter
percent (.25%) of the Loan Amount to
be paid on the first anniversary of
the Closing Date, with all said fees
to be fully earned on the Closing
Date. The fees payable pursuant to
this provision will survive
notwithstanding an Early Termination
of this Agreement pursuant to
Section 8.2 of this Agreement.
19
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
SECTION 8.2 - PREPAYMENT FEE: Subject to the provisions set forth
in Section 8.2 of the Agreement, an
amount equal to five percent (5%) of
the Loan Amount (as defined in the
Schedule), if termination occurs
within fifteen (15) months following
the Closing Date; and one percent
(1%) of the Loan Amount, if
termination occurs anytime
thereafter and before the Maturity
Date.
=============================================================================
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.14 - OTHER DOCUMENTS
AND AGREEMENTS: 1. Continuing Guaranty of Turf
Partners, Inc.;
2. UCC-1 financing statements,
fixture filings and termination
statements;
3. Security Agreements (including
those covering copyrights,
patents and trademarks);
4. Landlord waivers and access
agreements;
5. Opinion Letter of Borrower's and
Guarantor's counsel;
6. Amendment to Note Purchase
Agreement;
7. Intercreditor Agreement from First
National;
8. Collateral Assignment of Asset and
Technology Leases/Licenses (Turf
Partners);
9. Collateral Assignment of Asset and
Technology Leases/Licenses
(Agricultural Supply); and
10. Common Stock Warrant.
=============================================================================
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF
BORROWER: None.
SECTION 6.2 - PRIOR TRADE NAMES
OF BORROWER: Turf Partners.
SECTION 6.2 - EXISTING TRADE NAMES
OF BORROWER: None.
SECTION 6.3 - OTHER LOCATIONS AND
ADDRESSES: See Schedule 6.3 attached hereto.
20
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
SECTION 6.10 - MATERIAL ADVERSE
LITIGATION: In November 1998, the Company
executed a term sheet with the
Palladin Group, L.P. ("Palladin")
concerning negotiations for a
possible investment by Palladin in
certain new classes of securities
of the Company which, at the time,
the Company was considering
issuing to a certain fund managed by
Palladin. The Company subsequently
terminated the negotiations in
December 1998. An affiliate of
Palladin, Halifax Fund, L.P.
("Halifax"), filed a lawsuit on or
about March 19, 1999 in San Diego
Superior Court alleging that the
termination violated duties owed
by the Company to Halifax under the
term sheet. The lawsuit seeks
compensatory damages of
approximately $2.6 million and
punitive damages of approximately
$12.0 million. The Company
disputes Halifax's claim and
intends to vigorously defend itself
against the lawsuit.
SECTION 6.10 - FUTURE CLAIMS AND
LITIGATION: Borrower will promptly inform Coast
in writing of any claim, proceeding,
litigation or investigation in the
future threatened or instituted by
or against Borrower involving any
single claim of Two Hundred Thousand
Dollars ($200,000) or more, or
involving Six Hundred Thousand
Dollars ($600,000) or more in the
aggregate.
=============================================================================
SECTION 7 - ADDITIONAL DUTIES OF BORROWER
SECTION 7.1 - OTHER PROVISIONS: 1. Borrower's ongoing Net Worth
shall be no less than Fifteen
Million Dollars ($15,000,000) at
all times.
2. Borrower's ongoing Debt Service
Coverage Ratio measured at the
end of Borrower's 2nd and 3rd
calendar quarters of 1999 shall
be at least 1.10 to 1.00 and
thereafter, at the end of all
future calendar quarters of
Borrower, said ratio shall be
1.10 to 1.00 based on a trailing
four quarter basis, with all
calculations of said ratio to be
determined by Coast in its sole
and absolute discretion.
SECTION 7.2 - INSURANCE: Subject to the limitations set forth
in Section 8.2 of the Agreement, Coast
shall release to Borrower insurance
proceeds with respect to Equipment
totaling less than Two Hundred
Thousand Dollars ($200,000).
SECTION 7.3 - REPORTING: Borrower shall provide Coast with the
following:
1. Monthly accounts payable agings,
aged by invoice date, and
outstanding or held check
registers within ten (10) days
after the end of each month.
2. Monthly consolidating and
consolidated internally prepared
financial statements for Borrower
and all subsidiaries, as soon as
available, and in any event
within thirty (30) days after the
end of each month.
3. Quarterly consolidating and
consolidated internally prepared
financial statements for Borrower
and all subsidiaries, as soon as
available, and in any event
within forty-five (45) days after
the end of each fiscal quarter of
Borrower.
4. Annual consolidating and
consolidated financial statements
for Borrower and all
subsidiaries, as soon as
available, and in any event
21
Coast Business Credit Term Loan and Security Agreement
_____________________________________________________________________________
within ninety (90) days following
the end of Borrower's fiscal
year, containing the unqualified
opinion of, and audited by, an
independent certified public
accountant reasonably acceptable
to Coast.
5. A monthly detailed listing of the
BioJect machines which will
include, among other things, the
location of said machines, to be
provided within ten (10) days
after the end of each month.
SECTION 7.5 - NEGATIVE COVENANTS
(ACQUIRED ASSETS): Five Hundred Thousand Dollars
($500,000) annually.
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SECTION 8 - TERM
SECTION 8.1 - MATURITY DATE: The date on which the last regularly
scheduled monthly payment on the Term
Loan is due according to the payment
schedule set forth in Section 2.1 of
this Schedule.
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